AUSTIN, Texas and DENVER, Oct. 14,
2019 /PRNewswire/ -- Parsley Energy, Inc. (NYSE: PE)
("Parsley," or "Parsley Energy") and Jagged Peak Energy Inc. (NYSE:
JAG) ("Jagged Peak") today announced they have entered into a
definitive merger agreement under which Parsley will acquire Jagged
Peak in an all-stock transaction valued at approximately
$2.27 billion, including Jagged
Peak's net debt of approximately $625
million as of June 30, 2019.
Under the terms of the agreement, Jagged Peak shareholders will
receive a fixed exchange ratio of 0.447 shares of Parsley Class A
common stock for each share of Jagged Peak common stock they own.
This represents $7.59 per Jagged Peak
share based on Parsley's closing price on October 11, 2019, and a premium of 1.5% compared
to Jagged Peak's 30-day volume weighted average price and 11.2%
compared to Jagged Peak's closing price on October 11, 2019.
The transaction, which is expected to close in the first quarter
of 2020, has been unanimously approved by each company's board of
directors. Following the close of the transaction, Parsley
shareholders will own approximately 77% of the combined company,
and Jagged Peak shareholders will own approximately 23% of the
combined company, in each case on a fully diluted basis. The
all-stock transaction is intended to be tax-free to Jagged Peak
shareholders.
Key Transaction Highlights
- Complementary, High-Margin Delaware Basin Footprint:
Parsley possesses an institutional familiarity with Jagged Peak's
Delaware Basin assets, with the
majority of the acreage directly offsetting Parsley's legacy
position. Furthermore, Jagged Peak's high-margin, oil-weighted
asset base will integrate smoothly into Parsley's near-term
development program. On a pro forma basis, Parsley will have
approximately 267,000 net acres in the Permian, comprised of
147,000 net acres in the Midland Basin and a highly contiguous
120,000 net acre footprint in the Delaware Basin.
- Accretive on Key Metrics: Parsley expects the
low-premium transaction to be immediately accretive to key metrics
in 2020, including: cash flow per share, free cash flow per share,
cash return on capital invested, and net asset value.
- Corporate Cost Optimization Accrues to Shareholders: The
combination is expected to generate cash general and administrative
("G&A") savings of approximately $25
million in the first year and $40-50 million of annual savings thereafter,
translating to a net present value of $250-300 million. Parsley expects this synergy to
facilitate margin expansion and enhance corporate free cash
flow.(1)
- Additional Synergies Clearly Identified: In addition to
G&A savings, Parsley has identified further synergies that are
anticipated to be realized over time:
-
- Capital Efficiency Gains: Parsley and Jagged Peak have
seen material improvements in recent Delaware Basin well costs. Sustained drilling
and completion efficiency improvements coupled with the supply
chain advantages of optimized scale have facilitated a material
reduction in Parsley's Delaware
Basin well costs during 2019. Parsley estimates its current average
drilling, completion and equipment cost in the Delaware Basin are $1,100-$1,150 per
lateral foot. Parsley believes applying its scale advantages and
employing collaborative best practices can translate to well cost
savings of at least $100 per lateral
foot across Jagged Peak's remaining inventory in the Delaware Basin.
- Overlapping Acreage: The combination of Parsley's and
Jagged Peak's acreage positions will create a highly contiguous,
interlocking footprint in the Delaware Basin that allows for a more
optimized lease geometry with additional extended lateral wells.
Additionally, the close proximity of Jagged Peak's acreage supports
additional operational efficiencies.
- Expansive Company-Owned Water Infrastructure Network:
Jagged Peak has invested nearly $90
million developing significant fresh and produced water
infrastructure across its acreage position, which is located nearby
Parsley's existing water assets. Integration of Jagged Peak's water
infrastructure network increases corporate flexibility and
operational scale.
- Cost of Capital Advantages: Parsley believes this
transaction can accelerate progress toward an investment grade
credit profile, which could help facilitate opportunistic debt
refinancing in the future.
- Maintains Strong Balance Sheet: An all-stock transaction
ensures the combined company will retain a strong balance sheet
with a pro forma net leverage ratio of 1.6x LTM adjusted earnings
before interest, income taxes, depreciation, depletion,
amortization, and exploration expense. Parsley expects to maintain
its dividend per share at current levels in the near term, with the
anticipated free cash flow enhancements from this transaction
expected to support increased return of capital in the future.
