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Pioneer Natural Resources Company Reports Third Quarter 2017 Financial and Operating Results
Pioneer reported a third quarter net loss attributable to common
Third quarter financial, production and other recent highlights included:
Pioneer’s third quarter drilling update and other recent operations activity included:
President and CEO
“Despite the drilling delays that we experienced in the second quarter,
our operations are back on track and we remain committed to our 10-year
plan of drilling high-return wells that will deliver organic compound
annual production growth of 15%+. Achieving this target will result in
oil production of approximately 700 MBPD in 2026 and total production
greater than 1 million barrels oil equivalent per day. This plan will
allow us to maintain a steady pace of activity, spend within cash flow
by 2020 at an oil price of
Spraberry/Wolfcamp Operations Update and Outlook
Pioneer is the largest acreage holder in the Spraberry/Wolfcamp, with approximately 600,000 gross acres in the northern portion of the play and approximately 200,000 gross acres in the southern Wolfcamp joint venture area. Pioneer’s contiguous acreage position and substantial resource potential allow for decades of drilling horizontal wells with lateral lengths ranging from 7,500 feet to 14,000 feet.
The Company implemented a completion optimization program during 2015 in the Spraberry/Wolfcamp that combines longer laterals with optimized stage lengths, clusters per stage, fluid volumes and proppant concentrations. The objective of the program is to improve well productivity by allowing more rock to be contacted closer to the horizontal wellbore. In 2013 and 2014, the Company’s initial fracture stimulation design (Version 1.0) consisted of proppant concentrations of 1,000 pounds per foot, fluid concentrations of 30 barrels per foot, cluster spacing of 60 feet and stage spacing of 240 feet. Beginning in mid-2015, the Company enhanced its fracture stimulation design (Version 2.0), which consisted of larger proppant concentrations of 1,400 pounds per foot, larger fluid concentrations of 36 barrels per foot, tighter cluster spacing of 30 feet and shorter stage spacing of 150 feet. Beginning in the first quarter of 2016, Pioneer commenced testing further-enhanced completion designs (Version 3.0), which included larger proppant concentrations up to 1,700 pounds per foot, larger fluid concentrations up to 50 barrels per foot, tighter cluster spacing down to 15 feet and shorter stage spacing down to 100 feet.
The Company placed 59 Version 3.0 wells on production in the third quarter. These wells and the more than 200 Version 3.0 wells that were placed on production prior to the third quarter of 2017 are continuing to outperform Version 2.0 completions.
Pioneer placed 12 wells on production during the second quarter that utilized higher intensity completions compared to Version 3.0 wells. These are referred to as Version 3.0+ completions. Nine of the Version 3.0+ wells utilized increased proppant and three utilized increased proppant and water compared to Version 3.0 wells. Early production results from all of these wells are outperforming nearby offset wells with less intense completions. The Company plans to test a minimum of three additional 3.0+ wells over the remainder of the year.
In addition to the 59 Version 3.0 wells that were placed on production
during the third quarter, Pioneer placed two
The budgeted costs to drill and complete Spraberry/Wolfcamp horizontal
wells in 2017 are: Wolfcamp B –
Production costs (including production and ad valorem taxes) for
Pioneer’s horizontal Spraberry/Wolfcamp wells are expected to continue
to range from
The drilling program in the Spraberry/Wolfcamp is expected to deliver
IRRs ranging from 40% to 75%, assuming Version 3.0 completions, an oil
The Company’s Spraberry/Wolfcamp horizontal drilling program continues
to drive production growth, with Spraberry/Wolfcamp horizontal
production growing by 22 MBOEPD, or 13%, in the third quarter of 2017
compared to the second quarter. Pioneer’s forecasted 2017 production
growth rate for the Spraberry/Wolfcamp ranges from 30% to 32%. This
reflects the Company placing approximately 230 wells on production in
2017. Of these wells, approximately 190 wells are expected to be in the
northern area and 40 wells will be in the southern Wolfcamp joint
venture area. Approximately 55% of the wells will be in the Wolfcamp B,
30% in the Wolfcamp A and 15% in the
In the fourth quarter, the Company expects to place approximately 70 wells on production, which are expected to be weighted evenly across the quarter.
Eagle Ford Shale Operations
In the liquids-rich area of the
The objective of this drilling and completion program is to test longer
laterals with wider spacing and higher intensity completions in the new
wells. Lateral lengths are being extended to 7,500 feet from the
previous design of 5,200 feet, with cluster spacing being reduced from
50 feet to 30 feet. Proppant concentrations are being increased from
1,200 pounds per foot to 2,000 pounds per foot. The cost of drilling and
completing the new wells is expected to be
Drilling was completed on the 11 new wells during the second quarter. Two of these wells were placed on production during the third quarter. Of the remaining nine wells, two wells were placed on production in October and the remaining seven wells are expected to be placed on production in mid-November. The nine DUCs were placed on production during the second and third quarters. The average cumulative production per well from the new drills and DUCs after approximately 80 days and 140 days of production, respectively, is more than double the average cumulative production per well for the same time period from all wells placed on production during 2015 and 2016.
