Pioneer Natural Resources (PXD)

[dan_s]

I am increasing my valuation of PXD by $11.00/share to $196.00/share. My valuation compares to First Call's Price Target of $198.74.

PXD is one of our "Elite Eight" and it is one to the Top Tier companies in the Permian Basin. They continue to improve their horizontal well results and the EURs per well continue to increase. I expect PXD to book a significant increase in proven reserves at year-end.

In 2016 the company should generate $1.6 to $1.7 Billion cash flow from operations, which compares to their capital program of $2.1 Billion. The company has more than enough liquidity to fund the difference.

My updated forecast model for PXD will be posted to the EPG website by Sunday, July 31.

Notes:
> Cash collected on their hedges for the first six months of 2016 = $349 million
> When evaluating quarterly results for an upstream growth company you need to ignore the mark-to-market adjustments on hedges, the DD&A expense and Impairment charges. PXD's drilling program is increasing the value of their leasehold, so DD&A and Impairment are just non-cash GAAP requirements.
> Over 80% of PXD's oil production and 70% of their natural gas is hedged at good prices through year-end. Near-term commodity price movements have very little impact on their revenues. My valuation assumes long-term prices of $60/bbl for oil and $3.00/mcf for gas. My gas price probably will move higher.