PXD - Embedded Expectations Analysis - 2020 07 06
Pioneer Natural Resources Company (PXD:USA) currently trades below historical averages relative to UAFRS-based (Uniform) assets, with a 1.1x Uniform P/B. At theselevels, the market has bearish expectations for the firm, and management appears concerned about their ability to reduce capex, the progress of an oil price recovery, and their leverage
Specifically, management may lack confidence in their ability to keep a strong balance sheet, maintain the lowest flaring intensity among Permian Basin operators, and reduce capex spend, namely related to water infrastructure. In addition, they may have concerns about the potential for additional oil prices declines, the pace of recovery of Brent strip prices, and the sustainability of demand increases, particularly in Asia. Furthermore, they may be exaggerating their capital efficiency and their ability to recover lost sales, and they may be concerned about the oil and gas industry's leverage and their ability to generate sufficient free cash flow to deliver
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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