Intrinsic value of Pioneer Natural Resources - PXD

Previous Close

$186.30

  Intrinsic Value

$14.91

stock screener

  Rating & Target

str. sell

-92%

Previous close

$186.30

 
Intrinsic value

$14.91

 
Up/down potential

-92%

 
Rating

str. sell

*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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  45.00
  41.00
  37.40
  34.16
  31.24
  28.62
  26.26
  24.13
  22.22
  20.50
  18.95
  17.55
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.00
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
Revenue, $m
  3,951
  5,729
  8,078
  11,099
  14,890
  19,543
  25,136
  31,736
  39,394
  48,147
  58,016
  69,008
  81,120
  94,341
  108,650
  124,025
  140,440
  157,872
  176,297
  195,696
  216,055
  237,365
  259,622
  282,830
  306,998
  332,143
  358,288
  385,462
  413,701
  443,046
  473,546
Variable operating expenses, $m
 
  9,211
  12,977
  17,820
  23,898
  31,356
  40,323
  50,903
  63,181
  77,212
  93,033
  110,628
  130,045
  151,239
  174,178
  198,826
  225,142
  253,086
  282,624
  313,723
  346,361
  380,523
  416,204
  453,408
  492,153
  532,464
  574,377
  617,940
  663,210
  710,254
  759,149
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
  9,211
  12,977
  17,820
  23,898
  31,356
  40,323
  50,903
  63,181
  77,212
  93,033
  110,628
  130,045
  151,239
  174,178
  198,826
  225,142
  253,086
  282,624
  313,723
  346,361
  380,523
  416,204
  453,408
  492,153
  532,464
  574,377
  617,940
  663,210
  710,254
  759,149
Operating income, $m
  -625
  -3,482
  -4,899
  -6,721
  -9,008
  -11,814
  -15,187
  -19,168
  -23,786
  -29,065
  -35,017
  -41,620
  -48,925
  -56,898
  -65,528
  -74,801
  -84,702
  -95,215
  -106,327
  -118,027
  -130,306
  -143,158
  -156,582
  -170,579
  -185,155
  -200,321
  -216,089
  -232,478
  -249,509
  -267,208
  -285,603
EBITDA, $m
  855
  -1,363
  -1,922
  -2,641
  -3,544
  -4,651
  -5,982
  -7,552
  -9,375
  -11,458
  -13,807
  -16,423
  -19,305
  -22,451
  -25,857
  -29,515
  -33,422
  -37,570
  -41,955
  -46,572
  -51,417
  -56,488
  -61,785
  -67,308
  -73,060
  -79,044
  -85,266
  -91,732
  -98,453
  -105,436
  -112,695
Interest expense (income), $m
  196
  155
  299
  488
  731
  1,036
  1,411
  1,861
  2,392
  3,009
  3,713
  4,507
  5,392
  6,367
  7,431
  8,582
  9,820
  11,141
  12,544
  14,027
  15,588
  17,227
  18,942
  20,733
  22,601
  24,546
  26,570
  28,674
  30,861
  33,134
  35,495
Earnings before tax, $m
  -959
  -3,638
  -5,198
  -7,209
  -9,739
  -12,850
  -16,598
  -21,028
  -26,179
  -32,074
  -38,730
  -46,127
  -54,317
  -63,265
  -72,959
  -83,384
  -94,521
  -106,356
  -118,871
  -132,054
  -145,894
  -160,385
  -175,524
  -191,312
  -207,756
  -224,867
  -242,659
  -261,152
  -280,370
  -300,342
  -321,098
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
  -3,638
  -5,198
  -7,209
  -9,739
  -12,850
  -16,598
  -21,028
  -26,179
  -32,074
  -38,730
  -46,127
  -54,317
  -63,265
  -72,959
  -83,384
  -94,521
  -106,356
  -118,871
  -132,054
  -145,894
  -160,385
  -175,524
  -191,312
  -207,756
  -224,867
  -242,659
  -261,152
  -280,370
  -300,342
  -321,098

