Pioneer Natural Resources (PXD) Q3 Results
Posted: Wed Nov 02, 2016 1:11 pm
EPS and production came in slightly higher than my forecast. - Dan
Pioneer reported third quarter net income attributable to common stockholders of $22 million, or $0.13 per diluted share. Noncash mark-to-market derivative losses were offset by an income tax benefit attributable to tax credits for research and experimental expenditures related to horizontal drilling and completions innovations, resulting in adjusted income (income after noncash mark-to-market derivative losses and unusual items) also being $22 million after tax, or $0.13 per diluted share.
Third quarter and other recent highlights included:
• producing 239 thousand barrels oil equivalent per day (MBOEPD), of which 56% was oil; quarterly production grew by 6 MBOEPD, or 3%, compared to the second quarter of 2016, and was above Pioneer’s second quarter production guidance range of 232 MBOEPD to 237 MBOEPD; third quarter production growth was driven by the Company’s Spraberry/Wolfcamp horizontal drilling and completion optimization program; unplanned downtime at the Fain gas processing plant negatively impacted production in the West Panhandle field by approximately 2 MBOEPD;
• placing 46 horizontal wells on production in the Spraberry/Wolfcamp during the third quarter, as expected, with continuing strong performance; 28 wells benefited from Pioneer’s Version 3.0 completion optimization program; Version 3.0 wells are on average outperforming earlier wells that utilized Version 2.0 completion optimization; as a result, the Version 3.0 testing program for 2016 has been increased from 80 wells to approximately 100 wells;
• continuing to realize significant capital efficiency gains in the Spraberry/Wolfcamp where the Company’s completion optimization program and the extension of lateral lengths are enhancing well productivity, while drilling and completion efficiency gains and cost reduction initiatives are driving down the cost per lateral foot to drill and complete wells;
• reducing production cost per barrel oil equivalent (BOE) by 6% from the second quarter of 2016 and 32% compared to the third quarter of 2015;
• enhancing Pioneer’s Martin County acreage position in the Midland Basin by completing the acquisition of approximately 28,000 net acres from Devon Energy for $429 million;
• selling Pioneer’s first two Permian oil cargoes for export to Europe during the third quarter, totaling 610 thousand barrels in aggregate;
• repaying a mid-July debt maturity of $455 million with cash on hand; and
• increasing 2017 derivatives coverage to 75% for oil and 55% for gas.
Pioneer’s latest outlook is summarized below:
• increasing the Company’s horizontal rig count from 12 rigs to 17 rigs in the northern Spraberry/Wolfcamp during the second half of 2016; three rigs were added during September and October, as planned, with two additional rigs expected in November;
• maintaining the 2016 capital budget at $2.1 billion;
• increasing the Company’s 2016 production growth forecast from 13%+ to 14%+ to reflect improving Spraberry/Wolfcamp well productivity; no incremental production is expected until 2017 from the five additional rigs being added during the second half of 2016;
• expecting 17 rigs to deliver production growth ranging from 13% to 17% in 2017; and
• funding for the 2017 capital program is expected to be provided by forecasted cash flow (assuming late-October strip prices), a strong derivatives position and a strong investment grade balance sheet.
Chairman and CEO Scott D. Sheffield stated, “The Company delivered another great quarter, with solid earnings, production above the top end of our third-quarter guidance range and continued impressive horizontal well performance in the Spraberry/Wolfcamp. Our strong financial position and improving capital efficiency are allowing us to continue to drill high-return wells, grow production and bring forward the inherent net asset value associated with this world class asset during a period of relatively low commodity prices. We are on a trajectory to deliver compound annual production and cash flow growth through 2020 of approximately 15% and 25%, respectively, while maintaining a net debt-to-operating cash flow ratio below 1.0 times assuming late-October strip prices. We also expect to spend within cash flow in 2018, assuming an oil price of approximately $55 per barrel.”
“As was announced previously, I will be retiring as the CEO of Pioneer at the end of this year. I am proud and honored to have led a Company that has become the premier oil shale resource company in the United States with excellent assets, a strong balance sheet and an outstanding management team. I want to personally thank all of our employees for their hard work and dedication in building this great Company that is well-positioned for the future.”
