PR Newswire | Oct 28, 2020 04:06PM EDT

10/28 15:05 CDT

Parsley Energy Announces Third Quarter 2020 Financial And Operating Results AUSTIN, Texas, Oct. 28, 2020

AUSTIN, Texas, Oct. 28, 2020 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended September 30, 2020.

Recent Highlights

* Generated positive free cash flow(1) in 3Q20. * Paid 3Q20 quarterly dividend of $0.05 per share on September 18, 2020 and declared 4Q20 quarterly dividend of $0.05 per share(2) payable on December 18, 2020. * 3Q20 net oil production decreased 1% quarter-over-quarter and increased 21% year-over-year to 111.0 MBo per day. Total 3Q20 net production averaged 183.2 MBoe per day. * Recently announced a definitive merger agreement to be acquired by Pioneer Natural Resources Company ("Pioneer") in an all-stock transaction valued at approximately $7.6 billion, inclusive of assumed debt, expected to close in 1Q21.

Operational Update

During the third quarter of 2020, the Company placed on production 26 gross operated horizontal wells. Parsley's average working interest on wells placed on production was approximately 88%, with an average completed lateral length of approximately 9,700 feet. The Company placed on production 15 gross operated horizontal wells in the Midland Basin, with the remainder placed on production in the Delaware Basin.

After reactivating development activity in July, Parsley delivered steady improvements in drilling and completion efficiency(3) within each basin. Notably, in the Delaware Basin, Parsley drilled its first two three-mile lateral wells in under 29 days each, which helped drive a new Company-record for Delaware drilling efficiency in 3Q20. Parsley attributes these recent drilling efficiency gains to enhancements made to the Company's remote operational command center during the activity shutdown in May and June. As operational efficiency gains take hold, the Company is delivering leading edge well costs below $850 per foot in the Delaware Basin.

In line with prior Company commentary, Parsley deployed two additional rigs in late October, bringing the current number of active operated rigs to four. The Company expects to continue operating four rigs and one-to-two frac spreads for the remainder of 2020.

Financial Update

Profitability

During 3Q20, the Company recorded net income attributable to its stockholders of $22.6 million, or $0.06 per share. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, adjusted net income for 3Q20 was $82.6 million, or $0.22 per share.(1)

Adjusted earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense ("Adjusted EBITDAX") for 3Q20 was $290.2 million.(1)

Realized Pricing

During 3Q20, Parsley reported an average unhedged oil price realization of $37.19 per Bbl net of transportation costs, representing a discount of $3.73 to the average WTI Cushing price(4) for the quarter.

Operating Costs

During the third quarter of 2020, the Company reported lease operating expense ("LOE") per Boe of $3.19, down 14% versus 2Q20 expense levels despite stable production volumes. Favorable LOE unit cost trends were driven by supplier price reductions and continued utilization of the Company's integrated water handling system.

Both general and administrative expense ("G&A") per Boe and cash based G&A per Boe(1), which excludes stock-based compensation expense, decreased quarter-over-quarter to $1.97 and $1.59, respectively. Encouraging G&A cost trends are a function of ongoing corporate cost savings initiatives.

Capital Expenditures

Parsley reported capital expenditures of $85 million during the third quarter of 2020, comprised of $84 million for operated drilling, completion, and equipment activity, and $1 million associated with water infrastructure and non-operated development activity.

Return of Capital Program

Today, Parsley Energy's board of directors declared a quarterly dividend of $0.05 per share.(2) The dividend is payable on December 18, 2020, to shareholders of record on December 8, 2020.

Liquidity and Hedging

The Company entered into an amendment to its revolving credit agreement on October 19, 2020, which reaffirmed its borrowing base at $2.7 billion and increased the elected commitment amount from $1.075 billion to $1.1 billion.

As of September 30, 2020, Parsley had approximately $767.7 million of liquidity, consisting of $4.7 million of cash and cash equivalents and an availability of $763.0 million on the Company's revolver.(5)

For details on Parsley's hedge position, please see the tables below under Supplemental Information and/or, upon availability, the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2020.

