Pioneer Natural Resources Company (PXD) reported its third-quarter adjusted earnings of 35 cents per share, which was below the Zacks Consensus Estimate of 38 cents but well ahead of the year-earlier loss of 3 cents. The year-over-year improvement was largely driven by growth in Spraberry field, Eagle Ford Shale and Tunisia.
Revenues in the quarter jumped significantly to $616.7 million from $393.0 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $493 million.
Operational Performance
Total production in the reported quarter averaged approximately 114.6 thousand barrels of oil equivalent per day (MBOE/d), up 1.2% year over year. Oil production averaged 33.7 million barrels per day (MMBbl/d), up approximately 6% year over year.
Natural gas production decreased more than 3% year over year to 361.7 million cubic feet per day (MMcf/d). Natural gas liquids production increased 10% year over year to 20.5 MMBbl/d.
On an oil equivalent basis, average realized price was $44.73 per barrel versus $39.57 per barrel in the year-ago quarter. Average realized price for oil was $84.71, compared with $78.20 in the third quarter of 2009.
Average natural gas price was $4.31 per Mcf, up from the year-earlier level of $3.64 per Mcf. Natural gas liquids had an average price of $34.46 per Bbl, up from $33.13 per Bbl recorded in the year-ago quarter.
Financials
At the end of the quarter, cash balance was $78.2 million. Long-term debt balance was $2.54 billion, representing a debt-to-capitalization ratio of 37.9%.
Company Guidance
The company expects its fourth quarter production to range from 115−120 MBOE/d, primarily due to planned drilling activity and the oil lifting schedule for Tunisia. Production costs are expected to average between $11.75 and $13.75 per BOE (based on current NYMEX price), and depletion, depreciation and amortization (DD&A) expense is expected to average around $14.25 to $15.50 per BOE.
Fourth quarter exploration expense guidance is $35–$45 million and the tax rate is expected to be in the 40–50% range.
The company also expects its capital budget for this year (including midstream investments) to total approximately $1.2 billion. The company has targeted operating cash flow of $1.2 billion, excluding the upfront cash payment of $266 million from Reliance related to the Eagle Ford Shale joint venture transaction, to fund this year’s capex.
Our Take
Eagle Ford Shale is a lucrative prospect for exploration and production players owing to its low break-even cost, high liquids content and large lease sizes relative to other shale plays. We believe the joint venture with Reliance will augment Pioneer’s position, making it the technology leader in the Eagle Ford Shale.
With the company’s big activity ramp up in the Spraberry oil field and the Eagle Ford Shale, Pioneer has set a goal to increase production by more than 15% per year until 2013, which is expected to improve its earnings and growth outlook.
Pioneer currently holds a Zacks #3 Rank (short-term Hold rating). Our long-term recommendation is Neutral for Pioneer.
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