Intrinsic value of Pioneer Natural Resources - PXD

Previous Close

$182.97

  Intrinsic Value

$16.18

stock screener

  Rating & Target

str. sell

-91%

Previous close

$182.97

 
Intrinsic value

$16.18

 
Up/down potential

-91%

 
Rating

str. sell

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 2017), $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 31.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  8,728
  13,485
  20,166
  29,261
  41,282
  56,754
  76,180
  100,029
  128,713
  162,575
  201,882
  246,820
  297,501
  353,967
  416,203
  484,144
  557,693
  636,732
  721,132
  810,766
  905,518
  1,005,289
  1,110,002
  1,219,611
  1,334,097
  1,453,478
  1,577,803
  1,707,155
  1,841,651
  1,981,443
Variable operating expenses, $m
  3,597
  5,543
  8,276
  11,996
  16,914
  23,242
  31,189
  40,944
  52,677
  66,529
  82,580
  100,962
  121,693
  144,791
  170,248
  198,039
  228,125
  260,455
  294,979
  331,644
  370,403
  411,214
  454,047
  498,882
  545,713
  594,546
  645,401
  698,312
  753,328
  810,510
Fixed operating expenses, $m
  2,854
  2,917
  2,981
  3,047
  3,114
  3,183
  3,253
  3,324
  3,397
  3,472
  3,548
  3,626
  3,706
  3,788
  3,871
  3,956
  4,043
  4,132
  4,223
  4,316
  4,411
  4,508
  4,607
  4,709
  4,812
  4,918
  5,026
  5,137
  5,250
  5,365
Total operating expenses, $m
  6,451
  8,460
  11,257
  15,043
  20,028
  26,425
  34,442
  44,268
  56,074
  70,001
  86,128
  104,588
  125,399
  148,579
  174,119
  201,995
  232,168
  264,587
  299,202
  335,960
  374,814
  415,722
  458,654
  503,591
  550,525
  599,464
  650,427
  703,449
  758,578
  815,875
Operating income, $m
  2,276
  5,025
  8,909
  14,217
  21,255
  30,329
  41,739
  55,761
  72,639
  92,575
  115,754
  142,232
  172,102
  205,389
  242,084
  282,148
  325,525
  372,144
  421,929
  474,806
  530,705
  589,567
  651,348
  716,020
  783,572
  854,014
  927,376
  1,003,706
  1,083,073
  1,165,568
EBITDA, $m
  4,418
  8,319
  13,822
  21,334
  31,284
  44,107
  60,224
  80,025
  103,853
  131,994
  164,670
  202,036
  244,186
  291,155
  342,930
  399,456
  460,654
  526,424
  596,660
  671,255
  750,112
  833,148
  920,302
  1,011,531
  1,106,824
  1,206,192
  1,309,677
  1,417,349
  1,529,305
  1,645,671
Interest expense (income), $m
  196
  148
  333
  603
  981
  1,497
  2,179
  3,056
  4,157
  5,509
  7,135
  9,055
  11,283
  13,831
  16,704
  19,905
  23,433
  27,285
  31,455
  35,936
  40,720
  45,802
  51,173
  56,830
  62,766
  68,980
  75,470
  82,238
  89,286
  96,619
  104,244
Earnings before tax, $m
  2,129
  4,692
  8,306
  13,236
  19,758
  28,151
  38,683
  51,604
  67,130
  85,440
  106,699
  130,949
  158,271
  188,685
  222,179
  258,715
  298,240
  340,690
  385,994
  434,086
  484,903
  538,393
  594,518
  653,254
  714,592
  778,544
  845,137
  914,419
  986,454
  1,061,323
Tax expense, $m
  575
  1,267
  2,243
  3,574
  5,335
  7,601
  10,445
  13,933
  18,125
  23,069
  28,809
  35,356
  42,733
  50,945
  59,988
  69,853
  80,525
  91,986
  104,218
  117,203
  130,924
  145,366
  160,520
  176,379
  192,940
  210,207
  228,187
  246,893
  266,343
  286,557
Net income, $m
  1,554
  3,425
  6,064
  9,662
  14,423
  20,550
  28,239
  37,671
  49,005
  62,371
  77,890
  95,592
  115,538
  137,740
  162,190
  188,862
  217,715
  248,703
  281,776
  316,883
  353,979
  393,027
  433,998
  476,875
  521,652
  568,337
  616,950
  667,526
  720,111
  774,766

