| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 0/6 |
| Past Performance | 6/6 |
| Financial Health | 5/6 |
| Dividends | 5/6 |
PXD Stock Overview
Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States.
Pioneer Natural Resources Company Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$243.41 |
| 52 Week High | US$288.46 |
| 52 Week Low | US$166.97 |
| Beta | 1.48 |
| 1 Month Change | 0.68% |
| 3 Month Change | 15.40% |
| 1 Year Change | 33.77% |
| 3 Year Change | 97.16% |
| 5 Year Change | 61.55% |
| Change since IPO | 2,567.51% |
Recent News & Updates
Pioneer Natural Resources: Old Guard Needs To Get It
Summary Pioneer Natural Resources has been a very turbulent stock as investors don't fully buy into the bull thesis. Investors struggle to believe that we are an oil economy and that they can get really high returns on investment from an oil company. Consequently, PXD continues to ooze free cash flow and returns to investors one of the highest dividends around. The bear case is that in a weaker economy, demand for oil will fall off a cliff, and so PXD's variable dividend will be cut going forward. I compare and contrast the vicissitudes between PXD and ARKK. Investment Thesis Pioneer Natural Resources Company (NYSE:PXD) deployed the equivalent of a 15% annualized yield in September. For investors that believe that today we are an oil economy and, irrespective of all news flow, we'll still be an oil economy in 2023, PXD is a very compelling high dividend paying stock. For the old guard that believes that only tech is the place for high returns, I argue that that's categorically not the case. There's a lot to be bullish about PXD. Let's get to it. Why Did The Energy Trade Die? Before the Russian invasion, PXD traded at $226 per share. Today, PXD trades for $217. Yes, there have been some dividends along the way that push this trade to breakeven, but for all intents and purposes, anyone that has been bullish on oil since the Russian invasion hasn't had much to show for it by holding PXD. This assertion puts aside the most nimble of investors that somehow managed to pick the bottoms and the top in real-time. So what's happened to the energy trade? There have been two driving forces that have substantially impacted the bull case here. The ''buy the dip'' story and the demand destruction fear. I'll discuss these in turn. In the first case, we are going to compare PXD with a proxy for technology stocks, the ARK Innovation ETF (ARKK). Data by YCharts What you can see above is that during the summer, investors were so eager to ''buy the dip'' on tech stocks that they couldn't quickly enough abandon commodity stocks, such as PXD, and deploy capital into ARKK-like stocks. As you can see above, during July and August there's a near-mirror image between these two sectors. Investors wanted to believe that the playbook of the past decade was bound to repeat in the next decade. And this leads me to highlight Max Planck's quote (emphasis added): A great scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it. Investors have doggedly come to believe that since tech was the winner of the previous decade, any selloff is an opportunity to buy something that they liked at a cheaper valuation. If investors liked something at 2x a silly valuation, therefore now that's it priced at 1x a silly valuation, it must offer investors a compelling entry point. And until a new generation of investors comes to understand that a silly valuation is just that, a silly valuation, we will stay in these bear market rallies. Now onto the second, and the more pernicious, theme, that of "demand destruction." Investors believe that with the U.S. about to embrace a prolonged recession, the demand for the engine driver of our economy, namely oil, is about to be substantially curtailed. However, I simply can't see how that's the case. For WTI prices to get substantially lower to the point where many oil companies will struggle to reach break-even, in most cases WTI needs to get below $50. And today, at approximately $80, we are far from that level. And given all the high fixed costs, on the back of strong operating operations, this means that anything above $50 is pure gold. Or oil. Or dividends. Whatever your religion. Ultimately, the only way to get oil prices to come down significantly is for there to be an oversupply in the market. And the facts on the ground don't echo that sentiment. Indeed, just today it appears that OPEC+ is looking to announce cutbacks in demand in the coming weeks. With those two in mind, let's turn our focus to PXD's shareholder return program. Capital Allocation Policy Before drilling down its dividend yield, I believe that it's worthwhile discussing PXD's returns on capital employed. Investors have been so heavily indoctrinated to believe that only tech with its ''asset-light'' business models could ever deliver investors with a business model with high ROCE, that few investors today would seriously think of the oil and gas sector as an area with potentially high ROCE. PXD October presentation However, the graph above clearly dispels that myth. We can see that energy clearly matches its ROCE, with PXD reaching around 30% ROCE. What's more, PXD has been very clear with its stakeholders that it's looking to return more than 75% of its post-base-dividend free cash flow. Meanwhile, last quarter actually saw more than 95% of PXD's free cash flow being returned to shareholders. PXD's October 2022 Presentation The point that I'm making is that the good times are here to stay. Even if PXD isn't able to offer a ''guaranteed'' dividend yield, it's clearly focused on returning capital to shareholders above all else. PXD's October 2022 Presentation The graph above shows a 15% annualized yield to shareholders on record on the 6th of September.