Finally, both Parsley and Jagged Peak recently added to their
respective 2020 hedge positions, and a majority of the combined
company's expected 2020 oil production is subject to hedge
protection. For details on Parsley and Jagged Peak's respective
hedge positions, please see the presentation posted to each
company's website that supplements the information in this
release.
Management Commentary
"The combination of Parsley and Jagged Peak is a natural fit,"
said Matt Gallagher, Parsley's
President and CEO. "Jagged Peak's oily, high-margin asset base
slots in nicely to our returns-focused development approach, its
acreage footprint and water infrastructure dovetails into our
legacy Delaware Basin position,
and its corporate culture aligns with our core values. In short, we
now have a premier Delaware Basin
business that rivals our foundational Midland Basin business. This
transaction also creates tangible synergies that will enhance our
corporate free cash flow profile and will be shared by the combined
shareholder base. Ultimately, I am proud of the high level of
execution Parsley has delivered throughout 2019, and I am excited
by the prospects of what the combination of Parsley and Jagged Peak
can deliver for shareholders in 2020."
Jim Kleckner, President and Chief
Executive Officer of Jagged Peak, commented, "The combined assets
of Jagged Peak and Parsley Energy are a great fit that create a
stronger combined Permian company. The pro-forma company provides
our shareholders with premier acreage in both the Midland and
Delaware sub-basins, while
providing additional scale, significant operational synergies, and
free cash flow in this competitive environment. Our team has made
tremendous progress to increase efficiencies as we evolved to pad
development on our acreage position. We look forward to working
closely with Parsley to ensure that we provide an efficient
changeover of asset-level institutional knowledge, so our
shareholders and the shareholders of Parsley Energy can reap the
maximized benefits of this transaction."
S. Wil VanLoh, Jr., a Jagged Peak
director and the Founder and Chief Executive Officer of Quantum
Energy Partners, Jagged Peak's controlling shareholder, commented,
"The inevitable consolidation in the Permian has started and Jagged
Peak made a decisive move to team up with the right partner.
Quantum has known Bryan, Matt and the Parsley team for many years
and has tremendous respect for the industry-leading execution
capabilities and top-tier rock they possess. The combination of the
two companies will create a unique platform that will benefit from
scale, capital allocation optionality, and peer-leading economics
(IRRs, oil-weighting and netback margins) that we believe will
represent one of the most compelling investment vehicles in the
Permian. We look forward to partnering with the Parsley team as
they mature into a Permian pure-play large cap. I would also like
to thank every current and former employee of Jagged Peak for
creating a great private equity success story and for positioning
Jagged Peak's shareholders for continued value creation in a very
tough macro energy environment. It's been an honor being your
partner."
Third Quarter Operational Update
Activity Overview
For the third quarter of 2019, Parsley expects net oil
production of 91.2-91.7 MBo per day, translating to 5-6%
quarter-over-quarter growth. During 3Q19, Parsley placed on
production 35 gross operated horizontal wells with an average
working interest of approximately 95% and an average completed
lateral length of approximately 10,000 feet. Parsley expects to
report third quarter capital expenditures of approximately
$315-325 million. Third quarter
development spending decreased relative to second quarter spending,
driven by lower well costs, fewer net completions, and
quarter-over-quarter decreases in facilities and infrastructure
spending.
Preliminary Pro Forma 2020 Outlook
- Parsley remains committed to a growing free cash flow profile
that returns capital to shareholders. Parsley continues to use a
$50 WTI oil price assumption for its
baseline capital budget in 2020.
- Parsley estimates that capital expenditures of $1.6-$1.9 billion
will translate to oil production of 126-134 MBo per day in 2020,
representing healthy year-over-year production growth. Both
production and capital expenditure range estimates assume a
full-year of contribution from Jagged Peak.
- Parsley plans to deploy 15 development rigs and four-to-five
frac spreads on average in 2020. Parsley anticipates five of its
development rigs will operate in the Delaware Basin, where Parsley has seen a
material reduction in well costs in 2019.
Governance and Leadership
The boards of directors at both Parsley and Jagged Peak have
unanimously approved the transaction, and recommended that their
respective shareholder groups approve the transaction.
Upon closing, Parsley's board of directors will be expanded to
eleven directors to include two members from the current Jagged
Peak board of directors. The combined company will be led by
Parsley's executive management team and will remain headquartered
in Austin, Texas.