Guidance

In light of Parsley's recent entry into a definitive merger agreement with Pioneer, Parsley has discontinued providing guidance and long-term outlook information regarding its results of operations. Further, Parsley does not intend to update previously issued guidance and long-term outlook information, including the guidance provided in the Company's presentation posted to its website on September 8, 2020. Accordingly, investors are cautioned not to rely on historical forward-looking statements regarding guidance and long-term outlook information, as those forward-looking statements were the estimates of management only as of the date provided, have not and will not be updated and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.

Conference Call Information

Parsley Energy will host a brief conference call and webcast to discuss its results for the third quarter of 2020 on Thursday, October 29, 2020 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). This conference call and webcast will not include a question and answer session. Participants should call 877-709-8150 (United States/Canada) or 201-689-8354 (International) 10 minutes before the scheduled time and request the Parsley Energy earnings conference call. A telephone replay will be available through November 5, 2020 by dialing 877-660-6853 (United States/Canada) or 201-612-7415 (International). Conference ID: 13710926. A live broadcast will also be available on the Internet at www.parsleyenergy.com under the "Investors-Events & Presentations" section of the website.

About Parsley Energy, Inc.

Parsley Energy, Inc. is an independent oil and natural gas company focused on the acquisition, development, exploration, and production of unconventional oil and natural gas properties in the Permian Basin. For more information, visit the Company's website at www.parsleyenergy.com.

Forward Looking Statements

Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Parsley Energy's expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Parsley Energy's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Parsley Energy does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Parsley Energy to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the Company's filings with the Securities and Exchange Commission ("SEC"), including its most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The risk factors and other factors noted in the Company's SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.

Investor Contacts:

Kyle RhodesVice President - Investor Relations

or

Dan GuillInvestor Relations Analyst

ir@parsleyenergy.com(512) 505-5199

Media and Public Affairs Contacts:

Kate ZaykowskiManager - Public Affairs and Corporate Communications

media@parsleyenergy.com(512) 220-7100

- Tables to Follow -

"Cash based G&A per Boe", "Adjusted EBITDAX", "free cash flow", and "adjusted net income" are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). For(1) definitions and reconciliations of the non-GAAP financial measures of Adjusted EBITDAX, free cash flow, and adjusted net income to GAAP financial measures, please see the tables and associated commentary below under Reconciliation of Non-GAAP Financial Measures.

Dividend to be paid to all Company equity holders, including shareholders of(2) Class A common stock and holders of Parsley Energy, LLC units/Class B common stock.

"Drilling efficiency" is measured based on drilled feet per operational day.(3) "Completion efficiency" is measured based on stimulated lateral length per operational day. "Operational days" are measured as days equipment is active and do not include mobilization or other idle time.

(4) Represents Bloomberg-sourced 3Q20 average WTI Cushing price.

(5) Revolver availability is net of letters of credit.

Parsley Energy, Inc. and Subsidiaries

Selected Operating Data

(Unaudited)



Three Months Ended

September 30, 2020June 30, 2020September 30, 2019

Net production volumes:

Oil (MBbls) 10,213 10,242 8,440

Natural gas (MMcf) 18,371 16,949 14,475

Natural gas liquids 3,581 3,600 2,983 (MBbls)

Total (MBoe) 16,856 16,667 13,836

Average daily net 183,217 183,154 150,391 production (Boe/d)

Average sales prices^ (1) :

Oil, without realized $ 37.19 $18.30 $ 55.16 derivatives (per Bbl)

Oil, with realized $ 35.73 $31.47 $ 54.12 derivatives (per Bbl)

Natural gas, without realized derivatives $ 1.02 $0.71 $ 0.59 (per Mcf)

Natural gas, with realized derivatives $ 0.92 $0.65 $ 0.64 (per Mcf)

Natural gas liquids $ 12.87 $5.10 $ 11.08 (per Bbl)

Average price per Boe, without realized $ 26.38 $13.07 $ 36.65 derivatives

Average price per Boe, with realized $ 25.38 $21.10 $ 36.07 derivatives

Average costs (per Boe):

Lease operating $ 3.19 $3.69 $ 3.30 expenses

Transportation and $ 1.32 $0.87 $ 0.87 processing costs

Production and ad $ 1.88 $1.40 $ 2.76 valorem taxes

Depreciation, depletion$ 7.60 $7.65 $ 15.30 and amortization

General and administrative expenses$ 1.97 $2.21 $ 2.65 (including stock-based compensation)

General and administrative expenses$ 1.59 $1.81 $ 2.28 (cash based)

Average prices shown in the table reflect prices both before and after the effects of the Company's realized commodity hedging transactions. The(1) Company's calculations of such effects include both realized gains and losses on cash settlements for commodity derivative transactions and premiums paid or received on options that settled during the period. Realized oil prices are net of transportation costs.

