Pioneer Pure Assets (PXD) posted stable first-quarter outcomes after the bell Wednesday, due to higher-than-expected vitality manufacturing. Free money stream, nevertheless, was a slight miss. It was additionally a bittersweet night as CEO Scott Sheffield mentioned he’ll retire on the finish of the 12 months after greater than 20 years collectively on the helm. Pioneer’s oil and gasoline income fell 19% year-over-year, to $3.17 billion, lacking analysts’ forecasts of $3.7 billion, in response to Refinitiv. However this will not be an correct comparability as we predict the analyst estimates embrace oil and gasoline plus different revenue objects. Pioneer’s adjusted diluted earnings per share (EPS) declined 32.7% on an annual foundation to $5.21, topping expectations of $4.91. Not like most corporations that maintain their earnings convention calls with analysts and traders the day they report, Pioneer hosts its quarterly calls the subsequent day — so Thursday at 10 a.m. ET. Backside line Total the quarter seems to be advantageous to us with manufacturing coming in on the excessive finish of steerage. However, the massive information was Sheffield’s retirement announcement and that Wealthy Dealy, the corporate’s President and COO, will turn into the brand new CEO on Jan. 1, 2024. After his exit, Sheffield is predicted to stay on Pioneer’s board. This transformation in management is critical as a result of it comes at a time when buyout rumors are swirling across the firm. Is the corporate extra more likely to promote to Exxon Mobil (XOM) with Sheffield not operating the present? Or does the appointment of Dealy, who brings greater than 30 years of expertise at Pioneer and its predecessor, imply the corporate just isn’t on the market? The fast appointment of a brand new chief suggests no deal is coming quickly. Because of this, it isn’t stunning to see Pioneer buying and selling down roughly 2.5% at round $217.50 per share in after-hours buying and selling. PXD YTD mountain Pioneer Pure Assets YTD Capital allocation Another excuse for the promoting strain on the inventory may very well be from income-oriented traders. Pioneer set its second-quarter base plus variable dividend at $3.34 a share – factoring in a base dividend of $1.25, which was raised 14% from $1.10, and a variable dividend of $2.09. On an annualized foundation, the brand new yield strikes down to six% primarily based on Wednesday’s closing worth. A far cry from the ten% dividend yield we have come to know and love from Pioneer, however there is a purpose behind it. Administration needs extra flexibility to repurchase shares as a substitute of paying an enormous variable dividend. Buybacks are literally extra precious these days when you assume oil costs are going greater sooner or later. Pioneer introduced it is refining its peer-leading capital return framework. The corporate continues to count on to return at the least 75% of quarterly free money stream to shareholders, however after paying the (now raised) base dividend, administration will allocate what stays inside the 75% to variable dividends and opportunistic share repurchases. Which means Pioneer will seemingly shift what beforehand went to the variable dividend into share buybacks. This is not the identical specific prioritization of buybacks over variable dividends that we noticed from fellow exploration and manufacturing (E & P) firm Coterra Power (CTRA), which tilts extra pure gasoline . However, it is a notable change at Pioneer. Some traders could not wish to lose out on the yield, however shopping for again inventory when occasions are leaner as a substitute of paying an unsustainable dividend is a extra shareholder-friendly approach to run the corporate on this harder commodity surroundings. Underneath this new framework, Pioneer administration can extra simply opportunistically buy inventory when it believes there’s a valuation disconnect out there. And, it seems to be like Pioneer jumped on the chance to purchase again its inventory on a budget within the first quarter. repurchasing $500 million of inventory, up from $400 million within the fourth quarter, at a median worth of $206 per share. That is a pleasant commerce with the inventory closing at $222.48 on Wednesday. Pioneer additionally mentioned the board licensed a brand new $4 billion share repurchase program. Given the $1.9 billion on its present authorization, the information suggests Pioneer needs to extra actively make the most of buybacks as a software to return capital. Administration will certainly be requested in regards to the revised framework on Pioneer’s convention name and talk about what different developments they’re seeing. Verify your electronic mail inboxes for any important updates. Pioneer’s whole Q1 manufacturing of 680,000 barrels of oil equal per day (MBoe/d) and oil manufacturing of 361,000 barrels per day beat estimates, topped the year-ago interval and got here in on the excessive finish of administration’s unique steerage. That is a constructive consequence given the corporate’s is oil-weighted and crude provides a a lot greater revenue margin than pure gasoline. Notably, Pioneer would not hedge its oil manufacturing, making its realized pricing nearer to that of the underlying commodity. Second-quarter steerage supplied by Pioneer appeared stable from our vantage level and relative to analyst estimates of FactSet. Complete Q2 manufacturing is estimated between 674,000 and 702,000 barrels of oil equal per day, which on the midpoint exceeds forecasts of almost 681,000. Oil manufacturing is forecast between 357,000 to 372,000 barrels per day, which on the midpoint tops estimates of 364,000. Pioneer made no adjustments to its full-year 2023 manufacturing or capital funds outlook. (Jim Cramer’s Charitable Belief is lengthy PXD, CTRA. See right here for a full listing of the shares.) As a subscriber to the CNBC Investing Membership with Jim Cramer, you’ll obtain a commerce alert earlier than Jim makes a commerce. Jim waits 45 minutes after sending a commerce alert earlier than shopping for or promoting a inventory in his charitable belief’s portfolio. If Jim has talked a few inventory on CNBC TV, he waits 72 hours after issuing the commerce alert earlier than executing the commerce. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Scott Sheffield, CEO of Pioneer Pure Assets.
Adam Jeffery | CNBC
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Pioneer Pure Assets (PXD) posted stable first-quarter outcomes after the bell Wednesday, due to higher-than-expected vitality manufacturing. Free money stream, nevertheless, was a slight miss. It was additionally a bittersweet night as CEO Scott Sheffield mentioned he’ll retire on the finish of the 12 months after greater than 20 years collectively on the helm.
