JPMorgan Downgrades Pioneer Natural Resources (PXD) to Neutral
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JPMorgan analyst Arun Jayaram downgraded Pioneer Natural Resources (NYSE: PXD) from Overweight to Neutral with a price target of $177.00 (from $168.00).
The analyst comments "PXD is the largest acreage holder in the Spraberry/Wolfcamp field in the Permian Basin of West Texas with ~1,034K net acres including PE and DPE acreage with 920K net acres in the “core of the core” of the Midland Basin that features an ideal geologic mix of depth, thickness, and thermal maturity. On January 12, PXD completed its previously announced acquisition of PE following shareholder approval for the allstock transaction. On the heels of its $7.6 billion purchase of PE, PXD announced a $6.4 billion transaction, on April 1, to purchase DoublePoint Energy, which was a private equity backed Permian pure play. The transaction is expected to be financed by $4.5 billion in equity and $1.9 billion in cash/assumed debt. The deal implies a per acre valuation of ~$42K per acre assuming $2.3 billion in value for production. On our updated numbers, the transaction is 9% accretive to our 2022 CFPS estimates and 6% accretive to 2022E FCF, but slightly dilutive to returns (our ’22 and ’23 ROCE estimates decline to 13.8% and 12.8% from 14.5% and 13.4% previously) given the transaction price equates to $42K per acre. Prior to the DPE transaction, PXD shares were trading at healthy premiums to the E&P peers (’21 and ’22 EBITDA multiples of 7.2x and 6.0x vs. the peers at 5.6x and 5.1x, respectively) reflecting the company’s unique inventory depth/quality and the company’s cash return strategy. From our analytical work, we believe a Neutral rating is justified."
Shares of Pioneer Natural Resources closed at $152.18 yesterday.
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