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Pioneer Natural Resources’ Free Cash Flow in 2Q17

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Pioneer Natural Resources’ operating cash flow

For 2Q17, Pioneer Natural Resources (PXD) reported operating cash flow of ~$479 million, which is ~3% higher than Wall Street analysts’ expectation of ~$463 million. On a year-over-year basis, PXD’s 2Q17 operating cash flow was ~17% higher than the ~$410 million it generated in 2Q16. PXD’s higher cash flows could be due to its higher operating revenues in 2Q17. To learn more about PXD’s revenues, see Part 3 of this series.

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Pioneer Natural Resources’ operating cash flows were increasing in fiscal 2015 despite a steep decline in crude oil and natural gas prices. However, in 1Q16, Pioneer Natural Resources’ cash flow fell steeply to ~$111 million—the lowest in two years. The steep decline in PXD’s cash flow in 1Q16 could be due to lower energy prices (USO)(UNG) and a much smaller gain on commodity hedges compared with 4Q15. More recently, on a sequential basis, PXD’s 2Q17 operating cash flow was ~32% higher than the ~$364 million it generated in 1Q17. PXD’s peers Occidental Petroleum (OXY) and Southwestern Energy (SWN) reported $1.85 billion and $266 million, respectively, in cash flows in 2Q17.

PXD’s free cash flow

In 2Q17, Pioneer Natural Resources spent ~$731 million in capital expenditure—meaning PXD’s free cash flow was negative at approximately -$252 million or -$1.48 per share.

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PXD’s capital expenditure

In 1H17, Pioneer Natural Resources’ total capital expenditure was ~$1.16 billion, which is ~5% higher than the 1H16 capital expenditures of ~$1.10 billion.

In its 2Q17 earnings press release, Pioneer Natural Resources reduced its fiscal 2017 capital expenditure guidance by $100 million to $2.7 billion. PXD’s capex guidance excludes expenditure toward acquisitions, asset retirement obligations, capitalized interest, geological and geophysical G&A (general and administrations expenses), and IT system upgrades.

PXD’s forecasted fiscal 2017 capital program represents an increase of ~31% compared with capital expenditures of ~$2.1 billion in 2016. For context, consider that PXD’s peer Encana (ECA) expects to record capital expenditure in the range of $1.6 billion–$1.8 billion, which represents a mid-point increase of ~55% compared with capital expenditure of ~$1.1 billion in 2016.

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