Parsley Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except for per share data)



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

REVENUES

Oil sales $379,804$465,549$1,089,423 $1,292,563

Natural gas sales 18,729 8,566 35,966 23,159

Natural gas liquids 46,095 33,041 96,894 115,138 sales

Other 2,761 2,995 10,119 5,503

Total revenues 447,389 510,151 1,232,402 1,436,363

OPERATING EXPENSES

Lease operating expenses53,696 45,719 188,853 129,587

Transportation and 22,182 12,052 50,942 26,917 processing costs

Production and ad 31,709 38,235 92,254 96,386 valorem taxes

Depreciation, depletion 128,045 211,737 530,190 584,023 and amortization

General and administrative expenses 33,282 36,718 106,052 109,662 (including stock-based compensation)

Exploration and 7,983 11,988 571,616 35,054 abandonment costs

Impairment - - 4,374,253 -

Acquisition costs 278 - 15,296 -

Accretion of asset 497 373 1,414 1,071 retirement obligations

Rig termination costs (202) - 14,904 -

Loss (gain) on sale of 357 (1,887) 332 (1,887) property

Restructuring and other 8,134 - 45,431 1,562 termination costs

Other operating expenses5,202 2,175 16,802 3,563

Total operating expenses291,163 357,110 6,008,339 985,938

OPERATING INCOME (LOSS)156,226 153,041 (4,775,937) 450,425

OTHER INCOME (EXPENSE)

Interest expense, net (40,456) (33,578) (122,589) (100,177)

Gain (loss) on early 56 - (21,037) - extinguishment of debt

(Loss) gain on (87,021) 56,552 178,665 (43,574) derivatives

Change in TRA liability - - 70,529 -

Interest income 16 216 285 610

Other expense (928) (1,678) (4,794) (905)

Total other (expense) (128,333)21,512 101,059 (144,046) income, net

INCOME (LOSS) BEFORE 27,893 174,553 (4,674,878) 306,379 INCOME TAXES

INCOME TAX (EXPENSE) (3,129) (34,953) 574,017 (59,788) BENEFIT

NET INCOME (LOSS) 24,764 139,600 (4,100,861) 246,591

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO (2,125) (19,890) 400,684 (35,010) NONCONTROLLING INTERESTS

NET INCOME (LOSS) ATTRIBUTABLE TO PARSLEY $22,639 $119,710$(3,700,177)$211,581 ENERGY, INC. STOCKHOLDERS



Net income (loss) per common share:

Basic $0.06 $0.43 $(9.91) $0.76

Diluted $0.06 $0.43 $(9.91) $0.76

Weighted average common shares outstanding:

Basic 377,452 279,961 373,503 279,491

Diluted 378,160 280,547 373,503 279,954

Parsley Energy, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)



September 30, 2020December 31, 2019

ASSETS

CURRENT ASSETS

Cash and cash equivalents $4,662 $20,739

Accounts receivable, net of allowance for doubtful accounts:

Joint interest owners and other 30,582 48,785

Oil, natural gas and natural gas 141,720 192,216 liquids

Related parties 188 183

Short-term derivative instruments, net 81,280 127,632

Other current assets 11,461 8,818

Total current assets 269,893 398,373

PROPERTY, PLANT AND EQUIPMENT

Oil and natural gas properties, 7,533,203 11,272,124 successful efforts method

Accumulated depreciation and depletion (249,704) (2,117,963)

