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Pioneer Natural Resources Company Reports Fourth-Quarter and Full-Year 2019 Financial and Operating Results; Provides 2020 Outlook

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.

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

 

 

December 31, 2019

 

December 31, 2018

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

631

 

 

$

825

 

Restricted cash

74

 

 

 

Short-term investments

 

 

443

 

Accounts receivable, net

1,035

 

 

814

 

Income taxes receivable

7

 

 

7

 

Inventories

205

 

 

242

 

Derivatives

32

 

 

52

 

Investment in affiliate

187

 

 

172

 

Other

20

 

 

25

 

Total current assets

2,191

 

 

2,580

 

Oil and gas properties, using the successful efforts method of accounting

23,028

 

 

21,766

 

Accumulated depletion, depreciation and amortization

(8,583

)

 

(8,218

)

Total oil and gas properties, net

14,445

 

 

13,548

 

Other property and equipment, net

1,632

 

 

1,291

 

Operating lease right-of-use assets

280

 

 

 

Long-term investments

 

 

125

 

Goodwill

261

 

 

264

 

Other assets

258

 

 

95

 

 

$

19,067

 

 

$

17,903

 

 

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

 

 

 

Accounts payable

$

1,411

 

 

$

1,624

 

Interest payable

53

 

 

53

 

Income taxes payable

3

 

 

2

 

Current portion of long-term debt

450

 

 

 

Derivatives

12

 

 

27

 

Operating leases

136

 

 

 

Other

431

 

 

112

 

Total current liabilities

2,496

 

 

1,818

 

Long-term debt

1,839

 

 

2,284

 

Derivatives

8

 

 

 

Deferred income taxes

1,389

 

 

1,152

 

Operating leases

170

 

 

 

Other liabilities

1,046

 

 

538

 

Equity

12,119

 

 

12,111

 

 

$

19,067

 

 

$

17,903

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

 

2019

2018

2019

2018

Revenues and other income:

 

 

 

 

Oil and gas

$

1,349

 

$

1,122

 

$

4,916

 

$

4,991

 

Sales of purchased oil and gas

1,292

 

1,082

 

4,755

 

4,388

 

Interest and other

118

 

 

 

76

 

38

 

Derivative gain (loss), net

(116

)

409

 

34

 

(292

)

Gain (loss) on disposition of assets, net

 

 

64

 

(477

)

290

 

 

2,643

 

2,677

 

9,304

 

9,415

 

Costs and expenses:

 

 

 

 

Oil and gas production

207

 

201

 

874

 

855

 

Production and ad valorem taxes

76

 

55

 

299

 

284

 

Depletion, depreciation and amortization

440

 

404

 

1,711

 

1,534

 

Purchased oil and gas

1,288

 

909

 

4,472

 

3,930

 

Impairment of oil and gas properties

 

 

 

 

 

 

77

 

Exploration and abandonments

11

 

32

 

58

 

114

 

General and administrative

78

 

99

 

324

 

381

 

Accretion of discount on asset retirement obligations

3

 

3

 

10

 

14

 

Interest

34

 

29

 

121

 

126

 

Other

58

 

533

 

448

 

849

 

 

2,195

 

2,265

 

8,317

 

8,164

 

Income before income taxes

448

 

412

 

987

 

1,251

 

Income tax provision

(104

)

(88

)

(231

)

(276

)

Net income

344

 

324

 

756

 

975

 

Net loss attributable to noncontrolling interests

 

 

 

 

 

 

3

 

Net income attributable to common stockholders

$

344

 

$

324

 

$

756

 

$

978

 

 

 

 

 

 

Net income per share attributable to common stockholders:

 

 

 

 

Basic

$

2.06

 

$

1.89

 

$

4.50

 

$

5.71

 

Diluted

$

2.06

 

$

1.89

 

$

4.50

 

$

5.70

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

166

 

171

 

167

 

171

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

 

2019

2018

2019

2018

Cash flows from operating activities:

 

 

 

 

Net income

$

344

 

$

324

 

$

756

 

$

975

 

Adjustments to reconcile net income to net cash

provided by operating activities:

 

 

 

 

Depletion, depreciation and amortization

440

 

404

 

1,711

 

1,534

 

Impairment of oil and gas properties

 

 

 

 

 

 

77

 

Impairment of inventory and other property and equipment

3

 

2

 

38

 

11

 

Exploration expenses, including dry holes

3

 

15

 

8

 

27

 

Deferred income taxes

109

 

88

 

236

 

274

 

(Gain) loss on disposition of assets, net

 

(64

)

477

 

(290

)

Accretion of discount on asset retirement obligations

3

 

3

 

10

 

14

 

Interest expense

5

 

1

 

9

 

5

 

Derivative-related activity

129

 

(576

)

13

 

(270

)