Pioneer reported third quarter net income attributable to common stockholders of $22 million, or $0.13 per diluted share. Noncash mark-to-market derivative losses were offset by an income tax benefit attributable to tax credits for research and experimental expenditures related to horizontal drilling and completions innovations, resulting in adjusted income (income after noncash mark-to-market derivative losses and unusual items) also being $22 million after tax, or $0.13 per diluted share.
Third quarter and other recent highlights included:
• producing 239 thousand barrels oil equivalent per day (MBOEPD), of which 56% was oil; quarterly production grew by 6 MBOEPD, or 3%, compared to the second quarter of 2016, and was above Pioneer’s second quarter production guidance range of 232 MBOEPD to 237 MBOEPD; third quarter production growth was driven by the Company’s Spraberry/Wolfcamp horizontal drilling and completion optimization program; unplanned downtime at the Fain gas processing plant negatively impacted production in the West Panhandle field by approximately 2 MBOEPD;
• placing 46 horizontal wells on production in the Spraberry/Wolfcamp during the third quarter, as expected, with continuing strong performance; 28 wells benefited from Pioneer’s Version 3.0 completion optimization program; Version 3.0 wells are on average outperforming earlier wells that utilized Version 2.0 completion optimization; as a result, the Version 3.0 testing program for 2016 has been increased from 80 wells to approximately 100 wells;
• continuing to realize significant capital efficiency gains in the Spraberry/Wolfcamp where the Company’s completion optimization program and the extension of lateral lengths are enhancing well productivity, while drilling and completion efficiency gains and cost reduction initiatives are driving down the cost per lateral foot to drill and complete wells;
• reducing production cost per barrel oil equivalent (BOE) by 6% from the second quarter of 2016 and 32% compared to the third quarter of 2015;
• enhancing Pioneer’s Martin County acreage position in the Midland Basin by completing the acquisition of approximately 28,000 net acres from Devon Energy for $429 million;
• selling Pioneer’s first two Permian oil cargoes for export to Europe during the third quarter, totaling 610 thousand barrels in aggregate;
• repaying a mid-July debt maturity of $455 million with cash on hand; and
• increasing 2017 derivatives coverage to 75% for oil and 55% for gas.
Pioneer’s latest outlook is summarized below:
• increasing the Company’s horizontal rig count from 12 rigs to 17 rigs in the northern Spraberry/Wolfcamp during the second half of 2016; three rigs were added during September and October, as planned, with two additional rigs expected in November;
• maintaining the 2016 capital budget at $2.1 billion;
• increasing the Company’s 2016 production growth forecast from 13%+ to 14%+ to reflect improving Spraberry/Wolfcamp well productivity; no incremental production is expected until 2017 from the five additional rigs being added during the second half of 2016;
• expecting 17 rigs to deliver production growth ranging from 13% to 17% in 2017; and
• funding for the 2017 capital program is expected to be provided by forecasted cash flow (assuming late-October strip prices), a strong derivatives position and a strong investment grade balance sheet.
Chairman and CEO Scott D. Sheffield stated, “The Company delivered another great quarter, with solid earnings, production above the top end of our third-quarter guidance range and continued impressive horizontal well performance in the Spraberry/Wolfcamp. Our strong financial position and improving capital efficiency are allowing us to continue to drill high-return wells, grow production and bring forward the inherent net asset value associated with this world class asset during a period of relatively low commodity prices. We are on a trajectory to deliver compound annual production and cash flow growth through 2020 of approximately 15% and 25%, respectively, while maintaining a net debt-to-operating cash flow ratio below 1.0 times assuming late-October strip prices. We also expect to spend within cash flow in 2018, assuming an oil price of approximately $55 per barrel.”
“As was announced previously, I will be retiring as the CEO of Pioneer at the end of this year. I am proud and honored to have led a Company that has become the premier oil shale resource company in the United States with excellent assets, a strong balance sheet and an outstanding management team. I want to personally thank all of our employees for their hard work and dedication in building this great Company that is well-positioned for the future.”