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Lance,
Doug,MitchandDan:Congrats!Youhavealottobeproudof!
Idliketoremindeveryonethattheinformationwithinthispresentationissupplemented
bynotesthatcoverimportantdetailssuchasoursources,assumptions,estimates,and
calculations,whichwillbepostedonlineonourwebsitelaterontoday.
ImnotgoingtotalkaboutSt.Joe.ButIdowanttodrawparallelsbetweenSt.Joeand
todaysidea.
Duringthelasthousingboom,St.Joe,aFloridabasedrealestatecompany,investedheavily
inlanddevelopmentbutdestroyedvalue.Ithadamillionacres practicallyaninfinite
supply thatasidefromafewpremiumspotsonthebeachcouldnotbedeveloped
profitably.
Whatisaninfinitesupplyofnegativereturninvestmentopportunitiesworth?Notmuch.
By2007,St.Joesbestoptionwastohaltdevelopmentandgraduallyliquidateitsland.And
thatswhatitdid.Byceasinginvestment,thecompanyavoidedbankruptcy.
TodayImgoingtodescribeasimilarsituationwithcertainenergycompanies.These
companieshavenegativedevelopmenteconomics,meaningthatasidefromafewchoice
locations,theydontearnapositivereturnoncapital,buthaveanearlyinfinitesupplyof
negativereturnopportunities.
Whatshouldsuchasupplybeworth?Notmuch.Yet,thesharepricesareveryhighand
webelievearepoisedforafall.
MeettheFrackers.
Whetheroilfrackingusesimmenseamountsofscarcewater,contaminatesthe
groundwater,emitscarcinogenicchemicals,orcausesearthquakesisbeyondthescopeof
thispresentation.
Thisisaninvestmentconference,soweregoingtosticktothemattersathand.
Profitsandlosses.Weobjecttooilfrackingbecausetheinvestmentcancontaminate
portfolioreturns.
https://youtu.be/Vb-SLuXZqH0
First,abriefhistoryofoil.
_____________
Source:Airplane2 ClassicsPartTwoathttps://www.youtube.com/watch?v=8dapalh7BjM&t=21s
Itsasimplebusiness.
Oilandgascompaniesacquirelandthattheybelievehasenergylockedawaybeneathit.
Thentheydrillholes,installwells,extracttheenergy,andgetittomarket.
10
Iftheycanselltheenergyformorethantheyspendonthelandandgettingitoutofthe
ground,theymakeahealthyliving.
11
Butitsaboomandbustindustry.Andinthe80s,itbusted.
12
Enterthefrackers.
Overthelastfewyears,theyveledaproductionboomthathasmadeourcountrymore
energyindependentand,morerecentlyhelpedcauseoilpricestofallduetooversupply.
_____________
Source:U.S.EnergyInformationAdministration,retrievedMay2015.
13
Conventionaldrillinginvolvesmakingaholeinthegroundandsuckingoutpoolsofenergy.
Butsometimes,theenergyisstuckintherocks.
Hydraulicfracturing,orfracking,pushesabunchofwater,chemicalsandsandintothe
rocks,breakingthemaparttoreleasethetrappedenergy.
Thebestresultscomefromcombiningfrackingwithhorizontaldrilling,wherethewell
turnshorizontallyundergroundtobetterpenetratetheenergybearingrock.
14
Insomeplaces,therocksholdoil.Lotsandlotsofoil.
Thefrackershavefoundsignificantamountsin3majorbasins:theBakkeninNorthDakota,
theEagleFordinSouthTexas,andthePermianinWestTexas.
15
Frackingisexpensive.Buyingtheland,settingupinfrastructureanddrillingtheholescosts
money.Lotsandlotsofmoney.
SothefrackerstooktheirstorytoWallStreet,explaininghowfrackingisanewwaytoget
richinoil.
16
Thelargeoilfrackershavespent$80billionmorethantheyhavereceivedfromselling
oil. WallStreetgreasedthoseskidsbyunderwritingdebtandequitysecuritiesthatallowed
themtogarnerbillionsinfees.
Thebanksareclearlyincentivizedtoenablethefrackaddicts.Whatslessobviousis
whetherinvestorsarefurnishedaclearanalysisofthereturnsthesecompaniesactually
generate.
_____________
Source:Greenlightcalculationsandestimatesbaseduponhistoricalandanticipatedcapitalexpendituresandcashfrom
operations,retrievedApril2015fromBloombergL.P.,forabasketof16publiclytradedexplorationandproduction
companies,selectedinthesolediscretionofGreenlight.
17
BehindmeisaquotefromaninvestorIalwayslistento:StanDruckenmiller.Hesaidit
betterthanIcould.Ifyougiveadrilleradollar,hesgoingtodrillahole.
_____________
Source:Source:http://www.bloomberg.com/news/articles/20150410/druckenmillerrecountingsorosexperiences
blastsfedpolicies.
18
Truetoform,thefrackersdrilledholes.
Infact,allthecapitalthesecompaniesgeneratedinternally,plusproceedsfromassetsales,
plusfinancingfrominvestors,wenttodrillingholes.
Thetop16oilfrackersalonedrilledathirdofatrilliondollarsworthofholes.
_____________
Source:Greenlightcalculationsbaseduponhistoricalcapitalexpenditures,retrievedApril2015fromBloombergL.P.,fora
basketof16publiclytradedexplorationandproductioncompanies,selectedinthesolediscretionofGreenlight.
19
Asoilpricesrose,itseemedlikethefrackersshouldhavebeendrowningincash.
Butnoneofthemgeneratedexcesscashflow,notevenwhenoilwasat$100abarrel.In
fact,theoppositewastrue.
20
Theyrespondedtohigheroilpriceswithevenmoreaggressivecapitalspending,financed
evermorecheaplybyWallStreet.Theresultwasthathigheroilpricesledtoevengreater
cashburn.Lastyear,with$100oil,thegroupburned$20billion.
_____________
Source:HistoricaloilpricesfromBloombergL.P.CashburnfiguresareGreenlightcalculationsofhistoricalcapital
expendituresandhistoricalcashfromoperations,retrievedApril2015fromBloombergL.P.,forabasketof16publicly
tradedexplorationandproductioncompanies,selectedinthesolediscretionofGreenlight.
21
Thefrackersinsisttheyareinvestingforgrowth,whichleadsinvestorstoignoretheGAAP
financialsinfavorofnontraditionalmetricslikeEBITDAX.
22
EBITDAX,incaseyou'rewondering,basicallystandsforearningsbeforealotofstuff.It's
notanSECreportedmeasure.
Thecapitalspendingforanoilproducingwellisdoneupfront,buttheoilcomesoutover
manyyears.Astheoilgetssold,companiesexpensethecorrespondingpartoftheprior
capitalspending.ThisiscalledDepletion,whichiswhattheDinEBITDAXstandsfor.
_____________
Source:DILBERT2004ScottAdams.UsedbypermissionofUNIVERSALUCLICK.Allrightsreserved.