Amortization of stock-based compensation

19

 

22

 

100

 

85

 

Investment in affiliate mark-to-market adjustment

(37

)

 

 

(15

)

 

 

Contingent consideration valuation adjustment

(16

)

 

45

 

 

 

Other

9

 

482

 

105

 

658

 

Change in operating assets and liabilities:

 

 

 

 

Accounts receivable

(180

)

181

 

(227

)

(52

)

Inventories

35

 

 

 

(20

)

(70

)

Other assets

(18

)

 

 

(33

)

3

 

Accounts payable

(8

)

15

 

(7

)

321

 

Interest payable

29

 

29

 

 

 

(5

)

Other liabilities

(41

)

(11

)

(91

)

(55

)

Net cash provided by operating activities

828

 

915

 

3,115

 

3,242

 

Net cash used in investing activities

(533

)

(834

)

(2,447

)

(2,610

)

Net cash used in financing activities

(103

)

(175

)

(788

)

(703

)

Net increase (decrease) in cash, cash equivalents and restricted cash

192

 

(94

)

(120

)

(71

)

Cash, cash equivalents and restricted cash, beginning of period

513

 

919

 

825

 

896

 

Cash, cash equivalents and restricted cash, end of period

$

705

 

$

825

 

$

705

 

$

825

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUMMARY PRODUCTION, PRICE AND MARGIN DATA

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

2019

 

2018

 

2019

 

2018

Average Daily Sales Volume:

 

 

 

 

 

 

 

Oil (Bbls)

220,326

 

 

199,193

 

 

212,353

 

 

190,639

 

Natural gas liquids ("NGLs") (Bbls)

80,159

 

 

61,911

 

 

72,323

 

 

63,780

 

Gas (Mcf)

377,268

 

 

351,176

 

 

365,055

 

 

393,391

 

Total (BOE)

363,364

 

 

319,633

 

 

345,518

 

 

319,984

 

 

 

 

 

 

 

 

 

Average Price:

 

 

 

 

 

 

 

Oil per Bbl

$

56.01

 

 

$

49.80

 

 

$

53.77

 

 

$

57.36

 

NGL per Bbl

$

18.60

 

 

$

26.88

 

 

$

19.33

 

 

$

29.84

 

Gas per Mcf

$

2.21

 

 

$

1.75

 

 

$

1.79

 

 

$

2.13

 

Total per BOE

$

40.36

 

 

$

38.16

 

 

$

38.98

 

 

$

42.73

 

 

Three Months Ended
December 31, 2019

 

(in $ per BOE)

Margin Data:

 

Average price

$

40.36

 

Production costs

(6.20

)

Production and ad valorem taxes

(2.28

)

 

$

31.88

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTARY EARNINGS PER SHARE INFORMATION

(in millions)

 

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 periods in which the Company realizes net income attributable to common shareholders, the Company's basic net income per share attributable to common shareholders 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. 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 Company's net income attributable to common stockholders is reconciled to basic and diluted net income attributable to common stockholders as follows:
 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

2019

 

2018

 

2019

 

2018

Net income attributable to common stockholders

$

344

 

 

$

324

 

 

$

756

 

 

$

978

 

Participating share-based basic earnings

(2

)

 

(2

)

 

(3

)

 

(5

)

Basic and diluted net income attributable to common stockholders

$

342

 

 

$

322

 

 

$

753

 

 

$

973

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

166

 

 

171

 

 

167

 

 

171

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

(in millions)

 
 

EBITDAX and discretionary cash flow ("DCF") (as defined below) are presented herein, and reconciled to the GAAP measures of net income 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 or net cash provided by operating activities, as defined by GAAP.

 

 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

 

2019

 

2018

2019

 

2018

Net income

$

344

 

 

$

324

 

$

756

 

 

$

975

 

Depletion, depreciation and amortization

440

 

 

404

 

1,711

 

 

1,534

 

Exploration and abandonments

11

 

 

32

 

58

 

 

114

 

Impairment of oil and gas properties

 

 

 

 

 

 

 

 

77

 

Impairment of inventory and other property and equipment

3

 

 

2

 

38

 

 

11

 

Accretion of discount on asset retirement obligations

3

 

 

3

 

10

 

 

14

 

Interest expense

34

 

 

29

 

121

 

 

126

 

Income tax provision

104

 

 

88

 

231

 

 

276

 

(Gain) loss on disposition of assets, net

 

 

 

 

(64

)

477

 

 

(290

)

Derivative-related activity

129

 

 

(576

)

13

 

 

(270

)

Amortization of stock-based compensation

19

 

 

22

 

74

 

 

85

 

Investment in affiliate fair value adjustment

(37

)

 

 

(15

)

 

 

Contingent consideration valuation adjustment

(16

)

 

 

 

