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Pioneer Natural (PXD) Likely to Divest Delaware Basin Assets

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Pioneer Natural Resources Company (PXD - Free Report) is planning to divest its assets in the Delaware Basin, per Reuters. The company is expecting to generate more than $2 billion from the divestments.

The recovery in commodity prices has made divestments of oil and gas assets more profitable for upstream companies. From last year’s historic oil price crash, WTI Crude is now hovering at around $70 per barrel. Natural gas prices are also climbing new heights as the demand for exports is rising. As such, Pioneer Natural expects to attract more cash from selling non-core properties. The company received the assets, which are now up for sale, from the Parsley Energy acquisition, per Reuters. 

The divestment is likely to help the company streamline the upstream portfolio. As investors these days are putting pressure on companies to boost shareholder value rather than production, upstream companies like Pioneer Natural are focusing more on profitable resources.

Cash from the potential offloading can enable it to reduce debt burden, following two major acquisitions that it executed this year. Pioneer Natural acquired smaller rival Parsley Energy for $4.5 billion, which expanded its Permian footprint to 930,000 net acres. The company’s DoublePoint Energy acquisition has made it one of the biggest producers in the Permian Basin. As a result of the bolt-on acquisition, 97,000 high-quality net contiguous acres were added to the company’s existing asset base. The deal boosted the acquirer’s total holding in the basin to more than 1 million net acres.

The potential divestment of its Delaware Basin non-core assets can provide its balance sheet some breathing room. As of Jun 30, 2021, the cash balance totaled only $93 million. Long-term debt summed $6,926 million at second quarter-end, up from $3,160 million at 2020-end.

Price Performance

The company’s shares have gained 70.8% in the past year compared with a 115.3% rise of the industry it belongs to.

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Zacks Rank & Stocks to Consider

Currently, Pioneer Natural has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space include Cheniere Energy, Inc. (LNG - Free Report) , Kinder Morgan, Inc. (KMI - Free Report) and Chevron Corporation (CVX - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Cheniere Energy’s bottom line for 2021 is pegged at $2.98 per share, indicating a massive improvement from the year-ago loss of 34 cents.

Kinder Morgan’s bottom line for 2021 is expected to rise 47.7% year over year.

The consensus estimate for Chevron’s earnings for 2021 is pegged at $6.73 per share, indicating a major improvement from the year-ago loss of 20 cents.