23
Butinvestingforgrowthisafiction.
Unlikemanybusinesseswhereinvestmentspendingworkstowardbuildingadurableasset,
afranchisevalue,andarecurringrevenuestream,heretheCapexgoestowardreducing
theassetsonebarrelatatime.
Onceyouextracttheoilfromtheground...that'sit.Poof! Itsgone.
Themantrafromthefrackersandthebankersthatprofiteerfromfundingthemisthat
energyinvestorsdontlookatGAAPearnings:Depletiongetsignoredbecauseit'snota
cashitem,andCapexgetsignoredbecauseitsfundingfuturegrowth.
24
Intruth,bothgetignoredbecausethesemetricsdontsupportthestorytheywanttotell.
Oneusefulruleofthumb:whensomeonedoesntwantyoutolookattraditionalmetrics,
itsagoodtimetolookattraditionalmetrics.
Infrackcountry,Capexhasaveraged75%ofrevenuesoverthepast8years.Depletionisa
realexpense.
ByaskinginvestorstoignoretheCapexwhenitsspent,andthedepletionwhentheoilis
produced,theindustrywantsustolookonlyatthecashthatcomesoutofthebusiness
whilecompletelyignoringthecashthatgoesintoit.
25
Recently,oilpriceshavedeclined.Becausethefrackershavelessrevenue,theyvebeen
forcedtocutCapex.Thoughtheywillcontinuetospendmoredollarsthantheytakein,
productionisnolongergrowing.Abusinessthatburnscashanddoesntgrowisntworth
anything.
_____________
Source:HistoricaloilpricesfromBloombergL.P.Estimatedoilpricefor2015baseduponcurrentpricecurve.Cashburn
figuresthrough2014areGreenlightcalculationsbaseduponhistoricalcapitalexpendituresandhistoricalcashfrom
operations,retrievedApril2015fromBloombergL.P.,forabasketof16publiclytradedexplorationandproduction
companies,selectedinthesolediscretionofGreenlight.Cashburnfigurefor2015isGreenlights estimateofanticipated
capitalexpendituresandanticipatedcashfromoperationsbasedupon2015analystestimatesforthesamecompany
subset,retrievedApril2015fromBloombergL.P.
26
ThenumbersImwalkingthroughtodaygenerallyapplytothelargepubliclylistedshaleoil
companiessuchasthoseshownhere.Notably,Iamnot talkingaboutthenaturalgas
frackers,whicharegloballycompetitive,lowcostenergyproducerswithattractive
economics.
Letsdrilldowndeeperintooneofthebiggestoilfrackersinthebusiness.Itiswellloved,
welllocated,andwellrun.
27
WecallittheMotherFracker,buteveryoneelsewillknowitasPioneerNaturalResources,
tickerPXD.
28
PioneerownsassetsprimarilyinthePermianBasin,Americasbiggestshaleoilfield.Italso
hassomeassetsinEagleFord.
_____________
Source:ExtractfromPioneerinvestorpresentationonApril6,2015availableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolpresentations.
29
ItisthesecondlargestpureplayshaleoilproducerbehindEOG,whichIguesswouldbethe
FatherFracker.PioneerclosedFridayatabout$172ashare,givingita$26billionmarket
cap,andanenterprisevalueof$27billion.Ittradesatafancymultipleoflastyears
earnings,beforeoilpricesfell.
Aidedbyitsprofitablehedges,Pioneerwillbarelyavoidreportingalossthisyear.Next
year,pricesareexpectedtorecoverenoughforPioneertoearnaboutabuckandahalfa
share.
_____________
Source:BloombergL.P.;PioneerSchedule14AdatedApril9,2015availableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolsec;andGreenlightcalculations.Greenlightcalculationsreflect
adjustmentstoexcludemarktomarketderivatives,discontinuedoperations,andotherunusualitems.
30
Since2006,Pioneerhasspentcloseto$19billioningrosscapex.Thatwasfundedby$12
billionincashfromoperations,$5billionofassetsales,and$2billionofequityraises.
Oh...that twobilliondollars.
_____________
Source:GreenlightcalculationsbaseduponPioneerForms10Kforyears20062014,inclusive,availableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolsec.
31
WethinkthatinthecurrentenvironmentPioneerearnsanegativeeconomicreturnonits
Capex.Letsdothemath.
32
First,someterminology:
AprovedreserveisanSECtermwhichis,inessence,apromiseoffutureoilorgas.
ReservesareexpressedinBarrelsofOilEquivalent,orBOE,whichisacombinationof
barrelsofoil,naturalgasliquids(orNGLs),andcubicfeetofnaturalgas.
33
So,howfasthavePioneersreservesgrownfromallthatspending?Theyreallyhavent
grownatall.
Evenbasedonlastyearsveryhighcommodityprices,Pioneersprovedreserveshavebeen
flattodown.
_____________
Source:PioneerForms10Kfortherelevanttimeperiodsavailableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolsec.
34
Provedreservescomeintwodesignations:developedandundeveloped.
Adevelopedreservehasnomorecapitalcostsassociatedwithit.Theholesbeendrilled,
andthewellhasbeencompletedandhookedintothetransportsystem.Theenergyis
eitherbeingsoldorisreadytobesold.
Undevelopedreservesusuallyinvolvewellsinprogressorsoontobedrilled.Inother
words,theystillhavemajorfuturecostsassociatedwiththem.
Thebigcapitalspendingcomesfromcreatingdevelopedreserves.
35
HowmuchdoesitcostforPioneertocreateadevelopedreserve?
ThischartlooksatPioneercumulativelyoverthepast9years.Ithasgrownitsdeveloped
reservesbyabout30millionBOEandtakenabout470millionoutoftheground.So,ithas
developedabout500millionBOE.
Capexnetofassetsalesduringthatsameperiodhasbeen$14billion,meaningreserves
havecost$28perBOEtodevelop.
_____________
Source:GreenlightcalculationsbaseduponPioneerForms10Kforyears20062014,inclusive,availableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolsec.
36
JustabouthalfofwhatPioneerproducesisoil.Abitoveraquarterisnaturalgas,andthe
restareNGLs.Despiteenergyequivalence,gasandNGLssellatbigdiscountstocrudeoil.
WhileWTItradesatabout$59perbarrel,naturalgastradesattheequivalentof$17per
barrel,andNGLsatonly$23perbarrel.
Afterpayingfortransportcosts,atspotcommodityprices,Pioneersrevenuesaverage$36
perBOE comparedtothe$59headlinepriceforcrude.
_____________
Source:BloombergL.P.pricingasofApril30andMay1,2015.Forthepurposeofcomparisononanenergyequivalents
basisinthe%ofBOEandValue$columns,thenaturalgasspotpriceandvolumehasbeenmultipliedbysix.
GreenlightestimatesbaseduponPioneerQ42014financialandoperatingresultsavailableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolnewsArticle&ID=2015419.
