Energy

3 Analysts Raise Parsley Energy Targets After Stock Offering, Acquisition

Chris Lange

Published: May 24, 2016 12:25 pm

Last Updated: January 13, 2020 7:38 am

Parsley Energy Inc. (NYSE: PE) recently upsized its secondary offering, and it is making some buzz in the analyst community. 24/7 Wall St. has found three analysts that are hiking their targets on Parsley after this announcement. Even one of the largest brokerage firms is taking a positive stance on the stock, despite not lifting its target.

In terms of the offering, Parsley is pricing its 8.25 million shares of Class A common stock right around the $25 mark, expecting $203 million in total gross proceeds. There is also an overallotment option for underwriters to purchase up to an additional 1.2375 million shares.

Previously the offering was only for 8 million shares, but Parsley increased the stake by 250,000 shares. This offering is expected to close on May 27.

As for the acquisition, the company intends to use a portion of the net proceeds of the equity offering to fund the aggregate purchase price for the acquisitions of mineral interests (and associated surface rights) and certain working interests in Pecos and Reeves Counties, Texas.

Merrill Lynch took a positive stance on the stock, reiterating a Buy rating with a $27 price objective. The firm detailed its call:

While not a cheap deal, we believe the deal portrays the company’s confidence in the Delaware Basin as a second core area, with inventory that will likely rival the Midland Basin. Additionally, we believe the establishment of a mineral rights position provides potential future monetization opportunities similar to FANG/VNOM. We maintain our Buy rating…. The company holds top tier acreage in the Midland Basin that has historically outperformed peers and has untapped value in several zones/regions that have not been fully derisked. With moderate debt and a strong hedge book, PE should be able to weather the current commodity weakness and re-accelerate growth, should prices recover.

The other analysts that hiked their price targets were:

• Nomura reiterated a Buy rating and raised its target to $31 from $25.
• Topeka has a Buy rating and raised its target to $29 from $27.
• KeyBanc has an Overweight rating and raised its target to $29 from $28.

After rising more than 2% to $25.72 early Tuesday, shares of Parsley were trading essentially flat at $25.08 by midday. The consensus analyst price target is $28.50, and the 52-week trading range is $13.29 to $26.29.