Pioneer Natural Res (PXD) Updated Valuation - May 5

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Pioneer Natural Res (PXD) Updated Valuation - May 5

Post by dan_s »

I have updated my forecast/valuation model for PXD (using an average realized oil price, net of cash settlements on hedges for 2021, of ~$53/bbl). Most of Pioneer's "Bad Hedges" expire at the end of 2021, so I am using an average oil price of $62/bbl for 2022.

PXD is trading for $163 at the time of this post. My valuation increases by $28 to $230, primarily because I've dropped 2020 results from my valuation.

Why so much upside?
> PXD has a Strong balance sheet that will be Super Strong by year-end.
> They hold a large chunk of the best acreage in Texas and lots of high-return drilling inventory.
> They have now closed the acquisitions of Parsley (1/12/21) and DoublePoint Energy (5/4/21), which significantly raises my confidence in their 2H 2021 guidance. From production of 473,937 Boepd in Q1 2021, the Company is now on track to have ~705,000 Boepd of production in Q4 2021, based on the mid-point of their fresh guidance.
> At today's oil, natural gas and NGL prices, PXD should generate approximately $8.5 Billion of operating cash flow in 2022. < Compare to their 2021 Capex budget of $3.4 Billion to see why PXD is a "Free Cash Flow Machine" starting NOW.
> Like Devon, PXD is going to have a "variable dividend" tied to free cash flow. This is what the Wall Street Gang says they want to see.
> 3 of the Wall Street Gang have increased their price targets since yesterday's announced Q1 results. Their PT are $200, $200 and $245 < Raymond James. I expect a lot more upgrades will be announced.

My forecast/valuation model will be posted to the EPG website this afternoon.
Dan Steffens
Energy Prospectus Group
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