Evercore Upgrades Parsley Energy, Says Q1 Was A Turning Point For Execution

The first-quarter beat delivered by Parsley Energy Inc PE has largely de-risked 2019, and there is now greater confidence in the company’s outlook, according to Evercore ISI. 

The Analyst

Stephen Richardson upgraded Parsley Energy from In Line to Outperform and raised the price target from $24 to $27.

The Thesis

With 12 rigs operational across 192,000 net acres, Parsley Energy enjoys scale among the smaller pure plays, Richardson said in the Monday upgrade note. (See his track record here.) 

Over the past year, there has been pressure on Permian pure play stocks owing to investor concerns around scale and whether these companies will be able to achieve more ratable growth and generate free cash flows, the analyst said. 

Parsley Energy’s life cycle as a public company has been similar, focusing on “rationalizing operations and working towards a more balanced funding outlook,” Richardson said. The company adopted a more balanced operational approach in the first quarter, and its results indicated consistency, he said. 

Parsley is unlikely to achieve massive capital efficiency improvements, nor will its growth trajectory suddenly pivot, the analyst said. 

Yet the company is likely to achieve a steady improvement in execution, Richardson said. 

“We think there is room for multiple expansion as execution plays out." 

Price Action

Parsley Energy shares were up 0.2 percent at $19.76 at the time of publication Monday. 

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