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Why Pioneer Natural Resources Stock Is Rallying Today

By Matthew DiLallo – May 7, 2020 at 11:30AM

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The oil and gas driller is weathering the storm better than most peers.

What happened

Shares of Pioneer Natural Resources (PXD 2.11%) jumped as much as 11.8% by 10:45 a.m. EDT on Thursday. Fueling the rally in the oil stock was its stronger-than-expected first-quarter results as well as surging crude oil prices.  

So what

Pioneer Natural Resources generated $1.15 per share of adjusted earnings during the first quarter, which beat analyst expectations by $0.21 per share. Fueling that stronger-than-expected result was the gusher of production the company delivered during the quarter. Overall, its output averaged 375,000 barrels of oil equivalent per day (BOE/D), including 223,000 barrels of oil per day (BPD), which were both in the top half of its guidance range. Meanwhile, the company captured an average oil price of $45.60 per barrel during the quarter, which was only down 7.7% year over year thanks to its strong oil hedges.

Oil storage tanks near a pumpjack and the sun in the background.

Image source: Getty Images.

While those hedges are helping insulate Pioneer from the downturn in the oil market, it's not immune to the current challenges. Because of that, the company has reduced its capital spending plan by 55% this year to between $1.4 billion and $1.6 billion. And it is curtailing about 7,000 BPD of lower-margin, higher-cost production due to low oil prices. As a result of the spending reduction and well shut-ins, Pioneer expects its full-year output to average between 341,000 and 359,000 BOE/D.

The company also said that it would continue to evaluate its drilling and completion activity as well as voluntary production curtailments each month, making adjustments depending on oil prices. The company did get some positive news on that front today as the main U.S. oil price benchmark, WTI, rallied more than 7% to nearly $26 a barrel. Meanwhile, oil futures suggest that crude could go even higher in the coming months as the November WTI contract rose above $30 a barrel today. 

Now what

Pioneer Natural Resources is handling the oil market downturn better than many of its peers because of its strong oil hedging program and top-notch balance sheet. So it's still making money and not cutting production as deeply as some peers. Those factors also set the company up to benefit if crude prices do keep rallying this year.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Pioneer Natural Resources Company Stock Quote
Pioneer Natural Resources Company
$209.74 (2.11%) $4.33

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