Pioneer’s production from the
West Panhandle Operations
The West Panhandle field produced 4,500 BOEPD during the third quarter of 2017, reflecting the impact of multiple downtime events at the third-party gas processing plant where the liquids-rich gas from the field is processed into gas and NGLs. Early in the third quarter, field production was shut in due to a planned turnaround at the third-party plant. In mid-September, the field had to be shut in again after the plant incurred significant damage due to a fire. Repairs to the plant are underway, but it is expected to be several months before the plant can be placed back into service. As a result, the third party and Pioneer have made modifications to their respective facilities to enable field production to resume, with the gas volumes being rerouted to another gas processing facility operated by the third party. Production from the field resumed in late October at approximately 8 MBOEPD. The impact to third quarter production from the unplanned downtime associated with the fire was approximately 1,300 BOEPD, with most of this loss being gas and NGLs.
2017 Capital Program
The Company’s capital budget for 2017 is being increased from
The budget includes
The following provides a breakdown of the drilling capital budget by asset:
Capital spending for 2017 is expected to be funded from forecasted
operating cash flow of
Third Quarter 2017 Financial Review
Sales volumes for the third quarter of 2017 averaged 276 MBOEPD. Oil sales averaged 162 MBPD, NGL sales averaged 57 MBPD and gas sales averaged 340 MMCFPD.
The average realized price for oil was
Production costs, including taxes, averaged
Fourth Quarter 2017 Financial Outlook
The Company’s fourth quarter 2017 outlook for certain operating and financial items is provided below.
Production is forecasted to average 292 MBOEPD to 302 MBOEPD.
Production costs are expected to average
General and administrative expense is expected to be
The Company’s effective income tax rate is expected to range from 35% to
40%. Current income taxes are expected to be less than
The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined on the attached schedules.
Earnings Conference Call
Telephone: Dial (888) 539-3696 and confirmation code 3153325 five minutes before the call. View the presentation via Pioneer’s internet address above.
A replay of the webcast will be archived on Pioneer’s website. This
replay will be available through
Pioneer is a large independent oil and gas exploration and production
company, headquartered in
Except for historical information contained herein, the statements in
this presentation 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, 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, completion of planned divestitures, 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 liquid 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, the risks associated with the ownership and operation of
the Company’s industrial sand mining and 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
Cautionary Note to U.S. Investors --The
The Company uses the two-class method of calculating basic and diluted earnings per share. Under the two-class method of calculating earnings per share, generally acceptable accounting principles ("GAAP") provide that share-based awards with guaranteed dividend or distribution participation rights qualify as "participating securities" during their vesting periods. During the periods in which the Company realizes net income attributable to common shareholders, the Company's basic net income per share attributable to common stockholders is computed as (i) net income attributable to common stockholders, (ii) less participating share-based basic earnings (iii) divided by weighted average basic shares outstanding and the Company's diluted net income per share attributable to common stockholders is computed as (i) basic net income attributable to common stockholders, (ii) plus the reallocation of participating earnings, if any, (iii) divided by weighted average diluted shares outstanding. During periods in which the Company realizes a net loss attributable to common stockholders, securities or other contracts to issue common stock would be dilutive to loss per share; therefore, conversion into common stock is assumed not to occur.
The following table is a reconciliation of the Company's net income (loss) attributable to common stockholders to basic and diluted net income (loss) attributable to common stockholders for the three and nine months ended September 30, 2017 and 2016:
Both basic and diluted weighted average common shares outstanding were
170 million for the three and nine months ended
EBITDAX and discretionary cash flow ("DCF") (as defined below) are presented herein, and reconciled to the GAAP measures of net income (loss) and net cash provided by operating activities, because of their wide acceptance by the investment community as financial indicators of a company's ability to internally fund exploration and development activities and to service or incur debt. The Company also views the non-GAAP measures of EBITDAX and DCF as useful tools for comparisons of the Company's financial indicators with those of peer companies that follow the full cost method of accounting. EBITDAX and DCF should not be considered as alternatives to net income (loss) or net cash provided by operating activities, as defined by GAAP.
Income adjusted for noncash mark-to-market ("MTM") derivative losses, as
presented in this press release, is presented and reconciled to
Pioneer's net loss attributable to common stockholders (determined in
accordance with GAAP) because Pioneer believes that this non-GAAP
financial measure reflects an additional way of viewing aspects of
Pioneer's business that, when viewed together with its financial results
computed in accordance with GAAP, provides a more complete understanding
of factors and trends affecting its historical financial performance and
future operating results, greater transparency of underlying trends and
greater comparability of results across periods. In addition, management
believes that this non-GAAP financial measure may enhance investors'
ability to assess Pioneer's historical and future financial performance.
This non-GAAP financial measure is not intended to be a substitute for
the comparable GAAP measure and should be read only in conjunction with
Pioneer's consolidated financial statements prepared in accordance with
GAAP. Noncash MTM derivative gains or losses will recur in future
periods; however, the amount and frequency can vary significantly from
period to period. The table below reconciles Pioneer's net loss
attributable to common stockholders for the three months ended
Marketing derivatives. Periodically, the Company enters into buy
and sell marketing arrangements to fulfill firm pipeline transportation
commitments. Associated with these marketing arrangements, the Company
may enter into index swaps that mitigate price risk. As of
Interest rate derivatives. As of
The following table summarizes net derivative gains (losses) that the
Company recorded in earnings for the three and nine months ended
Pioneer Natural Resources Company
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