Update: Pioneer's Participation In Condensate Exports, And Mexico?
- The allowing of condensate exports for all producers is a bonus to a select group of producers when good news has been hard to find.
- The interim step of condensate exports may further open the door to lifting the crude oil export ban, in which Pioneer is a leading voice.
- As an Eagle Ford heavy weight (and Permian too), Pioneer's intrinsic value is starting to shine once again.
Liquidity And Hedging: Reasons To Be Bullish On Pioneer Natural Resources
- Pioneer Natural Resources is likely to generate $1 billion in cash from the potential mid-stream asset sale.
- 85% of the company's 2015 production is hedged at $73.54 per barrel and this will ensure that OCF remains robust.
- Current financial flexibility allows for robust asset development in 2015 even at current oil prices.
- 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.
Wed, Jan. 21, 3:59 PM
- Credit Suisse thinks it is still too early to buy E&P equities but the picture should brighten by late in Q1, when the firm suggests the time could be right to make a play for the strong balance sheets offered by the likes of Anadarko Petroleum (NYSE:APC), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Marathon Oil (NYSE:MRO) and Pioneer Natural Resources (NYSE:PXD).
- E&P stocks historically have been highly anticipatory, the firm says, with the stocks moving ahead of crude oil, adding that the key leading indicator of U.S. drilling and completion activity is U.S. drilling permits.
Thu, Jan. 15, 3:39 PM
- Eagle Ford pipeline operator EFS Midstream, owned by Pioneer Natural Resources (PXD +0.1%) and Reliance Industries, has attracted bids from Enterprise Products Partners (EPD +1.4%), Energy Transfer Equity (ETE -1.2%) and Williams Cos. (WMB +0.4%), Bloomberg reports.
- EFS has 460 miles of pipelines and 10 gathering plants, and is forecast to generate more than $100M in cash flow this year; the unit would be expected to sell for more than $3B, according to the report.
Tue, Jan. 13, 3:23 PM
- J.P. Morgan's Joseph Allman is “mildly bullish” on oil and gas E&P companies in 2015, as short-term nervousness about the oil market’s oversupply is outweighed by the benefits of low oil prices, declining service costs and a more balanced oil market.
- Allman’s favorite picks among big-cap names are EOG, APC and NBL, among mid-caps are XEC and PXD, plus PDCE in the small-cap space; his least favorite stocks are APA, AREX, GDP and JONE.
- Among majors, JPM analysts Phil Gresh and John Royall initiate SunCor (NYSE:SU) at Overweight, citing "top tier sustainable dividend coverage and leverage, with some underlying growth potential"; the pair also downgrade Cenovus (NYSE:CVE) to Neutral, tags ConocoPhillips with an Underweight rating, and are neutral on Exxon (NYSE:XOM) and Chevron (NYSE:CVX).
- Earlier: Valero Energy upgraded, Marathon Petroleum downgraded at J.P. Morgan
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, DIG, DUG, IYE, IEO, PXE, FENY, PXJ, RYE, FXN, DDG
Tue, Jan. 13, 12:47 PM
- Traders smelling blood - or oil - in the water have piled into shorts against energy E&P companies, with short interest jumping a total of 12% for the final two weeks of 2014, according to Sterne Agee analysts using NYSE data.
- Oasis Petroleum (NYSE:OAS) led a 45.9% jump in short interest, followed by Pioneer Natural Resources (NYSE:PXD) with a 45.2% increase and Chesapeake Energy (NYSE:CHK) short growth of 31.9%.
- Sterne Agee energy analyst Tim Rezvan thinks the shorts are on the right side of the oil trade for the foreseeable future, believing a break below $40/bbl "wouldn't be a surprise in the short term."
- Short positions did not increase for all companies, as short growth fell for Viper Energy Partners (NASDAQ:VNOM), Callon Petroleum (NYSE:CPE), Energen (NYSE:EGN) and PetroQuest Energy (NYSE:PQ), among others.
Mon, Jan. 12, 3:17 PM
- Goldman Sachs upgrades a few energy stocks even as it cast a pall of gloom over most of the sector today (I, II, III), raising Chesapeake Energy (CHK -3.6%) to Buy from Neutral and Parsley Energy (PE -4.2%) to Neutral from Sell as potential "shale sale" winners.
- Despite PE's relative vulnerability to lower oil prices because of its weak balance sheet and negative projected free cash, Goldman has more confidence that its core Permian Basin position makes it an attractive M&A target.
- Among potential "shale scale" winners - companies that either can build positions in the core and reduce costs of capital - the firm's favorites remain EOG Resources (NYSE:EOG), Range Resources (NYSE:RRC), Pioneer Natural Resources (NYSE:PXD), Cabot Oil & Gas (NYSE:COG) and Concho Resources (NYSE:CXO).