Pioneer Natural Resources: One Of The Largest Dividends Out There
Summary Oil and gas rig counts are still hovering below the long-term mean. PXD owns the largest acreage of any company in the Permian Basin, one of the largest hydrocarbon-producing basins in the world. While PXD has a trailing dividend yield of 9.7%, the projected 12-month dividend yield is 13.4%. Blended forward EV/EBITDA is one standard deviation cheap. Editor's note: Seeking Alpha is proud to welcome Louis Sutton as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more » Pioneer Natural Resources (NYSE:PXD) is projected to earn above its cost of capital. With a dominant position in one of the largest hydrocarbon-producing basins in the world, PXD has a solid competitive advantage. The company also uses its high free cash flow to pay out one of the largest dividends in the S&P 500. Background Pioneer Natural Resources' history begins in 1962, when two Texas oilmen named Howard Parker and Joe Parsley made the decision to explore in the West Texas Permian Basin. Parker and Parsley soon gained a reputation by making aggressive deals to grow their fledgling enterprise. In 1997, Parker and Parsley merged with MESA Inc. to diversify into natural gas, and they adopted the name Pioneer Natural Resources. This independent energy company is now one of the largest energy producers in the Permian Basin. With its main office in Irving, Texas, PXD manages 961,000 gross acres and has more than 15,000 spots for drilling. The firm produced an average of 617 thousand barrels of oil equivalent per day in 2021. PXD employees more than 1,900 people. Over the last five years, the performance of PXD has varied, with 2021 being its highest-performing year. In comparison to 2020's revenue of $6.7 billion, revenue climbed by $7.9 billion to $14.6 billion in 2021. Due to the COVID-19 lockdowns and low oil prices in 2020, PXD recorded a net loss of $200 million. However, PXD bounced back in 2021 and recorded a net income of $2.1 billion. Over the past two years, as energy prices have climbed, PXD's cash flow has increased considerably, going from almost negative levels to long-term highs. Macro Setup Even before the Russia-Ukraine conflict caused an oil shock, the oil and gas industry's fortunes have changed drastically as demand rebounds from the COVID-19 lockdowns. Also, after years of underinvestment in the energy sector, a shortage of supply has pushed oil prices up to levels last seen in 2008. In recent months, oil prices have begun to recede. This is partly due to the temporary impact of the Biden Administration drawing down the Strategic Petroleum Reserve (SPR). The SPR drawdown is set to last only six months, and it was announced earlier this year on March 31. Bloomberg, US Department of Energy One key reason why a shortage could persist is because oil and gas rig counts are still hovering below the long-term mean. Oil and gas rig counts are an early indicator of future oil output. Bloomberg It's also worth noting that fossil fuels continue to occupy a large overall share of global energy consumption. The transition away from fossil fuels will take many years to materialize. This means there is strong potential for persistently high oil prices. BP Statistical Review of World Energy, Our World In Data Quality Factors Following two consecutive negative quarters of GDP for Q1 and Q2 this year, it's apparent that we're in an economic slowdown. Therefore, owning companies with a strong balance sheet is paramount. Low debt is important in the energy sector due to the volatility associated with commodity prices. If a company has too much debt, an event that decreases the cash flow can push the company to insolvency. That said, PXD has a healthier balance sheet relative to its peer group. PXD's total debt to total assets stands at 21.3%, while its peer group's median is 32.4%. PXD's interest coverage is almost 3x its peer group. Its peers include Diamondback Energy (FANG), ConocoPhillips (COP), Devon Energy (DVN), and EOG Resources (EOG). Also, aside from 2020 when the price of oil went negative due to the COVID-19 lockdowns, PXD's CFROI (cash flow return on investment) has consistently exceeded its discount rate since 2018. This has generated substantial shareholder wealth. Credit Suisse HOLT By turning accounting data into cash, the CFROI metric evaluates a company's ability to generate cash. Cash flow generation is a great way to measure a company's