Imperial Capital Raises Price Target on Parsley Energy (PE) to $40; Reiterates Outperform
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Imperial Capital reiterated an Outperform rating on Parsley Energy (NYSE: PE), and raised the price target to $40.00 (from $34.00), following the company's 2Q earnings report. The company has maintained a four rig program and its production sequentially grew 23% in 2Q16 with no new rigs. Over the next two years, PE estimates that adding one rig per year for two years would result in a 30% growth annual rate, or 60% if it grows by three rigs per year.
Analyst Kim Pacanovsky commented, "We are maintaining our Outperform rating and raising our one-year price target to $40 from $34 on PE shares, about 25% above the recent share price. On 8/3/16, PE delivered excellent 2Q16 earnings results with production far surpassing Street estimates (and our own) and operating costs continuing to materially decline. Spurred by these gains, management has elected to increase 2H16 activity by completing an extra 15 gross Midland Basin wells, with the midpoint of PE’s capex guidance rising 12% to $460-$510mn. We expect that 2016 production will increase by 71%, and with the addition of another two rigs in 2017, we estimate a 31% increase. PE remains a growth leader, and a low-cost leader, in its peer group."
Shares of Parsley Energy closed at $31.89 yesterday.
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