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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, 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.
Mon, Sep. 8, 6:43 PM
- The energy sector has seen little M&A activity despite a growth shortfall and cheap borrowing rates, but UBS analysts think a focus on incremental returns may lead to less exploration and more deals as resource prices on the market have fallen.
- The firm figures four large-cap E&P companies - Anadarko Petroleum (NYSE:APC), EOG Resources (NYSE:EOG), Marathon Oil (NYSE:MRO) and Pioneer Natural Resources (NYSE:PXD) - could prove tantalizing acquisition targets, but the buyer likely would need very deep pockets.
- In the case of EOG, UBS says the company's strong position in the three biggest tight oil plays - the Eagle Ford, Bakken and Permian - make it a perfect fit for an integrated major looking to expand in those areas.
Mon, Sep. 8, 12:32 PM
- The day's five biggest decliners in the S&P 500 are all energy companies - Newfield Exploration (NFX -5.6%), EOG Resources (EOG -3.6%), Anadarko Petroleum (APC -2.9%), Cimarex Energy (XEC -3.3%) and Pioneer Natural Resources (PXD -3.4%) - as crude oil prices slide to new lows, including Brent crude's first move below $100/bbl in more than a year.
- Brent crude dropped $1.12, or 1.1%, to $99.70/bbl after falling to as low as $99.36, a 16-month low, while U.S. crude slipped more than a percent to below $92 after settling at $93.29 on Friday for its sixth weekly drop in seven.
- Traders are concerned crude demand won't keep up, with data from the U.S. and China, the world's top oil consumers, suggesting their economies aren't growing as quickly as had been hoped.
- ETFs: USO, OIL, UCO, SCO, XOP, BNO, DTO, DBO, IEO, CRUD, PXE, USL, DBE, UWTI, DWTI, DNO, RJN, SZO, OLO, JJE, ONG, RGRE, OLEM, UBN
Wed, Sep. 3, 3:27 PM
- Pioneer Natural Resources (PXD +0.5%) says it is in negotiations with foreign buyers to sell condensate, which the company produces and has authority to export.
- The oil previously was sold at ~$15/bbl below U.S. crude oil prices, but PXD CEO Scott Sheffield says prices for the historically discounted grade have significantly improved since PXD and Enterprise Product Partners (NYSE:EPD) were licensed to export the condensate.
- Sheffield says PXD already has exported two cargoes, one to South Korea and another to Europe.
Wed, Aug. 20, 4:38 PM
Thu, Aug. 7, 11:58 AM
- Technological improvements will allow energy companies to scrape more crude out of the ground and drive U.S. oil production as high as 14M bbl/day, Pioneer Natural Resources (NYSE:PXD) CEO Scott Sheffield says.
- The industry may not discover any more elephant fields, but operators will continue to find new opportunities in conventional plays, the CEO says, noting the industry is pursuing new techniques for boosting the recovery rate at wells up from the 2%-3% common today.
- Only lower oil prices can stop the upward march in U.S. production, Sheffield adds, warning that a price collapse for domestic West Texas Intermediate crude would cause “a tremendous turndown.”
- ETFs: XLE, ERX, VDE, OIH, ERY, XOP, DIG, DUG, IYE, IEO, PXE, PXJ, FENY, RYE, FXN, DDG
Tue, Aug. 5, 2:48 PM
- Pioneer Natural Resources (PXD -5%) is defended by Goldman Sachs analyst Brian Singer, who maintains a Buy rating on the shares and lifts his price target to $266 from $257 after a "noisy" Q2 but with 2015 growth on track.
- While total production beat expectations, oil was lighter as vertical Permian wells that were returned to production at flush rates in Q1 declined in Q2; oil comprised 63% of Permian production vs. 68% in Q1, but the firm views the 67% 2013 average as more normal and expects an oilier mix as horizontal growth rises.
- The firm remains confident in PXD's growth, with H2 ramp-up the first key test; PXD raised its 2014 production growth to 16%-19% from 14%-19% and maintained its three-year compound annual growth rate at 16%-21%, warranting a double-digit multiple.
Tue, Aug. 5, 8:39 AM
- Pioneer Natural Resources (NYSE:PXD) says its first cargo of Eagle Ford condensate was exported in late July following confirmation from the Commerce Department that the ultra-light oil could be exported without a license if processed minimally.
- PXD says its monthly condensate shipments are expected through year-end at prices higher than domestic levels, adding that Asian petrochemical demand for the Eagle Ford shale condensate is growing.
