Barclays analyst breaks down why Pioneer is a top pick in the slumping oil sector

  • Jeanine Wai, senior oil and gas research analyst at Barclays, told Bloomberg her favourite pick for oil is Pioneer.
  • Wai said Pioneer has a strong balance sheet and consistent well productivity.
  • The energy sector has been the worst-performing sector in the S&P 500 this year.
  • Read more on Business Insider.

Jeanine Wai, senior oil and gas research analyst at Barclays, told Bloomberg on Wednesday that her favourite pick for oil right now is Pioneer, citing its strong balance sheet and “consistent well productivity.”

“Balance sheets matter a lot, and Pioneer has one of the strongest balance sheets in our sector,” Wai said. According to Pioneer Natural Resource’s Tuesday earnings report, the company has $US180 million of unrestricted cash on hand and net debt of $US2 billion. Pioneer had $US1.7 billion of liquidity as of June 30, comprising $US180 million of unrestricted cash and a $US1.5 billion unsecured credit facility.

Wai also noted Pioneer’s consistent well productivity. The company increased its oil production guidance by approximately 2.5% while maintaining its 2020 capital expenditure guidance, according to the earnings report.

Read more:Morgan Stanley’s top auto analyst told us why space investing is in danger of dot-com-style hysteria – and shared his best ideas for profiting from the booming theme

Pioneer’s stock on Wednesday rose to its highest point since June 10 after closing at $US99.52 on Tuesday. Barclays’ price target for Pioneer is $US121, implying almost 18% upside from current levels.

The energy sector has been the worst performer in the S&P 500 index this year. The Energy XLE ETF was down 38.31% on Tuesday, and Wai said there will be continuing volatility in the sector. She added that a “really understandable question for investors” right now is whether dividends will be cut for energy companies. She said: “For Chevron and Exxon what’s been really topical is the dividends.” Wai said Pioneer has announced a former shareholder return framework that increases total dividend payouts over time.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.