Intrinsic value of Pioneer Natural Resources - PXD

Previous Close

$131.63

  Intrinsic Value

$14.98

stock screener

  Rating & Target

str. sell

-89%

  Value-price divergence*

+12%

Previous close

$131.63

 
Intrinsic value

$14.98

 
Up/down potential

-89%

 
Rating

str. sell

 
Value-price divergence*

+12%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PXD stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 22.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  25.75
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  3,951
  6,322
  9,767
  14,606
  21,193
  29,900
  41,106
  55,176
  72,450
  93,226
  117,752
  146,221
  178,769
  215,477
  256,375
  301,451
  350,660
  403,931
  461,178
  522,308
  587,230
  655,858
  728,120
  803,963
  883,351
  966,273
  1,052,739
  1,142,786
  1,236,475
  1,333,889
  1,435,139
Variable operating expenses, $m
 
  10,161
  15,685
  23,443
  34,002
  47,961
  65,925
  88,481
  116,173
  149,479
  188,797
  234,409
  286,588
  345,434
  410,999
  483,261
  562,149
  647,549
  739,322
  837,321
  941,397
  1,051,416
  1,167,261
  1,288,846
  1,416,114
  1,549,047
  1,687,663
  1,832,018
  1,982,212
  2,138,378
  2,300,694
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  4,576
  10,161
  15,685
  23,443
  34,002
  47,961
  65,925
  88,481
  116,173
  149,479
  188,797
  234,409
  286,588
  345,434
  410,999
  483,261
  562,149
  647,549
  739,322
  837,321
  941,397
  1,051,416
  1,167,261
  1,288,846
  1,416,114
  1,549,047
  1,687,663
  1,832,018
  1,982,212
  2,138,378
  2,300,694
Operating income, $m
  -625
  -3,840
  -5,918
  -8,837
  -12,809
  -18,061
  -24,819
  -33,305
  -43,723
  -56,253
  -71,045
  -88,188
  -107,818
  -129,957
  -154,624
  -181,810
  -211,489
  -243,617
  -278,144
  -315,012
  -354,167
  -395,558
  -439,141
  -484,883
  -532,763
  -582,774
  -634,923
  -689,232
  -745,737
  -804,489
  -865,555
EBITDA, $m
  855
  -2,105
  -3,252
  -4,863
  -7,056
  -9,954
  -13,685
  -18,369
  -24,120
  -31,036
  -39,201
  -48,679
  -59,515
  -71,736
  -85,351
  -100,358
  -116,740
  -134,475
  -153,533
  -173,885
  -195,498
  -218,345
  -242,403
  -267,652
  -294,081
  -321,687
  -350,473
  -380,451
  -411,642
  -444,073
  -477,780
Interest expense (income), $m
  196
  155
  347
  624
  1,014
  1,544
  2,244
  3,146
  4,279
  5,669
  7,341
  9,315
  11,606
  14,226
  17,180
  20,472
  24,100
  28,060
  32,347
  36,955
  41,875
  47,100
  52,623
  58,439
  64,543
  70,932
  77,606
  84,565
  91,812
  99,352
  107,193
Earnings before tax, $m
  -959
  -3,995
  -6,265
  -9,461
  -13,823
  -19,604
  -27,063
  -36,451
  -48,002
  -61,922
  -78,386
  -97,503
  -119,425
  -144,183
  -171,804
  -202,282
  -235,588
  -271,677
  -310,491
  -351,967
  -396,042
  -442,658
  -491,764
  -543,322
  -597,306
  -653,707
  -712,529
  -773,797
  -837,549
  -903,842
  -972,747
Tax expense, $m
  -403
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -556
  -3,995
  -6,265
  -9,461
  -13,823
  -19,604
  -27,063
  -36,451
  -48,002
  -61,922
  -78,386
  -97,503
  -119,425
  -144,183
  -171,804
  -202,282
  -235,588
  -271,677
  -310,491
  -351,967
  -396,042
  -442,658
  -491,764
  -543,322
  -597,306
  -653,707
  -712,529
  -773,797
  -837,549
  -903,842
  -972,747