45

 

 

 

 

Restructuring charge (including stock-based compensation)

 

 

 

 

 

167

 

 

 

 

Other

9

 

 

482

 

105

 

 

658

 

EBITDAX before restructuring charge

1,043

 

 

746

 

3,791

 

 

3,310

 

Restructuring charge (excluding stock-based compensation)

 

 

 

 

 

(141

)

 

 

 

EBITDAX (a)

1,043

 

 

746

 

3,650

 

 

3,310

 

Cash interest expense

(29

)

 

(28

)

(112

)

 

(121

)

Current income tax (provision) benefit

5

 

 

 

 

5

 

 

(2

)

Discretionary cash flow (b)

1,019

 

 

718

 

3,543

 

 

3,187

 

Cash exploration expense

(8

)

 

(17

)

(50

)

 

(87

)

Changes in operating assets and liabilities

(183

)

 

214

 

(378

)

 

142

 

Net cash provided by operating activities

$

828

 

 

$

915

 

$

3,115

 

 

$

3,242

 

________________________________

(a)

“EBITDAX” represents earnings before depletion, depreciation and amortization expense; exploration and abandonments; impairment of oil and gas properties; impairment of inventory and other property and equipment; accretion of discount on asset retirement obligations; interest expense; income taxes; net loss (gain) on the disposition of assets; noncash derivative related activity; amortization of stock-based compensation; fair value adjustments on investments and contingent consideration; restructuring charges and other noncash items.

(b)

Discretionary cash flow equals cash flows from operating activities before changes in operating assets and liabilities and cash exploration expense.

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

(in millions, except per share data)

 

Adjusted income attributable to common stockholders excluding noncash mark-to-market ("MTM") adjustments and income attributable to common stockholders excluding noncash MTM adjustments and unusual items are presented in this earnings release and reconciled to the Company's net income attributable to common stockholders (determined in accordance with GAAP), as the Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of the Company's business that, when viewed together with its GAAP financial results, provide 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 financial measures may enhance investors' ability to assess the Company's historical and future financial performance. These non-GAAP financial measures are not intended to be a substitute for the comparable GAAP financial measure and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Noncash MTM adjustments and unusual items may recur in future periods; however, the amount and frequency can vary significantly from period to period.

The Company's net income attributable to common stockholders as determined in accordance with GAAP is reconciled to income adjusted for noncash MTM adjustments, including (i) the Company's derivative positions, (ii) contingent consideration attributable to the South Texas divestiture and (iii) the Company's equity investment in ProPetro Holding Corp. ("ProPetro"), and unusual items is as follows:

 

 

Three Months Ended
December 31, 2019

 

After-tax
Amounts

 

Per Diluted
Share

Net income attributable to common stockholders

$

344

 

 

$

2.06

 

Noncash MTM adjustments:

 

 

 

Derivative loss, net ($129 pretax)

101

 

 

0.60

 

South Texas contingent consideration gain ($16 pretax)

(12

)

 

(0.07

)

ProPetro stock gain ($36 pretax)

(28

)

 

(0.17

)

Adjusted income excluding noncash MTM adjustments

405

 

 

2.42

 

Unusual items:

 

 

 

Corporate headquarters move-related costs ($41 pretax)

32

 

 

0.19

 

Net gain on asset divestitures ($54 pretax)

(42

)

.

(0.25

)

Adjusted income excluding noncash MTM adjustments and unusual items

$

395

 

 

$

2.36

 

 

 

 

 

 

Twelve Months Ended
December 31, 2019

 

After-tax
Amounts

 

Per Diluted
Share

Net income attributable to common stockholders

$

756

 

 

$

4.50

 

Noncash MTM adjustments:

 

 

 

South Texas contingent consideration loss ($45 pretax)

35

 

 

0.21

 

Derivative loss, net ($13 pretax)

10

 

 

0.06

 

ProPetro stock gain ($15 pretax)

(11

)

 

(0.07

)

Total noncash MTM adjustments

34

 

 

0.20

 

Adjusted income excluding noncash MTM adjustments

790

 

 

4.70

 

Unusual items:

 

 

 

Net loss on asset divestitures ($423 pretax)

330

 

 

1.96

 

Corporate restructuring charges ($167 pretax)

130

 

 

0.77

 

Asset divestiture-related charges ($74 pretax)

57

 

 

0.34

 

Sand mine decommissioning-related charges ($47 pretax)

37

 

 

0.22

 

Corporate headquarters move-related costs ($41 pretax)

32

0.19

Total unusual items

586

 

 

3.48

 

Adjusted income excluding noncash MTM adjustments and unusual items

$

1,376

 

 

$

8.18

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

(in millions)

 

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 net noncash MTM adjustments, unusual items and interest expense) and average net debt. The Company believes ROCE is a good indicator of long-term performance, both absolute and relative to the Company's peers. ROCE is a measure of the profitability of the Company’s capital employed in its business compared with that of its peers.

