Flickr user Paul Lowry
Pioneer Natural Resources
its second quarter results on August 4, investors initially sold
off the stock. That's surprising in more ways than one. The
company reported adjusted second quarter earnings of $195
million, or $1.35 per share, which actually beat analysts'
estimates of $1.28 per share. Further, the company narrowed its
2014 production growth guidance range from 14%-19% to
The only notable miss was on the revenue side, where the
company fell about $10 million short of what analysts expected to
see this quarter. The revenue miss, however, is pretty
meaningless for an oil and gas company. So, if anything,
investors simply sold off what is viewed by analysts as a richly
valued stock as market troubles on the day the company released
earnings exacerbated any existing negativity on the revenue miss
-- sending Pioneer Natural Resources stock down by more than
However, beyond the headline numbers there was one important
number buried within Pioneer Natural Resources' earnings report
that investors cannot afford to miss. With each passing quarter
the company becomes stronger in its belief that it is sitting on
10 billion barrels of recoverable oil and gas in its position in
the Permian Basin. That is a huge step up from the 845 million
barrels of oil equivalent, or BOE, of proved oil and gas reserves
the company held at the end of last year. The company is basing
its recoverable resource number on the estimated ultimate
recovery, or EUR, it has been seeing from the horizontal wells it
is drilling in the Permian Basin.
What is EUR and why does it matter?
The estimated ultimate recovery, or EUR, of an oil and gas well
is the amount of oil and gas an energy company like Pioneer
Natural Resources expects to extract over the lifetime of a well.
It's a critical number in determining the return a company will
earn when it drills a well. Because of this, the higher the EUR,
the better the well.
In Pioneer Natural Resources' case, the company reported that
its EURs in the Permian Basin continue to average 1 million BOE
in the Wolfcamp B zone. That's a lot of oil and gas. In fact, it
is well above what companies in the Bakken Shale and Eagle Ford
Shale are seeing these days. For example, the average EUR of
' oil wells in the Bakken Shale is just 603,000 BOE. Meanwhile,
top wells targeting the Eagle Ford shale in DeWitt County and
Lavaca Texas see EURs of 850,000-950,000 BOE and 400,000-500,000
Pioneer Natural Resources' position in the Permian Basin,
however, consists of more than just the Wolfcamp B zone. The
company is also experiencing strong well results from the
Wolfcamp A and D zones, as well as the Lower Spraberry Shale. As
the following slide notes, the EURs from these zones are ranging
from as low as 650,000 BOE to well over 1 million BOE.
Source: Pioneer Natural Resources
(link opens a PDF)
In addition to that, Pioneer Natural Resources is also
appraising results from the Middle Spraberry Shale and Jo Mill
intervals. While the results of both intervals have been mixed,
the company is seeing its best wells produce really strong EURs.
In the Jo Mill the two best wells look to produce an EUR of
800,000 BOE, while the best Middle Spraberry Shale well looks
like it's on pace to produce 700,000 BOE, as noted in the
Source: Pioneer Natural Resources
Because of these high EURs, as well as the fact that several
layers of energy-rich shale plays are stacked on top of each
other, many companies are suggesting that the Permian Basin could
become the best shale play in the country.
Lots and lots of growth ahead for investors
Because of continued strong well results Pioneer Natural
Resources remains on pace to more than double its 2013 production
by 2018. Further, the company believes that its current position
in the Permian Basin offers more than a decade's worth of growth
as it works to unlock the more than 10 billion barrels of oil and
gas underneath its vast acreage position. The company's second
quarter earnings release highlighted the fact that the EURs from
Pioneer Natural Resources' wells continue to be on pace to
produce lots and lots of oil. Needless to say, because of this,
the long-term growth story remains very well intact.
Do you know this energy tax "loophole"?
You already know record oil and natural gas production is
changing the lives of millions of Americans. But what you
probably haven't heard is that the IRS is encouraging investors
to support our growing energy renaissance, offering you a tax
loophole to invest in some of America's greatest energy
companies. Take advantage of this profitable opportunity by
grabbing your brand-new special report, "
The IRS Is Daring You to Make This Investment
," and you'll learn about the simple strategy to take
advantage of a little-known IRS rule. Don't miss out
on advice that could help you cut taxes for decades
to learn more.
Pioneer Natural Resources Earnings: 1 Number
Investors Can't Afford to Miss
originally appeared on Fool.com.
has no position in any stocks mentioned. The Motley Fool owns
shares of Devon Energy. Try any of our Foolish newsletter
free for 30 days
. We Fools may not all hold the same opinions, but we all believe
considering a diverse range of insights
makes us better investors. The Motley Fool has a
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a