Press Release

DALLAS--(BUSINESS WIRE)--Feb. 19, 2020-- Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer" or "the Company") today reported financial and operating results for the quarter and year ended December 31, 2019. Pioneer reported fourth quarter net income attributable to common stockholders of $344 million, or $2.06 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the fourth quarter was $395 million, or $2.36 per diluted share. Cash flow from operating activities for the fourth quarter was $828 million. For the full year 2019, the Company reported net income attributable to common stockholders of $756 million, or $4.50 per diluted share. Cash flow from operating activities for the full year 2019 was $3.1 billion.

Highlights

• Achieved corporate return on capital employed (ROCE)¹ of 11% during 2019
• Delivered strong fourth-quarter and full-year 2019 free cash flow² of $384 million and $540 million, respectively
• Returned $780 million of capital to shareholders through dividends and share repurchases during 2019
• Averaged fourth quarter oil production of 220 thousand barrels of oil per day (MBOPD), at the top end of guidance
• Averaged fourth quarter total production of 363 thousand barrels of oil equivalent per day (MBOEPD), above the top end of guidance
• Announced 2020 Capital Budget³ of $3.15 billion to $3.45 billion, with cash flow⁴ expected to be $3.9 billion
• Increased quarterly dividend to $0.55 per share, or $2.20 per share on an annual basis

President and CEO Scott D. Sheffield stated, "2019 was an excellent year for Pioneer, where we delivered strong cash flow, robust free cash flow generation and top tier corporate returns. This was driven by an intense focus on execution that resulted in significant well cost reductions while maintaining peer-leading oil production per well in the Permian Basin. We remain committed to returning capital to shareholders, and in 2019 we delivered $780 million to shareholders through share repurchases and dividends.

Our 2020 plan builds on our strong 2019 performance and is structured to deliver a capitally efficient program that prioritizes free cash flow. Our dividend increase announced today solidifies our commitment to returning capital to shareholders and represents a greater than 185% increase, on an annualized basis, when compared to the dividends paid in 2019. Pioneer continues to offer a compelling value proposition, underpinned by our premier acreage position in the Permian Basin that drives best-in-class margins, increasing corporate returns and is forecasted to generate significant free cash flow."

Financial Highlights

Pioneer maintains a strong balance sheet, with unrestricted cash on hand as of December 31, 2019 of $631 million and net debt of $1.7 billion. The Company had a $2.1 billion liquidity position at year end 2019, reflecting $631 million of unrestricted cash and a $1.5 billion unsecured credit facility (undrawn as of December 31, 2019).

During the fourth quarter, the Company’s Permian drilling, completion and facilities capital expenditures totaled $569 million. The Company’s total Permian capital expenditures³ during the fourth quarter, including gas processing and water infrastructure expenditures, totaled $627 million, resulting in $384 million of free cash flow² before working capital changes. For the full year 2019, the Company's Permian drilling, completion and facilities capital expenditures totaled $2.7 billion. The Company's total Permian capital expenditures³ for the full year, including gas processing and water infrastructure expenditures, totaled $3.0 billion, resulting in $540 million of free cash flow² before working capital changes.

The Company announced today that its Board of Directors has approved an increase in the Company's quarterly cash dividend to $0.55 per share, representing a current yield of approximately 1.6% (based on the Company’s closing stock price as of February 14, 2020). This annualized dividend represents a greater than 185% increase when compared to the dividends paid in 2019. The decision to grow Pioneer's cash dividend, from $0.08 per share on an annualized basis in February 2018 to an annualized rate of $2.20 per share currently, is consistent with the Company’s objective of increasing its return of capital to shareholders.

In December 2018, the Board of Directors authorized a $2 billion common stock repurchase program. During the fourth quarter, the Company repurchased $22 million of common stock under this program. To-date, the Company has repurchased a total of 5.5 million shares for $749 million under this authorization. The Company evaluates many factors, including market conditions and corporate considerations, such as asset divestitures, liquidity and capital needs, in assessing the Company's ability to repurchase shares.

Fourth Quarter Financial Results

For the fourth quarter, the Company’s average realized price for oil was $56.01 per barrel. The Company’s average realized price for natural gas liquids (NGLs) was $18.60 per barrel, and the average realized price for gas was $2.21 per thousand cubic feet (MCF). These prices exclude the effects of derivatives.

