PIONEER NATURAL RES. (PXD) Message Board

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Gold/Mining/Energy : PIONEER NATURAL RES. (PXD)

PXD 269.62

0.0%

May 3 4:00 PM EDT

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From: Dennis Roth	5/7/2007 11:37:16 AM
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Pioneer Natural Resources Co. (PXD): Growth on track, capital discipline and cost structure remain key Goldman Sachs - May 4, 2007 What"s changed Pioneer reported adjusted EPS of $0.37 versus our estimate of $0.43 and First Call consensus of $0.42. Total production when adding back volumetric production payment volumes was 679 MMcfe/d, in line with our 683 MMcfe/d estimate. Operating cash flow was at $195 million versus our $200 million. The company raised its target production growth rate per share to 12% from 10% and raised its 2007 capital expenditures budget by $200 million or 15%. Implications Pioneer appears to be executing well on its growth plans thus far, with the Spraberry, Raton and Edwards Trend on track. The next year is a key test of both execution (long-awaited production in Alaska and South Africa is expected to come online) and capital discipline. The timing of the announcement that the company will pursue two Master Limited Partnerships gives pause given that the period where the Street can judge Pioneer's growth strategy and discipline is just opening. Regardless, the low decline rate, multi-year inventory of the Spraberry field makes it very amenable for an MLP relative to other E&P assets, in our view. Valuation Pioneer trades at 6.2x 2008 EV/debt-adjusted cash flow, in diversified/conventional E&Ps and the 8x-10x multiple for value proposition of MLPs will be a key driver for Pioneer discounted cash flow based target price to $48 from $45 to among other adjustments. We see 6% downside versus 3% between the 4.7x average for unconventional E&Ps. The long-term shares. We have raised our 12-month reflect initial upside from the MLP downside for E&Ps. Key risks Commodity price volatility, drilling results, cost pressures and the capital availability and volatility of the market for E&P MLPs are key risks.

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