Total oil and natural gas properties, 7,283,499 9,154,161 net

Other property, plant and equipment, 195,449 170,306 net

Total property, plant and equipment, 7,478,948 9,324,467 net

NONCURRENT ASSETS

Operating lease assets, net of 85,867 128,529 accumulated depreciation

Long-term derivative instruments, net 3,239 -

Other noncurrent assets 6,989 4,845

Total noncurrent assets 96,095 133,374

TOTAL ASSETS $7,844,936 $9,856,214



LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued expenses $280,055 $416,346

Revenue and severance taxes payable 176,618 154,556

Short-term derivative instruments, net 107,725 158,522

Current operating lease liabilities 40,029 61,198

Other current liabilities 3,886 5,002

Total current liabilities 608,313 795,624

NONCURRENT LIABILITIES

Long-term debt 2,996,015 2,182,832

Deferred tax liabilities 8,581 193,409

Operating lease liabilities 50,259 69,195

Payable pursuant to tax receivable - 70,529 agreement

Long-term derivative instruments, net 24,621 -

Asset retirement obligations 27,622 20,538

Financing lease liabilities 1,670 1,320

Other noncurrent liabilities 428 119

Total noncurrent liabilities 3,109,196 2,537,942

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 par value, 50,000,000 shares authorized, none - - issued and outstanding

Common stock

Class A, $0.01 par value, 600,000,000 shares authorized, 379,339,004 shares issued and 378,610,172 shares outstanding at September 30, 2020 and 3,793 2,822 282,260,133 shares issued and 281,241,443 shares outstanding at December 31, 2019

Class B, $0.01 par value, 125,000,000 shares authorized, 34,201,316 and 35,420,258 shares issued and 342 355 outstanding at September 30, 2020 and December 31, 2019

Additional paid in capital 6,971,249 5,200,795

(Accumulated deficit) retained earnings(3,148,317) 570,889

Treasury stock, at cost, 728,832 shares and 1,018,690 shares at September 30, (11,165) (17,428) 2020 and December 31, 2019

Total stockholders' equity 3,815,902 5,757,433

Noncontrolling interests 311,525 765,215

Total equity 4,127,427 6,522,648

TOTAL LIABILITIES AND EQUITY $7,844,936 $9,856,214

Parsley Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Three Months Ended September 30,Nine Months Ended September 30,

2020 2019 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $24,764 $139,600 $(4,100,861)$246,591

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and 128,045 211,737 530,190 584,023 amortization

Leasehold abandonments and 7,933 11,885 564,445 34,074 impairments

Impairment of - - 4,374,253 - long-lived assets

Accretion of asset retirement 497 373 1,414 1,071 obligations

Loss (gain) on 357 (1,887) 332 (1,887) sale of property

(Gain) loss on early (56) - 21,037 - extinguishment of debt

Stock-based 6,564 5,175 24,342 15,473 compensation

Deferred income tax expense 3,129 34,953 (574,017) 59,788 (benefit)

Change in TRA - - (70,529) - liability

Loss (gain) on 87,021 (56,552) (178,665) 43,574 derivatives

Net cash (paid) received for (10,780) 2,023 132,816 (13,088) derivative settlements

Net cash (paid) received for (6,128) (11,712) 42,758 (35,321) option premiums

Other 699 3,517 2,940 5,140

Changes in operating assets and liabilities, net of acquisitions:

Accounts (21,386) (30,727) 145,238 (44,144) receivable

Accounts receivable-related4,076 511 (5) (287) parties

Other current (5,067) (2,183) (4,097) 5,062 assets

Other noncurrent 820 531 2,632 (274) assets

Accounts payable and accrued 823 14,838 (175,528) 33,303 expenses

Revenue and severance taxes 5,957 3,277 22,062 8,143 payable

Other noncurrent 118 59 309 59 liabilities

Net cash provided by operating 227,386 325,418 761,066 941,300 activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Development of oil and natural gas (65,532) (343,988) (630,853) (1,081,182) properties

Acquisitions of oil and natural (2,400) (9,250) (14,344) (33,841) gas properties

Cash acquired from the Jagged Peak - - 53,347 - acquisition

Additions to other property and (8,976) (244) (12,138) (28,155) equipment

Proceeds from sales of property,308 3,074 2,689 40,967 plant and equipment

Other 6 732 (2,482) 5,221

Net cash used in investing (76,594) (349,676) (603,781) (1,096,990) activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under 136,000 175,000 1,421,000 462,000 long-term debt