37
Onthe$36ofrevenuesperBOE,Pioneerspendsabout$14onfieldoperatingexpenses
andanother$6oncorporateexpenses.Subtractthehistorical$28ofCapex,andPioneer
loses$12foreveryBOEitdevelops.
Thatslikeusing$50billstocounterfeit$20s.
_____________
Source:Greenlightestimatesbaseduponrevenuecalculationsinslide37andPioneercostsfromPioneerQ42014
financialandoperatingresultsavailableathttp://investors.pxd.com/phoenix.zhtml?c=90959&p=irol
newsArticle&ID=2015419.
38
Ofcourseoilpricesarentexpectedtostayat$59.Thisiswhatthecurrentforwardcurve,
orstrip,forWTIlookslike.Youcanseethatpricesareexpectedtorecovertoabout$64
nextyearand$68inthelongterm.
_____________
Source:BloombergL.P.asofMay1,2015.
39
Lowercommoditypricesareforcingtheindustrytocutcosts.Hereweadjusttherevenue
tothefuturestripprice,andcutexpensesby20%.Onthatbasis,grosscashflowis$30per
BOEandPioneerearnsapositivemargin.But,it'snotpositivevalue.
_____________
Source:Greenlightspotestimatesbaseduponrevenuecalculationsinslide37andcostestimateinslide38. Greenlight
stripestimatesbaseduponanticipated2023WTIandnaturalgaspricingretrievedfromBloombergL.P.onMay1,
2015. NGLpricesbaseduponGreenlightestimatedpricingrelationshiptooilprices. Pioneerestimated%ofBOEmix
fromWTI,NaturalGas,andNGLbasedonresourcebasinestimatesfromWoodMackenzie. Pioneercostestimates
adjustedtoanticipatesuccessful20%variablecashcostreductionsbymanagement.
40
Youhavetotakethetimevalueofmoneyintoaccount.Thewellispaidforupfront,butthe
oil andhencetherevenue comesover50years.
Pioneerhasan8.4%weightedaveragecostofcapital.Whenyoutakethatintoaccount,the
presentvalueofthecashflowsfallsto$16perBOE,whichdoesntcovertheupfront
capitalinvestment.ItsfairtosaythatPioneerislosingabout20centsofpresentvaluefor
everydollaritinvests.
_____________
Source:Greenlightcalculationbasedupongrosscashflowestimatefromslide40andGreenlightcapitalexpenditure
estimateinslide55. GreenlightestimatedcostofcapitalforPioneerbasedonfiguresinPioneerForm10K,pricingdata
fromBloombergL.P.,andequityriskpremiumestimatedbyGoldmanSachs. PresentvaluecalculationbasedonPermian
MidlandhorizontaltypecurvefromWoodMackenzie,adjustedtoterminaldeclinerateandeconomiclifevariables
providedbyPioneer.
41
Wecanseethisquiteclearlyincompanyguidance.Forits$1.85billionofbudgetedCapex,
productionfromtheendoflastyeartotheendofthisyearisexpectedtobeflat,whilethe
overspend(theireuphemismforcashburn)willbe$200million.
42
WhatifPioneerstopsspendingandjustmilksthe800millionbarrelsofprovedreserves?
PioneerfilesavaluationreportwiththeSECcalledaStandardizedMeasure.Youmight
thinkofitasadiscountedcashflow.WecallitSEConomics.
Lastyear,using$95foroil,Pioneersreserveswereworth$7.8billion,whichtranslatesto
$41pershareor$10perBOE.
_____________
Source:GreenlightsummarybaseduponPioneerStandardizedMeasureofDiscountedFutureNetCashFlowsfrom
PioneerForm10KforDecember31,2014availableathttp://investors.pxd.com/phoenix.zhtml?c=90959&p=irolsec.
43
Butoilisnt$95anymore;itslower.Weranasensitivitycaseonthenewpricing.
Provedreservesneedtobeeconomic,soabigdropinpricesusuallymeansadownward
revisionintheamountofreserves.
Whilethatslikelytobethecasehere,wegenerouslyassumednowritedowns.Justby
changingtheprices,thereservesareworthonly$9pershare.
_____________
Source:GreenlightestimatesbaseduponPioneerStandardizedMeasureofDiscountedFutureNetCashFlowsfromslide
43adjustedforfuturenaturalgasandWTIpricingretrievedfromBloombergL.P.onMay1,2015.Tablereflectslong
termpricingestimatesfor2023andfollowingyears.
44
Again,whilegenerouslyassumingnolostreserves,andnowallowingforthecompanyto
respondtolowerpriceswith20%cutsinitskeycostareassuchasrigdayrates,
horsepowerforfracking,andrawmaterials,weestimatePioneersexistingreservestobe
worthlessthan$22pershare.
_____________
Source:GreenlightestimatesbaseduponadjustedStandardizedMeasureofDiscountedFutureNetCashFlowsfromslide
44andforanticipatedcostcutsfromslide40.
45
Pioneerburnscashandisntgrowing.Iftheexistingreservesareworthsomewhere
between$3billionand$7.8billion,whyisthemarketpaying$27billionforthiscompany?
_____________
Source:Greenlightsummaryofprecedingestimates,EnterpriseValuefromslide28,andGreenlightestimateformarket
assignedvalue.
46
Pioneerhasanexcitinginvestmentstorythatshowsupinitspresentations.Thisstorybears
noresemblancetoitsfilings,orSEConomics.
WecallitInvestorDeckonomics.
47
Here,Pioneerclaimsithasabout22,000horizontaldrillingopportunities,whereitsnet
shareofresourcesisover11billionBOE.Tobeclear,thesearereferredtoasresources,
notprovedreserves.
_____________
Source:ExtractfromPioneerinvestorpresentationfromDecember2014availableathttp://media.corporate
ir.net/media_files/IROL/90/90959/20141204_December_Investor_Presentation.pdf.
48
InPioneersslidedeckitacknowledgesthatitsresourceestimatesarenotnecessarily
limitedtoeconomicallyrecoverablequantities.
_____________
Source:ExtractfromPioneerinvestorpresentationfromDecember2014availableathttp://media.corporate
ir.net/media_files/IROL/90/90959/20141204_December_Investor_Presentation.pdf.
49
Thisslideappearedin2014,whenoilpriceswerehigh.Weblewupfootnote3sothatits
easiertoread.
Notably,Pioneersresourceestimateassumed$90oiland$5naturalgas.
_____________
Source:ExtractfromPioneerinvestorpresentationfromDecember2014availableathttp://media.corporate
ir.net/media_files/IROL/90/90959/20141204_December_Investor_Presentation.pdf.
50
InitsmostrecentAprilinvestorpresentation,despitethelowercommodityprice
environment,noneoftheestimatedresourceshavedisappeared.Whathas disappearedis
theslidewiththefootnotesdisclosingthepriceassumptions.
ItwouldseemthatPioneerhasnotadjusteditsresourceestimatesforlowerprices.Surely,
someopportunitiesthatwereeconomicbeforearenoteconomicnow.
