BAK

Pioneer Natural Resources Eyes Growth Despite Macro Risks

Buy or sell dice

On May 17, 2016, we issued an updated research report on Pioneer Natural Resources CompanyPXD .

Pioneer Natural Resources' oil-weighted reserve base and large drilling inventory (over 20,000 liquids-rich drilling locations in low-risk resource plays) with significant resource potential are catalysts for shareholder value creation. The company boasts a deep inventory of high-return, liquids-leveraged drilling opportunities.

Pioneer Natural Resources has increased its production growth guidance for 2016 to 12% from 10%. Despite the weak pricing environment, the company intends to add rigs for the development of its key growth areas - the Spraberry and Wolfcamp acreage. The company has also increased capital spending projection for the same.

The Texas-based company's strong hedging position cushions it from commodity price fluctuations. It has hedged 90% of the oil production for the remainder of this year and about 80% production for the next year at promising levels.

As is the case with other independent exploration and production companies, results for Pioneer Natural Resources too are directly influenced by oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company's revenues, earnings and cash flow.

To a certain extent, the company's long-term production and reserve growth depends on its acquire-and-exploit model. In keeping with this, Pioneer Natural Resources may find it difficult to complete accretive transactions in the future. This could, in turn, negatively impact its growth rate.

Moreover, disappointing results from the company's properties in the Eagle Ford Shale could pose challenges for the stock. In addition, the Permian operations face potential risks. The company is slowing down its traditional vertical Spraberry program and accelerating the horizontal Wolfcamp program. From an operational point of view, this can create inefficiencies and pose higher execution risk.

Stocks to Consider

Currently, Pioneer Natural Resources carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include CVR Refining, LP CVRR , Murphy USA Inc. MUSA and Braskem S.A. BAK . All these stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MURPHY USA INC (MUSA): Free Stock Analysis Report

BRASKEM SA (BAK): Free Stock Analysis Report

PIONEER NAT RES (PXD): Free Stock Analysis Report

CVR REFINING LP (CVRR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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