Pioneer Natural Resources Company Reports Operating Results (10-K)
Pioneer Nat Res has a market cap of $14.16 billion; its shares were traded at around $109.33 with a P/E ratio of 20.1 and P/S ratio of 5.1. The dividend yield of Pioneer Nat Res stocks is 0.1%. Pioneer Nat Res had an annual average earning growth of 12.7% over the past 10 years. GuruFocus rated Pioneer Nat Res the business predictability rank of 4-star.
Highlight of Business Operations:The Company recognized $392.8 million of net derivative gains in its total revenues for 2011, including $225.5 million of noncash MTM gains, as compared to $448.4 million of net derivative gains during 2010, including $364.4 million of noncash MTM gains. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk and Notes B and I of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data for information about the Companys derivative contracts and associated accounting methods. The Company also recognized $138.9 million of net hurricane activity gains during 2010, primarily associated with East Cameron 322 insurance recoveries, and $17.3 million of net hurricane activity charges during 2009. See Note T of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data for more information about the East Cameron 322 reclamation and abandonment project.
Interest and other income. The Companys interest and other income from continuing operations totaled $102.0 million, $57.0 million and $101.6 million during 2011, 2010 and 2009, respectively. The $45.0 million increase during 2011, as compared to 2010, is primarily attributable to a $45.0 million increase in third-party income associated with vertical integration services provided by the Company on operated wells and an $8.7 million increase in equity earnings from EFS Midstream, partially offset by an $8.7 million decrease in Alaskan Petroleum Production Tax (PPT) credit recoveries. The $44.6 million decrease in interest and other income during 2010, as compared to 2009, is primarily attributable to a $47.3 million decrease in PPT credit recoveries and a $2.2 million increase in interest income.
Net income attributable to noncontrolling interest. Net income attributable to noncontrolling interests was $47.4 million, $40.8 million and $9.8 million for the years ended December 31, 2011, 2010 and 2009, respectively. The Companys net income attributable to noncontrolling interest is primarily associated with the net income of Pioneer Southwest that is allocated to limited partners. The $6.6 million increase in net income attributable to noncontrolling interest in 2011, as compared to 2010, is primarily due to an increase in Pioneer Southwests sales volumes and realized oil prices.
Successful efforts method of accounting. The Company utilizes the successful efforts method of accounting for oil and gas producing activities as opposed to the alternate acceptable full cost method. In general, the Company believes that net assets and net income are more conservatively measured under the successful efforts method of accounting for oil and gas producing activities than under the full cost method, particularly during periods of active exploration. The critical difference between the successful efforts method of accounting and the full cost method is as follows: under the successful efforts method, exploratory dry holes and geological and geophysical exploration costs are charged against earnings during the periods in which they occur; whereas, under the full cost method of accounting, such costs and expenses are capitalized as assets, pooled with the costs of successful wells and charged against the earnings of future periods as a component of depletion expense. During 2011, 2010 and 2009, the Company recognized exploration, abandonment, geological and geophysical expense from continuing operations of $121.3 million, $189.6 million and $79.1 million, respectively. During 2011, 2010 and 2009, the Company recognized exploration, abandonment, geological and geophysical expense from discontinued operations of $4.3 million, $15.9 million and $19.2 million, respectively, under the successful efforts method.
Goodwill. During 2004, the Company recorded $327.8 million of goodwill associated with a business combination. The goodwill was recorded to the Companys United States reporting unit. The Company has reduced goodwill by $29.7 million since the date of the business combination. The Company reduced the carrying value of goodwill by $10.6 million and $1.3 million during 2010 and 2009, respectively, as a charge to the gain from the sale of a portion of its United States reporting unit. The remaining $17.8 million reduction in goodwill was primarily for tax benefits associated with the exercise of fully-vested stock options assumed in conjunction with the business combination. In accordance with GAAP, goodwill is not amortized to earnings, but is assessed for impairment whenever events or circumstances indicate that impairment of the carrying value of goodwill is likely, but no less often than annually. If the carrying value of goodwill is determined to be impaired, it is reduced for the impaired value with a corresponding charge to pretax earnings in the period in which it is determined to be impaired. During the third quarter of 2011, the Company performed its annual assessment of goodwill for impairment and determined that there was no impairment. See Note R for additional information regarding the Companys impairment assessments.
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