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Pioneer Natural Resources Announces 2020 Capital Spending Reduction, Prioritizing Balance Sheet Strength and Free Cash Flow Generation
Pioneer is reducing its 2020 drilling, completion and facilities capital budget by approximately 45% and expects it to range between
As a result, Pioneer plans to take immediate action in response to current commodity prices and will reduce its operated rig count from 22 currently to 11 operated rigs within the next two months. In addition, the Company plans to reduce its contracted completion crews from six currently to two to three completion crews during the same time period. Pioneer expects full-year 2020 oil production to be similar to the Company’s 2019 Permian oil production average of approximately 211 thousand barrels of oil per day (MBOPD). Pioneer will release additional details during its first quarter 2020 earnings conference call.
In addition to the Company’s strong balance sheet, Pioneer recently enhanced its derivative position to provide additional downside protection. For the remainder of 2020, Pioneer has derivative coverage for approximately 90% of its revised 2020 oil production estimate. In addition, the Company has increased its derivative coverage for 2021 to include approximately 94 MBOPD. Details on Pioneer’s updated derivative position as of
President and CEO
“As such, during this challenging environment, Pioneer will protect our pristine balance sheet and focus on free cash flow generation by cutting our capital budget by approximately forty-five percent. Our balance sheet is among the best in the energy sector and provides us ample financial flexibility to manage through a period of prolonged low oil prices. We are making these capital reductions based on a
“With the significant reduction in energy investment over the past five years, exacerbated by the expected decline in shale production, I expect oil prices to recover once the global economy stabilizes and Pioneer to emerge in a stronger, more enviable position through the actions we are taking today.”
Pioneer is a large independent oil and gas exploration and production company, headquartered in
Except for historical information contained herein, the statements in this news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and the business prospects of Pioneer are subject to a number of risks and uncertainties that may cause Pioneer’s actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, the impact of the coronavirus outbreak on global or national economic activity, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company’s drilling and operating activities, access to and availability of transportation, processing, fractionation, refining and export facilities, Pioneer’s ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer’s credit facility, investment instruments and derivative contracts and purchasers of Pioneer’s oil, natural gas liquids and gas production, uncertainties about estimates of reserves and resource potential, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, cybersecurity risks, ability to implement planned stock repurchases, the risks associated with the ownership and operation of the Company’s oilfield services businesses and acts of war or terrorism. These and other risks are described in Pioneer’s Annual Report on Form 10-K for the year ended
Footnote 1: Excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical G&A, information technology and corporate facilities.
Footnote 2: The 2020 forecasted cash flow number is a non-GAAP financial measure, representing January and February cash flow and March through December forecasted cash flow (before working capital changes) assuming a Nymex WTI oil price of
Footnote 3: Free cash flow ("FCF") is a non-GAAP financial measure. As used by the Company, FCF is defined as net cash provided by operating activities, adjusted for changes in operating assets and liabilities, less capital expenditures. The Company believes this non-GAAP measure is a financial indicator of the Company’s ability to internally fund acquisitions, debt maturities, dividends and share repurchases after capital expenditures, excluding acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative expense, information technology and corporate facilities. Due to its forward-looking nature, management cannot reliably predict certain of the necessary components of the most directly comparable forward-looking GAAP measure, such as working capital changes. Accordingly, Pioneer is unable to present a quantitative reconciliation of such forward-looking non-GAAP financial measure to its most directly comparable forward-looking GAAP financial measure. Amounts excluded from this non-GAAP measure in future periods could be significant.
The Company's open commodity oil and gas derivative positions as of
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