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,559
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  16,459
  22,259
  34,390
  51,431
  74,624
  105,283
  144,740
  194,283
  255,106
  328,260
  414,619
  514,862
  629,469
  758,721
  902,729
  1,061,449
  1,234,720
  1,422,293
  1,623,867
  1,839,114
  2,067,710
  2,309,358
  2,563,804
  2,830,856
  3,110,392
  3,402,369
  3,706,828
  4,023,895
  4,353,784
  4,696,793
  5,053,306
Adjusted assets (=assets-cash), $m
  13,900
  22,259
  34,390
  51,431
  74,624
  105,283
  144,740
  194,283
  255,106
  328,260
  414,619
  514,862
  629,469
  758,721
  902,729
  1,061,449
  1,234,720
  1,422,293
  1,623,867
  1,839,114
  2,067,710
  2,309,358
  2,563,804
  2,830,856
  3,110,392
  3,402,369
  3,706,828
  4,023,895
  4,353,784
  4,696,793
  5,053,306
Revenue / Adjusted assets
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
Average production assets, $m
  10,674
  17,081
  26,390
  39,466
  57,264
  80,791
  111,069
  149,087
  195,760
  251,896
  318,165
  395,089
  483,034
  582,219
  692,725
  814,522
  947,484
  1,091,422
  1,246,104
  1,411,277
  1,586,695
  1,772,127
  1,967,381
  2,172,308
  2,386,815
  2,610,869
  2,844,501
  3,087,808
  3,340,954
  3,604,168
  3,877,745
Working capital, $m
  1,732
  -550
  -850
  -1,271
  -1,844
  -2,601
  -3,576
  -4,800
  -6,303
  -8,111
  -10,244
  -12,721
  -15,553
  -18,746
  -22,305
  -26,226
  -30,507
  -35,142
  -40,123
  -45,441
  -51,089
  -57,060
  -63,346
  -69,945
  -76,852
  -84,066
  -91,588
  -99,422
  -107,573
  -116,048
  -124,857
Total debt, $m
  3,213
  6,084
  10,949
  17,782
  27,082
  39,376
  55,199
  75,066
  99,456
  128,790
  163,420
  203,618
  249,575
  301,405
  359,152
  422,799
  492,281
  567,498
  648,329
  734,643
  826,310
  923,210
  1,025,243
  1,132,331
  1,244,425
  1,361,508
  1,483,596
  1,610,740
  1,743,025
  1,880,572
  2,023,534
Total liabilities, $m
  6,055
  8,926
  13,791
  20,624
  29,924
  42,218
  58,041
  77,908
  102,298
  131,632
  166,262
  206,460
  252,417
  304,247
  361,994
  425,641
  495,123
  570,340
  651,171
  737,485
  829,152
  926,052
  1,028,085
  1,135,173
  1,247,267
  1,364,350
  1,486,438
  1,613,582
  1,745,867
  1,883,414
  2,026,376
Total equity, $m
  10,404
  13,333
  20,600
  30,807
  44,700
  63,065
  86,699
  116,376
  152,809
  196,628
  248,357
  308,403
  377,052
  454,474
  540,735
  635,808
  739,597
  851,954
  972,696
  1,101,629
  1,238,558
  1,383,305
  1,535,718
  1,695,683
  1,863,125
  2,038,019
  2,220,390
  2,410,313
  2,607,916
  2,813,379
  3,026,930
Total liabilities and equity, $m
  16,459
  22,259
  34,391
  51,431
  74,624
  105,283
  144,740
  194,284
  255,107
  328,260
  414,619
  514,863
  629,469
  758,721
  902,729
  1,061,449
  1,234,720
  1,422,294
  1,623,867
  1,839,114
  2,067,710
  2,309,357
  2,563,803
  2,830,856
  3,110,392
  3,402,369
  3,706,828
  4,023,895
  4,353,783
  4,696,793
  5,053,306
Debt-to-equity ratio
  0.309
  0.460
  0.530
  0.580
  0.610
  0.620
  0.640
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
Adjusted equity ratio
  0.564
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -556
  -3,995
  -6,265
  -9,461
  -13,823
  -19,604
  -27,063
  -36,451
  -48,002
  -61,922
  -78,386
  -97,503
  -119,425
  -144,183
  -171,804
  -202,282
  -235,588
  -271,677
  -310,491
  -351,967
  -396,042
  -442,658
  -491,764
  -543,322
  -597,306
  -653,707
  -712,529
  -773,797
  -837,549
  -903,842
  -972,747
Depreciation, amort., depletion, $m
  1,480
  1,735
  2,666
  3,974
  5,754
  8,106
  11,134
  14,936
  19,603
  25,217
  31,844
  39,509
  48,303
  58,222
  69,273
  81,452
  94,748
  109,142
  124,610
  141,128
  158,669
  177,213
  196,738
  217,231
  238,682
  261,087
  284,450
  308,781
  334,095
  360,417
  387,775
Funds from operations, $m
  1,356
  -2,260
  -3,598
  -5,487
  -8,069
  -11,498
  -15,929
  -21,515
  -28,399
  -36,705
  -46,542
  -57,994
