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Pioneer Natural Resources: A Low-Leverage Upstream Company

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Pioneer Natural Resources’ net debt-to-EBITDA trend

As of 3Q17, Pioneer Natural Resources’ (PXD) net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) is on the lower side when compared with the trailing four quarters. It has decreased from ~0.96x in 3Q16 to ~0.44x in 3Q17. Currently, it’s well below its own historical average of ~1.32x over the last three years. That can be attributed to a steep increase in its trailing 12-month EBITDA, which has increased from ~$611 million in 3Q16 to ~$1.7 billion in 3Q17.

Pioneer Natural Resources’ leverage

Pioneer Natural Resources’ (PXD) total debt-to-equity ratio (or leverage) decreased from ~31% in 3Q16 to ~26% in 3Q17. In the last four quarters, its total debt decreased, whereas its shareholder equity increased marginally due to an increase in retained earnings. That has resulted in lower leverage in the last four quarters. For context, its peer Diamondback Energy (FANG) from the Permian Basin has a debt-to-equity ratio of ~26%.

Overall, increased earnings due to the year-over-year increase in crude oil (USO) and natural gas (UNG) (UGAZ) (DGAZ) prices in 2017 and lower debt helped PXD maintain its balance sheet strength. So if PXD follows its production growth plans and crude oil and natural gas prices stay at their current levels or get better, PXD believes its stock could have a strong footing in the market.

Next, let’s look at the debt situation for Anadarko Petroleum (APC).

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