_____________
Source:ExtractfromPioneerinvestorpresentationonApril6,2015availableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolpresentations.
51
Promotingunprovedresourceswhileassumingoilandgasareoneandahalftotwotimes
thepricerequiresalotofnerve.Manybusinesseswouldundoubtedlydogreatifthey
couldselltheirwaresatabovemarketprices.
Seriously,Pioneeroughttostoptoutingestimatesbasedonstalepricing,oratleastprovide
ausefulsensitivityanalysis.
52
Bullscounterthatwelleconomicsareimprovingovertime,andthatPioneersnewer
technologyandmoreextensiveexperiencemakesanyanalysisofitshistoricalperformance
irrelevant.Thefutureisinhorizontaldrilling,whereitsreportedCapexperBOEwasjust
$15.51lastyear.
_____________
Source:PioneercapitalexpenditureperBOEforhorizontaldrillingisfromPioneersreportonyearendprovedreserves
andfindingcostsavailableathttp://investors.pxd.com/phoenix.zhtml?c=90959&p=irolnewsArticle&ID=2015435.
Image:Copyright20092013byAllieBrosh;fromhttp://hyperboleandahalf.blogspot.com/2011/02/scarieststory.html.
53
However,Pioneersolda40%interestinpartofitsacreagetoSinochem in2013.Fora
portionofthepurchaseprice,Sinochem pays75%ofPioneersshareofthecapital
spendingonthoseacresforthenextcoupleyears.Lastyear,thatpaymentwas$485
million,whichreducedPioneersCapexandflatteredPioneersclaimedcostperBOEby
morethan$3.
_____________
Source:GreenlightcalculationsandestimatesutilizingPioneerpublicfilings,pressreleasesandmanagementstatements.
54
Further,Pioneerspendsabout1015%ofitsCapexbudgetonnondrillingitemsthat
includethingslikebuildings,vehiclesandotherequipment.Whenweallocatethis,the
adjustedCapexforthehorizontaldrillingprogramworksoutto$20.66perBOE.
_____________
Source:GreenlightcalculationsandestimatesutilizingPioneerpublicfilings,pressreleasesandmanagementstatements.
55
Partoftheimprovedeconomicscomesfromcherrypicking.Inthecurrentlowprice
environment,Pioneerandothersaredrillingtheirbest,lowestcostprospectsfirst.The
industrycallsthishighgrading.Theresultshouldbeaninitialburstofapparent
productivityimprovement.
56
Theproblemwithexploitingyourbestprospectsisthatyouareleftwithyourother
prospects.Longertermcapitalefficiencymayactuallydeteriorate.
57
Managementandbullishsellsideanalystsliketotoutthesocalledwelleconomicswhich
showgreatIRRs.HeresonefromanAprilanalystmodel.
_____________
Source:UBSanalystmodel,providedtoGreenlightinMay2015.
58
Theseanalysesmakethedrillingprogramslookgreat.But,whenweconsidercurrentprices
andfullyloadedcosts,adifferentpictureemerges.
_____________
Source:UBSanalystmodel,providedtoGreenlightinMay2015.GreenlightsummaryofGreenlightestimatespreviously
detailed.
59
MostanalystsvaluePioneerthroughshorthandmethodslikeamultipleofEBITDAX.We
thinkthepropervaluationisalongtermdiscountedcashflowoftheresourceopportunity.
Sowebuiltone.
60
Forthesakeofouranalysis,wegenerouslyassumethatall11billionBOEexist,even
thoughthatfigureassumed$90oiland$5gas.Weassumedevelopmentisover40years
withCapexrampingforthefirst20andthenplateauingforthenext20.
Weassumethewellsproducefor50years,thecompanyretainstherecent20%costcuts,
andlongtermCapexperbarreldoesnotdeteriorateduetohighgrading.Weusethe
currentcommoditystrip,whichflattensintheoutyearsat$68perbarrel.Wediscountthe
whole90yearstreamofcashflowsatthecompanysweightedaveragecostofcapital.
61
Icantshowyouallthemathrighthere,butwehavepostedtheanalysisasanappendixto
thispresentationonourwebsite.
Theanswerisntsurprising:Currentdevelopmenteconomicsdontcoverthecompanys
costofcapital,sothediscountedcashflowspitsoutanegativenumber.
Thecompanysequityhasnothingmorethanoptionvalue.Somehavesuggestedthat
Pioneercouldgeneratemorevaluebydrillingfaster.Actually,thatwouldmakeitworse,as
fasterdrillingbringsforwardthevaluedestruction.
_____________
Source:Greenlightcalculationsandestimatesutilizingassumptionsstatedonslide61.Pleaserefertoaccompanying
discountedcashflowfordetails.
62
Asasensitivity,welookedatthepricecurvefromwhenspotcrudepeakedlastJune.Its
interestingthatwhileshorttermoilpricesfellmorethanhalf,longertermpriceswere
muchmorestable,andfelllessthan$20perbarrel.
_____________
Source:BloombergL.P.PeaklinerepresentstheJune20,2014pricecurve,retrievedApril2015.
63
WeranahighcaseusinglastJunescommoditycurveandotherwiseheldourassumptions
thesame,includingthecostcutsthatareavailableintodayslowpriceenvironment.The
resultisavalueof$78pershare,lessthanhalfofthe$172wherethestocktrades.
Pioneerisdramaticallyovervaluedevenifyouassumeithas11billionbarrelsofresources
andweseeareturntopriorpeakprices.
Theproblemisthatoilfrackingishighcost.
_____________
Source:Greenlightcalculationsandestimates.Pleaserefertoaccompanyingdiscountedcashflowfordetails.
64
Analystsagree.HeresdatafromGoldmanSachsshowingtheeconomicbreakevensfor
variousglobaloilfields,withPioneersPermianfieldhighlightedinred.
_____________
Source:Greenlightestimatesutilizing,inpart,2014commercialbreakevenestimatesfromGoldmanSachsGlobal
InvestmentResearch,providedtoGreenlightinApril2015.
65
Andtheindustryagrees.ThisisfromSchlumberger,showingoilcapexperbarrelonthe
left.Inaggregate,capitalintensityfortightoil,whichiswhattheycallthefrackers,exceeds
everyothermajorsourceofsupply.
ItisntjustPioneer.WeransimilardiscountedcashflowanalysesonContinentaland
Conchousingcurrentstripprices,andtheyalsocomeoutwithnegativevalues.
_____________
Source:SchlumbergerinvestorpresentationonMarch23,2015availableat
http://investorcenter.slb.com/phoenix.zhtml?c=97513&p=irolpresentations.
66
Ithinkmanypeoplearebuyingthefrackers,becausetheywanttobetonhigheroilprices.
Itseemstomethatifyouwanttomakethatbet,theresamucheasierway.
67
Buyoil.
