Morningstar | Narrow-Moat Pioneer Pushes Ahead With Permian Growth in the Face of Lower Oil Prices
We're trimming our fair value estimate for narrow-moat Pioneer Natural Resources to $180 per share from $182 after the company released fourth-quarter results. The minor cut to our fair value stems from updates to our expectations for Pioneer's Midland drilling program. In summary, we shaved our near-term rig expectations, but also lowered operating cost per barrel forecasts based on recent results.Pioneer generated Permian volumes of 302 mboe/d in the quarter, just a hair below the upper end of management's guidance. Permian production was up 5% sequentially, and we think solid growth will continue for Pioneer. In fact, we think total production can double by 2025.
However, we would preach caution on the likelihood of the company meeting its optimistic goal to push total production to more than 1 million barrels per day of oil equivalent by 2026. We project Pioneer will fall well short of its goal. With other Permian producers also looking to aggressively grow production from attractive acreage, we think the ramp-up in overall basin activity implied by 1 million boe/d of production for Pioneer would be too much oil for the market to handle. Still, management continues to emphasize returns on capital and shareholder returns, two facets that should at least partially relieve concerns that Pioneer will seek to meet its growth targets at all costs.
We think shares look undervalued after trading down with oil prices over the last several months. With current oil prices now right around our midcycle forecast of $55/bbl for West Texas Intermediate, we see more value than we did several months ago when WTI prices were above $70/bbl. Still, we're less optimistic on long-term crude prices than consensus, and less bullish on Pioneer than most of the Street.
For more information on our long-term crude outlook, please see our December report "Lower Oil Prices Make Energy Stocks More Attractive."
Pioneer Natural Resources is a holding company. Through its subsidiaries, the company is engaged in oil and gas exploration and production. The company explores for, develops and produces oil, Natural Gas Liquids and gas within the United States, with operations in the Permian Basin in West Texas. The company's portfolio of resources are located in the Spraberry/Wolfcamp oil field.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.