Timing and Approvals
The transaction, which is expected to close during the first
quarter of 2020, is subject to customary closing conditions and
regulatory approvals, including the approval of Parsley and Jagged
Peak shareholders. Jagged Peak's controlling shareholder, Quantum
Energy Partners, which owns approximately 68 percent of the
outstanding voting shares of Jagged Peak, has committed to vote its
shares in favor of the transaction.
Advisors
Tudor, Pickering, Holt & Co is serving as exclusive
financial advisor to Parsley Energy, and Kirkland & Ellis LLP
is serving as Parsley's legal counsel. Citi and RBC Capital
Markets, LLC are serving as financial advisors to Jagged Peak and
Vinson & Elkins L.L.P. is serving as Jagged Peak's legal
counsel.
Conference Call Information
Parsley Energy will host a conference call and webcast on
Monday, October 14 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time, 7:00 a.m. Mountain Time). Participants should
call 877-709-8150 (United
States/Canada) or
201-689-8354 (International) ten minutes before the scheduled time
and request the Parsley Energy conference call. A telephone replay
will be available through October 21
by dialing 877-660-6853 (United
States/Canada) or
201-612-7415 (International). Conference ID: 13695703. A live
broadcast will also be available on the internet at
www.parsleyenergy.com under the "Investors-Events &
Presentations" section of the Parsley website and at
www.jaggedpeakenergy.com under the "News" section of the Jagged
Peak website. Each company has also posted a presentation to its
website that supplements the information in this release.
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.
About Jagged Peak Energy, Inc.
Jagged Peak Energy Inc. is an independent oil and natural gas
company focused on the acquisition and development of
unconventional oil and associated liquids-rich natural gas reserves
in the southern Delaware Basin, a
sub-basin of the Permian Basin of West
Texas.
No Offer or Solicitation
Communications in this news release do not constitute an offer
to sell or the solicitation of an offer to subscribe for or buy any
securities or a solicitation of any vote or approval with respect
to the proposed transaction or otherwise, nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
Additional Information for Shareholders
In connection with the proposed transaction, Parsley and Jagged
Peak intend to file materials with the Securities and Exchange
Commission ("SEC"), including a Registration Statement on Form S-4
of Parsley (the "Registration Statement") that will include a joint
proxy statement/prospectus of Parsley and Jagged Peak. After the
Registration Statement is declared effective by the SEC, Parsley
and Jagged Peak intend to mail a definitive proxy
statement/prospectus to the shareholders of Parsley and the
shareholders of Jagged Peak. This news release is not a substitute
for the joint proxy statement/prospectus or the Registration
Statement or for any other document that Parsley or Jagged Peak may
file with the SEC and send to Parsley's shareholders and/or Jagged
Peak's shareholders in connection with the proposed transaction.
INVESTORS AND SECURITY HOLDERS OF PARSLEY AND JAGGED PEAK ARE URGED
TO CAREFULLY AND THOROUGHLY READ THE JOINT PROXY STATEMENT AND THE
REGISTRATION STATEMENT/PROSPECTUS, AS EACH MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED
BY PARSLEY AND JAGGED PEAK WITH THE SEC, WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PARSLEY,
JAGGED PEAK, THE PROPOSED TRANSACTION, THE RISKS RELATED THERETO
AND RELATED MATTERS.
Investors will be able to obtain free copies of the Registration
Statement and joint proxy statement/prospectus, as each may be
amended from time to time, and other relevant documents filed by
Parsley and Jagged Peak with the SEC (when they become available)
through the website maintained by the SEC at www.sec.gov. Copies of
documents filed with the SEC by Parsley will be available free of
charge from Parsley's website at www.parsleyenergy.com under the
"Investors" tab or by contacting Parsley's Investor Relations
Department at (512) 505-5199 or IR@parsleyenergy.com. Copies of
documents filed with the SEC by Jagged Peak will be available free
of charge from Jagged Peak's website at www.jaggedpeakenergy.com
under the "Investor Relations" tab or by contacting Jagged Peak's
Investor Relations Department at (720) 215-3754 or
jedwards@jaggedpeakenergy.com.
Participants in the Proxy Solicitation
Parsley, Jagged Peak and their respective directors and certain
of their executive officers and other members of management and
employees may be deemed, under SEC rules, to be participants in the
solicitation of proxies from Parsley's shareholders and Jagged
Peak's shareholders in connection with the proposed transaction.