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
  20,172
  28,443
  39,081
  52,431
  68,812
  88,506
  111,745
  138,712
  169,532
  204,280
  242,986
  285,635
  332,186
  382,570
  436,706
  494,507
  555,886
  620,763
  689,070
  760,757
  835,791
  914,161
  995,879
  1,080,978
  1,169,517
  1,261,577
  1,357,261
  1,456,693
  1,560,022
  1,667,415
Adjusted assets (=assets-cash), $m
  13,900
  20,172
  28,443
  39,081
  52,431
  68,812
  88,506
  111,745
  138,712
  169,532
  204,280
  242,986
  285,635
  332,186
  382,570
  436,706
  494,507
  555,886
  620,763
  689,070
  760,757
  835,791
  914,161
  995,879
  1,080,978
  1,169,517
  1,261,577
  1,357,261
  1,456,693
  1,560,022
  1,667,415
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
  15,480
  21,826
  29,989
  40,234
  52,804
  67,917
  85,750
  106,443
  130,093
  156,758
  186,459
  219,187
  254,909
  293,572
  335,115
  379,469
  426,569
  476,353
  528,770
  583,781
  641,359
  701,498
  764,205
  829,508
  897,450
  968,094
  1,041,518
  1,117,820
  1,197,111
  1,279,521
Working capital, $m
  1,732
  -498
  -703
  -966
  -1,295
  -1,700
  -2,187
  -2,761
  -3,427
  -4,189
  -5,047
  -6,004
  -7,057
  -8,208
  -9,453
  -10,790
  -12,218
  -13,735
  -15,338
  -17,026
  -18,797
  -20,651
  -22,587
  -24,606
  -26,709
  -28,896
  -31,171
  -33,535
  -35,992
  -38,545
  -41,198
Total debt, $m
  3,213
  5,247
  8,564
  12,829
  18,183
  24,752
  32,649
  41,968
  52,781
  65,140
  79,074
  94,595
  111,698
  130,365
  150,569
  172,277
  195,455
  220,068
  246,084
  273,475
  302,222
  332,310
  363,737
  396,505
  430,630
  466,134
  503,050
  541,419
  581,292
  622,727
  665,791
Total liabilities, $m
  6,055
  8,089
  11,406
  15,671
  21,025
  27,594
  35,491
  44,810
  55,623
  67,982
  81,916
  97,437
  114,540
  133,207
  153,411
  175,119
  198,297
  222,910
  248,926
  276,317
  305,064
  335,152
  366,579
  399,347
  433,472
  468,976
  505,892
  544,261
  584,134
  625,569
  668,633
Total equity, $m
  10,404
  12,083
  17,037
  23,409
  31,406
  41,218
  53,015
  66,936
  83,088
  101,549
  122,364
  145,548
  171,096
  198,979
  229,159
  261,587
  296,210
  332,976
  371,837
  412,753
  455,693
  500,639
  547,582
  596,531
  647,506
  700,541
  755,685
  812,999
  872,559
  934,453
  998,782
Total liabilities and equity, $m
  16,459
  20,172
  28,443
  39,080
  52,431
  68,812
  88,506
  111,746
  138,711
  169,531
  204,280
  242,985
  285,636
  332,186
  382,570
  436,706
  494,507
  555,886
  620,763
  689,070
  760,757
  835,791
  914,161
  995,878
  1,080,978
  1,169,517
  1,261,577
  1,357,260
  1,456,693
  1,560,022
  1,667,415
Debt-to-equity ratio
  0.309
  0.430
  0.500
  0.550
  0.580
  0.600
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  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
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
  -3,638
  -5,198
  -7,209
  -9,739
  -12,850
  -16,598
  -21,028
  -26,179
  -32,074
  -38,730
  -46,127
  -54,317
  -63,265
  -72,959
  -83,384
  -94,521
  -106,356
  -118,871
  -132,054
  -145,894
  -160,385
  -175,524
  -191,312
  -207,756
  -224,867
  -242,659
  -261,152
  -280,370
  -300,342
  -321,098
Depreciation, amort., depletion, $m
  1,480
  2,119
  2,977
  4,080
  5,464
  7,163
  9,205
  11,615
  14,411
  17,607
  21,211
  25,197
  29,620
  34,447
  39,672
  45,286
  51,280
  57,644
  64,372
  71,455
  78,889
  86,670
  94,797
  103,271
  112,096
  121,277
  130,823
  140,746
  151,057
  161,772
  172,908
Funds from operations, $m
  1,356
  -1,519
  -2,221
  -3,129
  -4,275
  -5,687
  -7,393
  -9,413
  -11,767
  -14,467
  -17,520
  -20,930
  -24,697
  -28,818
  -33,287
  -38,098
  -43,242
  -48,711
  -54,499
  -60,599
  -67,005