Payments on (262,934) (200,000) (1,507,534) (447,000) long-term debt

Payments on financing lease (642) (696) (1,941) (2,126) obligations

Debt issuance (120) - (11,897) - costs

Repurchase of (89) (20) (11,165) (5,672) common stock

Dividends and (20,610) (9,465) (61,825) (9,465) distributions paid

Distributions to owners from - - - (603) consolidated subsidiary

Net cash used in financing (148,395) (35,181) (173,362) (2,866) activities

Net increase (decrease) in cash, cash 2,397 (59,439) (16,077) (158,556) equivalents and restricted cash

Cash, cash equivalents and restricted cash at2,265 64,099 20,739 163,216 beginning of period

Cash, cash equivalents and $4,662 $4,660 $4,662 $4,660 restricted cash at end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for $(41,600) $(13,610) $(118,009) $(71,774) interest

Cash received for $- $- $- $240 income taxes

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Asset retirement obligations incurred, $532 $411 $4,448 $1,619 including changes in estimate

Additions to oil and natural gas properties - $19,367 $(25,695) $(102,872) $15,429 change in capital accruals

Common stock issued for oil and$- $- $1,776,199 $- natural gas properties

Net premiums on options that $7,156 $(11,765) $5,922 $(31,513) settled during the period

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDAX

Adjusted EBITDAX is not a measure of net income (loss) as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by the Company's management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net income (loss) before depreciation, depletion and amortization, exploration and abandonment costs, net interest expense, interest income, income tax expense, change in Tax Receivable Agreement ("TRA") liability, stock-based compensation, acquisition costs, impairment on long-lived assets, (gain) loss on early extinguishment of debt, gain on sale of property, rig termination costs, restructuring and other termination costs, accretion of asset retirement obligations, loss (gain) on derivatives, net settlements on derivative instruments, net premiums on options that settled during the period and other.

Management believes Adjusted EBITDAX is useful because it allows the Company to more effectively evaluate its operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net loss in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structure, and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net loss as determined in accordance with GAAP or as an indicator of the Company's operating performance. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company's computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDAX is useful to investors as a widely followed measure of operating performance.

The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net income (loss) attributable to Parsley Energy, Inc. stockholders for each of the periods indicated.

Parsley Energy, Inc. and Subsidiaries

Adjusted EBITDAX

(Unaudited, in thousands)



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Adjusted EBITDAX reconciliation to net income (loss) attributable to Parsley Energy, Inc. stockholders:

Net income (loss) attributable to Parsley $22,639 $119,710$(3,700,177)$211,581 Energy, Inc. stockholders

Net income (loss) attributable to 2,125 19,890 (400,684) 35,010 noncontrolling interests

Depreciation, depletion 128,045 211,737 530,190 584,023 and amortization

Exploration and 7,983 11,988 571,616 35,054 abandonment costs

Interest expense, net 40,456 33,578 122,589 100,177

Interest income (16) (216) (285) (610)

Income tax expense 3,129 34,953 (574,017) 59,788

EBITDAX 204,361 431,640 (3,450,768) 1,025,023

Change in TRA liability - - (70,529) -

Stock-based compensation6,564 5,175 19,592 15,473

Acquisition costs 278 - 15,296 -

Impairment on long-lived- - 4,374,253 - assets

(Gain) loss on early (56) - 21,037 - extinguishment of debt

Gain on sale of property357 (1,887) 332 (1,887)

Rig termination costs (202) - 14,904 -

Restructuring and other 8,134 - 45,431 1,562 termination costs

Accretion of asset 497 373 1,414 1,071 retirement obligations

Loss (gain) on 87,021 (56,552) (178,665) 43,574 derivatives

Net settlements on (23,900) 3,686 158,628 (13,108) derivative instruments

Net premiums on options that settled during the 7,156 (11,765) 5,922 (31,513) period

