Pioneer Natural Resources (PXD) Update - Nov 9

[dan_s]

Despite much lower realized oil prices in Q3 than I was expecting, PXD crushed everyone's forecast including mine. Higher NGL prices and lower Lease Operating Expense more than offset the impact of lower oil prices.

PXD is a company "In Transition" as they are selling everything outside of the Permian Basin. Proceeds from the asset sales are shoring up an already SUPER STRONG balance sheet. Plus, the company is on-track to generate $3.2 to $3.4 Billion cash flow from operations in 2018. Every time you see one of those crazy articles that say the shale plays are "Ponzi Schemes" and none of the companies are making money, send them my forecast models for CLR and PXD. The large-caps are printing money and doing it with much lower oil prices than we have today.

First Call's forecasts for 2019 need to be updated, but FC is forecasting that PXD will report $11.32 EPS and $25.28 operating CFPS next year. A company putting up these kind of numbers should be trading for AT LEAST 10X operating cash flow per share. A few of the Wall Street Gang are getting it. In the last 3 months, 10 ranked analysts set 12-month price targets for PXD. The average price target among the analysts is $238.00. The 10 valuations range from $195 to $320. PXD is trading for $158 today.

Several firms have PXD rated as a HOLD because of all of the asset sales. PXD should conclude the sales process soon; ending with one of the strongest balance sheets I've ever seen.

I have updated my forecast/valuation model for PXD and it will be posted to the EPG website later today. I do have a large "cushion" in my 2019 forecast because to the uncertainty of the asset sales process. My valuation increases by $1 to $248/share.