Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer" or "the Company") today reported financial and operating results for the quarter ended September 30, 2021. Pioneer reported third quarter net income attributable to common stockholders of $1.0 billion, or $4.07 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the third quarter was $1.1 billion, or $4.13 per diluted share. Cash flow from operating activities for the third quarter was $2.0 billion. < Compares to my forecast of $978 million net income.
Highlights
Delivered record free cash flow of $1.1 billion during the third quarter
Announced divestiture of Delaware Basin assets for $3.25 billion, returning Pioneer to a pure-play operator in the high-margin, high-return Midland Basin
Declared quarterly variable dividend of $3.02 per share to be paid during the fourth quarter, a 100% increase from the prior quarter variable dividend per share payment
Increased quarterly base dividend to $0.62 per share, or $2.48 per share on an annualized basis, representing a greater than 10% increase from the prior quarter per share payment
Averaged third quarter oil production of 389 thousand barrels of oil per day (MBOPD), in the upper half of guidance
Averaged third quarter production of 676 thousand barrels of oil equivalent per day (MBOEPD), in the upper half of guidance
CEO Scott D. Sheffield stated, "Pioneer continues to execute at a high level, delivering another strong quarter and generating record quarterly free cash flow1 of $1.1 billion. Our peer-leading distribution framework will result in returning approximately 80% of third quarter free cash flow, or approximately $880 million, to shareholders through our base and variable dividend payments in the fourth quarter of 2021.
With the divestment of the Delaware Basin assets for $3.25 billion, Pioneer is 100% focused on developing its high-margin, high-return Midland Basin assets where we have decades of operating experience and the size and scale to generate significant free cash flow. This divestment strengthens our balance sheet and enables Pioneer to add opportunistic share repurchases during market dislocations to our capital return strategy.
Our strong financial and operational outlook is complemented by Pioneer's commitment to sustainable practices as evidenced by our robust emission reduction goals and targets that we outline in our recently published 2021 Sustainability and Climate Risk reports. With our solid Environmental, Social and Governance (ESG) foundation and our unmatched investment framework, we believe our differentiated strategy will drive significant long-term value for Pioneer shareholders."
Financial Highlights
Pioneer maintains a strong balance sheet, with unrestricted cash on hand at the end of the third quarter of $581 million and net debt of $6.3 billion. The Company had $2.6 billion of liquidity as of September 30, 2021, comprised of $581 million of unrestricted cash and a $2.0 billion unsecured credit facility (undrawn as of September 30, 2021).
During the third quarter, the Company’s drilling, completion and facilities capital expenditures totaled $960 million. The Company’s total capital expenditures2, including water infrastructure, totaled $982 million.
Cash flow from operating activities during the third quarter was $2.0 billion, leading to free cash flow1 of $1.1 billion.
The Company announced today that its Board of Directors has approved an increase in the Company's quarterly cash base dividend from $0.56 per share to $0.62 per share, or $2.48 per share on an annualized basis. This payment represents a greater than 10% increase when compared to the base dividend paid in October 2021. Pioneer's strong record of base dividend growth is demonstrated through the Company's peer-leading five-year compound annual base dividend growth rate of 96%.
In addition to a strong base dividend, the Company's investment framework provides significant shareholder returns through a quarterly cash variable dividend3 of up to 75% of the prior quarter’s free cash flow after deducting the base dividend paid during the prior quarter. For the fourth quarter, the Board of Directors has declared a quarterly cash variable dividend of $3.02 per share, or a total of approximately $740 million being returned to shareholders. This represents approximately 75% of the Company’s third quarter free cash flow after deducting the base dividend distributed in July.
Including the base and variable dividend, total dividend payments during the fourth quarter will be $3.58 per share, representing a current annualized yield of approximately 8% (based on the Company's closing stock price as of October 29, 2021).
Pioneer's balance sheet and leverage metrics continue to strengthen with the divestment of the Company's Delaware Basin assets and the strong commodity price environment. This enhanced financial strength provides Pioneer with the flexibility to opportunistically return additional capital to shareholders through a share repurchase program during market dislocations. The Company has $1.1 billion of remaining capacity under a $2 billion share repurchase program that was authorized during the fourth quarter of 2018. Pioneer believes this peer-leading return of capital strategy, which combines a base dividend, a substantial variable dividend and opportunistic share repurchases, creates significant long-term value for shareholders.