- However, Goldman cuts Bill Barrett (BBG -8.3%) to Sell from Neutral, seeing greater downside risk to its production in a lower oil price environment, and lowers Eclipse Resources (ECR -1.5%) to Neutral from Buy due to a persistently wide funding gap through 2017 coupled with a weak balance sheet.
Wed, Jan. 7, 3:58 PM
- More icy weather is expected this week in the Permian Basin of Texas, after last week's hard freeze that snarled truck traffic, caused power outages and disrupted oil and gas work.
- Apache (APA -1.1%), a leading Permian oil producer, said today it suffered a modest impact from the freezes, while Pioneer Natural Resources (PXD -1.1%) said yesterday severe winter weather had disrupted its production and drilling operations in the Permian.
- Energy intelligence service Genscape says lost output last week in the Permian amounted to ~2.3M barrels.
Wed, Jan. 7, 12:59 PM
- Pioneer Natural Resources (PXD -1%) trades modestly lower after news that it has converted 85% of its 2015 derivatives contracts from primarily three-way collars to fixed-price swaps that cover oil production at an average price of $71.18/bbl.
- Three-way collars essentially allow oil producers to ensure they will get paid prices within a certain range for their product as long as prices stay above a specific floor; such a strategy can make sense, but it is "less than an ideal strategy” when prices are falling rapidly, writes Mercatus Energy Advisors in an analysis of the technique.
- PXD is defended at Howard Weil, however, which sees the change as a proactive move as oil volumes continue to grow as a percentage of overall production; the firm estimates that at current strip prices, PXD is receiving a benefit of ~$0.56/share to FY 2015 earnings by implementing its new hedge position (Briefing.com).
Tue, Jan. 6, 4:38 PM
- Pioneer Natural Resources (NYSE:PXD) -3.2% AH after saying severe winter weather in west Texas has significantly disrupted production and drilling operations in the Spraberry/Wolfcamp area; PXD expects an extensive recovery period, with several weeks needed before the full impact can be determined.
- The area suffered from heavy icing and freezing temperatures at the start of January that has resulted in extensive power outages, facility freeze-ups, trucking curtailments and limited access to production and drilling facilities; Q4 production was not affected.
- Separately, PXD says it has converted ~85% of its 2015 oil derivative contracts from three-way collars to fixed-price swaps, and its 2015 fixed-price oil swaps cover 82K bbl/day of production at an average of $71.18/bbl.
Dec. 31, 2014, 2:48 AM
- The U.S. Bureau of Industry and Security said it will allow companies to sell oil condensate that has been processed through a basic distillation tower, giving them a green light for export without violating a four decade old ban.
- The agency also published a list of answers to common questions about crude exports, providing guidelines for the first time on an area that has been blanketed in confusion, although many are saying there is still a lot of room for interpretation.
- Previously: U.S. gives silent okay to condensate exports (Dec. 30 2014)
- Related tickers: PXD, EPD, BHP, PSX, KMI, ETP, RGP, CVX
Dec. 30, 2014, 8:13 AM
- The U.S. Commerce Department is telling some oil companies that they should consider exporting condensate without formal permission, Reuters reports.
- Officials familiar with the law said the agency's discussions did not represent a change in policy since self-classification is allowed under U.S. export controls.
- Despite the policy, Pioneer Natural Resources (NYSE:PXD) and Enterprise Products Partners (NYSE:EPD) obtained explicit permission from the agency to export in June, while last month BHP Billiton (NYSE:BHP) became the first company to announce that it would export condensate without authorization from the government.
- Related tickers: PSX, KMI, ETP, RGP, CVX
Dec. 22, 2014, 10:45 AM
- Natural gas prices fall 9.5% to near two-year lows at $3.133/mmBtu, in the biggest one-day percentage loss since February and the lowest intraday price since January 2013, on mild weather forecasts and inventory that is above year-ago levels.
- Prices are now down more than 15% in three straight losing sessions and are 30% lower than the six-month high closing price of $4.489/mmBtu it hit just a month ago.
- Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low stockpiles to catch up to where they were a year ago and encouraging traders to sell based on the belief that supply is relatively healthy.
- Gas producers are among the biggest early decliners: XOM -1.1%, CHK -7.3%, APC -2.6%, SWN -6%, DVN -2.2%, COP -2.3%, BP -1.5%, COG -4%, BHP -1.9%, CVX -1.3%, ECA -5.1%, EQT -4.3%, RDS.A -1.7%, UPL -12%, WPX -6.9%, EOG -1%, OXY -1.1%, RRC -6.1%, APA -2.3%, AR -3.2%, CNX -3%, QEP -4.8%, LINE -4.9%, NBL -1.6%, SM -2.6%, XEC -4.2%, PXD -2.9%, NFX -5.1%.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, NAGS, DCNG
Dec. 5, 2014, 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, COP, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, XOM, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Dec. 3, 2014, 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.
Nov. 28, 2014, 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
Nov. 17, 2014, 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.
Nov. 12, 2014, 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).
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