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- The 35% drop in PXD over the past 6 months is an opportunity for investors.
- PXD is growing production by nearly 20%, but with a well-timed stock sale and planned divestiture, PXD should be cash positive next year.
- Its hedge profile also partially insulates PXD from lower oil.
- PXD is a compelling value compared to its 11 billion barrel resource potential.
- With the strength to withstand low prices in the near term and a massive long term asset base, PXD is attractive here.
Pioneer Natural Resources: A Reasonable Choice For An Energy Play
- Pioneer is well positioned to weather the low price environment.
- PXD has an extremely prudent 2-year hedging program, surpassing many competitors.
- A stellar balance sheet and a pending midstream asset sale in the Eagle Ford are clear strengths.
Pioneer Natural Resources: Market May Be Ignoring 3 Key Offsets To Drop In Oil Prices
- Diversification and hedging will offset a substantial portion of the short-term impact of the recent drop in oil prices.
- Macroeconomic data suggests oil prices will rebound in 2015.
- PXD has a lower cost structure than its peers.
- Pioneer raised $1 billion in a new equity offering designed to scale up infrastructure and cost efficiencies for the long haul.
- Pioneer's production forecasts have remained largely unchanged.
- Pioneer's seemingly defensive moves also are really smart offensive maneuvers.
- The magnitude of the Spraberry/Wolfcamp shale infrastructure build out is compared to that of the Alaskan North Slope efforts.
Fundamentals Of Pioneer, The Permian Basin And Oil Prices
- Leading oil producers continue to see their stocks decline.
- Fundamentals point to possible market overreaction.
- Producers are not panicking, just markets.
- "Holding the fort" may be the best investor strategy, if one is able.
Update: Pioneer Sale Potential In Eagle Ford Is JV Partner's Interest
- Bloomberg noted Pioneer's willingness to sell Eagle Ford assets for $4-4.5 billion; this news has been corrected to reflect JV partner Reliance's interests, not Pioneer's.
- Industry oil production and E&P re-organizations are combining for interesting opportunities.
- Pioneer Eagle Ford production was 47,000 boe p/d in the second quarter, up from 43,000 in the first quarter.*.
Pioneer Natural Resources Will Benefit From Production Growth
- During the second quarter of 2014, Pioneer was able to beat its own production guidance primarily due to the successful increase of its horizontal drilling program.
- The company also plans to double the number of wells from 68 in the first half of 2014 to 125 wells in the second half of the current year.
- The increased operational efficiency coupled with management’s commitment to drill more wells means the company has revised the lower side of its production guidance.
- Given the fact that the company has also allocated 63 percent of its $3 billion capital budget to its horizontal drilling program.
- In addition, the company stands to benefit from the recent export approval by the U.S. Department of Commerce.
Pioneer Natural Resources - Great Potential, But What About The Recent Revenue Shortfall And Hedging Losses?
- Pioneer Natural Resources posted disappointing second-quarter results.
- While results are typically volatile, hedging losses appear quite large, bigger than should be expected.
- While I see the long-term potential, I am still left with many valuation questions to be answered.
Don't Underestimate The Condensate: Pioneer's Holistic Rich-Liquids Model
- The condensates export allowed for Pioneer were little appreciated by the market.
- Pioneer's holistic approach and vertical integration is becoming more in focus, and an identifiable source of value.
- Other upstream and midstream firms will benefit from Pioneer's leadership in the condensate space.
Pioneer Natural Resources: 12 Different Insiders Have Sold Shares This Month
- 12 insiders sold Pioneer stock within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- 4 of these 12 insiders decreased their holdings by more than 10%.
Exporting Crude Oil: A Short-Tem Windfall And A Long-Term Question Mark For Pioneer Natural Resources
- Wall Street Journal reports that U.S. Department of Commerce will allow Pioneer Natural Resources (PXD) to export crude oil. White House denies any change to ban on crude oil.
