Analyst Favors Exxon Mobil Deal, But Downgrades Pioneer Natural Resources: Here's Why

Zinger Key Points
  • The analyst expects PXD's development plan to improve capital efficiency on enhanced well performance.
  • "Our revised price target is based on that for XOM and the acquisition exchange ratio," the analyst wrote.

BMO Capital Markets analyst Phillip Jungwirth downgraded Pioneer Natural Resources Co PXD to Market Perform from Outperform rating.

The analyst reduced the rating on its all-stock merger with Exxon Mobil Corp XOM for $59.5 billion, or $253 per share.

Under the terms of the deal, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing. The acquisition deal represents an 18% premium to Pioneer's undisturbed closing price on Oct. 5 and a 9% premium to its prior 30-day volume-weighted average price on the same day. 

Related: Jim Cramer Urges Reevaluation Following Pioneer's $60B Exxon Deal - 'I Will Sell Every Share...'

The analyst views the deal favorably, with the Permian footprint improved at a reasonable valuation.

"Our revised price target is based on that for XOM and the acquisition exchange ratio. While PXD has only outperformed E&P peers by 3/5% in the last 10/15 trading days, we anticipate the deal to close in 2Q24," Jungwirth wrote.

He revised EPS to $5.73 (from $4.99) for Q3 FY23, $21.57 (from $20.63) for FY23, and $29.63 (from $29.21) for FY24. 

Price Action: PXD shares are trading higher by 0.17% at $248.65 on the last check Monday. 

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