  -73,715
  -80,727
  -88,041
  -95,660
  -103,589
  -111,835
  -120,406
  -129,314
  -138,570
  -148,190
Change in working capital, $m
  -142
  -155
  -204
  -263
  -330
  -405
  -487
  -574
  -666
  -761
  -859
  -956
  -1,054
  -1,150
  -1,245
  -1,338
  -1,428
  -1,517
  -1,603
  -1,688
  -1,771
  -1,854
  -1,936
  -2,019
  -2,103
  -2,188
  -2,275
  -2,364
  -2,457
  -2,553
  -2,653
Cash from operations, $m
  1,498
  -1,364
  -2,017
  -2,867
  -3,945
  -5,282
  -6,906
  -8,839
  -11,101
  -13,705
  -16,661
  -19,973
  -23,643
  -27,668
  -32,042
  -36,760
  -41,814
  -47,195
  -52,896
  -58,911
  -65,234
  -71,861
  -78,790
  -86,022
  -93,558
  -101,402
  -109,561
  -118,042
  -126,857
  -136,017
  -145,537
Maintenance CAPEX, $m
  0
  -1,442
  -2,092
  -2,949
  -4,053
  -5,437
  -7,136
  -9,178
  -11,588
  -14,384
  -17,580
  -21,184
  -25,197
  -29,620
  -34,447
  -39,672
  -45,286
  -51,280
  -57,644
  -64,372
  -71,455
  -78,889
  -86,670
  -94,797
  -103,271
  -112,096
  -121,277
  -130,823
  -140,746
  -151,057
  -161,772
New CAPEX, $m
  -2,060
  -4,806
  -6,347
  -8,163
  -10,244
  -12,571
  -15,112
  -17,833
  -20,693
  -23,650
  -26,665
  -29,701
  -32,728
  -35,721
  -38,663
  -41,543
  -44,355
  -47,100
  -49,784
  -52,417
  -55,010
  -57,579
  -60,139
  -62,707
  -65,303
  -67,942
  -70,644
  -73,424
  -76,302
  -79,291
  -82,410
Cash from investing activities, $m
  -3,820
  -6,248
  -8,439
  -11,112
  -14,297
  -18,008
  -22,248
  -27,011
  -32,281
  -38,034
  -44,245
  -50,885
  -57,925
  -65,341
  -73,110
  -81,215
  -89,641
  -98,380
  -107,428
  -116,789
  -126,465
  -136,468
  -146,809
  -157,504
  -168,574
  -180,038
  -191,921
  -204,247
  -217,048
  -230,348
  -244,182
Free cash flow, $m
  -2,322
  -7,612
  -10,456
  -13,979
  -18,242
  -23,290
  -29,154
  -35,850
  -43,382
  -51,739
  -60,906
  -70,858
  -81,569
  -93,009
  -105,153
  -117,975
  -131,454
  -145,574
  -160,325
  -175,700
  -191,699
  -208,329
  -225,599
  -243,526
  -262,131
  -281,440
  -301,481
  -322,290
  -343,904
  -366,365
  -389,718
Issuance/(repayment) of debt, $m
  -455
  2,519
  3,317
  4,266
  5,353
  6,569
  7,897
  9,319
  10,813
  12,359
  13,934
  15,521
  17,103
  18,667
  20,204
  21,709
  23,178
  24,613
  26,016
  27,391
  28,746
  30,089
  31,426
  32,769
  34,125
  35,504
  36,916
  38,369
  39,873
  41,435
  43,064
Issuance/(repurchase) of shares, $m
  2,516
  7,391
  10,152
  13,581
  17,736
  22,663
  28,394
  34,949
  42,331
  50,535
  59,545
  69,311
  79,864
  91,149
  103,139
  115,811
  129,144
  143,122
  157,732
  172,970
  188,835
  205,330
  222,467
  240,261
  258,731
  277,902
  297,802
  318,466
  339,931
  362,236
  385,427
Cash from financing (excl. dividends), $m  
  2,062
  9,910
  13,469
  17,847
  23,089
  29,232
  36,291
  44,268
  53,144
  62,894
  73,479
  84,832
  96,967
  109,816
  123,343
  137,520
  152,322
  167,735
  183,748
  200,361
  217,581
  235,419
  253,893
  273,030
  292,856
  313,406
  334,718
  356,835
  379,804
  403,671
  428,491
Total cash flow (excl. dividends), $m
  -260
  2,298
  3,013
  3,868
  4,847
  5,942
  7,137
  8,418
  9,763
  11,154
  12,573
  13,974
  15,398
  16,807
  18,191
  19,545
  20,868
  22,160
  23,423
  24,662
  25,882
  27,090
  28,295
  29,503
  30,724
  31,966
  33,237
  34,545
  35,899
  37,306
  38,773
Retained Cash Flow (-), $m
  -2,036
  -7,391
  -10,152
  -13,581
  -17,736
  -22,663
  -28,394
  -34,949
  -42,331
  -50,535
  -59,545
  -69,311
  -79,864
  -91,149
  -103,139
  -115,811
  -129,144
  -143,122
  -157,732
  -172,970
  -188,835
  -205,330
  -222,467
  -240,261
  -258,731
  -277,902
  -297,802
  -318,466
  -339,931
  -362,236
  -385,427
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
 