68
Whilenearbyoilhasrecentlybouncedfromitslows,thevalueofthefrackersdepends
mostlyonthelongendofthecurve,whichhasntbouncedatall.
_____________
Source:BloombergL.P.TroughlinerepresentstheMarch17,2015pricecurve,retrievedApril2015.
69
ThefrackersWallStreetstorydemandsthattheykeepspendinginadesperateeffortto
groworatleastmaintainreservesandproduction,eventhoughthatspendingdestroys
value.Theiralternative,likeSt.Joedidafterthehousingboomended,istostopspending,
whichwouldendthecharade.
Eitherway,theFrackersare
70
Thereareseveralappendicesattachedtothispresentation:
A Greenlights PioneerDCFbasecase
B Greenlights PioneerDCFupsidecase
C DCFsensitivitytables
71
PioneerNaturalResources
DiscountedCashFlowKeyAssumptions&Statistics
BaseCase
PVofcashflows($B)
Netdebt($B)
Equityvalue($B)
Sharesoutstanding(M)
Value/share
CostofCapital
Equityriskpremium
Adjustedbeta
Riskfreerate
Equitycostofcapital
Debtcostofcapital
Equityas%ofEV
WACC
$0.3
$1.6
$1.4
149.4
$9
5.4%
1.23
2.1%
8.8%
2.1%
94%
8.4%
CapitalSpendingInputs
Capexgrowthrate
Capexgrowthperiod
Peakcapexperiod
Wellproductionperiod
Capex/BOE
CommodityAssumptions
Currentcurvestripprices
Oil
Naturalgas
NGL
Productionas%ofBOE
Oil
Naturalgas
NGL
7.1%
20years
20years
50years
$20.66
$68
$4.16
$27
58.7%
24.1%
17.2%
DevelopmentData(B)
Startingcapex
Peakcapex
Peaknetdebt
TotalBOEdeveloped
TotalBOEproduced
$1.85
$6.8
$20.4
10.4
11.0
Opex/BOE
Oil&gasproduction
Productiontaxes
SG&A
Cashexploration
Other
Cashtaxrate
$8.3
6.2%
$3.9
$1.1
$1.1
37%
Notes:
Estimated%ofBOEmixfromWTI,NaturalGas,andNGLbasedonresourcebasinestimatesfromWoodMackenzie
PermianMidlandhorizontaltypecurvefromWoodMackenzie,adjustedtoterminaldeclinerateandeconomiclifevariablesprovidedbyPioneer.
Cashtaxcalculationbasedoncurrent&futureestimatednetoperatinglosscarryforwards
A-1
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2015
1,850
91
2016
1,982
96
2017
2,123
103
2018
2,275
110
2019
2,437
118
2020
2,611
126
2021
2,797
135
2022
2,996
145
2023
3,210
155
2024
3,439
166
663
74
682
77
705
79
735
80
770
83
810
86
857
89
909
93
967
97
1,030
103
Revenues/BOE($)
Revenues
43.78
3,236
45.83
3,532
43.93
3,482
45.04
3,616
45.52
3,768
46.06
3,957
46.47
4,137
46.85
4,355
47.15
4,594
47.15
4,847
Cashopex/BOE($)
Opex
19.65
1,452
16.97
1,308
17.11
1,357
17.18
1,380
17.21
1,425
17.25
1,482
17.27
1,538
17.30
1,608
17.31
1,687
17.31
1,780
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
1,783
1,850
67
0
1,000
933
2,224
1,982
242
0
2,126
2,123
2
0
2,237
2,275
38
0
2,343
2,437
93
0
2,475
2,611
135
0
2,599
2,797
197
0
2,748
2,996
249
0
2,907
3,210
303
0
3,067
3,439
372
0
242
38
93
135
197
249
303
372
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
A-2
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2025
3,684
178
2026
3,947
191
2027
4,228
205
2028
4,530
219
2029
4,853
235
2030
5,199
252
2031
5,570
270
2032
5,967
289
2033
6,392
309
2034
6,848
331
ProvedDevelopedReserves(Mboe)
Production(Mboe)
1,100
108
1,177
115
1,260
122
1,350
130
1,447
138
1,552
147
1,665
157
1,786
168
1,916
179
2,056
192
Revenues/BOE($)
Revenues
47.15
5,102
47.15
5,402
47.15
5,732
47.15
6,112
47.15
6,490
47.15
6,921
47.15
7,389
47.15
7,916
47.15
8,439
47.15
9,029
Cashopex/BOE($)
Opex
17.31
1,874
17.31
1,984
17.31
2,105
17.31
2,244
17.31
2,383
17.31
2,542
17.31
2,713
17.31
2,907
17.31
3,099
17.31
3,316
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
3,228
3,684
456
0
3,418
3,947
529
0
3,627
4,228
601
0
3,867
4,530
662
0
4,106
4,853
746
0
4,379
5,199
820
0
4,675
5,570
894
0
5,009
5,967
958
0
5,340
6,392
1,053
0
5,713
6,848
1,135
0
456
529
601
662
746
820
894
958
1,053
1,135
Capex
ReservesDeveloped(Mboe)
A-3
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2035
6,848
331
2036
6,848
331
2037
6,848
331
2038
6,848
331
2039
6,848
331
2040
6,848
331
2041
6,848
331
2042
6,848
331
2043
6,848
331
2044
6,848
331
ProvedDevelopedReserves(Mboe)
Production(Mboe)
2,184
203
2,303
213
2,414
221
2,517
228
2,613
235
2,703
242
2,787
247
2,865
253
2,938
258
3,006
264
Revenues/BOE($)
Revenues
47.15
9,569
47.15
10,041
47.15
10,402
47.15
10,757
47.15
11,083
47.15
11,417
47.15
11,665
47.15
11,929
47.15
12,178
47.15
12,447
Cashopex/BOE($)
Opex
17.31
3,514
17.31
3,687
17.31
3,820
17.31
3,950
17.31
4,070
17.31
4,193
17.31
4,284
17.31
4,381
17.31
4,472
17.31
4,571
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
6,055
6,848
793
0
6,353
6,848
495
0
6,582
6,848
266
0
6,807
6,848
42
0
7,013
6,848
165
0
7,224
6,848
376
0
7,381
6,848
533
0
7,549
6,848
700
0
7,706
6,848
858
0
7,876
6,848
1,028
0
793
495
266
42
165
376
533
700
858
1,028
Capex
ReservesDeveloped(Mboe)
A-4
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2045
6,848
331
2046
6,848
331
2047
6,848
331
2048
6,848
331
2049
6,848
331
2050
6,848
331
2051
6,848
331
2052
6,848
331
2053
6,848
331
2054
6,848
331
3,069
268
3,129
272
3,183
277
3,234
281
3,281
284
3,325
288
3,365
291
3,402
295
3,436
297
3,468
300
Revenues/BOE($)
Revenues
47.15
12,631
47.15
12,840
47.15
13,037
47.15
13,259
47.15
13,395
47.15
13,561
47.15
13,717
47.15
13,903
47.15
14,001
47.15
14,133
Cashopex/BOE($)
Opex
17.31
4,638
17.31
4,715
17.31
4,788
17.31
4,869
17.31
4,919
17.31
4,980
17.31
5,038
17.31
5,106
17.31
5,142
17.31
5,190
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
7,992
6,848
1,144
0
8,124
6,848
1,276
0
8,249
6,848
1,401
0
8,390
6,848
1,541
0