Other - - 2,142 -

Adjusted EBITDAX $290,210$370,670$958,989 $1,040,195

Free Cash Flow

Free cash flow is not a measure of net cash provided by operating activities as determined by GAAP. Free cash flow is a supplemental non-GAAP financial measure that is used by the Company, analysts and investors as an indicator of the Company's ability to manage its operating cash flow, internally fund its exploration and development activities, pay dividends, and to service or incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or accounts payable related to capital expenditures. The Company believes that this measure, as so adjusted, presents a meaningful indicator of the Company's actual sources and uses of capital associated with its operations conducted during the applicable period. The Company defines free cash flow as net cash provided by operating activities before changes in operating assets and liabilities, net of acquisitions and acquisition and cash restructuring costs related to the acquisition of Jagged Peak, less accrual-based development capital expenditures. The amounts included in the calculation of free cash flow were computed in accordance with GAAP.

Free cash flow is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in the Company's condensed consolidated financial statements prepared in accordance with GAAP (including the notes), included in its SEC filings and posted on its website. The following table provides a reconciliation of free cash flow to the GAAP financial measure of net cash provided by operating activities.

Parsley Energy, Inc. and Subsidiaries

Free Cash Flow

(Unaudited, in thousands)



Three Months Ended September 30,

2020 2019

Net cash provided by operating activities $ 227,386 $ 325,418

Net change in operating assets and 14,659 13,694 liabilities, net of acquisitions

Acquisition costs related to the acquisition278 - of Jagged Peak

Restructuring costs related to the acquisition of Jagged Peak (excluding 58 - non-cash)

Total discretionary cash flow 242,381 339,112



Development of oil and natural gas (65,532) (343,988) properties

Additions to oil and natural gas properties (19,367) 25,695 - (increase) decrease in capital accruals

Total accrual-based development capital (84,899) (318,293) expenditures

Free cash flow $ 157,482 $ 20,819

Adjusted Net Income

Adjusted net income is not a measure of net income (loss) determined in accordance with GAAP. Adjusted net income is a supplemental non-GAAP performance measure used by the Company's management to evaluate financial performance, prior to loss (gain) on derivatives, net settlements on derivative instruments, net premiums on options that settled during the period, loss (gain) on sale of property, rig termination costs, restructuring and other termination costs, exploration and abandonment costs, impairment of long-lived assets, acquisition costs, change in TRA liability, (gain) loss on early extinguishment of debt, and other, while adjusting for changes in noncontrolling interests, the associated changes in estimated income tax and changes to deferred tax asset valuation allowance. Management believes adjusted net income is useful because it may enhance investors' ability to assess Parsley's historical and future financial performance. Adjusted net income should not be considered an alternative to, or more meaningful than, consolidated net income (loss), operating income (loss), or any other measure of financial performance presented in accordance with GAAP. The following table presents a reconciliation of the non-GAAP financial measure of adjusted net income to the GAAP financial measure of net income (loss) attributable to Parsley Energy, Inc. stockholders.

Parsley Energy, Inc. and Subsidiaries

Adjusted Net Income and Net Income Per Share

(Unaudited, in thousands, except per share data)



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Net income (loss) attributable to Parsley $22,639$119,710$(3,700,177)$211,581Energy, Inc. stockholders

Adjustments:

Loss (gain) on derivatives 87,021 (56,552) (178,665) 43,574

Net settlements on (23,900)3,686 158,628 (13,108) derivative instruments

Net premiums on options that settled during the 7,156 (11,765) 5,923 (31,513) period

Loss (gain) on sale of 357 (1,887) 332 (1,887) property

Rig termination costs (202) - 14,904 -

Restructuring and other 8,134 - 45,431 1,562 termination costs

Exploration and abandonment7,983 11,988 571,616 35,054 costs

Impairment of long-lived - - 4,374,253 - assets

Acquisition costs 278 - 15,296 -

Change in TRA liability - - (70,529) -

(Gain) loss on early (56) - 21,037 - extinguishment of debt

Other - - 2,142 -

Change in noncontrolling (7,473) 6,106 (425,398) (4,113) interests

Income taxes on above (19,336)10,675 (351,629) (6,565) adjustments^(1)

Adjustment to deferred tax asset valuation allowance^ - - (284,727) - (2)

