EFTA01457567.pdf

Deutsche Bank Markets Research Hating 6 May 2015 Hold Pioneer Natural Resources Results North America United States Price at 5 May 2015 (USD) 163.05 Industrials PXD N PM) UN NYS PXD Price Target 182.00 Oil & Gas Exploration & 52-week range 233.07 - 130.60 Production Laying the Foundation Hyatt Todd frj..: Clain. in Research Analyst Research Analyst (+I) 212 250-8342 (+11 2I 2 250-4278 [email protected] [email protected] Lookinct io set the stage into a 2ti aCE:eleiotv>n With arguably amongst the largest core positions in what could be the leading David Fernand•) asset of the next oil cycle, the investment case at PXD largely rests on it ability Research Associate to translate resource potential into leading, capital efficient growth. Despite (+11212 250-3191 encouraging signs, noisy 1O operations (weather downtime, ethane rejection, davIdiemandezCadb.com completion deferrals) prevent a clean look at improving operations. Going forward, we look for efficiency gains in a narrowed, focused Permian development program as an indicator for future broad asset potential as !Prina/pc ice telanva activity accelerates in 2H15. Hold. 2210 Whet to looJ toE on the call" • Leading the charge? PXD expects to add two horizontal rigs per month in the northern SpraberryNVolfcamp beginning in July contingent on continued strength in the oil markets and following a sale of its Eagle Ford 200 100 120 --114/ve yevl 10 midstream business. We look for timing of potential production impact and 11/12 1.13 11113 504 11/14 growth and capital implications for 2016. — Pawn 14*tr•I otaie S&P BOO IICIx (44/346/4) Cost Reductions: Look for detailed updates on the pace of remaining cost Performance I%) 1m 3m 12m reductions. Realized D&C cost reductions of 15% vs. 2014 to date, with Absolute -4.6 2.8 -17.8 year-end target of 20%+. Lifting costs -8% YoY driving further profitability gains. Look for additional clarity on potential/timing of reductions, S&P 500 INDEX 1.1 1.3 10.9 including 15% and 10% in facilities costs and lifting costs respectively. Sane Oeun,,..e Sere Deferring to Save: Expect some discussion on portfolio benefit of its Valuation and Risk decision to defer 25 hz well completions (of 90 planned in I H15) in the Our $182 PT is based on our NAV at Permian in order to exclusively utilize Pioneer Pumping Services. The shift LT prices of $80/$4.50. Upside risks will reduce 2Q volumes expectations (198-203 Mboe/d vs. Street 207), but include a greater than expected production growth rate, meanwhile increase and flatten 2H volumes (-200 Mboe/d). Also look for impact of downside risks include operational shift on ability to accelerate in 2H15. missteps which will adversely affect Highgrading and the Production Outlook: Although operational noise on production. the quarter obscured underlying operations somewhat (Permian production --4 Mboe/d QoQ), impacted by weather (3 Mboe/d), ethane rejection (5 Mobe/d), production of 194 Mboe/d still hit the guidance range (192-197) despite materially lower well completions than planned (deferrals). Look for read through to efficiency gains, the impact of highgraded inventory, and potential of upper Eagle Ford resource. Conference Call IOAM EST. dial-in ti 388-399-3503, passcocle. 7269832 Fixecaats And Ratios Year End Doc 31 2014A 2015E 2016E FY EPS IUSD) 4.77 0.93 P/E (x) 40.2 175.4 0.0 Revenue 10501 3.639.8 2,335.0 0.0 Sane Dasecne one ~neon ccmpery I Intik/Mt int /333111 01 FAS1Z39 niqueleg Int 430enseng 01 stO4k Opto3to Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0117171 CONFIDENTIAL SDNY_GM_00263355 EFTA01457567