8,476
6,848
1,628
0
8,581
6,848
1,733
332
8,680
6,848
1,832
678
8,797
6,848
1,949
721
8,860
6,848
2,011
744
8,943
6,848
2,095
775
1,144
1,276
1,401
1,541
1,628
1,401
1,154
1,228
1,267
1,320
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
A-5
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
Capex
ReservesDeveloped(Mboe)
2055
0
0
2056
0
0
2057
0
0
2058
0
0
2059
0
0
2060
0
0
2061
0
0
2062
0
0
2063
0
0
2064
0
0
ProvedDevelopedReserves(Mboe)
Production(Mboe)
3,211
257
2,981
230
2,772
209
2,579
193
2,399
180
2,231
169
2,073
158
1,924
148
1,785
140
1,653
132
Revenues/BOE($)
Revenues
47.15
12,137
47.15
10,824
47.15
9,851
47.15
9,105
47.15
8,477
47.15
7,952
47.15
7,440
47.15
6,997
47.15
6,588
47.15
6,225
Cashopex/BOE($)
Opex
17.31
4,457
17.31
3,975
17.31
3,618
17.31
3,344
17.31
3,113
17.31
2,920
17.31
2,732
17.31
2,569
17.31
2,419
17.31
2,286
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
7,680
0
7,680
2,841
6,849
0
6,849
2,534
6,233
0
6,233
2,306
5,761
0
5,761
2,132
5,364
0
5,364
1,985
5,032
0
5,032
1,862
4,708
0
4,708
1,742
4,427
0
4,427
1,638
4,169
0
4,169
1,542
3,939
0
3,939
1,457
4,838
4,315
3,927
3,630
3,379
3,170
2,966
2,789
2,626
2,482
A-6
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
Capex
ReservesDeveloped(Mboe)
2065
0
0
2066
0
0
2067
0
0
2068
0
0
2069
0
0
2070
0
0
2071
0
0
2072
0
0
2073
0
0
2074
0
0
ProvedDevelopedReserves(Mboe)
Production(Mboe)
1,529
123
1,413
116
1,304
109
1,202
103
1,105
96
1,015
90
930
85
851
80
776
74
706
70
Revenues/BOE($)
Revenues
47.15
5,812
47.15
5,467
47.15
5,140
47.15
4,843
47.15
4,536
47.15
4,259
47.15
3,996
47.15
3,758
47.15
3,510
47.15
3,286
Cashopex/BOE($)
Opex
17.31
2,134
17.31
2,008
17.31
1,887
17.31
1,779
17.31
1,666
17.31
1,564
17.31
1,468
17.31
1,380
17.31
1,289
17.31
1,207
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
3,678
0
3,678
1,361
3,459
0
3,459
1,280
3,252
0
3,252
1,203
3,065
0
3,065
1,134
2,870
0
2,870
1,062
2,695
0
2,695
997
2,529
0
2,529
936
2,378
0
2,378
880
2,221
0
2,221
822
2,079
0
2,079
769
2,317
2,179
2,049
1,931
1,808
1,698
1,593
1,498
1,399
1,310
A-7
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2075
0
0
2076
0
0
2077
0
0
2078
0
0
2079
0
0
2080
0
0
2081
0
0
2082
0
0
2083
0
0
2084
0
0
641
65
580
61
524
57
471
53
421
49
376
46
334
42
295
39
259
36
226
33
Revenues/BOE($)
Revenues
47.15
3,073
47.15
2,871
47.15
2,678
47.15
2,494
47.15
2,319
47.15
2,152
47.15
1,992
47.15
1,839
47.15
1,692
47.15
1,550
Cashopex/BOE($)
Opex
17.31
1,129
17.31
1,054
17.31
983
17.31
916
17.31
852
17.31
790
17.31
731
17.31
675
17.31
621
17.31
569
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
1,944
0
1,944
719
1,816
0
1,816
672
1,694
0
1,694
627
1,578
0
1,578
584
1,467
0
1,467
543
1,362
0
1,362
504
1,260
0
1,260
466
1,163
0
1,163
430
1,070
0
1,070
396
981
0
981
363
1,225
1,144
1,067
994
924
858
794
733
674
618
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
A-8
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2085
0
0
2086
0
0
2087
0
0
2088
0
0
2089
0
0
2090
0
0
2091
0
0
2092
0
0
2093
0
0
2094
0
0
196
30
168
27
144
25
121
22
102
19
84
18
68
16
54
14
41
13
30
11
Revenues/BOE($)
Revenues
47.15
1,416
47.15
1,289
47.15
1,169
47.15
1,056
47.15
892
47.15
861
47.15
766
47.15
676
47.15
591
47.15
511
Cashopex/BOE($)
Opex
17.31
520
17.31
473
17.31
429
17.31
388
17.31
327
17.31
316
17.31
281
17.31
248
17.31
217
17.31
188
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
896
0
896
331
815
0
815
302
740
0
740
274
669
0
669
247
564
0
564
209
545
0
545
202
484
0
484
179
428
0
428
158
374
0
374
138
323
0
323
120
564
514
466
421
355
343
305
269
236
204
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
A-9
PioneerNaturalResources
DiscountedCashFlow
BaseCase
($Munlessotherwisenoted)
2095
0
0
2096
0
0
2097
0
0
2098
0
0
2099
0
0
2100
0
0
2101
0
0
2102
0
0
2103
0
0
2104
0
0
27
3
24
3
21
3
18
3
15
3
12
3
9
3
6
3
3
3
0
3
Revenues/BOE($)
Revenues
47.15
142
47.15
142
47.15
142
47.15
142
47.15
142
47.15
142
47.15
142
47.15
142
47.15
142
47.15
142
Cashopex/BOE($)
Opex
17.31
52
17.31
52
17.31
52
17.31
52
17.31
52
17.31
52
17.31
52
17.31
52
17.31
52
17.31
52
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
90
0
90
33
57
57
57
57
57
57
57
57
57
57
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
A-10
PioneerNaturalResources
DiscountedCashFlowKeyAssumptions&Statistics
UpsideSensitivityCase
PVofcashflows($B)
Netdebt($B)
Equityvalue($B)
Sharesoutstanding(M)
Value/share
CostofCapital
Equityriskpremium
Adjustedbeta
Riskfreerate
Equitycostofcapital
Debtcostofcapital
Equityas%ofEV
WACC
$13.3
$1.6
$11.6
149.4
$78
5.4%
1.23
2.1%
8.8%
2.1%
94%
8.4%
CapitalSpendingInputs
Capexgrowthrate
Capexgrowthperiod
Peakcapexperiod
Wellproductionperiod
Capex/BOE
7.1%
20years
20years
50years
$20.66
CommodityAssumptions
Strippricesfromthe20Jun14curve
Oil
$86
Naturalgas
$5.29
NGL
$35
Productionas%ofBOE
Oil
58.7%
Naturalgas
24.1%
NGL
17.2%
DevelopmentData(B)
Startingcapex
Peakcapex
Peaknetdebt
TotalBOEdeveloped
TotalBOEproduced
$1.85
$6.8
$0.6
10.4
11.0
Opex/BOE
Oil&gasproduction
Productiontaxes
SG&A
Cashexploration
Other
Cashtaxrate
$8.3
6.2%
$3.9
$1.1
$1.1
37%
Notes:
Estimated%ofBOEmixfromWTI,NaturalGas,andNGLbasedonresourcebasinestimatesfromWoodMackenzie
PermianMidlandhorizontaltypecurvefromWoodMackenzie,adjustedtoterminaldeclinerateandeconomiclifevariablesprovidedbyPioneer.