- Exemption to oil export ban would allow PXD to capitalize on the significant spread between price of domestic and foreign crude oil.
- Department of Commerce's action is a short-term windfall for PXD.
- Long-term implications to PXD of lifting the ban on exporting oil depends on whether investors and refiners still view expanding refineries' capacity as attractive.
Federal Approval Of Condensate Exports By Pioneer And Enterprise Products Should Give Eagle Ford E&P Companies A Lift
- The US Department of Commerce ruled June 25, 2014 to allow PXD and EPD to export condensates (an ultra light crude oil).
- This should mean greater profits for PXD and EPD.
- PXD produces about 43,000 boepd of condensates. EPD is a midstream company that can export directly or use its splitters to refine condensates beforehand.
- What other effects will there be?.
Permian Basin's Robust Growth Also Means Managing Gas, Water For Pioneer
- Pioneer Natural Resources continues to reveal more Permian Basin upside.
- Its vertical integration strategy indicates support for robust production.
- Pioneer's transparency about all aspects of production are likely helping other peers and their valuations.
- Pioneer’s stock had a great run since 2009.
- The company has experienced strong production growth.
- However, the stock is currently rich in value and due for a pullback.
- I would consider it a buy at a better valuation, since strong production growth is expected to continue.
Shale Oil Outlook: Fundamentals And Permian Growth
Fri, Dec. 5, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, APC, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, COP, XOM, FST, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Wed, Dec. 3, 11:32 AM
- The energy sector (XLE +1.5%) continues its momentum from yesterday, leading the way again as the best performing sector in early trading with crude oil rising 1.2% so far today and reports that U.S. well permits fell 40% last month.
- Top performers include Clayton Williams (CWEI +7.7%), Transocean Partners (RIGP +10.6%), Gaslog (GLOG +13.8%) and Energy XXI (EXXI +15.7%).
- Other leading energy names are showing stronger recoveries as they clear last Friday's bearish gap zone: XOM +0.2%, CVX +0.4%, COP +2.5%, OXY +2.5%, DVN +2.9%, EOG +2.5%, HES +2.2%, MUR +1.5%, NBL +2.3%, PXD +4.2%, SU +3%, CNQ +1.9%.
- Some analysts warn that the worst may not be over, however, as much of the advance is being driven by investors repurchasing ETFs they used to make short bets; investors also could opt to sell oil shares at a loss in coming weeks to reduce tax burdens.
Fri, Nov. 28, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Mon, Nov. 17, 3:59 PM
- In the wake of Halliburton's (NYSE:HAL) $34.6B offer for Baker Hughes (NYSE:BHI), it appears the next hot sector for M&A action is energy: More consolidation is likely, given the weakness for stocks in the oilfield services subsector, low interest rates, and as a drop in demand for oil increases cutthroat pricing competition.
- Speculation is running rampant as investors try to figure out who is next in an industry that is sure to undergo some more consolidation; some names identified as possible candidates include Kodiak Oil and Gas (NYSE:KOG), Marathon Oil (NYSE:MRO), Northern Oil and Gas (NYSEMKT:NOG), Anadarko Petroleum (NYSE:APC), Pioneer Natural Resources (NYSE:PXD).
- GE could go after National Oilwell Varco (NYSE:NOV) to show it is serious about the energy industry after last year’s purchase of pumpmaker Lufkin, Royal Bank of Canada says, and Oppenheimer says even BP could be an acquisition candidate.
- But Morgan Stanley does not see offshore drillers getting in on the action, as larger players like Diamond Offshore (NYSE:DO), Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL) are still addressing dividend concerns while smaller companies such as Atwood Oceanics (NYSE:ATW) and Pacific Drilling (NYSE:PACD) still trade close to replacement value.
Wed, Nov. 12, 6:45 PM
- Whether or not there is an oil "price war," the U.S. shale industry is flinching only a little, essentially committing to concentrate their efforts where they will be most effective rather than admit defeat, according to an FT report.
