Watch the stock of Pioneer Natural Resources (PXD). Yesterday's disastrous offering of 5.25 million shares at $157.52, which was priced 3.1% below where the stock went out the night before, has left people bruised and wounded after oil fell sharply in the afternoon. You were five points below the print when you left the office.
Now, we know that Pioneer is smart. As I wrote yesterday, Pioneer is making a judgment that the rights to 28,000 Permian acres are going to be worth a heck of a lot more than they paid Devon Energy (DVN). But were they also making an opportunistic bet that its stock was too high?
For that, we have to go back to early January, when Pioneer priced 12 million shares at $117 which, at the time, looked like desperation. You lost money on that one, too, even though it was priced eight points in the hole, as oil kept trading down and the stock failed to hold the print price that day, too. You lost a little less than a buck that day, but you were then down four bucks four days later as oil continued to trade erratically down to the $20s where it remained, off and on for the rest of the month.
Needless to say, the short-term pain was worth it, as four months later the stock ticked at $168.
So the question is, will that happen again, or has the top been reached?
I have been consistent in saying from the high $30s that oil would have a hard time going through $50, and I think the rig count that comes out this afternoon will show another jump in usage.
But that doesn't mean oil deserves to go back to $40. I think that the trading in Pioneer, which was a precursor to oil last time, will do so again.
That's why this stock has to hold around here to believe that oil can go back up.
If the rig count is down, then I think those who hold on will do well. But let's put it this way: you got clobbered before, you are getting clobbered now, before oil started its way up.
I think that history will repeat itself; it's just about how intense the clobbering is.
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