Pioneer Natural Resources (PXD) Target Increased At UBS

UBS analyst, William Featherston, sees a clean 1Q EPS/CFPS of ($0.64)/$1.60 for Pioneer Natural Resources (NYSE: PXD) which comfortably beat consensus of ($0.84)/$1.40, respectively. The beat was driven by stronger than expected production (particularly oil volumes) & lower than expected costs. EBITDX of ~$310MM was 2% above consensus, respectively. 1Q production of ~222 MBoed rose 14% YoY and 3% QoQ and was above the guidance range of 211- 216 MBoed, with the oil mix climbing to 55.4% (vs. 52.6% in 4Q and 50.8% in 1Q15). PT goes to $185, no change to Buy rating.

Realizations fell 32% YoY to $3.38/Mcfe. Pre-tax unit costs fell ~12% YoY to $5.77/Mcfe.

The company raised 2016 production guidance with no change to capex. PXD raised its 2016 production guidance from >224 MBoed to >229 MBoed, up 12% YoY (vs. >10% prior) with 24% YoY oil growth (vs. 20% YoY prior) enabled by improving well productivity in the Wolfcamp from optimized well completions. PXD

maintained its 2016 capex budget of ~$2.0bn (down ~9% YoY). The company also provided 2Q production guidance of 224-229 MBoed, above both prior UBSe of ~221 MBoed & consensus of ~223 MBoed.

CFPS estimates increase from $8.05/$9.30 to $8.75/$11.25 on higher production, lower LOE, and a higher 2017 capex budget. 2P NAV increases by ~$24/sh to ~$244/sh on lower LOE & increased activity levels.

Other key takeaways from 1Q results:

1) plans to add 5-10 rigs when the oil price recovers to ~$50/Bbl & "the outlook for oil supply/demand fundamentals is positive;"

2) can add the rigs quickly given five rigs are currently stacked & has enough pressure pumping crews to support up to 28 rigs

3) current frac design has been applied to 97 northern Spraberry/Wolfcamp wells & has enabled production rates to range from 10% to 35% above 1 MMBoe type curve (reflects performance from initial design); PXD plans to test further enhanced completion designs on ~80 wells & 10-15 wells with >10,000' laterals (vs. typical

average of 7,000-9,500 feet) with the first 2 outperforming prior wells on same lease.

PT increases to $185 from $159 and assumes ~0.75x 2P NAV.

For an analyst ratings summary and ratings history on Pioneer Natural Resources click here. For more ratings news on Pioneer Natural Resources click here.

Shares of Pioneer Natural Resources closed at $153.50 yesterday.

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