  -3,019
  -7,139
  -9,713
  -12,889
  -16,721
  -21,257
  -26,531
  -32,568
  -39,381
  -46,972
  -55,337
  -64,466
  -74,342
  -84,949
  -96,266
  -108,276
  -120,962
  -134,309
  -148,309
  -162,953
  -178,240
  -194,173
  -210,758
  -228,006
  -245,935
  -264,565
  -283,921
  -304,032
  -324,930
  -346,654
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
 
  -2,895
  -6,536
  -8,453
  -10,612
  -12,961
  -15,427
  -17,924
  -20,356
  -22,622
  -24,626
  -26,279
  -27,510
  -28,266
  -28,519
  -28,262
  -27,515
  -26,319
  -24,734
  -22,835
  -20,706
  -18,436
  -16,111
  -13,813
  -11,613
  -9,567
  -7,719
  -6,094
  -4,704
  -3,547
  -2,610
Current shareholders' claim on cash, %
  100
  77.4
  60.7
  48.1
  38.5
  31.1
  25.4
  20.8
  17.3
  14.4
  12.1
  10.2
  8.6
  7.3
  6.3
  5.4
  4.6
  4.0
  3.4
  3.0
  2.6
  2.3
  2.0
  1.7
  1.5
  1.3
  1.2
  1.0
  0.9
  0.8
  0.7

Pioneer Natural Resources Company is an oil and gas exploration and production company. The Company explores for, develops and produces oil, natural gas liquids (NGLs) and gas within the United States, with 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 owned interests in eight gas processing plants and nine treating facilities. As of December 31, 2016, its Spraberry/Wolfcamp field covered approximately 800,000 gross acres (690,000 net acres). The Company completed 12 Eagle Ford Shale wells during the fiscal year ended December 31, 2016. As of December 31, 2016, the Company owned approximately 185,000 gross acres (165,000 net acres) in the center of the Raton Basin. As of December 31, 2016, the Company's gas had an average energy content of 1,400 British thermal unit (Btu).

FINANCIAL RATIOS  of  Pioneer Natural Resources (PXD)

Valuation Ratios
P/E Ratio -56.9
Price to Sales 8
Price to Book 3
Price to Tangible Book
Price to Cash Flow 21.1
Price to Free Cash Flow -56.3
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 45% 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 7.4 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 169.858 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 $31.6 billion.

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Financial statements of PXD
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