- To be sure, activity is starting to slow: Continental Resources (NYSE:CLR), Rosetta Resources (NASDAQ:ROSE) and ConocoPhillips (NYSE:COP) are among leading shale oil companies that have announced reductions in their capital spending plans, and EOG suggested as much last week when it said it would make sure its capital spending plus dividend payments were in line with the cash flow it has coming in.
- If statements from shale industry leaders are even broadly accurate, oil prices may have to go much lower before U.S. oil production starts to fall; EOG CEO William Thomas says that even if oil fell to $40, his company could still earn a 10% return in some areas, such as the Bakken and Eagle Ford.
- Although they may be drilling less than they had expected, oil companies also will focus on maximizing production from the rigs they are already using, which encourages continued expectations for output growth from the likes of Devon Energy (NYSE:DVN), EOG, CLR and Pioneer Natural (NYSE:PXD).
Tue, Nov. 11, 11:26 AM
- A new report from J.P. Morgan says hammered stocks in the energy exploration and production sector may have bottomed, even if the price of oil hasn’t yet.
- JPM says investors looking to buy energy stocks should buy the E&P names with operational momentum and strong balance sheets, including Anadarko Petroleum (NYSE:APC) and EOG Resources (NYSE:EOG), which the firm sees as potential takeover candidates.
- The firm also likes Noble Energy (NYSE:NBL), Pioneer Natural Resources (NYSE:PXD) and Cimarex Energy (NYSE:XEC).
Wed, Nov. 5, 8:32 AM
- Pioneer Natural Resources (NYSE:PXD) -4.2% premarket after announcing plans to sell its Eagle Ford Shale Midstream venture with India’s Reliance Industries (OTC:RLNIY); the two companies will sell their stakes in a joint process.
- PXD says the divestment will allow it to redeploy capital to its core oil-rich Spraberry/Wolfcamp assets in the Permian Basin of west Texas.
- Based on a $100M cash flow estimate from the Midstream venture for next year, PXD's interest could be valued as high as $1.2B.
- PXD says it is not selling its Eagle Ford exploration business it owns with Reliance, in which PXD holds a 46% stake, Reliance 45%, and Newpek LLC the remaining 9%.
- Separately, PXD said Q3 earnings rose to $2.58/share from $0.65 a year earlier, and announces plans to sell 5.75M common shares in a public offering.
Tue, Nov. 4, 4:27 PM| Comment!
Tue, Oct. 14, 3:31 PM
- Global growth, foreign-exchange, oil, and small caps are the subject of every client inquiry, says David Kostin. His team's recommendation: Buy "American exceptionalism."
- In Kostin's view, U.S. economy and corporate fundamentals are still strong, with economic growth expected by Goldman economists to be 3.2% next year, the fastest expansion since 2005. Europe is expected to grow just 1%.
- What his team likes are those stocks of companies which have a high proportion of domestic sales, plus sectors like Consumer Staples (XLP -0.1%) and Discretionary (XLY +0.7%) which stand to benefit from lower oil prices (plunging again today).
- As for small caps (IWM +0.9%), Kostin is wary, noting downward earnings revisions have boosted small cap P/E ratios even as prices have declined.
- The list of S&P 500 names capturing two or more of Kostin's themes: GT, GM, PCLN, AMZN, CMCSA, LOW, DG, TSN, ADM, CVS, AVP, WAG, PXD, HAL, JPM, BAC, SCHW, PNC, MS, C, GNW, LNC, MET, THC, AET, UNH, ESRX, HUM, WLP, BIIB, GILD, DAL, CMI, FLR, CRM, JBL, MA, FB, MU, FSLR, VMC, MON, T.
Fri, Oct. 10, 6:34 PM
- India's Reliance Industries (OTC:RLNIY) is seeking a buyer for its stake in the Eagle Ford Basin oil and natural gas joint venture with Pioneer Natural Resources (NYSE:PXD), a sale that could raise up to $4.5B, Reuters reports.
