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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To: Dennis Roth who wrote (195)	5/8/2008 6:28:12 PM
From: Dennis Roth	Read Replies (1) of 233

Pioneer Natural Resources Co. (PXD): Resource momentum, execution improving; stock trades at discount - Goldman Sachs May 08, 2008 What's changed Pioneer reported adjusted EPS of $0.99 versus our estimate of $0.82 and First Call consensus of $0.84. Total production net of volumetric production payment volumes was 110 MBOE/d, slightly higher than our 109 MBOE/d estimate. Operating cash flow was $322 million versus our $279 million. The company sees 2Q08 production of 110-115 MBOE/d versus our estimate of 115 MBOE/d. Implications Pioneer continues to show better-than-expected production and continues to boost confidence in longer-term growth potential by extending drilling opportunities in West Texas (Spraberry downspacing and Wolfberry), the Raton Basin (potential from the Pierre Shale) and the Edwards Trend (recent wells with IPs of 10-18 MMcfe/d). Pioneer shares have been out of favor at times in the past, which has led to a discounted valuation. However, unless there is a hiccup at above-mentioned fields or in the rampup of oil production in Alaska, we do not see what will stop momentum from continuing to increase. Pioneer appears to be on track to have improved drillbit reserve replacement without a major surge in finding and development costs, a key to unlocking additional value beyond 2008 if there is not a surge in proved undeveloped reserves bookings. Valuation While we rate Pioneer Neutral relative to our Attractive coverage view, we would highlight that valuation is attractive and Pioneer like many other E&Ps should benefit from commodity prices that surprise to the upside. Shares trade at 4.8x 2009 EV/DACF, a discount to long-lived peer group which trades at a 5.8x multiple. We see a 22% upside to a $80 12-month discounted cash flow based target price versus 26% upside for E&P stocks. Key risks Key risks include commodity price volatility, drilling results, cost pressures and government pronouncements.

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