Pioneer Natural Resources May Have 21% Upside, Says Williams Capital

Williams Capital has started coverage of Pioneer Natural Resources (NYSE: PXD) with a Buy rating on the company's strong position in Midland Basin, while its price target of $217 implies a potential upside of 21 percent.

"We place PXD in our top picks bucket (both on the value and growth front), given its scale in the most coveted domestic resource play (~700,000 net acres in the Wolfcamp/Spraberry shale in the Midland Basin) with the strongest balance sheet in the sector," analyst Gabriele Sorbara wrote in a note.

"With more than 20,000 gross horizontal drilling locations and ~75.0 billion boe of upside potential in the Midland Basin alone (vs. companywide 2015 year-end proved reserves of 664.0 Mmboe), we view PXD as an E&P powerhouse," Sorbara continued.

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The analyst expects 2016 production growth of 14.6 percent year-over-year (27.8 percent oil growth), above management's guidance of 13 percent plus (24 percent plus oil growth).

Sorbara said the production estimate would be conservative if oil prices increase to $50+/bbl and the company improves well in productivity.

As of the end of second quarter, the analyst estimate PXD to have a total liquidity of about $4.4 billion (pro forma). Sorbara sees PXD to exit 2016 with a net debt-to-EBITDA of 0.2x, which increases to 0.4x by year-end 2017.

At time of writing, shares of Pioneer Drilling were up 0.99 percent to $181.28.