Pioneer (PXD) Q3 Results - Nov 3
Pioneer (PXD) Q3 Results - Nov 3
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Pioneer (PXD) Q3 Results - Nov 3
Fourth Quarter 2021 Guidance
Fourth quarter 2021 oil production is forecasted to average between 388 to 403 MBOPD and total production is expected to average between 670 to 695 MBOEPD, reflecting the impact of the Glasscock acreage divestiture that closed in October 2021. < Compares to my Q4 forecast of 717,500 Boepd and 415,000 bopd.
Production costs are expected to average $7.50 per BOE to $9.00 per BOE, reflecting the impact of higher commodity prices on forecasted production taxes. DD&A expense is expected to average $10.75 per BOE to $12.75 per BOE. Total exploration and abandonment expense is forecasted to be $10 million to $20 million. G&A expense is expected to be $67 million to $77 million. Interest expense is expected to be $39 million to $44 million. Other expense is forecasted to be $15 million to $30 million. Accretion of discount on asset retirement obligations is expected to be $2 million to $5 million. The cash flow impact related to purchases and sales of oil and gas, including firm transportation, is expected to be a loss of $45 million to $75 million, based on forward oil price estimates for the quarter. The Company’s effective income tax rate is expected to between 22% to 27%.
The Delaware Basin assets being sold to CLR won't close until mid-December, so pre-closing production will be in PXD's Q4 results.
Fourth quarter 2021 oil production is forecasted to average between 388 to 403 MBOPD and total production is expected to average between 670 to 695 MBOEPD, reflecting the impact of the Glasscock acreage divestiture that closed in October 2021. < Compares to my Q4 forecast of 717,500 Boepd and 415,000 bopd.
Production costs are expected to average $7.50 per BOE to $9.00 per BOE, reflecting the impact of higher commodity prices on forecasted production taxes. DD&A expense is expected to average $10.75 per BOE to $12.75 per BOE. Total exploration and abandonment expense is forecasted to be $10 million to $20 million. G&A expense is expected to be $67 million to $77 million. Interest expense is expected to be $39 million to $44 million. Other expense is forecasted to be $15 million to $30 million. Accretion of discount on asset retirement obligations is expected to be $2 million to $5 million. The cash flow impact related to purchases and sales of oil and gas, including firm transportation, is expected to be a loss of $45 million to $75 million, based on forward oil price estimates for the quarter. The Company’s effective income tax rate is expected to between 22% to 27%.
The Delaware Basin assets being sold to CLR won't close until mid-December, so pre-closing production will be in PXD's Q4 results.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Pioneer (PXD) Q3 Results - Nov 3
Stifel's take on Nov 4
Pioneer Natural Resources Company (PXD, $189.83, Buy; Target $236.00)
Stong update, imploring all yield investors to take a look at PXD - Derrick Whitfield
We view this release as positive. The positives include: i) the sale of its Delaware assets for $3.25 billion enables the company to add opportunistic share repurchases to its return strategy, ii) a 10.7% increase to the base dividend to $0.62/share (1.7% yield annualized), iii) record quarterly FCF resulting in a strong fixed + variable dividend (7.5% annualized yield) declared for Q421, and iv) an increase in the number of expected wells placed on production on reiterated full-year capex.
The quarter itself was largely in-line with our estimates; however, the only potential negative was higher than expected Q321 capex (3.5% above consensus, 0.7% above Stifel). Net-net, at strip prices, management forecasts Pioneer's dividend yield (~11%) in 2022 would exceed all peers, Majors and S&P 500. With its best-in-class asset base and fortress balance sheet, we believe Pioneer's return strategy offers yield-oriented investors a very attractive investment proposition.
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I probably should move PXD to our High Yield Income Portfolio. I will work on it early next week.
Pioneer Natural Resources Company (PXD, $189.83, Buy; Target $236.00)
Stong update, imploring all yield investors to take a look at PXD - Derrick Whitfield
We view this release as positive. The positives include: i) the sale of its Delaware assets for $3.25 billion enables the company to add opportunistic share repurchases to its return strategy, ii) a 10.7% increase to the base dividend to $0.62/share (1.7% yield annualized), iii) record quarterly FCF resulting in a strong fixed + variable dividend (7.5% annualized yield) declared for Q421, and iv) an increase in the number of expected wells placed on production on reiterated full-year capex.
The quarter itself was largely in-line with our estimates; however, the only potential negative was higher than expected Q321 capex (3.5% above consensus, 0.7% above Stifel). Net-net, at strip prices, management forecasts Pioneer's dividend yield (~11%) in 2022 would exceed all peers, Majors and S&P 500. With its best-in-class asset base and fortress balance sheet, we believe Pioneer's return strategy offers yield-oriented investors a very attractive investment proposition.
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I probably should move PXD to our High Yield Income Portfolio. I will work on it early next week.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group