Mon, Aug. 4, 5:15 PM
- Pioneer Natural Resources (NYSE:PXD) agrees to sell its Hugoton and Barnett Shale assets for ~$495M, part of its move to focus on its oil-related Spraberry/Wolfcamp assets in the Permian Basin in west Texas.
- Linn Energy (NASDAQ:LINE) is buying PXD's Hugoton Shale assets for $340M, while an unnamed private company is buying the Barnett Shale assets for ~$155M.
- LINE says its acquisition in the Hugoton Shale would make it the largest producer in the field, as it would acquire ~235K net acres, all held by production, with ~1,200 producing wells; meanwhile, LINE is selling its rights to the Woodford and Meramec horizons in the STACK play on ~26K undeveloped acres in the Anadarko Basin for ~$90M.
- Earlier: Pioneer Natural Resources beats by $0.07, misses on revenue.
Mon, Aug. 4, 4:14 PM| Comment!
Sun, Aug. 3, 5:35 PM
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Tue, Jul. 29, 12:58 PM
- The U.S. reportedly has put on hold two companies’ requests for permission to sell condensate, effectively stalling an industry push for U.S. exports of the expanding glut of oil.
- The delay may give the Commerce Department more time to put together some form of comprehensive public guidance about what kind of oil can or cannot be exported, answering the industry's plea for clarity; sources tell Reuters they think it could occur within weeks.
- The news last month that Pioneer Natural Resources (NYSE:PXD) and Enterprise Product Partners (NYSE:EPD) had been told that putting condensate through an advanced stabilizer was sufficient processing to export it without a license created a storm of confusion and questions.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM
Wed, Jul. 9, 6:30 PM
- A new EIA report underscores the remarkable comeback of the Permian Basin, which boomed in an earlier era, faded and now leads the U.S. in oil production.
- Daily crude oil production in the Permian, which lies under much of west Texas and part of eastern New Mexico, has increased from a low of 850K barrels in 2007 to 1.35M barrels last year.
- The increased production is concentrated in six low-permeability formations: the Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso, and Delaware.
- Among the top Permian producers: OXY, PXD, APA, KMP, XOM, COG, CVX, EOG, EGN, XEC, FANG.
Thu, Jun. 26, 1:47 AM
- Following yesterday's reports that the ban on U.S. oil exports will begin to narrow, the White house has announced that there has been no change to its policy.
- Pioneer Natural Resources (PXD) and Enterprise Products Partners (EPD) received permission this week to ship condensates to foreign buyers, leading reports to surface about a change to export policy. However, U.S. law allows for refined oil, even minimally refined, to be exported under the name fuel, instead of crude oil.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM, TWTI
Wed, Jun. 25, 7:17 PM
- The decision to allow two Texas companies to export condensates looks like a win for Eagle Ford Shale crude producers at the expense of refiners and companies planning to build processing plants along the Gulf coast.
- Today's selloff in refiners reflected concern that the groups will lose some of their competitive edge if condensate exports become common: Valero Energy (NYSE:VLO), the largest U.S. refiner, dropped 8.3%, PBF tumbled 10.7%, PSX fell 4.2%, and HFC slid 6.7%.
- Oppenheimer notes that PXD, DVN, MRO, COP and MUR produce the most Eagle Ford condensate, and could benefit if U.S. condensate prices close some of the gap with European prices; EOG, the largest Eagle Ford producer, produces little condensate and likely benefits little from the lifting of the condensate ban.
- Investor reaction toward Gulf Coast gathering and processing MLPs such as EPD, MMP, KMP and NGLS was more muted, since plans to build splitters in Texas may be undermined by even modest rule changes in the crude export ban that allow Eagle Ford producers to sell condensate after running it from the wellhead to their own nearby - and much cheaper - distillation towers.
Wed, Jun. 25, 10:18 AM
- Refiners take a beating in early trading, as a lift of the ban on U.S. oil exports is expected to narrow the WTI-Brent spread, which could cause refiners' profits drop if they are forced to pay higher prices to compete with international buyers for U.S. crude.
- “We don’t think the current system needs to be changed,” Valero Energy tells Bloomberg.
- Yesterday's rulings gave Pioneer Natural Resources (PXD +2.6%) and Enterprise Products Partners (EPD +1.4%) permission to ship ultralight oil to foreign buyers - a narrow ruling, but one that is likely to spark similar requests from other companies, and increase lobbying for a full lifting of the 40-year-old ban on exporting crude oil.
- Refining stocks are broadly lower: VLO -7.4%, PBF -5.8%, MPC -5.7%, WNR -5.5%, DK -5.4%, HFC -4.6%, ALDW -4.6%, TSO -3.8%, NTI -3.5%, PSX -2.9%, ALJ -2.7%, CVI -2.3%.
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