underlying economics. PXD is projected to beat the market implied CFROI of 5.3% by a sizable margin. Earning above its cost of capital indicates that PXD has a solid competitive advantage. One of the reasons why PXD has a competitive advantage is because it benefits from having a dominant position in the Permian Basin. PXD only operates in the Permian Basin, and it owns the largest acreage of any company. Over the past 10 years, the Permian Basin has been at the epicenter of the American shale oil boom. The Permian Basin is one of the largest hydrocarbon-producing basins in the world. Even though this resource-rich basin has been producing oil and natural gas for about 100 years, the U.S. Energy Information Administration estimates that the Permian still has proven reserves of more than 5 billion barrels of oil and 19.1 trillion cubic feet of natural gas. PXD is therefore well positioned geographically. Breakeven prices in the Permian Basin typically average $50 per barrel. Due to its scale advantage, PXD is one of the lowest cost producers in the Permian Basin with a breakeven price of roughly $45. With oil prices currently at roughly $85 per barrel, PXD enjoys a large margin of safety with respect to its future profitability. PXD also has a shareholder-friendly CEO named Scott Sheffield, who was previously Pioneer's CEO from 1997 to 2016. Sheffield came out of retirement in 2019 to serve once again while aiming "to enhance performance and capital efficiency" and deliver "strong results" for shareholders. For example, under Sheffield, PXD implemented a variable dividend policy in 2021 while maintaining consistent share repurchases. PXD has commendable capital deployment discipline. Based on Q2's share repurchases and dividends, PXD returned over 95% of its quarterly free cash flow, which translates to an annualized shareholder yield exceeding 19%. Pioneer Natural Resources, Q2 2022 Earnings Presentation Value Factors PXD trades at an attractive valuation relative to its own history. For instance, PXD's blended forward EV/EBITDA is one standard deviation cheap at 4.7x. Bloomberg PXD's five-year historical average BF EV/EBITDA is 6.8x. If PXD's valuation were to revert to the mean, this would imply a 47.6% upside move from today's share price. Thus, owning PXD at current prices provides a large margin of valuation safety. PXD has become popular among many investors due to its recent dividend increase. PXD has a trailing dividend yield of 9.7%, and the projected 12-month dividend yield is 13.4%. Therefore, shareholders of PXD can make a handsome return from the dividend alone. Sheffield mentioned during a recent earnings call that he believes an oil price of ~$100 "will be the most likely outcome over the next five years." If he is proven correct, PXD should be able to maintain a double-digit dividend yield. Pioneer Natural Resources, Q2 2022 Earnings Presentation According to Naveed Rahman, co-manager of the Fidelity Equity-Income Strategy, dividends have contributed roughly 40% of the total return of the S&P 500 since 1930. Rahman also suggests that during decades when inflation averaged 5% or higher, dividends produced 54% of that total return. Therefore, dividends are an important factor in an investor's portfolio, especially during periods of abnormally high inflation. In addition to its dividend, PXD also has capital appreciation potential due to its earnings growth outlook. Earnings per share is projected to rise to $33.59 in 2022, which would represent over a 300% increase from 2019's reported EPS of $8.18. PXD earnings per share. Source: Bloomberg It is borderline absurd that a large-cap stock like PXD trades at a forward P/E multiple of 7x with that type of earnings growth profile. By comparison, the S&P 500 trades at 17x estimated 2022 earnings with cumulative earnings growth since 2019 of only 46%. Timing Factors Considering the large upside move in oil and inflation this year, the energy sector still makes up a relatively modest portion of the S&P 500. For instance, the information technology and consumer discretionary sectors account for 27.0% and 11.5% of the S&P 500, respectively. The energy sector merely represents a 4.7% weight.
A Look At The Fair Value Of Pioneer Natural Resources Company (NYSE:PXD)
In this article we are going to estimate the intrinsic value of Pioneer Natural Resources Company ( NYSE:PXD ) by...
Pioneer Natural Resources: How Safe Is The Dividend Moving Forward?
