Pioneer Natural Resources Tops Q4 Earnings Estimates, Shares Gain

Pioneer Natural Resources, an independent oil & gas exploration and production company, reported better-than-expected earnings in the fourth quarter, largely driven by a recovery in crude oil demand and prices from COVID-19 pandemic lows.

The U.S. shale producer reported fourth-quarter net income attributable to common stockholders of $43 million, or $0.26 per diluted share. Excluding these items, non-GAAP adjusted income for the fourth quarter was $177 million, or $1.07 per diluted share, which beat the Wall Street consensus estimates of $0.69 per share.

The company’s cash flow from operating activities for the fourth quarter was $537 million. For the full year 2020, the company reported a net loss attributable to common stockholders of $200 million, or $1.21 per diluted share. Cash flow from operating activities for the full year 2020 was $2.1 billion.

Pioneer forecasts its 2021 drilling, completions and facilities capital budget to range between $2.4 billion to $2.7 billion, with an additional $100 million budgeted for integration expenses related to the acquisition of Parsley, resulting in a total 2021 capital budget range of $2.5 billion to $2.8 billion.

The U.S. shale producer’s 2021 production is expected to be between 528K to 554K barrels of oil and gas per day, including a winter storm impact of 8K to 14K barrels daily, the company said.

“Pioneer delivered production of 365 mboe/d in the fourth quarter, which was 3% higher sequentially and flat year-over-year. This compares with previous guidance of 355-370 mboe/d.  In addition, the firm’s oil differential narrowed slightly, but the benefit was offset by fractionally higher production costs. But the overall margin still shifted favourably due to incrementally higher crude prices in the Permian. Profitability is expected to trend higher in 2021 due to economies of scale related to the acquisition of Parsley Energy, which closed in January,” said Dave Meats, director at Morningstar.

Pioneer shares, which slumped about 25% in 2020, rose over 27% so far this year. The stock closed 4.13% higher at $145.24 on Tuesday.

Pioneer Natural Stock Price Forecast

Fourteen analysts who offered stock ratings for Pioneer Natural in the last three months forecast the average price in 12 months of $154.21 with a high forecast of $198.00 and a low forecast of $120.00.

The average price target represents a 6.18% increase from the last price of $145.24. From those 14 analysts, 13 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $120 with a high of $173 under a bull scenario and $63 under the worst-case scenario. The firm gave an “Equal-weight” rating on the oil & gas exploration and production company’s stock.

Several other analysts have also updated their stock outlook. Pioneer Natural Resources had its price target boosted by KeyCorp to $144 from $139. The brokerage currently has an overweight rating on the oil and gas development company’s stock. Goldman Sachs issued a buy rating on the stock. Truist Financial upgraded to a buy rating from hold.

Moreover, Stifel Nicolaus dropped their target price to $149 from $161 and set a buy rating on the stock. Piper Sandler upped their target price to $132 from $113 and gave the stock an overweight rating.

Analyst Comments

“Free cash flow yield remains below peers. Pioneer‘s FCF yield is expected to benefit from a rising oil price environment, though is expected to remain below that of peers. Long runway of high-quality assets. Pioneer Natural Resources (PXD) offers a deep inventory of high-quality core drilling locations which allows for wider spacing between wells vs peers. Their contiguous acreage allows for long laterals,” said Devin McDermott, equity and commodities strategist at Morgan Stanley.

“Clear investment framework and capital return plans. Long-term, PXD has committed to investing 65-75% of cash flow on capital spending, while limiting production growth to 5%. The company intends to grow its base dividend while distributing cash windfalls via variable dividend.”

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