In an effort to boost oil production, Permian pure-play operator Parsley Energy Inc. increased its capital expenditures (capex) budget and plans to drill more wells in 2016.

The Austin, TX-based company reported production of 25,207 boe/d (63% oil) in 4Q2015, a 38.3% increase from the previous fourth quarter (18,228 boe/d). For the full-year 2015, Parsley had average production of 22,003 boe/d (60% oil), a 54.9% increase from 2014 (14,207 boe/d).

Parsley said it expects production to average 30,000-33,000 boe/d in 2016, with 65-70% oil. It plans to spend $380-430 million on capex, an increase from the $225-250 million it planned to spend in 2015 (the company reported that it actually spent $401 million). The newest capex budget includes $330-370 million for drilling and completion costs, and $50-60 million for infrastructure and other expenses.

The company said it plans to have 60-70 gross horizontal completions in 2016 — 57-65 in the Midland Basin, and three to five in the Delaware Basin. It also plans three to six vertical completions. The horizontal wells would have an average lateral length of 7,000 feet.

“Looking ahead, enthusiasm is tempered at a time like this, but we continue to believe we have a lot to look forward to this year,” CEO Bryan Sheffield said during an earnings call Thursday. “Based on current strip prices, our plan is to continue to drill and complete at a steady clip. Operational momentum is an elusive phenomenon that we’re keen to maintain.”

Sheffield said the company has a durable inventory of drilling locations (2,975 gross, 2,457 net) across the Middle and Lower Spraberry formations, the Wolfcamp A, B and C intervals, the Cline Shale, and the Atoka Formation. He added that the company also bolstered its balance sheet. Pro forma for the more than 5,000 undeveloped net acres it acquired in the Permian last December (see Shale Daily, Dec. 10, 2015), Parsley had $195 million of cash on hand, $770 million of liquidity and a net debt to annualized adjusted EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration expenses) ratio of 1.5x. Anticipated oil volumes are also fully hedged in 2016.

“Our hedging program and capital markets activity have been sized to allow us to drill through a downturn of the magnitude and duration we are experiencing without moving outside of our leverage and liquidity comfort zones,” Sheffield said. “These decisions bought us time. If oil prices are still plodding along in a few months, we will re-evaluate. But for now, this is an opportunity for us to stay a step ahead.”

Parsley lauded the performance of two wells — Trees State 16-1H and Skaggs 8-2808H — its first wells in the Southern Delaware Basin and the Lower Spraberry, respectively.

The company said the Trees State well, which it operates, achieved 30-day initial production (IP) of 1,151 boe/d, using a 4,562-foot lateral. That equates to a production rate of 252 boe/d per thousand completed feet, a rate tied for the company’s second-highest scaled 30-day peak rate. Parsley noted that a second, non-operated well — Cilantro 2524-C31H, which was drilled in the northwest corner of the company’s acreage position in the Southern Delaware Basin, generated a 30-day IP rate of 1,501 boe/d, using a 8,279-foot lateral, or 181 boe/d per thousand completed feet. Both the Trees State and Cilantro wells are targeting the Upper Wolfcamp formation.

Meanwhile, the Skaggs wells achieved a 30-day IP rate of 585 boe/d, using a 5,049-foot lateral. That equates to 116 boe/d per thousand completed feet.

“Given these results and the exploratory work we’ve done, we think the value of this asset is substantial,” said COO Matt Gallagher. “It’s a large continuous block that’s ideally suited for long lateral development, and just like in the Midland Basin, we’ve been high grading in the Southern Delaware.

“We’ve picked up some acreage in the area while letting go of a small portion of our acreage that came up on the Central Basin Platform. At this point, 99% of our Southern Delaware acreage is secured through 2018, so explorations aren’t on the horizon.”

Parsley reported an adjusted net loss of $3.5 million (minus two cents/share) for 4Q2015, and an adjusted net loss of $25.5 million (minus 18 cents/share) for the full-year 2015. Adjusted EBITDAX was $58.2 million for 4Q2015 (up 10.2% from 4Q2014, $52.8 million), and $195.4 million for the full-year 2015 (down 5.6% from 2014, $207.1 million). Parsley held an initial public offering in May 2014 (see Shale Daily, May 23, 2014).