Analysts continue to be impressed with Pioneer Natural Resources (NYSE:PXD) and are raising their price targets. The ball got rolling last month when analysts over at FBR & Co (NASDAQ:FBRC) raised their price target on the company to $225 per share. Then analysts over at UBS AG (ADR) (NYSE:UBS) followed up and raised their price target to $155. Now analysts at Bank of America Corp (NYSE:BAC)/Merrill Lynch have raised their target to $200. With all of these upgrades going on, it pays to have a look at what makes Pioneer Natural Resources (NYSE:PXD) so special.
Pioneer’s impressive first-quarter results really got the ball rolling. Adjusted income in the first quarter came in at $136 million, or $1.02 per share. First quarter oil production was 171,000 barrels of oil equivalent per day. Prior guidance was for only 165,000 to 170,000 barrels; the results represent an increase of 6,000 barrels from last quarter.
The answer lies in the Permian Basin
Pioneer Natural Resources (NYSE:PXD) is one of the most active drillers in Texas’ Spraberry/Wolfcamp field in the Permian Basin. The company has 900,000 prime acres in this oil field. Oil companies have been drilling for oil in the region since 1923 when oil was first discovered in the area. The Spraberry field is one of the largest and most prolific oil fields in the U.S.
Analysts are getting excited about Pioneer because the company is in the early stages of a new horizontal-drilling program in the Wolfcamp Shale portion of the Spraberry field. So far, the geologic data and drilling results have been impressive. In its first horizontal-drilling well in the Wolfcamp, the 24-hour initial production rate came in at 1,572 barrels of oil equivalent per day. This type of flow-rate indicates the potential for Pioneer’s leasehold as the company drills more wells.
According to Pioneer Natural Resources (NYSE:PXD)’s geological data, the company estimates that there is 22 billion barrels of oil equivalent in the Wolfcamp Shale. On the first-quarter earnings call, chairman and CEO Scott Sheffield said
So you see, the Wolfcamp..will probably end up being the biggest discovery in North America. Before the shale era, Prudhoe Bay, was your largest discovery at about 13 billion barrels recoverable.
Pioneer Natural Resources (NYSE:PXD) expects second-quarter production to be between 174,000 and 179,000 barrels of oil equivalent per day.
In the second quarter, Pioneer is expected to close its $1.7 billion deal with Chinese company Sinochem to fund drilling costs in the Permian Basin. Pioneer is selling 40% of its interest in approximately 207,000 net acres in the Wolfcamp Shale. At closing, Sinochem will pay Pioneer $500 million and pay the remaining $1.2 billion by carrying a portion of Pioneer’s share of future drilling and facilities costs.