Adjusted net income $82,601$81,961 $198,437 $234,585

Net income (loss) per diluted share - as reported$0.06 $0.43 $(9.91) $0.76 ^(1)

Adjustments:

Loss (gain) on derivatives $0.23 $(0.20) $(0.48) $0.16

Net settlements on (0.06) 0.01 0.42 (0.05) derivative instruments

Net premiums on options that settled during the 0.02 (0.04) 0.02 (0.11) period

Loss (gain) on sale of - (0.01) - (0.01) property

Rig termination costs - - 0.04 -

Restructuring and other 0.02 - 0.12 0.01 termination costs

Exploration and abandonment0.02 0.04 1.53 0.13 costs

Impairment of long-lived - - 11.70 - assets

Acquisition costs - - 0.04 -

Change in TRA liability - - (0.19) -

Loss on early - - 0.06 - extinguishment of debt

Other - - 0.01 -

Change in noncontrolling (0.02) 0.02 (1.14) (0.01) interests

Income taxes on above (0.05) 0.04 (0.93) (0.04) adjustments

Adjustment to deferred tax - - (0.76) - asset valuation allowance

Adjusted net income per $0.22 $0.29 $0.53 $0.84 diluted share^(4)

Basic weighted average shares outstanding - as 377,452 279,961 373,503 279,491 reported^(3)

Effect of dilutive securities:

Class B Common Stock - - - -

Restricted Stock and 708 586 - 463 Restricted Stock Units

Diluted weighted average shares outstanding - as 378,160 280,547 373,503 279,954 reported^(3)

Effect of dilutive securities:

Class B Common Stock - - - -

Restricted Stock and - - 304 - Restricted Stock Units

Diluted weighted average shares outstanding for 378,160 280,547 373,807 279,954 adjusted net income^(4)

(1) The assumed income tax rate is 22% and 20% for the three and nine months ended September 30, 2020 and 2019, respectively.

(2) Deferred tax valuation allowance has been adjusted to reflect the assumed income tax rate of 22%.

For the three and nine months ended September 30, 2020 and the nine months ended September 30, 2019, the number of weighted average diluted shares used to calculate actual net income (loss) per share is based on the fact that, under the "if converted" and "treasury stock" methods, Class B Common Stock(3) and shares of restricted stock and restricted stock units, respectively, were not recognized because the effect would have been antidilutive. For the nine months ended September 30, 2019, the number of weighted average diluted shares used to calculate actual net income (loss) per share is based on the fact that, under the "if converted" method, Class B Common Stock was not recognized because the effect would have been antidilutive.

For purposes of calculating adjusted net income per diluted share for the(4) three and nine months ended September 30, 2020 and 2019, Class B Common Stock was not recognized because the shares would have been antidilutive using the "if converted" method.

Open Derivatives Position



Parsley Energy, Inc. and Subsidiaries

Open Crude Oil Derivatives Positions^(1)



4Q20 1Q21 2Q21 3Q21 4Q21 1Q22

CUSHING

Swaps - Cushing 11.0 (MBbls/d)^(2)

Swap Price ($/ $57.87 Bbl)

MIDLAND

Three Way Collars - 13.8 Midland (MBbls/ d)^(3)

Short Call Price$51.65 ($/Bbl)

Long Put Price $35.66 ($/Bbl)

Short Put Price $25.66 ($/Bbl)

Two Way Collars - Midland (MBbls6.5 /d)^(4)

Short Call Price$48.00 ($/Bbl)

Long Put Price $43.00 ($/Bbl)

Swaps - Midland 3.3 5.0 5.0 5.0 5.0 (MBbls/d)^(2)

Swap Price ($/ $32.60 $40.50 $40.50$40.50$40.50 Bbl)

MAGELLAN EAST HOUSTON ("MEH")

Three Way Collars - MEH 24.1 20.3 20.2 9.4 9.4 (MBbls/d)^(3)

Short Call Price$51.22 $59.43 $59.39$51.29$51.29 ($/Bbl)

Long Put Price $37.23 $49.32 $49.30$41.55$41.55 ($/Bbl)

