UPDATE: Drexel Hamilton Starts Pioneer Natural Resources (PXD) at Buy

Drexel Hamilton initiated coverage on Pioneer Natural Resources (NYSE: PXD) with a Buy rating with a $193 price target. Analyst Robert L. Christensen, Jr. noted Pioneer Natural's dominate position in the Midland basin, and he sees it as the strongest large cap crude oil-leveraged E&P company.

"Should our $50/bbl forecast for 2017 transpire, PXD’s margins would expand dramatically and a very fast new phase of multi-year growth – 30% plus production growth might be possible for more than a decade," said Christensen. "We see PXD as having 7.8BBOE of crude oil reserves (proved 664 MMBOE, and probable and possible of 7.2 BBOE) that can be aggressively drilled for and produced when such time as world oil prices improve."

"PXD has a strong balance sheet and its debt is investment grade so has a great deal of financial flexibility to: a) prudently manage through the current commodity price downturn, or b) to quickly ramp up drilling activity should world oil prices move up to over $50/bbl which we predict for 2017," continued the analyst.

Christensen added, "Based on its latest well results, we estimate its breakeven cost per barrel in the Wolfcamp B formation that it prefers, is now edging close to $35/bbl ... Latest wells show the strongest performances yet, tracking well above 1.0 MMBOE EURs (estimated ultimate recovery) or reserves per well. Moreover, only 65% of these wells were “optimized” using PXD’s latest techniques that we remind are still in an early state of research at the company and evolving. With $2.0bn of cash on hand, an investment grade posture, and strong oil price hedges thru 2017, PXD's drilling programs are fully funded with-out more debt thru 2017."

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 $138.44 yesterday.

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