Pioneer Natural Resources Valuation – June 2016 $PXD

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Pioneer Natural Resources (PXD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Pioneer Natural Resources Company is an independent oil and gas exploration and production company with operations in the United States. The Company operates through the oil and gas development, exploration and production segment. The Company focuses on production of oil, natural gas liquid (NGLs) and gas through development drilling, production enhancement activities and acquisitions of producing properties. The Company’s properties include Spraberry/Wolfcamp oil field located in West Texas; the Eagle Ford Shale field located in South Texas; Raton gas field located in southern Colorado; the West Panhandle gas and liquids field located in the Texas Panhandle, and the Edwards gas field located in South Texas. The Company’s operations include well stimulation and completion activities, such as hydraulic fracturing, and water distribution and disposal activities. The Company owns interests in over seven gas processing plants and approximately eight treating facilities.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of PXD – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,642,578,611 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.29 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -44.49% Fail
6. Moderate PEmg Ratio PEmg < 20 -254.60 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.67 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.29 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.19 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

PXD value chart June 2016

EPSmg -$0.63
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$9.09
MG Value based on 0% Growth -$5.33
Market Implied Growth Rate -131.55%
Current Price $159.55
% of Intrinsic Value N/A

Pioneer Natural Resources does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.41 in 2012 to an estimated $-0.63 for 2016. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Pioneer Natural Resources scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

PXD charts June 2016

Net Current Asset Value (NCAV) -$14.83
Graham Number $0.00
PEmg -254.60
Current Ratio 2.29
PB Ratio 2.67
Current Dividend $0.08
Dividend Yield 0.05%
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $4,081,000,000
Total Current Liabilities $1,783,000,000
Long-Term Debt $2,724,000,000
Total Assets $16,171,000,000
Intangible Assets $272,000,000
Total Liabilities $6,483,000,000
Shares Outstanding (Diluted Average) 162,000,000

Earnings Per Share History

Next Fiscal Year Estimate -$2.08
Dec2015 -$1.83
Dec2014 $6.38
Dec2013 -$6.16
Dec2012 $1.50
Dec2011 $6.88
Dec2010 $5.08
Dec2009 -$0.46
Dec2008 $1.85
Dec2007 $3.06
Dec2006 $5.81
Dec2005 $3.80
Dec2004 $2.46
Dec2003 $3.46
Dec2002 $0.23
Dec2001 $1.00
Dec2000 $1.53
Dec1999 -$0.22
Dec1998 -$7.46
Dec1997 -$17.14

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$0.63
Dec2015 $0.52
Dec2014 $2.04
Dec2013 $0.37
Dec2012 $3.41
Dec2011 $4.01
Dec2010 $2.74
Dec2009 $1.98
Dec2008 $3.27
Dec2007 $3.89
Dec2006 $3.92
Dec2005 $2.71
Dec2004 $2.02
Dec2003 $1.60
Dec2002 $0.12
Dec2001 -$1.44
Dec2000 -$3.33

Recommended Reading:

Other ModernGraham posts about the company

Pioneer Natural Resources Annual Valuation – 2015 $PXD

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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