Short Put Price $27.23 $39.32 $39.30$31.55$31.55 ($/Bbl)

Put Spreads - MEH (MBbls/d)^ 17.9 (5)

Long Put Price $40.00 ($/Bbl)

Short Put Price $30.00 ($/Bbl)

Swaps - MEH 15.7 45.0 45.0 45.0 45.0 20.0 (MBbls/d)^(2)

Swap Price ($/ $39.28 $40.54 $40.54$40.54$40.54$43.81Bbl)

BRENT

Two Way Collars - Brent (MBbls/ 6.5 d)^(4)

Short Call Price$52.30 ($/Bbl)

Long Put Price $47.30 ($/Bbl)

Swaps - Brent 6.3 22.0 22.0 22.0 22.0 (MBbls/d)^(2)

Swap Price ($/ $47.40 $44.46 $44.46$44.46$44.46 Bbl)

Total Hedged Volumes (MBbls/ 105.1 92.3 92.2 81.4 81.4 20.0 d)

Premium Realization $7.2 $(2.6) $(2.6)$(1.4)$(1.4) ($MM)^(6)

Midland-Cushing Basis Swaps 14.0 (MBbls/d)^(7)

Basis Differential ($/$(1.44) Bbl)

Rollfactor Swaps52.2 10.0 (MBbls/d)^(8)

Swap Price ($/$(2.09)$(0.45) Bbl)



Parsley Energy, Inc. and Subsidiaries

Open Natural Gas Derivatives Positions^(1)



4Q20 1Q21 2Q21 3Q21 4Q21 1Q22

WAHA

Swaps - Waha (MMBtu/78,152116,667116,484116,304116,30420,000d)^(2)

Swap Price ($/MMBtu)$1.40$2.36 $2.36 $2.36 $2.36 $2.46



(1) Hedge position as of 10/27/2020. Prices represent the weighted average price of contracts scheduled for settlement during the period.

(2) Parsley receives the swap price.

When the reference price (Midland, MEH, or Brent) is at or above the short call price, Parsley receives the short call price. When the reference price(3) is between the long put price and the short put price, Parsley receives the long put price. When the reference price is below the short put price, Parsley receives the reference price plus the difference between the short put price and the long put price.

When the reference price is above the short call price, Parsley receives the(4) short call price. When the reference price is between the short call price and the put price, Parsley receives the reference price. When the reference price is below the put price, Parsley receives the put price.

When the reference price is above the long put price, Parsley receives the reference price. When the reference price is between the long put price and(5) the short put price, Parsley receives the long put price. When the reference price is below the short put price, Parsley receives the reference price plus the difference between the short put price and the long put price.

Premium realizations represent net premiums paid (including deferred(6) premiums), which are recognized as income or loss in the period of settlement.

Swaps that fix the basis differentials representing the index prices at(7) which the Company sells its oil and gas produced in the Permian Basin less the WTI Cushing price and Henry Hub price, respectively.

These positions hedge the timing risk associated with Parsley's physical sales. Parsley generally sells crude oil for the delivery month at a sales(8) price based on the average NYMEX price during that month, plus an adjustment calculated as a spread between the weighted average prices of the delivery month, the next month, and the following month during the period when the delivery month is the first month.

Weighted Average Shares Outstanding



Parsley Energy, Inc. and Subsidiaries

Weighted Average Shares Outstanding

(Unaudited, in thousands)



Three Months Ended September 30,

2020 2019



Weighted average common shares outstanding, 377,452 279,961 class A

Weighted average common shares outstanding, 34,681 35,519 class B

Adjusted weighted average common shares 412,133 315,480 outstanding^(1)

PE Units (and a corresponding number of shares of Class B common stock) can be exchanged for Class A common stock at an exchange ratio of one share of Class A common stock for each PE Unit (and corresponding share of Class B(1) common stock) exchanged. As such, assumes the exchange of all outstanding PE Units (and corresponding shares of Class B common stock) for shares of Class A common stock. Excludes potentially dilutive restricted stock and restricted stock units of approximately 0.7 million and 0.6 million shares for the three months ended September 30, 2020 and 2019, respectively.

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SOURCE Parsley Energy, Inc.