  -71,121
  -85,961
  -102,531
  -120,830
  -140,840
  -162,535
  -185,881
  -210,839
  -237,373
  -265,445
  -295,026
  -326,091
  -358,624
  -392,620
  -428,079
  -465,016
  -503,454
  -543,425
  -584,973
Change in working capital, $m
  -142
  -206
  -300
  -421
  -573
  -758
  -975
  -1,224
  -1,503
  -1,807
  -2,134
  -2,477
  -2,832
  -3,194
  -3,558
  -3,922
  -4,281
  -4,635
  -4,980
  -5,318
  -5,648
  -5,971
  -6,287
  -6,598
  -6,907
  -7,214
  -7,523
  -7,834
  -8,151
  -8,475
  -8,809
Cash from operations, $m
  1,498
  -2,054
  -3,299
  -5,066
  -7,496
  -10,740
  -14,954
  -20,291
  -26,896
  -34,898
  -44,409
  -55,517
  -68,290
  -82,768
  -98,973
  -116,908
  -136,559
  -157,900
  -180,900
  -205,521
  -231,724
  -259,474
  -288,739
  -319,492
  -351,718
  -385,405
  -420,557
  -457,182
  -495,303
  -534,950
  -576,164
Maintenance CAPEX, $m
  0
  -1,067
  -1,708
  -2,639
  -3,947
  -5,726
  -8,079
  -11,107
  -14,909
  -19,576
  -25,190
  -31,817
  -39,509
  -48,303
  -58,222
  -69,273
  -81,452
  -94,748
  -109,142
  -124,610
  -141,128
  -158,669
  -177,213
  -196,738
  -217,231
  -238,682
  -261,087
  -284,450
  -308,781
  -334,095
  -360,417
New CAPEX, $m
  -2,060
  -6,407
  -9,309
  -13,076
  -17,797
  -23,527
  -30,278
  -38,018
  -46,674
  -56,136
  -66,269
  -76,924
  -87,945
  -99,184
  -110,507
  -121,797
  -132,963
  -143,938
  -154,681
  -165,174
  -175,417
  -185,433
  -195,254
  -204,927
  -214,507
  -224,054
  -233,632
  -243,307
  -253,146
  -263,214
  -273,577
Cash from investing activities, $m
  -3,820
  -7,474
  -11,017
  -15,715
  -21,744
  -29,253
  -38,357
  -49,125
  -61,583
  -75,712
  -91,459
  -108,741
  -127,454
  -147,487
  -168,729
  -191,070
  -214,415
  -238,686
  -263,823
  -289,784
  -316,545
  -344,102
  -372,467
  -401,665
  -431,738
  -462,736
  -494,719
  -527,757
  -561,927
  -597,309
  -633,994
Free cash flow, $m
  -2,322
  -9,528
  -14,316
  -20,781
  -29,240
  -39,994
  -53,311
  -69,416
  -88,478
  -110,610
  -135,867
  -164,258
  -195,744
  -230,256
  -267,702
  -307,977
  -350,973
  -396,587
  -444,724
  -495,305
  -548,270
  -603,576
  -661,205
  -721,158
  -783,455
  -848,141
  -915,276
  -984,940
  -1,057,230
  -1,132,259
  -1,210,158
Issuance/(repayment) of debt, $m
  -455
  3,356
  4,865
  6,833
  9,300
  12,294
  15,822
  19,867
  24,390
  29,335
  34,630
  40,198
  45,957
  51,830
  57,747
  63,647
  69,482
  75,217
  80,831
  86,314
  91,667
  96,901
  102,033
  107,088
  112,094
  117,083
  122,088
  127,144
  132,285
  137,547
  142,962
Issuance/(repurchase) of shares, $m
  2,516
  8,999
  13,531
  19,668
  27,715
  37,969
  50,698
  66,128
  84,435
  105,741
  130,115
  157,549
  188,074
  221,606
  258,064
  297,355
  339,378
  384,034
  431,234
  480,900
  532,971
  587,404
  644,177
  703,286
  764,748
  828,601
  894,900
  963,720
  1,035,152
  1,109,304
  1,186,299
Cash from financing (excl. dividends), $m  
  2,062
  12,355
  18,396
  26,501
  37,015
  50,263
  66,520
  85,995
  108,825
  135,076
  164,745
  197,747
  234,031
  273,436
  315,811
  361,002
  408,860
  459,251
  512,065
  567,214
  624,638
  684,305
  746,210
  810,374
  876,842
  945,684
  1,016,988
  1,090,864
  1,167,437
  1,246,851
  1,329,261
Total cash flow (excl. dividends), $m
  -260
  2,826
  4,080
  5,720
  7,775
  10,270
  13,209
  16,578
  20,347
  24,466
  28,878
  33,489
  38,287
  43,180
  48,110
  53,025
  57,886
  62,664
  67,341
  71,909
  76,369
  80,729
  85,005
  89,216
  93,387
  97,543
  101,713
  105,925
  110,208
  114,591
  119,103
Retained Cash Flow (-), $m
  -2,036
  -8,999
  -13,531
  -19,668
  -27,715
  -37,969
  -50,698
  -66,128
  -84,435
  -105,741
  -130,115
  -157,549
  -188,074
  -221,606
  -258,064
  -297,355
  -339,378
  -384,034
  -431,234
  -480,900
  -532,971
  -587,404
  -644,177
  -703,286
  -764,748
  -828,601
  -894,900
  -963,720
  -1,035,152
  -1,109,304
  -1,186,299
Prev. year cash balance distribution, $m
 
