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Pioneer Natural Resources Reports Fourth Quarter 2015 Financial and Operating Results and Announces 2016 Capital Program
Pioneer reported a fourth quarter net loss attributable to common
Fourth quarter and other recent highlights included:
Pioneer’s plans for 2016 in response to the outlook for continuing weak oil prices are summarized below:
Mark-To-Market Derivative Gains and Unusual Items Included in Fourth Quarter 2015 Earnings
Pioneer’s fourth quarter earnings included noncash mark-to-market losses
on derivatives of
Fourth quarter earnings also included a net loss of
Spraberry/Wolfcamp Operations Update and 2016 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 10,000 feet.
In the northern Spraberry/Wolfcamp, horizontal well performance continues to improve. The Company placed 22 horizontal Wolfcamp B interval wells on production during the fourth quarter. Early production results from these wells are on average displaying Pioneer’s strongest horizontal well performance to date and tracking well above a 1 MMBOE estimated ultimate recovery (EUR) type curve. The wells, which had an average perforated lateral length of 8,400 feet, delivered an average 24-hour peak production rate of approximately 2,200 barrels oil equivalent per day (BOEPD), with 80% oil content. All of the wells benefited from Pioneer’s completion optimization program. This program combines longer laterals with optimized stage length, clusters per stage, fluid volumes and proppant concentrations.
Pioneer also placed two Wolfcamp A interval wells and 11 Lower Spraberry Shale wells on production in the northern Spraberry/Wolfcamp during the fourth quarter. The two Wolfcamp A wells, which were placed on production at year end, had an average perforated lateral length of 9,450 feet and benefited from optimized completions. They delivered an average 24-hour peak production rate of approximately 1,570 BOEPD, with 80% oil content. The wells were recently placed on gas lift. The 11 Lower Spraberry Shale wells, which had an average perforated lateral length of 8,850 feet, have delivered to date an average 24-hour peak production rate of approximately 1,110 BOEPD, with 84% oil content. Five of the 11 wells have not yet achieved their 24-hour peak production rates. The wells are on average tracking close to a 1 MMBOE EUR type curve. Completions were optimized on nine of the 11 Lower Spraberry Shale wells.
During the third quarter of 2015, Pioneer placed 30 horizontal Wolfcamp interval wells on production in the northern Spraberry/Wolfcamp (28 wells in the Wolfcamp B interval and 2 wells in the Wolfcamp A interval). Completions were optimized (stage length, clusters per stage, fluid volumes and proppant concentrations) on approximately 65% of these wells. Production results from all of these wells (optimized and non-optimized) continue to exceed a 1 MMBOE EUR type curve.
Horizontal well performance also continues to improve in the southern Wolfcamp joint venture area. The Company placed nine wells on production during the fourth quarter in this area. Early production results from the eight Wolfcamp B interval wells that were placed on production are on average tracking above a 1 MMBOE EUR type curve. These wells, which had an average perforated lateral length of 9,070 feet, delivered an average 24-hour peak production rate of approximately 1,630 BOEPD, with 83% oil content. Production from the one Wolfcamp A interval well that was placed on production is tracking above an 800 MBOE EUR type curve. This well, which had an average perforated lateral length of 10,250 feet, delivered an average 24-hour peak production rate of approximately 980 BOEPD, with 79% oil content. Completions were optimized in all of the wells (stage length, clusters per stage, fluid volumes and proppant concentrations).
The Company is realizing significant capital efficiency gains in the Spraberry/Wolfcamp. For example, the drilling and completion cost per perforated lateral foot for all horizontal Wolfcamp B interval wells placed on production in the northern Spraberry/Wolfcamp area between the fourth quarter of 2014 and the fourth quarter of 2015 has decreased by 30% on average as a result of cost reductions and efficiency gains. During this same period, well productivity for these same Wolfcamp B interval wells over the first 90 days of production has improved significantly as a result of Pioneer’s completion optimization program. This is evidenced by an approximate 50% increase in the average 90-day cumulative production per well for the Wolfcamp B interval wells from the fourth quarter of 2014 to the fourth quarter of 2015. Stated differently, the average daily production rate for the 22 Wolfcamp B interval wells in the fourth quarter of 2015 averaged approximately 1,250 BOEPD for their first 90 days on production compared to an average of approximately 830 BOEPD for the 20 Wolfcamp B interval wells placed on production in the fourth quarter of 2014.
Pioneer expects to place approximately 230 horizontal wells on
production in the Spraberry/Wolfcamp area during 2016. Of these wells,
approximately 190 wells will be in the northern area and 40 wells will
be in the southern Wolfcamp joint venture area. Approximately 60% of the
wells will be drilled in the Wolfcamp B interval, 25% in the Wolfcamp A
interval and 15% in the
The Company is forecasting EURs for its 2016 drilling program ranging
from 800 MBOE to 1.2 MMBOE. EURs are benefiting from longer lateral
lengths and Pioneer’s completion optimization program that commenced in
2015 and includes increased fluid volumes and proppant concentrations,
reduced stage lengths and additional clusters per stage. The current
cost to drill and complete a horizontal well is approximately
Despite weak commodity prices, the 2016 drilling program in the northern Spraberry/Wolfcamp area is expected to continue to deliver favorable internal rates of return, with returns up to 30% expected at current strip commodity prices. These returns, which include tank battery and saltwater disposal facility costs, are benefiting from continuing cost reduction efforts, drilling and completion efficiency gains and well productivity improvements.
The Company’s horizontal drilling program continues to drive production growth, with total Spraberry/Wolfcamp area production growing by 26 MBOEPD, or 27%, in 2015 compared to 2014. Oil production grew 28% in 2015 and represented 66% of total 2015 production, on a BOE basis, in this asset. Horizontal production surpassed vertical production in the third quarter of 2015 and represented approximately 50% of total production for the year. Production for 2015 was negatively impacted by approximately 4 MBOEPD related to the Company’s continuing decision to reject ethane due to weak market conditions.
