Pioneer Natural Amends Sale Agreement - Analyst Blog

Pioneer Natural Resources Company PXD has entered into an amendment to its sale agreement with Caelus Energy Alaska LLC. Per the agreement, the company is divesting the full stake of its subsidiary, Pioneer Natural Resources Alaska, Inc.

As a result of the amendment, at closing the company will receive cash in the amount of $300 million. The transaction, as amended, will have an effective date of Jan 1, 2014, and is expected to close during the second quarter. Moreover, the company expects to recognize an additional non-cash loss of approximately $30 million, which will be recorded in the first quarter of 2014.

Prior to the amendment, Pioneer Natural Resources was slated to receive cash proceeds of $550 million. The transaction had an effective date of Oct 1, 2013 and was expected to close by the end of 2013.

Pioneer Natural Resources is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas with operations in the U.S. The company's oil-weighted reserves base and large drilling inventory (over 20,000 liquids rich drilling locations in low-risk resource plays) with significant resource potential are catalysts to unlock value for shareholders. The company offers a deep inventory of high-return, liquids-leveraged drilling opportunities.

For 2014, Pioneer plans to spend $3.3 billion in total. Of this, the company has planned drilling capex of $3 billion and capital for vertical integration of $0.3 billion. An amount of $2.2 million has been allocated for the northern Spraberry/Wolfcamp area; $205 million has been set aside for the southern Wolfcamp joint venture area, $545 million for Eagle Ford shale and $100 million or other assets.

However, the company's long-term production and reserve growth depends to a certain extent on its acquire-and-exploit mode. Pioneer may therefore find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate.

Pioneer Natural Resources currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the energy sector like Patterson-UTI Energy Inc. PTEN, Helmerich & Payne Inc. HP and Warren Resources Inc. WRES. All these stocks sport a Zacks Rank #1 (Strong Buy).