Cashtaxcalculationbasedoncurrent&futureestimatednetoperatinglosscarryforwards
B-1
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2015
1,850
91
2016
1,982
96
2017
2,123
103
2018
2,275
110
2019
2,437
118
2020
2,611
126
2021
2,797
135
2022
2,996
145
2023
3,210
155
2024
3,439
166
663
74
682
77
705
79
735
80
770
83
810
86
857
89
909
93
967
97
1,030
103
Revenues/BOE($)
Revenues
49.00
3,621
58.37
4,498
60.36
4,784
60.70
4,874
60.64
5,020
60.89
5,232
60.95
5,427
61.05
5,675
61.05
5,950
61.05
6,277
Cashopex/BOE($)
Opex
20.81
1,538
18.13
1,397
18.13
1,437
18.15
1,458
18.15
1,503
18.17
1,561
18.17
1,618
18.18
1,690
18.18
1,771
18.18
1,869
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
2,083
1,850
233
86
1,000
1,147
3,101
1,982
1,119
414
3,347
2,123
1,224
453
3,416
2,275
1,142
422
3,517
2,437
1,080
400
3,671
2,611
1,060
392
3,809
2,797
1,012
374
3,986
2,996
990
366
4,178
3,210
968
358
4,409
3,439
970
359
705
771
719
681
668
638
623
610
611
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
B-2
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2025
3,684
178
2026
3,947
191
2027
4,228
205
2028
4,530
219
2029
4,853
235
2030
5,199
252
2031
5,570
270
2032
5,967
289
2033
6,392
309
2034
6,848
331
ProvedDevelopedReserves(Mboe)
Production(Mboe)
1,100
108
1,177
115
1,260
122
1,350
130
1,447
138
1,552
147
1,665
157
1,786
168
1,916
179
2,056
192
Revenues/BOE($)
Revenues
61.05
6,607
61.05
6,995
61.05
7,423
61.05
7,915
61.05
8,404
61.05
8,963
61.05
9,568
61.05
10,252
61.05
10,929
61.05
11,692
Cashopex/BOE($)
Opex
18.18
1,967
18.18
2,082
18.18
2,210
18.18
2,356
18.18
2,502
18.18
2,668
18.18
2,848
18.18
3,052
18.18
3,253
18.18
3,481
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
4,640
3,684
956
354
4,913
3,947
966
357
5,213
4,228
985
365
5,559
4,530
1,029
381
5,902
4,853
1,049
388
6,294
5,199
1,095
405
6,720
5,570
1,150
426
7,200
5,967
1,233
456
7,675
6,392
1,283
475
8,211
6,848
1,363
504
602
608
621
648
661
690
725
777
808
859
Capex
ReservesDeveloped(Mboe)
B-3
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2035
6,848
331
2036
6,848
331
2037
6,848
331
2038
6,848
331
2039
6,848
331
2040
6,848
331
2041
6,848
331
2042
6,848
331
2043
6,848
331
2044
6,848
331
2,184
203
2,303
213
2,414
221
2,517
228
2,613
235
2,703
242
2,787
247
2,865
253
2,938
258
3,006
264
Revenues/BOE($)
Revenues
61.05
12,392
61.05
13,003
61.05
13,471
61.05
13,931
61.05
14,353
61.05
14,785
61.05
15,106
61.05
15,449
61.05
15,771
61.05
16,119
Cashopex/BOE($)
Opex
18.18
3,689
18.18
3,871
18.18
4,010
18.18
4,147
18.18
4,273
18.18
4,401
18.18
4,497
18.18
4,599
18.18
4,695
18.18
4,799
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
8,703
6,848
1,855
686
9,132
6,848
2,284
845
9,461
6,848
2,612
967
9,784
6,848
2,935
1,086
10,080
6,848
3,232
1,196
10,383
6,848
3,535
1,308
10,609
6,848
3,761
1,391
10,850
6,848
4,001
1,481
11,076
6,848
4,228
1,564
11,320
6,848
4,472
1,655
1,169
1,439
1,646
1,849
2,036
2,227
2,369
2,521
2,664
2,817
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
B-4
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2045
6,848
331
2046
6,848
331
2047
6,848
331
2048
6,848
331
2049
6,848
331
2050
6,848
331
2051
6,848
331
2052
6,848
331
2053
6,848
331
2054
6,848
331
3,069
268
3,129
272
3,183
277
3,234
281
3,281
284
3,325
288
3,365
291
3,402
295
3,436
297
3,468
300
Revenues/BOE($)
Revenues
61.05
16,357
61.05
16,627
61.05
16,883
61.05
17,170
61.05
17,347
61.05
17,561
61.05
17,764
61.05
18,005
61.05
18,132
61.05
18,303
Cashopex/BOE($)
Opex
18.18
4,869
18.18
4,950
18.18
5,026
18.18
5,112
18.18
5,164
18.18
5,228
18.18
5,288
18.18
5,360
18.18
5,398
18.18
5,449
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
11,488
6,848
4,639
1,717
11,677
6,848
4,829
1,787
11,857
6,848
5,008
1,853
12,059
6,848
5,210
1,928
12,182
6,848
5,334
1,974
12,333
6,848
5,485
2,029
12,476
6,848
5,628
2,082
12,645
6,848
5,797
2,145
12,734
6,848
5,886
2,178
12,854
6,848
6,006
2,222
2,923
3,042
3,155
3,283
3,361
3,456
3,545
3,652
3,708
3,784
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
B-5
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
Capex
ReservesDeveloped(Mboe)
2055
0
0
2056
0
0
2057
0
0
2058
0
0
2059
0
0
2060
0
0
2061
0
0
2062
0
0
2063
0
0
2064
0
0
ProvedDevelopedReserves(Mboe)
Production(Mboe)
3,211
257
2,981
230
2,772
209
2,579
193
2,399
180
2,231
169
2,073
158
1,924
148
1,785
140
1,653
132
Revenues/BOE($)
Revenues
61.05
15,717
61.05
14,017
61.05
12,757
61.05
11,791
61.05
10,978
61.05
10,298
61.05
9,636
61.05