  2,074
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -4,098
  -9,451
  -13,948
  -19,940
  -27,699
  -37,489
  -49,549
  -64,088
  -81,275
  -101,237
  -124,060
  -149,787
  -178,425
  -209,955
  -244,330
  -281,492
  -321,370
  -363,893
  -408,991
  -456,602
  -506,676
  -559,172
  -614,070
  -671,361
  -731,058
  -793,188
  -857,796
  -924,944
  -994,713
  -1,067,196
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -3,929
  -8,652
  -12,138
  -16,418
  -21,471
  -27,207
  -33,475
  -40,057
  -46,688
  -53,075
  -58,914
  -63,919
  -67,841
  -70,485
  -71,731
  -71,533
  -69,925
  -67,014
  -62,973
  -58,020
  -52,407
  -46,397
  -40,247
  -34,194
  -28,439
  -23,141
  -18,411
  -14,310
  -10,858
  -8,036
Current shareholders' claim on cash, %
  100
  66.5
  45.1
  31.2
  21.9
  15.7
  11.4
  8.4
  6.3
  4.7
  3.6
  2.8
  2.2
  1.7
  1.4
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1

Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. The company explores for, develops, and produces oil, liquefied natural gas (NGL), and gas. It has operations primarily in the Permian Basin in West Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado, and the West Panhandle field in the Texas Panhandle. As of December 31, 2016, the company had proved undeveloped reserves and proved developed reserves of approximately 37 million Bbls of oil, 10 million Bbls of NGLs, and 136 billion cubic feet of gas; and owned interests in eight gas processing plants and nine treating facilities. Pioneer Natural Resources Company was founded in 1997 and is headquartered in Irving, Texas.

FINANCIAL RATIOS  of  Pioneer Natural Resources (PXD)

Valuation Ratios
P/E Ratio -40.2
Price to Sales 5.7
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 14.9
Price to Free Cash Flow -39.8
Growth Rates
Sales Growth Rate 25.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.9%
Cap. Spend. - 3 Yr. Gr. Rate -6.5%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 26.2%
Total Debt to Equity 30.9%
Interest Coverage -4
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital -4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. 1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 41.4%
Gross Margin - 3 Yr. Avg. 48.2%
EBITDA Margin 18.1%
EBITDA Margin - 3 Yr. Avg. 39.7%
Operating Margin -15.8%
Oper. Margin - 3 Yr. Avg. -17.6%
Pre-Tax Margin -24.3%
Pre-Tax Margin - 3 Yr. Avg. -0.2%
Net Profit Margin -14.1%
Net Profit Margin - 3 Yr. Avg. -0.4%
Effective Tax Rate 42%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio -2.3%

PXD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PXD stock intrinsic value calculation we used $3951 million for the last fiscal year's total revenue generated by Pioneer Natural Resources. The default revenue input number comes from 2016 income statement of Pioneer Natural Resources. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PXD stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PXD is calculated based on our internal credit rating of Pioneer Natural Resources, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Pioneer Natural Resources.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PXD stock the variable cost ratio is equal to 161%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PXD stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.7% for Pioneer Natural Resources.