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  27,190
  42,009
  62,824
  91,154
  128,605
  176,803
  237,321
  311,618
  400,976
  506,466
  628,915
  768,909
  926,794
  1,102,702
  1,296,582
  1,508,236
  1,737,362
  1,983,588
  2,246,517
  2,525,752
  2,820,930
  3,131,741
  3,457,950
  3,799,410
  4,156,066
  4,527,969
  4,915,273
  5,318,239
  5,737,232
  6,172,721
Adjusted assets (=assets-cash), $m
  27,190
  42,009
  62,824
  91,154
  128,605
  176,803
  237,321
  311,618
  400,976
  506,466
  628,915
  768,909
  926,794
  1,102,702
  1,296,582
  1,508,236
  1,737,362
  1,983,588
  2,246,517
  2,525,752
  2,820,930
  3,131,741
  3,457,950
  3,799,410
  4,156,066
  4,527,969
  4,915,273
  5,318,239
  5,737,232
  6,172,721
Revenue / Adjusted assets
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
Average production assets, $m
  21,148
  32,674
  48,863
  70,898
  100,027
  137,514
  184,584
  242,371
  311,873
  393,920
  489,160
  598,045
  720,845
  857,663
  1,008,459
  1,173,081
  1,351,290
  1,542,801
  1,747,303
  1,964,487
  2,194,071
  2,435,815
  2,689,535
  2,955,116
  3,232,518
  3,521,778
  3,823,016
  4,136,436
  4,462,321
  4,801,037
Working capital, $m
  -1,711
  -2,643
  -3,953
  -5,735
  -8,091
  -11,124
  -14,931
  -19,606
  -25,228
  -31,865
  -39,569
  -48,377
  -58,310
  -69,378
  -81,576
  -94,892
  -109,308
  -124,799
  -141,342
  -158,910
  -177,482
  -197,037
  -217,560
  -239,044
  -261,483
  -284,882
  -309,249
  -334,602
  -360,964
  -388,363
Total debt, $m
  6,166
  11,160
  18,175
  27,722
  40,343
  56,586
  76,980
  102,018
  132,132
  167,682
  208,947
  256,125
  309,333
  368,614
  433,951
  505,279
  582,494
  665,472
  754,079
  848,181
  947,656
  1,052,400
  1,162,332
  1,277,404
  1,397,597
  1,522,929
  1,653,450
  1,789,250
  1,930,450
  2,077,210
Total liabilities, $m
  9,163
  14,157
  21,172
  30,719
  43,340
  59,583
  79,977
  105,015
  135,129
  170,679
  211,944
  259,122
  312,330
  371,611
  436,948
  508,276
  585,491
  668,469
  757,076
  851,178
  950,653
  1,055,397
  1,165,329
  1,280,401
  1,400,594
  1,525,926
  1,656,447
  1,792,247
  1,933,447
  2,080,207
Total equity, $m
  18,027
  27,852
  41,652
  60,435
  85,265
  117,220
  157,344
  206,603
  265,847
  335,787
  416,971
  509,787
  614,465
  731,092
  859,634
  999,961
  1,151,871
  1,315,119
  1,489,441
  1,674,574
  1,870,276
  2,076,344
  2,292,621
  2,519,009
  2,755,472
  3,002,044
  3,258,826
  3,525,993
  3,803,785
  4,092,514
Total liabilities and equity, $m
  27,190
  42,009
  62,824
  91,154
  128,605
  176,803
  237,321
  311,618
  400,976
  506,466
  628,915
  768,909
  926,795
  1,102,703
  1,296,582
  1,508,237
  1,737,362
  1,983,588
  2,246,517
  2,525,752
  2,820,929
  3,131,741
  3,457,950
  3,799,410
  4,156,066
  4,527,970
  4,915,273
  5,318,240
  5,737,232
  6,172,721
Debt-to-equity ratio
  0.340
  0.400
  0.440
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
Adjusted equity ratio
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,554
  3,425
  6,064
  9,662
  14,423
  20,550
  28,239
  37,671
  49,005
  62,371
  77,890
  95,592
  115,538
  137,740
  162,190
  188,862
  217,715
  248,703
  281,776
  316,883
  353,979
  393,027
  433,998
  476,875
  521,652
  568,337
  616,950
  667,526
  720,111
  774,766
Depreciation, amort., depletion, $m
  2,142
  3,294
  4,913
  7,117
  10,030
  13,778
  18,485
  24,264
  31,214
  39,419
  48,916
  59,804
  72,084
  85,766
  100,846
  117,308
  135,129
  154,280
  174,730
  196,449
  219,407
  243,581
  268,954
  295,512
  323,252
  352,178
  382,302
  413,644
  446,232
  480,104
Funds from operations, $m
  3,696
  6,719
  10,977
  16,779
  24,453
  34,328
  46,724
  61,935
  80,219
  101,790
  126,806
  155,397
  187,622
  223,506
  263,036
  306,170
  352,844
  402,983
  456,506
  513,331
  573,386
  636,609
  702,952
  772,387
  844,904
  920,515
  999,252
  1,081,170
  1,166,343
  1,254,870
Change in working capital, $m
  -642
  -932
  -1,310
  -1,782
  -2,356
  -3,032
  -3,808
  -4,674
  -5,622
  -6,637
  -7,704
  -8,808
  -9,933
  -11,067
  -12,198
  -13,316
  -14,416
  -15,492
  -16,542
  -17,568
  -18,571
  -19,555
  -20,524
  -21,483
  -22,439
  -23,399
  -24,368
  -25,353
