By Sam Boughedda
Citi analysts downgraded Pioneer Natural Resources (NYSE:PXD) to Neutral, lowering the firm's price target on the stock to $240 from $257 per share in a note on Wednesday.
The analysts said that while they continue to view PXD as having an advantaged inventory position, recent modeling changes suggest upside from here will be limited.
"Of note, the reduction in near-term capital efficiency associated with full stack development points to lower volumes and/or greater capex in 2023," wrote the analysts. "We're at 3% oil growth and $4.5B of capex. Peers which experienced similar issues faced multiple quarters of being 'in the penalty box' with investors."
Citi also noted the expiration of Pioneer's primary frac contract at year-end and the need to reprice in a tight market.
"PXD's variable dividend appears to have peaked and should compress over the next several quarters," added the analysts. "The key risk appears to be a spike in oil prices this winter, but we see superior upside in APA and EOG."