Production costs, including taxes, averaged $8.48 per barrel of oil equivalent (BOE). Depreciation, depletion and amortization (DD&A) expense averaged $13.15 per BOE. Exploration and abandonment costs were $11 million. General and administrative (G&A) expense was $78 million. Interest expense was $34 million. Other expense was $58 million, or $17 million excluding an unusual item⁵.

Operations Update

Pioneer continued to see strong efficiency gains in both drilling and completions during the fourth quarter, enabling the Company to place 77 horizontal wells on production. During 2019, both drilling and completions efficiencies increased by greater than 30% when compared to 2017, averaging approximately 1,000 drilled feet per day and 1,600 completed feet per day in 2019, respectively. These increased efficiencies, coupled with approximately 30% lower well costs and strong production, continue to drive increasing corporate returns and free cash flow generation.

During 2020, the Company plans to operate an average of 23 to 24 horizontal rigs in the Permian Basin, including approximately five rigs in the southern joint venture area. The 2020 program is expected to place 345 to 375 wells on production, compared to 306 wells placed on production during 2019. Wells placed on production in 2020 are expected to be approximately 40% Wolfcamp B, 40% Wolfcamp A, 15% Spraberry and 5% other formations, with an average lateral length of approximately 9,800 feet.

The Company continues to transport oil, NGLs and gas from the Permian Basin to premium-priced markets. This led to an incremental benefit of $4 million during the fourth quarter of 2019 and a total benefit in 2019 of $283 million. During the fourth quarter of 2019, the Company's gas price realizations benefited from firm transportation to the higher-priced West Coast and Gulf Coast markets, compared to selling gas into the oversupplied Waha gas market. Pioneer realized $2.21 per MCF during the fourth quarter compared to the average Gas Daily Waha Index price of $1.11 per MCF. The Company expects to have minimal exposure to the Waha gas market going forward.

2020 Outlook

The Company expects its 2020 drilling, completions and facilities capital budget to range between $3.0 billion to $3.3 billion, with an additional $125 million budgeted for Pioneer's differentiated water infrastructure. The Company expects its capital program to be fully funded within forecasted cash flow⁴ of approximately $3.9 billion.

Pioneer expects 2020 oil production of 235 to 245 MBOPD and total production of 383 to 403 MBOEPD. Pioneer's efficient, high-margin growth is driven by the Company's top-tier acreage position in the Permian Basin that continues to deliver the most productive oil wells in the Permian Basin, combined with low well costs. Further benefiting margins and cash flow, NGL volumes experienced strong growth during the second half of 2019 due to improved gas processing yields from the start-up of the Hopson and Pembrook gas processing plants. The Company expects this benefit to continue throughout 2020, along with the forecasted addition of the Gateway gas processing plant in the second half of 2020.

Pioneer increased its oil derivative positions to approximately 149 MBOPD for the first quarter of 2020 and 129 MBOPD for full-year 2020 at approximately $62 Brent pricing. The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined in the attached schedules.

First Quarter 2020 Guidance

First quarter 2020 oil production is forecasted to average between 217 to 227 MBOPD and total production to average between 361 to 376 MBOEPD. Production costs are expected to average $8.25 per BOE to $10.25 per BOE. DD&A expense is expected to average $12.50 per BOE to $14.50 per BOE. Total exploration and abandonment expense is forecasted to be $10 million to $20 million. G&A expense is expected to be $72 million to $82 million. Interest expense is expected to be $30 million to $35 million. Other expense is forecasted to be $20 million to $30 million. Accretion of discount on asset retirement obligations is expected to be $2 million to $5 million. The cash flow impact related to purchases and sales of oil and gas, including firm transportation, is expected to be zero to a loss of $50 million. The Company’s effective income tax rate is expected to range from 21% to 25%. Current income taxes are expected to be less than $5 million.

Proved Reserves

The Company added proved reserves totaling 302 million barrels of oil equivalent (MMBOE) during 2019. These proved reserve additions equate to a drillbit reserve replacement ratio of 235% when compared to Pioneer's full-year 2019 production of 128 MMBOE, including field fuel. The drillbit finding and development (F&D) cost was $9.76 per BOE in 2019, with a drillbit proved developed F&D costs of $9.49 per BOE.

