IalwayslookforwardtoSohn.Iamamazedbywhatitsturnedintoover20years.

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