Information regarding the executive officers and directors of
Parsley is included in its definitive proxy statement for its 2019
annual meeting filed with the SEC on April
8, 2019. Information regarding the executive officers and
directors of Jagged Peak is included in its definitive proxy
statement for its 2019 annual meeting filed with the SEC on
April 10, 2019. Additional
information regarding the persons who may be deemed participants
and their direct and indirect interests, by security holdings or
otherwise, will be set forth in the Registration Statement and
joint proxy statement/prospectus and other materials when they are
filed with the SEC in connection with the proposed transaction.
Free copies of these documents may be obtained as described in the
paragraphs above.
Cautionary Statement Regarding Forward-Looking
Information
Certain statements in this news release concerning the proposed
transaction, including any statements regarding the expected
timetable for completing the proposed transaction, the results,
effects, benefits and synergies of the proposed transaction, future
opportunities for the combined company, future financial
performance and condition, guidance and any other statements
regarding Parsley's or Jagged Peak's future expectations, beliefs,
plans, objectives, financial conditions, assumptions or future
events or performance that are not historical facts are
"forward-looking" statements based on assumptions currently
believed to be valid. Forward-looking statements are all statements
other than statements of historical facts. The words "anticipate,"
"believe," "ensure," "expect," "if," "intend," "estimate,"
"probable," "project," "forecasts," "predict," "outlook," "aim,"
"will," "could," "should," "would," "potential," "may," "might,"
"anticipate," "likely" "plan," "positioned," "strategy," and
similar expressions or other words of similar meaning, and the
negatives thereof, are intended to identify forward-looking
statements. Specific forward-looking statements include statements
regarding Parsley and Jagged Peak's plans and expectations with
respect to the proposed transaction and the anticipated impact of
the proposed transaction on the combined company's results of
operations, financial position, growth opportunities and
competitive position. The forward-looking statements are intended
to be subject to the safe harbor provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act of
1995.
These forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those anticipated, including, but not limited to, the
possibility that shareholders of Parsley may not approve the
issuance of new shares of Parsley Class A common stock in the
transaction or that shareholders of Jagged Peak may not approve the
merger agreement; the risk that a condition to closing of the
proposed transaction may not be satisfied, that either party may
terminate the merger agreement or that the closing of the proposed
transaction might be delayed or not occur at all; potential adverse
reactions or changes to business or employee relationships,
including those resulting from the announcement or completion of
the transaction; the diversion of management time on
transaction-related issues; the ultimate timing, outcome and
results of integrating the operations of Parsley and Jagged Peak;
the effects of the business combination of Parsley and Jagged Peak,
including the combined company's future financial condition,
results of operations, strategy and plans; the ability of the
combined company to realize anticipated synergies in the timeframe
expected or at all; changes in capital markets and the ability of
the combined company to finance operations in the manner expected;
regulatory approval of the transaction; the effects of commodity
prices; the risks of oil and gas activities; and the fact that
operating costs and business disruption may be greater than
expected following the public announcement or consummation of the
proposed transaction. Expectations regarding business outlook,
including changes in revenue, pricing, capital expenditures, cash
flow generation, strategies for our operations, oil and natural gas
market conditions, legal, economic and regulatory conditions, and
environmental matters are only forecasts regarding these
matters.
Additional factors that could cause results to differ materially
from those described above can be found in Parsley's Annual Report
on Form 10-K for the year ended December 31,
2018 and in its subsequently filed Quarterly Reports on Form
10-Q, each of which is on file with the SEC and available from
Parsley's website at www.parsleyenergy.com under the "Investors"
tab, and in other documents Parsley files with the SEC, and in
Jagged Peak's Annual Report on Form 10-K for the year ended
December 31, 2018 and in its
subsequently filed Quarterly Reports on Form 10-Q, each of which is
on file with the SEC and available from Jagged Peak's website at
www.jaggedpeakenergy.com under the "Investor Relations" tab, and in
other documents Jagged Peak files with the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Neither Parsley nor Jagged Peak assumes any obligation to update
forward-looking statements to reflect circumstances or events that
occur after the date the forward-looking statements were made or to
reflect the occurrence of unanticipated events except as required
by federal securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
(1)
|
As used in this press
release, free cash flow, a non-GAAP financial measure, is defined
as cash flow from operations before changes in operating assets and
liabilities less accrual-based development capital
expenditures.
|
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SOURCE Parsley Energy, Inc.