Spraberry/Wolfcamp area production is expected to grow by 30%+ in 2016, compared to 2015. Production is expected to increase sequentially throughout the year. During the first quarter, the Company expects to place approximately 45 horizontal wells on production in the Spraberry/Wolfcamp, similar to the fourth quarter of 2015. However, first quarter production is expected to be negatively impacted by shut-in production associated with offset fracture stimulations being approximately three times greater than the fourth quarter, as most of the wells being placed on production in the first quarter will be near existing pads where wells are already producing. The existing nearby wells must be shut in while the new wells are being fracture stimulated to avoid damaging them.
Spraberry/Wolfcamp Infrastructure Plans
Pioneer is focused on optimizing the development of the
Spraberry/Wolfcamp, which includes ensuring that future infrastructure
requirements are constructed. These requirements include the build-out
of horizontal tank batteries and saltwater disposal facilities,
construction of a field-wide water distribution system, construction of
additional gas processing facilities and the expansion of the sand mine
Forecasted spending for the construction of tank batteries and saltwater
disposal facilities reflects a combination of building new facilities
and expanding existing facilities. The Company expects to spend
Pioneer owns a 27% interest in Targa Resources’ (“Targa”)
The Company’s long-term plans call for the construction of a field-wide
water distribution system to reduce the cost of water for drilling and
completion activities and to ensure that adequate supplies of
non-potable water are available for use in the development of the
Spraberry/Wolfcamp field. The system is expected to be built out based
on the timing of adding new rigs and the economics associated with
adding new water sources. The Company recently completed construction of
a delivery line for 391 million barrels of effluent water that will be
purchased from the city of
Pioneer’s sand mine in
2016 Capital Program
The Company’s capital budget for 2016 is
The following provides a breakdown of the capital budget by asset:
The 2016 capital budget is expected to be funded from forecasted
operating cash flow of
The Company expects to deliver production growth of 10%+ in 2016
compared to 2015 based on the above capital program. This growth
reflects Spraberry/Wolfcamp area production growing by 30%+, partially
offset by declines of approximately 25% in the
Fourth Quarter 2015 Financial Review
Sales volumes for the fourth quarter of 2015 averaged 215 MBOEPD. Oil sales averaged 113 thousand barrels per day (MBPD), NGL sales averaged 41 MBPD and gas sales averaged 367 MMCFPD.
The average realized price for oil was
Production costs averaged
First Quarter 2016 Financial Outlook
The Company’s first quarter 2016 outlook for certain operating and financial items is provided below.
Production is forecasted to average 211 MBOEPD to 216 MBOEPD.
Production costs are expected to average
General and administrative expense is expected to be
Pioneer expects to incur restructuring charges of
The Company’s effective income tax rate is expected to range from 35% to
40%. Current income taxes are expected to be
The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined on the attached schedules.
Earnings Conference Call
Select “Investors,” then “Earnings & Webcasts” to listen to the discussion, view the presentation and see other related material.
Telephone: Dial (877) 675-4750 and confirmation code 6797143 five minutes before the call. View the presentation via Pioneer’s website address above.
A replay of the webcast will be archived on Pioneer’s website. A
telephone 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 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, 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,
including the ability to realize future reductions in costs,
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 and refining
facilities, Pioneer's ability to replace reserves, implement its
business plans or complete its development activities as scheduled,
access to and cost of capital, uncertainties about estimates of reserves
and resource potential 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 10-K and 10-Q Reports and other filings with
Cautionary Note to U.S. Investors --The
An audit of proved reserves follows the general principles set forth
in the standards pertaining to the estimating and auditing of oil and
gas reserve information promulgated by the
“Drillbit finding and development cost per BOE,” or “drillbit F&D cost per BOE,” means the summation of exploration and development costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to discoveries and extensions (excludes purchases of minerals-in-place) and revisions of previous estimates. Revisions of previous estimates exclude price revisions. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.
“Drillbit reserve replacement” is the summation of annual proved reserves, on a BOE basis, attributable to discoveries and extensions (excludes purchases of minerals-in-place) and revisions of previous estimates divided by annual production of oil, NGLs and gas, on a BOE basis. Revisions of previous estimates exclude price revisions.
U.S. investors are urged to consider closely the disclosures in the
Company’s periodic filings with the
UNAUDITED SUPPLEMENTARY EARNINGS PER SHARE INFORMATION
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. The Company's basic net income (loss) per share attributable to common stockholders is computed as (i) net income (loss) attributable to common stockholders, (ii) less participating share-based basic earnings (iii) divided by weighted average basic shares outstanding. The Company's diluted net income (loss) per share attributable to common stockholders is computed as (i) basic net income (loss) 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 loss from continuing operations 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
twelve months ended
Basic and diluted weighted average common shares outstanding were 149
million for both the three and twelve months ended
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
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.
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)
Net loss adjusted for noncash mark-to-market ("MTM") derivative losses,
and adjusted loss excluding noncash MTM derivative losses and unusual
items, as presented in this press release, are presented and reconciled
to Pioneer's net loss attributable to common stockholders (determined in
accordance with GAAP) because Pioneer believes that these non-GAAP
financial measures reflect 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 these non-GAAP measures may enhance investors' ability to
assess Pioneer's historical and future financial performance. These
non-GAAP financial measures are not intended to be substitutes 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 and losses and unusual items 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
Interest rate derivatives. As of
Marketing and basis derivative activities. 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 to mitigate price
risk. As of
Pioneer Natural Resources
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