  -26,361
  -27,399
Cash from operations, $m
  4,337
  7,652
  12,287
  18,562
  26,809
  37,361
  50,532
  66,610
  85,841
  108,427
  134,510
  164,205
  197,556
  234,574
  275,235
  319,486
  367,260
  418,475
  473,048
  530,900
  591,958
  656,164
  723,476
  793,870
  867,343
  943,914
  1,023,620
  1,106,523
  1,192,705
  1,282,269
Maintenance CAPEX, $m
  -1,322
  -2,115
  -3,267
  -4,886
  -7,090
  -10,003
  -13,751
  -18,458
  -24,237
  -31,187
  -39,392
  -48,916
  -59,804
  -72,084
  -85,766
  -100,846
  -117,308
  -135,129
  -154,280
  -174,730
  -196,449
  -219,407
  -243,581
  -268,954
  -295,512
  -323,252
  -352,178
  -382,302
  -413,644
  -446,232
New CAPEX, $m
  -7,929
  -11,526
  -16,190
  -22,035
  -29,129
  -37,487
  -47,070
  -57,787
  -69,502
  -82,048
  -95,239
  -108,885
  -122,800
  -136,818
  -150,796
  -164,621
  -178,210
  -191,511
  -204,501
  -217,184
  -229,584
  -241,744
  -253,720
  -265,581
  -277,401
  -289,260
  -301,239
  -313,420
  -325,885
  -338,716
Cash from investing activities, $m
  -9,251
  -13,641
  -19,457
  -26,921
  -36,219
  -47,490
  -60,821
  -76,245
  -93,739
  -113,235
  -134,631
  -157,801
  -182,604
  -208,902
  -236,562
  -265,467
  -295,518
  -326,640
  -358,781
  -391,914
  -426,033
  -461,151
  -497,301
  -534,535
  -572,913
  -612,512
  -653,417
  -695,722
  -739,529
  -784,948
Free cash flow, $m
  -4,914
  -5,989
  -7,171
  -8,360
  -9,410
  -10,129
  -10,290
  -9,635
  -7,898
  -4,808
  -121
  6,404
  14,951
  25,671
  38,672
  54,019
  71,742
  91,835
  114,267
  138,985
  165,925
  195,013
  226,174
  259,335
  294,431
  331,402
  370,203
  410,801
  453,176
  497,321
Issuance/(repayment) of debt, $m
  3,434
  4,994
  7,015
  9,547
  12,621
  16,243
  20,395
  25,038
  30,114
  35,550
  41,266
  47,178
  53,207
  59,281
  65,337
  71,327
  77,215
  82,978
  88,607
  94,102
  99,475
  104,743
  109,933
  115,072
  120,193
  125,331
  130,522
  135,799
  141,201
  146,760
Issuance/(repurchase) of shares, $m
  5,199
  6,400
  7,737
  9,121
  10,407
  11,405
  11,885
  11,588
  10,240
  7,568
  3,294
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  8,633
  11,394
  14,752
  18,668
  23,028
  27,648
  32,280
  36,626
  40,354
  43,118
  44,560
  47,178
  53,207
  59,281
  65,337
  71,327
  77,215
  82,978
  88,607
  94,102
  99,475
  104,743
  109,933
  115,072
  120,193
  125,331
  130,522
  135,799
  141,201
  146,760
Total cash flow (excl. dividends), $m
  3,719
  5,405
  7,581
  10,308
  13,618
  17,518
  21,990
  26,990
  32,456
  38,310
  44,438
  53,582
  68,158
  84,952
  104,009
  125,347
  148,957
  174,813
  202,874
  233,087
  265,400
  299,756
  336,107
  374,407
  414,624
  456,733
  500,725
  546,601
  594,376
  644,081
Retained Cash Flow (-), $m
  -6,753
  -9,825
  -13,801
  -18,783
  -24,830
  -31,955
  -40,124
  -49,259
  -59,245
  -69,939
  -81,184
  -92,816
  -104,678
  -116,627
  -128,542
  -140,327
  -151,910
  -163,248
  -174,322
  -185,133
  -195,703
  -206,068
  -216,277
  -226,388
  -236,463
  -246,572
  -256,783
  -267,166
  -277,792
  -288,729
Prev. year cash balance distribution, $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 flow adjustment, $m
  76
  122
  189
  282
  410
  578
  795
  1,067
  1,400
  1,802
  2,276
  2,826
  3,455
  4,165
  4,956
  5,827
  6,778
  7,808
  8,914
  10,096
  11,351
  12,677
  14,074
  15,540
  17,075
  18,677
  20,349
  22,089
  23,900
  25,783
Cash available for distribution, $m
  -3,034
  -4,420
  -6,219
  -8,475
  -11,212
  -14,436
  -18,134
  -22,269
  -26,788
  -31,629
  -36,746
  -39,234
  -36,519
  -31,675
  -24,533
  -14,980
  -2,953
  11,565
  28,552
  47,955
  69,697
  93,688
  119,830
  148,020
  178,161
  210,161
  243,942
  279,434
  316,584
  355,352
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
  -2,909
  -4,046
  -5,413
  -6,978
  -8,690
  -10,477
  -12,251
  -13,918
  -15,389
  -16,582
  -17,450
  -16,743
  -13,885
  -10,634
  -7,202
  -3,807
  -642
  2,130
  4,396
  6,094
  7,209
  7,774
  7,854
  7,539
  6,931
  6,131
  5,236
  4,323
  3,456
  2,676
Current shareholders' claim on cash, %
  85.7
  75.9
  69.0
  63.9
  60.1
  57.4
  55.3
  53.9
  52.9
  52.4
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2
  52.2

