Pioneer Natural Res (PXD) Updated Valuation - July 1

[dan_s]

At the time of this post PXD was trading at $218.43.

I have lowered my valuation by $5 to $360/share.

PXD is a large-cap upstream company that I moved from our Sweet 16 to the High Yield Income Portfolio.
Why? >>> PXD has committed to paying out a high percentage of their free cash flow from operations in the form of "Fixed + Variable Dividends" and a well-funded Share Repurchase Program.
> Dividends this year: $3.78 paid on 3/14/22 and $7.38 paid on 6/14/22
> Based on my forecast, PXD will pay dividends of approximately $8.00 mid-Sept and $7.25 mid-Dec. 2023 dividends should be approximately $24/share.

Based on the share price today, 2022 dividend yield is ~12.1%.

PXD has a rock-solid balance sheet and assets that are worth much more than book value.
Except for some basis swaps on natural gas, none of their production is hedged beyond Q1 2022. Q2 results should beat First Call estimates.
~75% of PXD's revenues are from liquids sales. The dip in natural gas prices only lowered my valuation by $5/share.
PXD is telling the market in their presentations that they will generate $9 Billion of free cash flow this year.
Based on my forecast, 2022 FCF will be over $10 Billion.

Bottomline: If you are investing for high dividend yield and you think oil prices will stay over $80/bbl, PXD offers double-digit dividend yield + more than 50% upside on the share price if WTI averages $100/bbl during 2H 2022.

[willvanam]

Thanks Dan. I'm going to buy some back here