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Upstream: Tax: Parsley Energy Inc.

Parsley Energy Inc. (Parsley), is an exploration and production company with operations in the Permian Basin and is based in Midland, Texas.  Opportune was engaged to assist Parsley through its initial public offering (IPO) process, including filing a registration statement on Form S-1 (S-1) with the Securities Exchange Commission (SEC).

Opportune’s transaction services and tax experts worked with the complex financial reporting team to coordinate the complex process of filing the S-1. The legal and tax nature of Parsley’s IPO vehicle would be a tax-paying C Corporation, however, not 100% of Parsley’s predecessor ownership interests would be contributed to the registrant in the IPO, as Parsley’s owners elected to employ the contemporary UP-C structure to enhance their yield on their investment.

Parsley needed to record the future tax liability of the members related to the portion of their interests contributed in the IPO, as those future taxes would be due by the new C Corporation.  Under tax law and accounting rules, the pre-IPO tax liabilities of Parsley’s shareholders as a private company must now be recorded as liabilities of the registrant. Opportune calculated the amount and made the appropriate adjustments and disclosures in the S-1.  In the end, a liability of $100 million was recorded on the initial S-1 for Parsley.  Opportune’s team then communicated the tax complexities and their related financial reporting treatment to the various stakeholders for their understanding.

Opportune provides comprehensive tax solutions for businesses that require strategic or tactical tax support. Our seasoned professionals combine sound, innovative and adaptable ideas with the pragmatism that comes from having been on both sides of the desk — in both corporate and consulting roles. We develop creative solutions that drive performance while mitigating enterprise risk. For additional information, click here.