PXD Q4 Results
Posted: Tue Feb 07, 2017 5:03 pm
4th quarter production and adjusted earnings per share beat my forecast. Big increase in proven reserves at F&C costs under $10/Boe.
My valuation of PXD will be going up because their 2017 production guidance is above what I have in my forecast model.
Pioneer’s 2017 Plan and Capital Program is summarized below:
PXD is:
> planning to operate 18 horizontal rigs in the Spraberry/Wolfcamp during 2017; of these, 14 rigs will be in the northern area (13 rigs currently operating with an additional rig to be added in March) and four rigs will be focused in the northern portion of the southern Wolfcamp joint venture area (Pioneer has a 60% working interest in the joint venture); completions in both areas will be predominantly Version 3.0, with some wells testing larger completions during the year;
> planning to complete 20 wells in the Eagle Ford Shale, which includes nine drilled but uncompleted wells and 11 new drills (Pioneer has a 46% working interest); the objective of the limited new well program is to test longer laterals and higher-intensity completions;
> transferring West Panhandle gas processing operations from the Company’s Fain plant to a third-party facility in March;
> forecasting production growth in 2017 ranging from 15% to 18% compared to 2016 (approximately 62% oil content compared to 57% oil content in 2016); Spraberry/Wolfcamp production growth is expected to be the primary contributor, with growth ranging from 30% to 34% in 2017 compared to 2016 (oil growth expected to increase by 33% to 37%);
> expecting internal rates of return for the 2017 drilling program, including tank battery and saltwater disposal facility investments, ranging from 50% to 100% assuming an oil price of $55.00 per barrel and a gas price of $3.00 per thousand cubic feet (MCF);
> planning capital expenditures for 2017 of $2.8 billion, which includes $2.5 billion for drilling and completion activities and $275 million for water infrastructure, vertical integration and field facilities; this capital program assumes that further efficiency gains will offset the Company’s estimated cost inflation of 5%; Pioneer’s vertical integration operations mitigate the impact of the 10% to 15% cost inflation forecasted for the industry in 2017; the 2017 drilling and completion capital of $2.5 billion is $0.6 billion higher than 2016, reflecting (i) the higher Spraberry/Wolfcamp rig count for 2017, (ii) a reduced southern Wolfcamp joint venture drilling carry benefit in 2017, (iii) an increased number of higher-cost Version 3.0 completions in the 2017 Spraberry/Wolfcamp drilling program, (iv) additional tank batteries, saltwater disposal facilities and gas processing facilities related to the increased 2017 drilling activity in the Spraberry/Wolfcamp and (v) additional drilling activity in the Eagle Ford Shale in 2017;
> funding the 2017 capital program from forecasted cash flow of $2.2 billion and cash on hand;
> maintaining derivative positions that cover approximately 85% of forecasted 2017 oil production and 55% of forecasted 2017 gas production;
>forecasting net debt to 2017 operating cash flow to remain below 1.0 times; and
> high-grading Pioneer’s Permian acreage position by (i) agreeing in January to sell approximately 5,600 net acres in Upton and Andrews counties for $63 million (before normal closing adjustments) and (ii) evaluating offers to sell approximately 20,500 net acres in Martin County; also opening a data room to sell approximately 10,500 net acres in the Eagle Ford Shale.
President and CEO Timothy L. Dove stated, “Despite experiencing another year of downward pressure on oil prices, the Company’s focus on execution, improving capital efficiency and maintaining a strong balance sheet allowed us to meet or exceed all of the Company’s financial and operating goals for 2016 and deliver one of the best years in the Company’s 20-year history. The key drivers of this strong performance were the continued success of Pioneer’s horizontal drilling program in the Spraberry/Wolfcamp and the outstanding efforts of our employees. As we enter 2017, we are well positioned to drill high-return wells, grow production and bring forward the inherent net asset value associated with this world-class asset.”
“I am excited about Pioneer’s vision to grow production from 234 MBOEPD in 2016 to approximately 1 million barrels oil equivalent per day in 2026. We expect to achieve this vision by continuing to drill high-return wells that will deliver organic compound annual production growth of 15%+ and compound annual cash flow growth of approximately 20% over this 10-year period. This assumes an oil price of $55.00 per barrel and a gas price of $3.00 per MCF. In addition, we expect to maintain our net debt to operating cash flow ratio below 1.0 times and improve corporate returns. We also expect to spend within cash flow beginning in 2018 and generate free cash flow thereafter.”