Summary Pioneer Natural Resources' dividend currently yields 13.06%, with the majority of the dividend attributable to the variable portion. PXD plans to continue to benefit from high energy prices and not having any hedges that lock in their production. While PXD pays out a healthy dividend, the company also has a $4 billion share buyback program with about $3 billion left to spend (roughly 5% of their market capitalization). Having traded investment grade fixed income, we were trained to always question rates/yields that are outliers to peer groups. Sometimes you can do some research and get comfortable with outlier yields, but the vast majority of the time there is a reason that things trade out of line versus peer investments. That is not to say that it is always a bad reason, sometimes there are good reasons - although in these situations sometimes you have to look at another measurement (such as yield to call, or YTC). Investors have become infatuated with energy dividends over the last 18-24 months, so much so we have seen a number of companies stop paying the special dividends which had become a bit of a trend and instead make their quarterly dividends "blended". Pioneer Natural Resources (PXD) is one of those companies, and due to some decisions made by management the company is currently able to pay a forward dividend yield of just over 13% via a base dividend of $1.10/share per quarter and a variable dividend of $7.47/share per quarter for a total of $8.57/share per quarter. As impressive as this return of capital is for shareholders, it actually gets better because Pioneer is also utilizing share repurchases; with the current share repurchase plan authorized to buy back $4 billion of the company's stock, of which $3 billion is still available. So What To Make Of The Dividend? Pioneer Natural Resources' management team is one of the E&Ps who have been carrying little to no hedging exposure. When prices move in your favor it certainly looks like you hit it out of the park, and right now Pioneer has. Due to the variability of cash flows due to the company's lack of hedges, investors need to do a deep dive into how they view the energy market moving forward in order to establish some comfort into the safety and sustainability of the company's dividend moving forward. To start this exercise one needs to look at management's estimates on where the dividend will be based upon energy prices. The following graph lays this out: Pioneer Natural Resources' management team's estimated annual dividend at various WTI oil prices. (PXD Investor Presentation) The above graph gives investors a good idea of where management believes the dividend will be based off of WTI oil prices, but that still does not tell the entire story. While Pioneer has a lot of oil production, it also produces a lot of NGLs and dry natural gas. Since the company does not have hedges, changes in prices for this other production can impact the dividend as well, which is why investors also need to look at the below information when modeling out their price assumptions. PXD has benefited from higher realized prices across the board for their production. (PXD Investor Presentation) Oil makes up over 50% of Pioneer's production, with NGLs and natural gas making up the rest. NGL pricing is more closely tied to oil prices than natural gas prices are, but we think investors might want to pay attention to the realized pricing in Q2 2022 for oil and natural gas. Oil prices have fallen a little over 10% (although that is not to say that Pioneer's realized pricing has fallen that much) and natural gas prices have shot up lately due to U.S. natural gas prices now being bid up by European buyers. Back of the envelope math tells us that the dividend (base and variable) could increase yet again next quarter off of higher natural gas prices, even with the pullback in oil prices. While that is good news, the question we see arising is how the company will approach hedging moving forward. Prices cannot go higher forever, and we have seen both oil and natural gas price spikes in the past met with sharp sell-offs that saw a lot of pain for producers (which in some cases lasted years). We think this question will have to be answered over the next year or so, but also telling is that Pioneer's CEO Scott Sheffield believes that oil prices will average $100/bbl or more over the next five years. Natural Gas prices have been on a run this year, having doubled with European buyers bidding up American LNG imports. (Seeking Alpha)
Shareholder Returns
| PXD | US Oil and Gas | US Market | |
|---|---|---|---|
| 7D | 17.7% | 10.3% | 1.0% |
| 1Y | 33.8% | 36.4% | -20.0% |
Return vs Industry: PXD underperformed the US Oil and Gas industry which returned 36.4% over the past year.
Return vs Market: PXD exceeded the US Market which returned -20% over the past year.
Price Volatility
| PXD volatility | |
|---|---|
| PXD Average Weekly Movement | 5.8% |
| Oil and Gas Industry Average Movement | 8.0% |
| Market Average Movement | 6.8% |
| 10% most volatile stocks in US Market | 15.5% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: PXD is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.
Volatility Over Time: PXD's weekly volatility (6%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1997 | 1,932 | Scott Sheffield | https://www.pxd.com |
Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. The company explores for, develops, and produces oil, natural gas liquids (NGLs), and gas. It has operations in the Midland Basin in West Texas.
Pioneer Natural Resources Company Fundamentals Summary
| PXD fundamental statistics | |
|---|---|
| Market Cap | US$58.09b |
| Earnings (TTM) | US$6.17b |
| Revenue (TTM) | US$23.69b |
9.4x
P/E Ratio2.5x
P/S RatioIs PXD overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| PXD income statement (TTM) | |
|---|---|
| Revenue | US$23.69b |
| Cost of Revenue | US$10.69b |
| Gross Profit | US$13.01b |
| Other Expenses | US$6.83b |
| Earnings | US$6.17b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 25.86 |
| Gross Margin | 54.90% |
| Net Profit Margin | 26.06% |
| Debt/Equity Ratio | 23.9% |
How did PXD perform over the long term?
See historical performance and comparison