PXD - Embedded Expectations Analysis - 2019 04 03
Pioneer Natural Resources Company (PXD:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Assets, with a 1.6x Uniform P/B. At these levels, the market has somewhat bearish expectations for the firm, and management may have concerns about their production capabilities, low-cost operations, capital allocation strategy, and fleet development.Specifically, management may be exaggerating their production capabilities and the efficiency of their fleet, and may be concerned about their ProPetro contract and its ability to reduce capex and gel sand costs. Moreover, they may be overstating their low-cost advantage and capital efficiency, and may have concerns about their ability to sustain dividend increases and share buybacks. Furthermore, they may lack confidence in their ability to increase margins and sustain FT oil volumes, and the sustainability of Brent-related price tailwinds to cash flows. Finally, they may be exaggerating the strength of their balance sheet and ability to meet debt covenants, and may be concerned about the progress of their fleet development, their still 3-well pad mix, and the results of their Stackberry drilling tests.
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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