My valuation of PXD will be going up because their 2017 production guidance is above what I have in my forecast model.
Pioneer’s 2017 Plan and Capital Program is summarized below:
PXD is:
> planning to operate 18 horizontal rigs in the Spraberry/Wolfcamp during 2017; of these, 14 rigs will be in the northern area (13 rigs currently operating with an additional rig to be added in March) and four rigs will be focused in the northern portion of the southern Wolfcamp joint venture area (Pioneer has a 60% working interest in the joint venture); completions in both areas will be predominantly Version 3.0, with some wells testing larger completions during the year;
> planning to complete 20 wells in the Eagle Ford Shale, which includes nine drilled but uncompleted wells and 11 new drills (Pioneer has a 46% working interest); the objective of the limited new well program is to test longer laterals and higher-intensity completions;
> transferring West Panhandle gas processing operations from the Company’s Fain plant to a third-party facility in March;
> forecasting production growth in 2017 ranging from 15% to 18% compared to 2016 (approximately 62% oil content compared to 57% oil content in 2016); Spraberry/Wolfcamp production growth is expected to be the primary contributor, with growth ranging from 30% to 34% in 2017 compared to 2016 (oil growth expected to increase by 33% to 37%);
> expecting internal rates of return for the 2017 drilling program, including tank battery and saltwater disposal facility investments, ranging from 50% to 100% assuming an oil price of $55.00 per barrel and a gas price of $3.00 per thousand cubic feet (MCF);
> planning capital expenditures for 2017 of $2.8 billion, which includes $2.5 billion for drilling and completion activities and $275 million for water infrastructure, vertical integration and field facilities; this capital program assumes that further efficiency gains will offset the Company’s estimated cost inflation of 5%; Pioneer’s vertical integration operations mitigate the impact of the 10% to 15% cost inflation forecasted for the industry in 2017; the 2017 drilling and completion capital of $2.5 billion is $0.6 billion higher than 2016, reflecting (i) the higher Spraberry/Wolfcamp rig count for 2017, (ii) a reduced southern Wolfcamp joint venture drilling carry benefit in 2017, (iii) an increased number of higher-cost Version 3.0 completions in the 2017 Spraberry/Wolfcamp drilling program, (iv) additional tank batteries, saltwater disposal facilities and gas processing facilities related to the increased 2017 drilling activity in the Spraberry/Wolfcamp and (v) additional drilling activity in the Eagle Ford Shale in 2017;
> funding the 2017 capital program from forecasted cash flow of $2.2 billion and cash on hand;
> maintaining derivative positions that cover approximately 85% of forecasted 2017 oil production and 55% of forecasted 2017 gas production;
>forecasting net debt to 2017 operating cash flow to remain below 1.0 times; and
> high-grading Pioneer’s Permian acreage position by (i) agreeing in January to sell approximately 5,600 net acres in Upton and Andrews counties for $63 million (before normal closing adjustments) and (ii) evaluating offers to sell approximately 20,500 net acres in Martin County; also opening a data room to sell approximately 10,500 net acres in the Eagle Ford Shale.
President and CEO Timothy L. Dove stated, “Despite experiencing another year of downward pressure on oil prices, the Company’s focus on execution, improving capital efficiency and maintaining a strong balance sheet allowed us to meet or exceed all of the Company’s financial and operating goals for 2016 and deliver one of the best years in the Company’s 20-year history. The key drivers of this strong performance were the continued success of Pioneer’s horizontal drilling program in the Spraberry/Wolfcamp and the outstanding efforts of our employees. As we enter 2017, we are well positioned to drill high-return wells, grow production and bring forward the inherent net asset value associated with this world-class asset.”
“I am excited about Pioneer’s vision to grow production from 234 MBOEPD in 2016 to approximately 1 million barrels oil equivalent per day in 2026. We expect to achieve this vision by continuing to drill high-return wells that will deliver organic compound annual production growth of 15%+ and compound annual cash flow growth of approximately 20% over this 10-year period. This assumes an oil price of $55.00 per barrel and a gas price of $3.00 per MCF. In addition, we expect to maintain our net debt to operating cash flow ratio below 1.0 times and improve corporate returns. We also expect to spend within cash flow beginning in 2018 and generate free cash flow thereafter.”