Identifying the key drivers
In this final part, we’ll study Pioneer Natural Resources’ (PXD) stock price movement with respect to energy prices, the dollar index, and the broader market.
As shown in the above chart, Pioneer Natural Resources’ stock price followed a massive uptrend between September 2011 and June 2014, which was when NYMEX (New York Mercantile Exchange) WTI (West Texas Intermediate) crude oil (USO) prices were also following an uptrend. When NYMEX WTI crude oil started falling in June 2014, PXD’s stock followed. Since then, both NYMEX WTI crude oil and PXD have been following a downtrend.
Clearly, crude oil is a key driver behind movements in Pioneer Natural Resources’ stock price. Since their peak in June 2014, WTI crude oil and PXD have lost ~64% and ~41% of their values, respectively. During the same period, upstream peers Marathon Oil (MRO), ConocoPhillips (COP), and Energen (EGN) have fallen by ~74%, ~51%, and ~62%, respectively.
The dollar and the broader market
As seen in the above chart, there is an inverse relationship between Pioneer Natural Resources’ stock price and dollar index movements. A stronger dollar weakens energy prices, which affects PXD’s earnings. In 2016, PXD has been outperforming the S&P 500 ETF (SPY), with PXD gaining ~12% and the S&P 500 gaining only ~2%.
Pioneer Natural Resources: The conclusion
Pioneer Natural Resources has excellent quality oil and gas reserves with a low-cost production capacity. Also, Pioneer has a strong balance sheet and has one of the best hedges in place for 2016. The only unfavorable factor right now is the price of energy. If energy prices continue to follow the same downtrend, PXD will be at risk for further reductions in its earnings.