What did I learn from the graphic yday? 3 things. The growth trajectory of PXD is without comparison; the white space closely correlates with the PXD IR map (which begs the question-are they the only ones with inventory?); and the picture provided me the answer as to why my SMOG analysis on PXD didn’t make sense. That’s the topic of this post.

I know, I know. For 2 days I’ve said “look at the pictures” but today, we are going to use numbers. I think the most important valuation metric for an O&G company is their SMOG number. Unlike other industries, we can model the future, one well at a time. And once per year, the SEC requires companies do just that. Using a prescribed price (this year will be $55.85/bbl and $2.58/mcf), they run a 5 year PROVED development plan and publish that value. When I did this exercise for every company in the space, PXD stood out as odd. Why? Only 6% of their SMOG value is from PUDs, which until I saw the map, I didn’t understand.

If you don’t have offsetting HZ wells, you can’t book proved reserves. It also makes it really hard for an investor to gauge the relative value of PXD in comparison to peers.

What’s the takeaway? All the data you need is out there; you just need the desire to pull the thread and see where it goes. Happy hunting!