Identifying the key driver
In this final part of our series, we’ll take a look at Pioneer Natural Resources’ (PXD) stock price movement with respect to energy prices, dollar index, and the broader market.
As you can see in the above graph, Pioneer Natural Resources’ stock price was in an uptrend from October 2011 to June 2014. That’s when NYMEX (New York Mercantile Exchange) WTI (West Texas Intermediate) crude oil (USO) prices were also on an uptrend.
NYMEX WTI crude oil started its decline in June 2014, and that’s when Pioneer Natural Resources’ stock price peaked. Since then, both NYMEX WTI crude oil and PXD have been on a downward trend.
Clearly, crude oil is a key driver behind movements in Pioneer Natural Resources’ stock price. Since the peak in June 2014, WTI crude oil and PXD have fallen ~56% and ~37%, respectively.
Effect of the stronger dollar
As you can see in the above graph, there’s an inverse relationship between Pioneer Natural Resources’ stock price and dollar index movements. A stronger dollar weakens energy prices, which affects Pioneer Natural Resources’ earnings.
Comparison to broader market
So far in 2016, Pioneer Natural Resources has been outperforming the S&P 500 ETF (SPY). PXD has risen ~19%, whereas the S&P 500 has risen only ~1% in the same period.
Wrapping it up
Pioneer Natural Resources has a lower cost of production. It also has a less leveraged balance sheet. The dilutive effects of its recent equity offerings are a concern. Add to this the unfavorable crude oil prices. If crude oil prices decline further, Pioneer Natural Resources will be at a greater risk of steep declines in its earnings.