Pioneer Natural Debt
| PXDDelisted Stock | USD 269.62 0.15 0.06% |
Pioneer Natural Resources holds a debt-to-equity ratio of 0.243. Pioneer Natural's financial risk is the risk to Pioneer Natural stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Pioneer Natural's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Pioneer Natural's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Pioneer Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Pioneer Natural's stakeholders.
For most companies, including Pioneer Natural, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Pioneer Natural Resources the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Given that Pioneer Natural's debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Pioneer Natural is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Pioneer Natural to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Pioneer Natural is said to be less leveraged. If creditors hold a majority of Pioneer Natural's assets, the Company is said to be highly leveraged.
Pioneer |
Pioneer Natural Bond Ratings
Pioneer Natural Resources bond ratings play a critical role in determining how much Pioneer Natural have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Pioneer Natural's borrowing costs.Pioneer Natural Resources Debt to Cash Allocation
As Pioneer Natural Resources follows its natural business cycle, the capital allocation decisions will not magically go away. Pioneer Natural's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 5.26 B in debt with debt to equity (D/E) ratio of 0.24, which may show that the company is not taking advantage of profits from borrowing. Pioneer Natural Resources has a current ratio of 1.01, demonstrating that it may have difficulties to pay its financial commitments when the payables are due. Debt can assist Pioneer Natural until it has trouble settling it off, either with new capital or with free cash flow. So, Pioneer Natural's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Pioneer Natural Resources sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Pioneer to invest in growth at high rates of return. When we think about Pioneer Natural's use of debt, we should always consider it together with cash and equity.Pioneer Natural Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Pioneer Natural's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Pioneer Natural, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Pioneer Natural debt ratio should be compared their industry average or other competing firms.Pioneer Natural Corporate Bonds Issued
Pioneer Natural issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Pioneer Natural Resources uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most Pioneer bonds can be classified according to their maturity, which is the date when Pioneer Natural Resources has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Understaning Pioneer Natural Use of Financial Leverage
Pioneer Natural financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Pioneer Natural's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Pioneer Natural assets, the company is considered highly leveraged. Understanding the composition and structure of overall Pioneer Natural debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Pioneer Natural's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Pioneer Natural's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. Pioneer Natural Resources Company was founded in 1997 and is headquartered in Irving, Texas. Pioneer Natural operates under Oil Gas EP classification in the United States and is traded on New York Stock Exchange. It employs 1932 people. Please read more on our technical analysis page.
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Check out the analysis of Pioneer Natural Fundamentals Over Time. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Consideration for investing in Pioneer Stock
If you are still planning to invest in Pioneer Natural Resources check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Pioneer Natural's history and understand the potential risks before investing.
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What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.