As of December 31, 2019, the Company's total proved reserves were estimated at 1,136 MMBOE, of which 95% are proved developed.

Environmental, Social & Governance

Pioneer views sustainability as a multidisciplinary focus that balances economic growth, environmental stewardship and social responsibility. The Company emphasizes developing natural resources in a manner that respects surrounding communities and preserves the environment.

Pioneer is focused on reducing emissions and emission intensities. Between 2016 and 2018, the Company's greenhouse gas (GHG) emissions have been reduced by 24%, total GHG emission intensity has decreased by 38% and methane intensity has declined by 41%. Additionally, between January 2018 and July 2019, the Company was able to limit Permian Basin flaring to less than 2% of its produced gas, one of the lowest flaring percentages in the Permian Basin. The Company's proactive measures, including monitoring 100% of its Permian Basin facilities aerially for leak detection and repair and only producing a well once it is fully connected to a gas line, help to make Pioneer a leader in environmental stewardship.

Socially, Pioneer maintains a proactive safety culture, supports a diverse workforce and inspires teamwork to drive innovation. The Board of Directors has a Health, Safety and Environment Committee and a Nominating and Corporate Governance Committee to provide director-level oversight of these activities. These committees help to promote a culture of continuous improvement in safety and environmental practices.

For more details, see Pioneer’s 2019 Sustainability Report at pxd.com/sustainability.

Earnings Conference Call

On Thursday, February 20, 2020, at 9:00 a.m. Central Time, Pioneer will discuss its financial and operating results for the quarter and full-year ended December 31, 2019, with an accompanying presentation. Instructions for listening to the call and viewing the accompanying presentation are shown below.

Internet: www.pxd.com
Select "Investors," then "Earnings & Webcasts" to listen to the discussion, view the presentation and see other related material.

Telephone: Dial 888-394-8218 and enter confirmation code 6718938 five minutes before the call.

A replay of the webcast will be archived on Pioneer’s website. This replay will be available through March 20, 2020. Click here to register for the call-in audio replay and you will receive the dial-in information.

Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations in the United States. For more information, visit www.pxd.com.

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, 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, storage 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 December 31, 2018, and other filings with the Securities and Exchange Commission. In addition, Pioneer may be subject to currently unforeseen risks that may have a materially adverse impact on it. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. Pioneer undertakes no duty to publicly update these statements except as required by law.

Future dividends are at the discretion of the Company's Board of Directors, and, if declared, the Board of Directors may change the dividend amount based on the Company's liquidity and capital resources at that time.

“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, extensions 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, extensions 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.

“Proved developed finding and development cost per BOE,” or “proved developed F&D cost per BOE,” means the summation of exploration and development costs incurred (excluding asset retirement obligations) divided by the summation of annual proved reserves, on a BOE basis, attributable to proved developed reserve additions, including (i) discoveries and extensions placed on production during 2019, (ii) transfers from proved undeveloped reserves at year-end 2018 and (iii) technical revisions of previous estimates for proved developed reserves during 2019. Revisions of previous estimates exclude price revisions.

Footnote 1: "Return on Capital Employed (ROCE)" is a non-GAAP financial measure. As used by the Company, ROCE is net income adjusted for tax-effected noncash mark-to-market (MTM) adjustments, unusual items and interest expense divided by the summation of average total equity (adjusted for tax-effected noncash MTM adjustments, unusual items and interest expense) and average net debt. See reconciliation to comparable GAAP number in supplemental schedules.

Footnote 2: Free cash flow is a non-GAAP measure, see reconciliation to comparable GAAP number in supplemental schedules.

Footnote 3: Excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical G&A, information technology and corporate facilities.

Footnote 4: The 2020 estimated cash flow number is a non-GAAP financial measure, representing January through December forecasted cash flow (before working capital changes) assuming a Nymex oil price of $55 (assuming a $5 differential to the Brent oil price) and Henry Hub gas of $2.50 per MCF; represents the midpoint of production guidance. 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.

Footnote 5: The unusual item represents $41 million of charges during the fourth quarter of 2019 associated with moving the Company’s corporate headquarters.

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Source: Pioneer Natural Resources Company

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