Pioneer has redefined its investment proposition to prioritize free cash flow generation and return of capital. This capital allocation framework is intended to create long-term value for shareholders by optimizing the reinvestment of cash flow to accelerate the Company's free cash flow profile. The acquisition of Parsley is expected to reduce the reinvestment rate from a range of 70% to 80% to a range of 65% to 75%, enhancing the value proposition for shareholders through increased free cash flow generation. Pioneer is targeting a 10% total annual return, inclusive of a strong and growing base dividend4, a variable dividend4 and high-return oil growth. The Company believes this differentiated strategy will position Pioneer to be competitive across sectors.
Pioneer continues to maintain substantial oil derivative coverage in order to protect the balance sheet, providing the Company with operational and financial flexibility. The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined in the attached schedules.
I am working on the PXD forecast/valuation model this morning. 2021 will be "proforma" assuming the merger with Parsley Energy (PE) closes in January.
Pioneer Natural Resources (PXD) Update - Nov 11
Pioneer Natural Resources (PXD) Update - Nov 11
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Pioneer Natural Resources (PXD) Update - Nov 11
Since PXD announced Q3 results, 4 analysts have updated their forecasts and price targets for PXD. The price targets range from $120 to $149. PXD is trading for ~$91 today.
Based on my forecast/valuation model, which assumes that the merger with PE will close early in 2021, my valuation is increased by $6 to $129.
Here is what I like:
> PXD has a super strong balance sheet and access to lots of capital. They should be able to significantly reduce interest expense on the PE debt.
> The merger with PE will be accretive to operating cash flow even without any of the expense savings that it should generate.
> 2021 operating cash flow should be approximately $4.3 Billion in 2021 (~$20/share), with approximately $1.5 Billion of FCF for dividends, debt reduction and stock buybacks.
> PXD produces a lot of natural gas and NGLs. Those prices will be going up a lot in the next few months, hopefully followed by rising oil prices in 2H 2021.
My forecast model will be available on the EPG website this afternoon.
Based on my forecast/valuation model, which assumes that the merger with PE will close early in 2021, my valuation is increased by $6 to $129.
Here is what I like:
> PXD has a super strong balance sheet and access to lots of capital. They should be able to significantly reduce interest expense on the PE debt.
> The merger with PE will be accretive to operating cash flow even without any of the expense savings that it should generate.
> 2021 operating cash flow should be approximately $4.3 Billion in 2021 (~$20/share), with approximately $1.5 Billion of FCF for dividends, debt reduction and stock buybacks.
> PXD produces a lot of natural gas and NGLs. Those prices will be going up a lot in the next few months, hopefully followed by rising oil prices in 2H 2021.
My forecast model will be available on the EPG website this afternoon.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group