EFTA01457567

Deutsche Bank Markets Research Hating Hold North America United States Industrials Oil & Gas Exploration & Production Pioneer Natural Resources PXD N Laying the Foundation PM) UN NYS PXD Lookinct io set the stage into a 2ti aCE:eleiotv>n With arguably amongst the largest core positions in what could be the leading asset of the next oil cycle, the investment case at PXD largely rests on it ability to translate resource potential into leading, capital efficient growth. Despite encouraging signs, noisy 1O operations (weather downtime, ethane rejection, completion deferrals) prevent a clean look at improving operations. Going forward, we look for efficiency gains in a narrowed, focused Permian development program as an indicator for future broad asset potential as activity accelerates in 2H15. Hold. Whet to looJ toE on the call" • Leading the charge? PXD expects to add two horizontal rigs per month in the northern SpraberryNVolfcamp beginning in July contingent on continued strength in the oil markets and following a sale of its Eagle Ford midstream business. We look for timing of potential production impact and growth and capital implications for 2016. Cost Reductions: Look for detailed updates on the pace of remaining cost reductions. Realized D&C cost reductions of 15% vs. 2014 to date, with year-end target of 20%+. Lifting costs -8% YoY driving further profitability gains. Look for additional clarity on potential/timing of reductions, including 15% and 10% in facilities costs and lifting costs respectively. Deferring to Save: Expect some discussion on portfolio benefit of its decision to defer 25 hz well completions (of 90 planned in I H15) in the Permian in order to exclusively utilize Pioneer Pumping Services. The shift will reduce 2Q volumes expectations (198-203 Mboe/d vs. Street 207), but increase and flatten 2H volumes (-200 Mboe/d). Also look for impact of shift on ability to accelerate in 2H15. Highgrading and the Production Outlook: Although operational noise on the quarter obscured underlying operations somewhat (Permian production --4 Mboe/d QoQ), impacted by weather (3 Mboe/d), ethane rejection (5 Mobe/d), production of 194 Mboe/d still hit the guidance range (192-197) despite materially lower well completions than planned (deferrals). Look for read through to efficiency gains, the impact of highgraded inventory, and potential of upper Eagle Ford resource. Conference Call IOAM EST. dial-in ti 388-399-3503, passcocle. 7269832 Fixecaats And Ratios Year End Doc 31 2014A 2015E 2016E FY EPS IUSD) 4.77 0.93 P/E (x) 40.2 175.4 0.0 Revenue 10501 3.639.8 2,335.0 0.0 Sane Dasecne one ~neon ccmpery I Intik/Mt int /333111 01 FAS1 Z39 niqueleg Int 430enseng 01 stO4k Opto3to 6 May 2015 Results Price at 5 May 2015 (USD) Price Target 52-week range Hyatt Todd Research Analyst (+I) 212 250-8342 [email protected] 163.05 182.00 233.07 - 130.60 frj..: Clain. in Research Analyst (+11 2I 2 250-4278 [email protected] David Fernand•) Research Associate (+11212 250-3191 davIdiemandezCadb.com !Prina/pc ice telanva 2210 200 100 120 --11/4ve yevl 10 11/12 1.13 11113 504 11/14 — Pawn 14*tr•I otaie S&P BOO IICIx (44/346/4) Performance I%) 1m 3m 12m Absolute -4.6 2.8 -17.8 S&P 500 INDEX 1.1 1.3 10.9 Sane Oeun,,..e Sere Valuation and Risk Our $182 PT is based on our NAV at LT prices of $80/$4.50. Upside risks include a greater than expected production growth rate, meanwhile downside risks include operational missteps which will adversely affect production. Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0117171 SDNY_GM_00263355 EFTA01457567