9,061
61.05
8,532
61.05
8,062
Cashopex/BOE($)
Opex
18.18
4,679
18.18
4,173
18.18
3,798
18.18
3,510
18.18
3,268
18.18
3,066
18.18
2,868
18.18
2,697
18.18
2,540
18.18
2,400
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
11,038
0
11,038
4,084
9,844
0
9,844
3,642
8,959
0
8,959
3,315
8,281
0
8,281
3,064
7,710
0
7,710
2,853
7,232
0
7,232
2,676
6,767
0
6,767
2,504
6,363
0
6,363
2,354
5,992
0
5,992
2,217
5,662
0
5,662
2,095
6,954
6,202
5,644
5,217
4,857
4,556
4,263
4,009
3,775
3,567
B-6
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
Capex
ReservesDeveloped(Mboe)
2065
0
0
2066
0
0
2067
0
0
2068
0
0
2069
0
0
2070
0
0
2071
0
0
2072
0
0
2073
0
0
2074
0
0
ProvedDevelopedReserves(Mboe)
Production(Mboe)
1,529
123
1,413
116
1,304
109
1,202
103
1,105
96
1,015
90
930
85
851
80
776
74
706
70
Revenues/BOE($)
Revenues
61.05
7,527
61.05
7,079
61.05
6,656
61.05
6,272
61.05
5,875
61.05
5,516
61.05
5,175
61.05
4,866
61.05
4,546
61.05
4,255
Cashopex/BOE($)
Opex
18.18
2,241
18.18
2,108
18.18
1,981
18.18
1,867
18.18
1,749
18.18
1,642
18.18
1,541
18.18
1,449
18.18
1,353
18.18
1,267
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
5,286
0
5,286
1,956
4,972
0
4,972
1,840
4,674
0
4,674
1,730
4,405
0
4,405
1,630
4,126
0
4,126
1,527
3,874
0
3,874
1,433
3,635
0
3,635
1,345
3,417
0
3,417
1,264
3,192
0
3,192
1,181
2,989
0
2,989
1,106
3,330
3,132
2,945
2,775
2,599
2,440
2,290
2,153
2,011
1,883
B-7
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2075
0
0
2076
0
0
2077
0
0
2078
0
0
2079
0
0
2080
0
0
2081
0
0
2082
0
0
2083
0
0
2084
0
0
641
65
580
61
524
57
471
53
421
49
376
46
334
42
295
39
259
36
226
33
Revenues/BOE($)
Revenues
61.05
3,980
61.05
3,717
61.05
3,468
61.05
3,230
61.05
3,003
61.05
2,787
61.05
2,579
61.05
2,381
61.05
2,191
61.05
2,008
Cashopex/BOE($)
Opex
18.18
1,185
18.18
1,107
18.18
1,032
18.18
962
18.18
894
18.18
830
18.18
768
18.18
709
18.18
652
18.18
598
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
2,795
0
2,795
1,034
2,611
0
2,611
966
2,435
0
2,435
901
2,268
0
2,268
839
2,109
0
2,109
780
1,957
0
1,957
724
1,812
0
1,812
670
1,672
0
1,672
619
1,538
0
1,538
569
1,410
0
1,410
522
1,761
1,645
1,534
1,429
1,329
1,233
1,141
1,053
969
888
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
B-8
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2085
0
0
2086
0
0
2087
0
0
2088
0
0
2089
0
0
2090
0
0
2091
0
0
2092
0
0
2093
0
0
2094
0
0
196
30
168
27
144
25
121
22
102
19
84
18
68
16
54
14
41
13
30
11
Revenues/BOE($)
Revenues
61.05
1,833
61.05
1,669
61.05
1,514
61.05
1,368
61.05
1,155
61.05
1,115
61.05
991
61.05
875
61.05
765
61.05
662
Cashopex/BOE($)
Opex
18.18
546
18.18
497
18.18
451
18.18
407
18.18
344
18.18
332
18.18
295
18.18
261
18.18
228
18.18
197
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
1,287
0
1,287
476
1,172
0
1,172
434
1,063
0
1,063
393
961
0
961
356
811
0
811
300
783
0
783
290
696
0
696
258
615
0
615
227
538
0
538
199
465
0
465
172
811
738
670
605
511
493
439
387
339
293
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
B-9
PioneerNaturalResources
DiscountedCashFlow
UpsideSensitivityCase
($Munlessotherwisenoted)
2095
0
0
2096
0
0
2097
0
0
2098
0
0
2099
0
0
2100
0
0
2101
0
0
2102
0
0
2103
0
0
2104
0
0
27
3
24
3
21
3
18
3
15
3
12
3
9
3
6
3
3
3
0
3
Revenues/BOE($)
Revenues
61.05
184
61.05
184
61.05
184
61.05
184
61.05
184
61.05
184
61.05
184
61.05
184
61.05
184
61.05
184
Cashopex/BOE($)
Opex
18.18
55
18.18
55
18.18
55
18.18
55
18.18
55
18.18
55
18.18
55
18.18
55
18.18
55
18.18
55
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
129
0
129
48
81
81
81
81
81
81
81
81
81
81
Capex
ReservesDeveloped(Mboe)
ProvedDevelopedReserves(Mboe)
Production(Mboe)
EBITDA
Capex
Cashflow
Cashtax
SaleofEFS
Aftertaxcashflow
B-10
C-1
$25
44
11
33
44
82
134
$23
59
26
18
30
69
123
$21
77
42
0
12
54
111
CapexPerBOE
$20.66
80
45
3
9
51
109
$19
99
60
19
7
36
96
$17
125
83
39
28
14
79
$15
159
112
63
52
11
57
78
7.0%
8.0%
8.4%
9.0%
10.0%
$25
47
45
44
42
39
$23
28
30
30
29
28
$21
6
11
12
14
15
CapexPerBOE
$20.66
2
8
9
11
12
$19
18
10
7
4
0
$17
45
32
28
23
17
$15
76
57
52
44
34
OilPrice
78
$90
$80
$70
$68
$60
$50
WACC
WACC
OilPrice
PioneerNaturalResources
Sensitivitytables:PerShareEquityValue
78
$90
$80
$70
$68
$60
$50
0%
58
22
28
41
84
143
10%
69
34
12
25
67
126
78
7.0%
8.0%
8.4%
9.0%
10.0%
$90
110
87
80
70
58
$80
64
49
45
38
30
OpexSaves
20%
80
45
3
9
51
109
30%
91
55
17
6
35
91
40%
102
66
29
19
19
75
OilPrice
$70
$68
12
2
5
8
3
9
0
11
2
12
$60
54
52
51
49
46
$50
126
113
109
102
91