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 -55.9
Price to Sales 7.9
Price to Book 3
Price to Tangible Book
Price to Cash Flow 20.7
Price to Free Cash Flow -55.3
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 $5455 million for the last fiscal year's total revenue generated by Pioneer Natural Resources. The default revenue input number comes from 2017 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 41.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2793 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 5.4% 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 1.4%.

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 242.3%.

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 -19.6%. 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 - $11274 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 170 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 $31.1 billion.

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COMPANY NEWS

▶ Energy Earnings: 8 Stocks to Buy Now   [Jul-18-18 02:36PM  Barrons.com]
▶ [$$] Lime Rock Partners Promotes J. McLane to Chief Investment Officer   [Jul-12-18 03:41PM  The Wall Street Journal]
▶ Energy Stocks Decline as Production Concerns Deepen   [Jul-02-18 06:01PM  TheStreet.com]
▶ Pioneer CEO Says 'Permian 3.0' Arrives With New Well Designs   [Jun-28-18 08:45PM  Bloomberg Video]
▶ Goldman Touts Oil Stocks to Buy After OPEC Agreement   [Jun-25-18 10:00PM  TheStreet.com]
▶ [$$] U.S. Shale Companies Motor Ahead Despite OPEC   [Jun-24-18 07:50PM  The Wall Street Journal]
▶ 5 U.S. Oil Stocks To Own Post-OPEC Overhang   [Jun-22-18 04:10PM  Forbes]
▶ OPECs Agreement Sends Oil Prices Soaring   [03:30PM  Oilprice.com]
▶ Shale CEO: U.S. To Be The Worlds Top Oil Producer By Fall   [Jun-21-18 10:30AM  Oilprice.com]
▶ 3 Energy Stocks to Play the Permian Bottleneck   [Jun-15-18 12:25PM  Barrons.com]
▶ 5 Top Energy Stocks to Buy Right Now   [01:20PM  InvestorPlace]
▶ Drilling Permit Roundup: Endeavor Natural Gas carves out niche in the San Miguel   [May-22-18 06:31AM  American City Business Journals]
▶ Is It a Good Time to Join the Energy Sector Party?   [May-21-18 07:45AM  Investopedia]
▶ Drilling Permit Roundup: Eagle Ford rush for Pioneer Natural Resources   [02:55PM  American City Business Journals]
▶ 3 Energy Stocks for the End of the Iran Nuclear Deal   [May-09-18 09:53AM  TheStreet.com]
▶ The Best Oil ETF to Own for Trump Ending Iran Nuclear Deal   [May-07-18 02:21PM  TheStreet.com]
▶ Oil Giant Jumps Into Buy Zone, Permian Play Holds On To Entry   [May-03-18 04:00PM  Investor's Business Daily]
▶ Pioneer Natural 1st-qtr profit beats expectations   [May-02-18 05:52PM  Reuters]
▶ Pioneer Natural Resources: 1Q Earnings Snapshot   [04:50PM  Associated Press]
▶ KLR Downgrades 3 E&P Names On Valuation Concerns   [Apr-18-18 03:30PM  Benzinga]
▶ Edited Transcript of PXD presentation 7-Mar-17 2:15pm GMT   [Apr-10-18 02:59PM  Thomson Reuters StreetEvents]
▶ Concho acquires RSPP for $9.5 billion   [06:24AM  CNBC Videos]
▶ Pioneer sells some Eagle Ford assets in $102 million deal   [03:56PM  American City Business Journals]
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