Parsley Energy Inc. (NYSE: PE) has reeled in bolt-on assets in the Permian Basin, which should produce attractive well economics despite the plunge in crude oil prices, the company said in a Feb. 6 news release.

Parsley said that it acquired certain undeveloped acreage located adjacent to its existing operating areas in the Midland Basin for $139 million. A seller was not disclosed.

The acquisition, which closed during the fourth quarter of 2014, includes about 8,450 net acres primarily in northwest Reagan County, Texas.

The Austin, Texas, company said the assets are in the heart of its horizontal development area.

Highlights:

  • Based on offset results, anticipate attractive well economics on acquired properties even at depressed commodity prices;
  • 100% operated, 73% HBP, with 75% net revenue interest and average working interest of 91%;
  • Full rights to Wolfcamp and below across acquired acreage;
  • Adds 199 net horizontal locations to drilling inventory; and
  • Adds 410 net vertical drilling locations to drilling inventory.

Including the acquisition, the company now has more than 1,800 horizontal drilling locations in the core of the Midland Basin.

“We are pleased to add high-quality assets adjacent to our existing leasehold,” said Bryan Sheffield, chairman and CEO of Parsley, in a statement. “Rarely do assets of this quality become available."

Sheffield said he expect wells drilled on the acquired acreage to generate results consistent with the wells Parsley has drilled on its core acreage to date, which are among the most productive in the Midland Basin.

Outlook

Parsley's net production averaged 18.2 thousand barrels of oil equivalent per day (Mboe/d) in the fourth quarter of 2014, an increase of 19% over the third quarter. Full year 2014 net production increased 184% year-over-year to 14.2 Mboe/d.

“Nimble organizations have a significant advantage in volatile environments,” he said.

The company entered the fourth quarter with plans to accelerate drilling activity, but rapidly changed course. In the end, the company exited 2014 with one fewer horizontal rig and three fewer vertical rigs than contemplated by its stated plan.

"Despite being among the first companies to decelerate, we are pleased to have again delivered strong quarter-over-quarter production growth, and our year-over-year growth of almost 200% demonstrates our ability to identify and develop premier assets," he said.

In 2015, Parsley's capex will be $225-250 million. The company plans to spend $195-210 million on drilling and completion activities and $30-40 million on infrastructure and other items.

The company expects to grow production by 30% in 2015, to an average of 18-19 Mboe/d. In 2014, average daily production was 14.2 Mboe/d.

Parsley currently operates four horizontal rigs and plans to operate an average of three horizontal rigs during 2015.

The shape of drilling activity in 2015 is intended to reflect an anticipated uplift in returns associated with declining costs for services and equipment, with two horizontal rigs running on average during the first half of the year and four horizontal rigs running on average during the second half of the year.

Substantially all of Parsley’s horizontal drilling activity will target zones from which the company has already generated strong well productivity, with 80-90% of horizontal wells targeting the Wolfcamp B zone.

In order to hold acreage, the company intends to operate one vertical rig on an as-needed basis, representing about 10% of drilling and completion spending in 2015.

The company plans to complete 30-35 gross operated horizontal wells and 18-22 gross operated vertical wells, with average working interest above 90% for both the horizontal and vertical drilling programs.

Sheffield said the company is well-prepared to resume a rapid growth trajectory if and when conditions dictate.

"We are fortunate, given our asset concentration in the core of the Midland Basin and leading well productivity, to be able to generate consistently attractive returns on horizontal drilling investments even at currently depressed crude prices," he said. "Anticipated reductions in service and equipment costs would make our returns even more compelling."

Parsley also announced Feb. 6 that it entered into an agreement to sell about 14.9 million shares of its Class A common stock in a private placement. Proceeds are expected to be about $231 million gross, $224 million net.

Shares were sold to selected institutional and accredited investors.

Proceeds will be used to pay down its revolving credit facility and for general corporate purposes.

Credit Suisse was sole placement agent and Tudor, Pickering, Holt & Co. was a financial advisor for the offering.