Strong results in 3Q, but overshadowed by Exxon merger
- Pioneer (PXD) reported adjusted EPS of US$5.83, beating consensus, due to strong oil production and cost control in 3Q23
- Oil & gas production came in at higher end of guidance, annual growth targets maintained
- Strong cash flows in 3Q, rewards shareholders with dividend (base + variable) totalling US$3.20 per share, implying more than 5% annualised yield
- Pending merger with ExxonMobil, we maintain our HOLD call with a target price of US$245
PXD reported strong third quarter results driven by oil production and cost management. Adjusted earnings per share of US$5.83 beat consensus estimates of US$5.59. Adjusted quarterly earnings of US$1.4bn compared with US$1.1bn recorded in 2Q23. Oil production came in at 377 mbopd, near the high end of guidance, and 2% higher q-o-q. Total oil & gas production came in 721 mboepd, again near the top end of guidance and up 1.4% q-o-q. This allowed PXD to generate net income free cash flow of US$1.2bn, compared to US$742m in 2Q23. PXD returned cash to shareholders through a quarterly dividend of US$3.20 per share, implying annualised dividend of more than 5%.
Returns to be limited pending merger with XOM. Looking ahead, PXD remains positive on delivering annual production growth of 5% for oil and 8% for total production through its operations in the Permian Basin. However, the pending merger with ExxonMobil means PXD will not provide quarterly guidance going forward. Quarterly dividends will be limited to US$1.25 per share from 2024 onwards pending the merger and PXD will also not repurchase any stock prior to the merger closing date. Given the limited upside to share price until the merger with ExxonMobil is completed, we reiterate our HOLD recommendation on PXD with a target price of US$245.