Corporate tax rate of 27% is the nominal tax rate for Pioneer Natural Resources. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PXD stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PXD are equal to 270.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Pioneer Natural Resources operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PXD is equal to -8.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10404 million for Pioneer Natural Resources - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 169.13 million for Pioneer Natural Resources is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Pioneer Natural Resources at the current share price and the inputted number of shares is $22.3 billion.

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COMPANY NEWS

▶ IEA: OPEC Must Extend Cuts To Balance Oil Markets   [Aug-15-17 07:00PM  Oilprice.com]
▶ The Oil Price Tug Of War   [04:00PM  Oilprice.com]
▶ Oil And Gas E&P Earnings: GOR'ed   [03:44PM  Barrons.com]
▶ Supply Risks Could Push Oil Prices Higher This Week   [Aug-14-17 07:00PM  Oilprice.com]
▶ Can The Permian Push Prices Down To $40?   [07:00PM  Oilprice.com]
▶ Have Oil Markets Reached A Tipping Point?   [Aug-11-17 03:00PM  Oilprice.com]
▶ [$$] Investors Question Oil Output in America's Fastest-Growing Field   [Aug-09-17 09:39PM  The Wall Street Journal]
▶ [$$] Investors Question Oil Output In Big Field   [07:52PM  The Wall Street Journal]
▶ These Energy Stocks Fell the Most Last Week   [11:36AM  Market Realist]
▶ Shale Producers Hedge At Much Lower Prices   [05:00PM  Oilprice.com]
▶ Why Oil Price Gains Won't Stick   [11:50AM  Motley Fool]
▶ Pioneer Natural Resources Down 13% in 1 Day   [Aug-05-17 06:13PM  Motley Fool]
▶ New Strong Sell Stocks for August 4th   [Aug-04-17 07:56AM  Zacks]
▶ Is The EIA Exaggerating U.S. Oil Production?   [Aug-03-17 07:00PM  Oilprice.com]
▶ ETF Flopper: A Bad Day For Oil E&P Stocks   [06:01PM  Barrons.com]
▶ Oil Has a Crisis of Faith   [01:10PM  Bloomberg]
▶ New iPhone Fears 'Overblown'; Illumina Upgraded, Stock Breaks Out   [Aug-02-17 04:31PM  Investor's Business Daily]
▶ A Bucket Of Water For Hot Shale   [01:35PM  Bloomberg]
▶ Wednesday's Worst Stocks: AMC, JWN, PXD   [12:40PM  TheStreet.com]
▶ Oil Steadies After Small Stockpile Drop, Higher U.S. Output   [11:21AM  Investor's Business Daily]
▶ Pioneer's Oily Slip-Up   [08:27AM  Bloomberg]
▶ Pioneer Natural Resources posts 2Q profit   [Aug-01-17 11:04PM  Associated Press]
▶ Pioneer Natural Trims 2017 Budget, Cites Weak Oil Prices   [Jul-31-17 08:00PM  Rigzone.com]
▶ [$$] Investors Eager to Hear Shale Companies' Plans for Rest of 2017   [Jul-30-17 07:22AM  The Wall Street Journal]
▶ Nine Oil Picks From Goldman Sachs   [09:41AM  Barrons.com]
▶ 3 Stocks With Hasbro-Like Return Potential   [Jul-25-17 10:43AM  Motley Fool]
▶ Permian Oil Reserves Are Grossly Exaggerated   [Jul-19-17 07:00PM  Oilprice.com]
▶ 3 Growth Stocks for the Long Term   [Jul-18-17 06:00PM  Motley Fool]
▶ The Next Oil Boom Could Be Here Sooner Than You Think   [Jul-15-17 03:15PM  Motley Fool]
▶ Verizon unveils plans for new Hidden Ridge corporate magnet in Irving's Las Colinas   [Jul-13-17 11:45AM  American City Business Journals]
▶ ConocoPhillipss 1Q17 Crude Oil Price Underperforms WTI   [Jul-03-17 10:37AM  Market Realist]
▶ Insiders Are Buying Oil Stocks: Should You?   [Jun-28-17 06:03PM  Zacks]
▶ The Most Ignored Oil Price Influencer   [Jun-21-17 05:00PM  Oilprice.com]
▶ [$$] US oil producers: fool me once   [03:00PM  Financial Times]
▶ Chart in Focus: Stone Energys Operating Netbacks   [Jun-20-17 10:35AM  Market Realist]
▶ It's done: Pioneer Natural Resources inks deal for its Hidden Ridge campus   [Jun-16-17 05:20PM  American City Business Journals]
Stock chart of PXD Financial statements of PXD
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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