Pioneer Natural (PXD): What Awaits This Earnings Season?

Independent oil and gas exploration and production company, Pioneer Natural Resources Company PXD is expected to report fourth-quarter 2015 results on Feb 10. Let’s see how things are shaping up prior to the announcement.

Last quarter, the company had incurred adjusted loss of a penny per share, narrower than the Zacks Consensus Estimate of a loss of 7 cents. Let’s see how things are shaping up for this announcement.    

Factors Likely to Affect Q4 Results

Pioneer Natural Resources’ oil-weighted reserves base and a large drilling inventory lost momentum in the October–December period owing to high crude stockpiles, as imports increased and refiners scaled down their utilization rates. As a result, Pioneer now expects fourth-quarter production to average 213–215 thousand barrels of oil equivalent per day (MBOE/d).

Moreover, in the same period, crude prices declined persistently due to oversupply amid low demand. Almost throughout fourth-quarter 2015, West Texas Intermediate (WTI) crude traded significantly below the $50-per-barrel level. In fact, during December, the commodity traded below $40 per barrel. Predictably, the company was able to extract less value for its products. This is sure to put pressure on the company’s fourth-quarter profit margins.  

The southward march in crude prices provided little incentive to oil exploration and production companies to hire drilling rigs. This amplified the rig oversupply concern. All these are likely to have a negative impact on the results of the quarter to be reported.

Earnings Whispers

Our proven model does not conclusively show that Pioneer Natural is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for the company is -9.09%. This is because the Most Accurate estimate stands at loss of 36 cents and the Zacks Consensus Estimate is pegged at loss of 33 cents.  

Zacks Rank: Pioneer Natural carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a negative ESP makes our surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While a beat looks uncertain for Pioneer Natural, here are some firms which have the right combination of elements to outshine earnings estimates:

Enbridge Energy Partners, L.P. EEP with an Earnings ESP of +5.56% and a Zacks Rank #3. The partnership is anticipated to release fourth-quarter 2015 results on Feb 17.

Transocean Ltd. RIG with an Earnings ESP of +20.27% and a Zacks Rank #2. The company is anticipated to release fourth-quarter 2015 results on Feb 24.

Summit Midstream Partners, L.P. SMLP with an Earnings ESP of +33.33% and a Zacks Rank #2. The partnership is expected to release fourth-quarter 2015 results on Feb 25.

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