Pioneer Natural Resources: Should You Invest?PXD) announced second quarter ended June 30, 2016 total revenue of $613 million, up 3 percent year-over-year from $596 million during the same period last year.
Pioneer declared second quarter of 2016 net loss attributable to its common stockholders of $268 million or $1.63 of loss per diluted share compared to net loss of $218 million or $1.46 of loss per diluted share in second quarter of 2015.
The independent oil and gas exploration & production company reported continued year-over-year top line growth primarily driven by the consistently improving global commodity demand and pricing environment.
Pioneer is successfully minimizing overall production costs by about 35% to $850 in second quarter of 2016 from $1,300 in fourth quarter of 2014, primarily driven by notable cost-optimization initiatives undertaken by the company coupled with superior efficiency benefits.
The company witnessed weaker 3rd party carriage expenses driven by falling production at Eagle Ford Shale.
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Pioneer has the greatest Wolfcamp/Spraberry acreage availability with significant drilling inventory, superior oil exposure, robust investment grade financial position, solid availability of derivatives that preserves cash flows. Further, the company is expected to have -15% of CAGR all through 2020 while spending within the cash flow limit as of 2018 and at an oil price of $55.
The ongoing commitment of Pioneer towards minimizing both core and non-core capital expenditures while sustaining solid financial position coupled with an attractive acreage position in the key drilling regions across the continent is believed to drive sustainable long-term company growth while offering attractive shareholder returns.
Expanding its investments
Going forward, Pioneer targets on expanding the count of its horizontal rigs to 17 rigs from 12 rigs earlier across the strategic northern Wolfcamp/Spraberry in the second half of 2016. This key expansion plan includes the addition of a first rig during September subsequently 2 rigs during October and finally, 2 rigs during November. From the total available rigs, 3 key horizontal rigs are expected to be employed at key drilling areas being uniquely acquired across the Sale Ranch region after the well sites get permission.
Importantly, Pioneer has planned to expand the 2016 capital spending to $2.1 billion from $2.0 billion decided earlier. Further, Pioneer is growing its complete fiscal year 2016 production expansion estimate to over 13% from over 12% earlier that signifies enhancing Wolfcamp/Spraberry well productivity. Also, the consolidated activity level of 17 rigs is estimated to provide production expansion in the range of 13% to 17% during 2017.
Pioneer has strategically increased the 2016 estimated capital expenditure program that includes $1.95 billion of drilling and finalizing capital and $150 million of other capital. This key capital expenditure program is funded from superior cash in hand that includes investments and $1.5 billion of key cash flow from operations. Moving ahead, Pioneer is consistently expanding its year-over-year consolidated production growth estimate to over 231 MBOEPD from over 229 MBOEPD decided earlier that reflects expanding productivity at Wolfcamp/Spraberry well.
The continuing capital spending by Pioneer on increasing the number of high-productivity wells in the company’s active acreage indicate robust company operations with a solid financial position to support its key expansion plans amid still tough global operating environment.
Overall, the investors are advised to “Hold” their position in Pioneer Natural Resources Co. considering the company’s significant long-term growth prospects but, currently weaker financial position with significant total debt of $3.67 billion against weaker total cash position of $3.30 billion only, restricting the company to continue with its daily operations profitably. The profit margin of -15.38% seems disappointing and signifies no profit but loss. However, the PEG ratio of -70.46 seems misguiding and indicate no near-term growth but decline.
Published on Sep 9, 2016By Vinay Singh