Pioneer Natural (PXD) Posts Narrower-than-Expected Q2 Loss

Pioneer Natural ResourcesCompany (NYSE:PXD) reported second-quarter 2016 adjusted loss of 22 cents per share, substantially narrower than the Zacks Consensus Estimate of loss of 34 cents. Notably, the company had posted adjusted earnings of 10 cents per share in the year-earlier quarter. The underperformance was mainly due to lower price realizations.

Revenues and other income in the quarter increased 22% year over year to $786 million from $644 million. The top line, however, missed the Zacks Consensus Estimate of $794 million.

Production

Total production in the reported quarter averaged approximately 232.7 thousand barrels of oil equivalent per day (MBOE/d), up 18.4% year over year. Robust yield from core growth assets – particularly Spraberry field and Wolfcamp Shale – boosted growth.

Oil production averaged 134.7 thousand barrels per day (MBbl/d), up 33.9% year over year. Natural gas liquids (NGLs) production jumped 12.3% year over year to 41.2 MBbl/d. Natural gas production decreased to 340.5 million cubic feet per day (MMcf/d) from the year-ago level of 356.4 MMcf/d.

Price Realization

On an oil equivalent basis, the average realized price was $28.95 per barrel in the reported quarter as against $33.32 a year ago. The average realized price for oil was $41.43 per barrel compared with $51.64 in second-quarter 2015.

Average natural gas price plunged 29.5% year over year to $1.67 per thousand cubic feet (Mcf). Natural gas liquids were sold at $14.21 per barrel as against $14.03 in the year-ago quarter.

Cash, Debt and Capex

At the end of the quarter, cash balance was $1,825.0 million. Long-term debt was $2,725.0 million, which represents a debt-to-capitalization ratio of 26.1% (as against 30.4% in the preceding quarter).

Capital Outlay

For 2016, Pioneer plans to spend $2.1 billion in total. The estimation has been increased from the preliminary forecast in first-quarter 2016. Of this, the company has planned drilling capex of $1.95 billion and capital for vertical integration of $150 million.

An amount of $1,810 million has been allocated for the northern Spraberry/Wolfcamp area and $60 million has been set aside for the southern Wolfcamp joint venture. The company will also spend $60 million for Eagle Ford Shale and $20 million for other assets.

Guidance

Pioneer expects production to average between 232 MBOE/d and 237 MBOE/d in the third quarter of 2016.

Production costs are anticipated between $8.25 per BOE and $10.25 per BOE. Depletion, depreciation and amortization expenses are expected to average between $17.50 per BOE and $19.50 per BOE. The projected range for general and administrative expenses is $78–$83 million, for interest expenses is $45–$50 million and for other expenses is $65–$75 million. The company estimates exploration and abandonment expenses in the range of $20–$30 million, while the expected tax rate is 35–40%.

Zacks Rank and Key Stock Picks

Pioneer Natural Resources currently holds a Zacks Rank #2 (Buy).

Other favorably placed players from the same sector are GeoPark Limited (NYSE:GPRK) , Northern Oil and Gas, Inc. (NYSE:NOG) and Rex Energy Corporation (NASDAQ:REXX) . All these stocks sport a Zacks Rank #1 (Strong Buy).