- PXD is the operator of the wells in the JV, which could complicate the sale process; it owns 46% of the venture and sold a 45% interest to Reliance for $1.2B in 2010.
- The property for sale produces 115K boe/day, with 60% of the production in liquids rather than gas.
Wed, Oct. 8, 8:10 AM
- Pioneer Natural Resources (NYSE:PXD) is pushing forward with a sale of its oil and gas operations in the Eagle Ford shale which could fetch $4B-$4.5B, Bloomberg reports.
- It would be the second time PXD has sought to sell the assets, and it appears to have lowered its price expectations from the $5B or more the company was seeking earlier this year.
- PXD is said to be working with Citigroup and Tudor Pickering Holt to find buyers for the assets.
Tue, Sep. 30, 10:34 AM
- The positive market reaction following Encana's deal for Athlon Energy and other recent transactions may put pressure on inventory short majors and other large-cap companies to pursue M&A activity to increase their quality inventory in the U.S. onshore market, according to a UBS report.
- UBS lists six top potential targets, some of which already are swirling in the rumor mill, including Pioneer Natural Resources (NYSE:PXD), with its own fracking fleet and huge Midland Basin play making it a very attractive but expensive target.
- The firm's other five top M&A candidates: COG, CXO, OAS, RRC, WLL.
Mon, Sep. 29, 4:36 AM
- Pioneer Natural Resources (NYSE:PXD) expects to double its U.S. exports of condensate to 50K barrels per day next year.
- The U.S. shale resources explorer, along with Enterprise Product Partners (NYSE:EPD), received permits in June to export the ultra-light oil, after the country eased its 40-year ban on oil exports.
- Pioneer sells condensate from its Eagle Ford shale site to Enterprise, which markets the oil to foreign buyers.
Wed, Sep. 24, 11:59 AM
- A new research note from the Credit Suisse energy team points out that West Texas crude oil could drop into the low $80s, but the top companies in the booming Permian Basin have the ability to continue to make money, and they have sold off dramatically.
- Leading the firm's top five Permian picks is Diamondback Energy (FANG -1.6%), a strong performer despite the selloff; FANG's average well produces 80%-90% liquids, which results in high margins, and the company could be a potential takeover candidate given its high quality assets in west Texas.
- Credit Suisse also likes Athlon Energy (ATHL -0.3%), Concho Resources (CXO +0.1%), Pioneer Natural Resources (PXD -0.8%) and Cimarex Energy (XEC +0.2%).
Wed, Sep. 24, 10:33 AM
- Occidental Petroleum (OXY +0.6%) is added to the US 1 List at BofA/Merrill with a $130 price target, saying OXY's combination of share repurchases, competitive debt adjusted per share growth and a prospective sector leading dividend above ~4% can drive a re-rating over the next 12 months.
- BofA sees OXY using proceeds from asset sales for buying back as much as 13% of its outstanding shares, as well as posting another year of strong dividend growth, perhaps serving as a catalyst to bring OXY in line with other large-cap dividend stocks.
- Pioneer Natural Resources (PXD -0.8%) is removed from the US 1 List.
Wed, Sep. 17, 2:32 PM
- Investors have been lulled by a lack of volatility, but October is on the way, reminds Goldman, and it's time to buy options (volatility) on a number of companies where the market has yet to price in event risk.
- "On average since 1928, October realized volatility has been 19 vs 15 for all other months," say the Goldman team of John Marshall and Katherine Fogertey. "In recent years, October volatility has been even higher and even more of a standout."
- Bristol-Myers Squibb (NYSE:BMY), Dish Network (NASDAQ:DISH), Intel (NASDAQ:INTC), Ford (NYSE:F), J.C. Penney (NYSE:JCP), and Pioneer Natural Resources (NYSE:PXD) are all names, they say, that have key events in October for which the options market has not priced in elevated volatility.
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