Parsley Energy Is Latest Fracking Company To Hit Pay Dirt In IPO

Another shale-energy company hit pay dirt with an initial public offering.

Parsley Energy Inc.(PE) opened higher Friday after the Midland, Tex.-based oil driller and some of its early shareholders sold more shares than planned at a higher price than expected in an IPO. The shares jumped 19% in morning trading.

Not that kind of parsley. Bloomberg News

Parsley and the existing holders sold 50 million shares for $18.50 each, raising $925 million before the potential sale of additional shares to underwriters. That topped Parsley's expectation for a 43.9 million-share offering fetching between $15 and $18 a share, according to a regulatory filing.

The stock was trading at $21.95 minutes after its debut Friday morning.

It's been a rather energy-heavy IPO calendar this year. That's little surprise given the strong showing for shares of such companies, particularly among those applying hydraulic fracturing—or fracking—to extract oil and gas from shale so-called rock formations. Parsley Energy drills shale formations in the Permian Basin area in Texas.

Producers focused on hot shale regions have been in vogue among investors of late, said Bill Costello, portfolio manager at Westwood Holdings Group Inc.(WHG), which manages about $19 billion.

"It's the flavor of the day," he said. "It's easy to understand—you're in one basin, in one play, it's repeatable."

It also helps, he said, that Parsley and similar companies "are very fast-growing."

Even before Parsley's debut, oil and gas "exploration and development" companies—essentially, the industry term for drillers—had raised $2.2 billion in U.S.-listed IPOs this year. That's 9% of the overall deal volume, the category's highest share since 2001.

Rice Energy Inc.(RICE) has rallied 44% since its $1.1 billion January IPO through Thursday. RSP Permian Inc.(RSPP) has gained 42% since debuting the same month. This year's other E&P IPO, EP Energy Corp.(EPE), is off 1.9% since it went public in January.

The drillers considered to be Parsley's closest peers include Diamondback Energy Inc.(FANG), which has seen its shares rally 38% so far this year through Thursday. Athlon Energy Inc.(ATHL), another similar company, is up 43% this year and 116% since its August IPO.

"Their acreage is definitely in the sweet spot," Westwood's Mr. Costello said of Parsley. He sought an allocation in the IPO. As for the prospect for further shale energy-industry IPOs this year, "we've exhausted some of it but I think there's more to come," he added.

Parsley Energy is trading on the New York Stock Exchange under the symbol “PE.”  Credit Suisse Group AG led the offering with Goldman Sachs Group Inc.