Pioneer Natural Resources Company
(
PXD
) reported fourth quarter 2012 adjusted earnings of 83 cents per
share, missing the Zacks Consensus Estimate of 85 cents. The
quarterly earnings plunged from the year-earlier adjusted income
of $1.19 per share. The underperformance was mainly due to lower
price realization.
Full-year 2012 adjusted earnings came in at $3.66 per share,
missing our expectation of $3.68 and dropped more than 12% from
the year-ago profit level of $4.18.
Revenues and other income in the quarter increased 18.8% year
over year to $818.7 million, and comfortably surpassed the Zacks
Consensus Estimate of $787.0 million.
For the full year, total revenue increased about 18% to
$3,228.3 million from the year-ago level of $2,751.5 million and
beat the Zacks Consensus Estimate of $3,117.0 million.
Production
Total production in the reported quarter averaged
approximately 164.8 thousand barrels of oil equivalent per day
(MBOE/d), up 20.6% year over year, attributable to the company's
core growth assets - Spraberry field and Eagle Ford Shale. Again,
its encouraging drilling results from the horizontal Wolfcamp
Shale play are also expected to contribute considerably to its
production growth in the future.
Oil production averaged 67.1 thousand barrels per day
(MBbl/d), showing a significant improvement of 33.5% year over
year. Natural gas liquids (NGLs) production surged 22.1% year
over year to 31.9 MBbl/d. Natural gas production increased to
394.8 million cubic feet per day (MMcf/d) from the year-ago level
of approximately 361.8 MMcf/d.
For full-year 2012, total production was 155.5 MBOE/d versus
120.4 MBOE/d in the year earlier period.
Price Realization
On an oil equivalent basis, the average realized price was
$48.45 per barrel in the reported quarter versus $52.86 in the
year-ago quarter. The average realized price for oil was $85.60
per barrel, compared with $95.75 in fourth quarter 2011.
Average natural gas price dropped 5% to $3.20 per Mcf from the
year-earlier level. Natural gas liquids were sold at $30.69 per
barrel, down from $45.70 in the year-ago quarter.
Cash, Debt & Capex
At the end of the quarter, the cash balance was $229.4
million. Long-term debt was $3,721.2 million, representing a
debt-to-capitalization ratio of 38.8% (versus 38.0% in the
preceding quarter).
Capital Outlay
In 2013, Pioneer plans to spend $3.0 billion in total. Of
this, the company has planned drilling capex of $2.75 billion
(prior expectation was $2.4 billion) and capital for vertical
integration of $0.25 billion.
An amount of $70 million has been allocated for the expansion
of the Brady, Texas sandmine and $145 million has been set aside
for the company's new Midland office building and several new
field buildings. However, the budget excludes acquisitions, asset
retirement obligations, capitalized interest and geological and
geophysical G&A.
Guidance
Pioneer expects its production to average between 165 MBOE/d
and 170 MBOE/d for the first quarter of 2013.
Production costs are expected to range between $14.00 and
$16.00 per BOE, and depletion, depreciation and amortization
expense is expected to average around $13.50 to $15.50 per BOE.
The first quarter exploration expense guidance is $25-$35 million
and the tax rate is expected in the 35-40% range.
Our Take
Pioneer's oil-weighted reserves base and large drilling
inventory with significant resource potential are likely to
unlock value for shareholders. With a ramp-up in activity at its
three core liquids-rich growth assets in Texas, Pioneer aims to
boost its production, which would in turn improve its earnings
and growth outlook.
In particular, Pioneer's stepped-up activities in the
horizontal Wolfcamp Shale play - where
EOG Resources Inc.
(
EOG
) is also a leaseholder - provide a multi-year inventory of
development drilling opportunities.
During the reported quarter, Pioneer inked a $1.7 billion farm
out agreement with a U.S. subsidiary of Sinochem Group for 40% of
its 100% holding in the highly prospective horizontal Wolfcamp
Shale play.
Pioneer will retain its current working interest as well as
operatorship in all horizons shallower than the Wolfcamp horizon.
Per the development plan, both the companies have proposed to
drill 86 horizontal Wolfcamp Shale wells in 2013. This will
increase to 120 wells in 2014 and 165 wells in 2015.
The company also abandoned its plan to divest its Barnett
shale properties. In spite of receiving an unidentified number of
bids in Dec 2012, the company believes that not a single one
valued the properties correctly.
However, we remain skeptical about the company's
lower-than-expected earnings for three quarters in a row.
Earnings got a beating from lower price realization and higher
expenses.
The company holds a Zacks Rank #3, which is equivalent to a
short-term Hold rating. However, there are other stocks in the
oil and gas sector -
Cabot Oil & Gas Corp
(
COG
) and
Memorial Production Partners L.P.
(
MEMP
) - which hold a Zacks Rank #1 (Strong Buy) and are expected to
perform better.
CABOT OIL & GAS (COG): Free Stock Analysis
Report
EOG RES INC (EOG): Free Stock Analysis Report
MEMORIAL PRODUC (MEMP): Free Stock Analysis
Report
PIONEER NAT RES (PXD): Free Stock Analysis
Report
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