 

Twelve Months Ended

 

2019

2018

2017

Net income

$

756

 

$

975

 

$

833

 

After-tax noncash MTM adjustments:

 

 

 

South Texas contingent consideration loss

35

 

 

N/A

 

 

N/A

 

Derivative (gain) loss, net

10

 

(211

)

112

 

ProPetro stock gain

(11

)

 

N/A

 

 

N/A

 

After-tax unusual items:

 

 

 

Net (gain) loss on asset divestitures

330

 

(226

)

(124

)

Corporate restructuring charges

130

 

 

N/A

 

 

N/A

 

Asset divestiture-related charges

57

 

189

 

182

 

Sand mine decommissioning-related charges

37

 

351

 

 

N/A

 

Corporate headquarters move-related costs

32

 

 

N/A

 

 

N/A

 

Excess tax benefits and reduction in deferred tax liability

 

N/A

 

 

N/A

 

(633

)

After-tax adjusted income excluding noncash MTM adjustments and unusual items.

1,376

 

1,078

 

370

 

After-tax interest expense

94

 

98

 

98

 

ROCE earnings

$

1,470

 

$

1,176

 

$

468

 

 

 

 

 

 

As of December 31,

 

2019

2018

2017

Average total equity (a)

$

12,472

 

$

11,796

 

$

10,663

 

Average net debt (b)

1,275

 

724

 

396

 

Capital employed

$

13,747

 

$

12,520

 

$

11,059

 

 

 

 

 

ROCE percentage

11

%

9

%

4

%

_________________________________

(a)

Average total equity is calculated as the average of current year adjusted total equity and prior year total equity as follows:

 

As of December 31,

 

2019

 

2018

Total equity

$

12,119

 

 

$

12,111

 

Less: Net income

756

 

 

 

Plus: ROCE earnings

1,470

 

 

 

Adjusted total equity

$

12,833

 

 

 

 

 

 

 

Average total equity

$

12,472

 

 

 

 

As of December 31,

 

2018

 

2017

Total equity

$

12,111

 

 

$

11,279

 

Less: Net income

975

 

 

 

Plus: ROCE earnings

1,176

 

 

 

Adjusted total equity

$

12,312

 

 

 

 

 

 

 

Average total equity

$

11,796

 

 

 

 

As of December 31,

 

2017

 

2016

Total equity

$

11,279

 

 

$

10,411

 

Less: Net income

833

 

 

 

Plus: ROCE earnings

468

 

 

 

Adjusted total equity

$

10,914

 

 

 

 

 

 

 

Average total equity

$

10,663

 

 

 

_________________________________

(b)

Average net debt is calculated as follows:

 

As of December 31,

 

2019

 

2018

 

2017

 

2016

Current portion of long-term debt

$

450

 

 

$

 

 

$

449

 

 

$

485

 

Long-term debt

1,839

 

 

2,284

 

 

2,283

 

 

2,728

 

Less:

 

 

 

 

 

 

 

Cash and cash equivalents

631

 

 

825

 

 

896

 

 

1,118

 

Short-term investments

 

 

443

 

 

1,213

 

 

1,441

 

Long-term investments

 

 

125

 

 

66

 

 

420

 

Net debt

$

1,658

 

 

$

891

 

 

$

557

 

 

$

234

 

 

 

 

 

 

 

 

 

Average net debt

$

1,275

 

 

$

724

 

 

$

396

 

 

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

(in millions)

 

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.

 

 

Three Months Ended
December 31, 2019

 

Twelve Months Ended
December 31, 2019

Net cash provided by operating activities

$

828

 

 

$

3,115

 

Changes in operating assets and liabilities

183

 

 

378

 

Less: Capital expenditures (a)

627

 

 

2,953

 

Free cash flow

$

384

 

 

$

540

 

_________________________________

(a)

Capital expenditures are calculated as follows:

 

Three Months Ended
December 31, 2019

 

Twelve Months Ended
December 31, 2019

Costs incurred

$

655

 

 

$

2,970

 

Less: Excluded items (a)

61

 

 

164

 

Plus: Other property, plant and equipment capital (b)

33

 

 

147

 

Capital expenditures

$

627

 

 

$

2,953

 

_________________________________

(a)

Includes acquisition costs, asset retirement obligations, geological and geophysical general and administrative costs, capitalized interest and capital expenditures on non-Permian Basin divested assets.

(b)

Includes other property plant and equipment additions related to water infrastructure, well services and vehicles.

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION

Open Commodity Derivative Positions as of February 18, 2020

(Volumes are average daily amounts)

 

 

2020

 

Year Ending
December 31,
2021

 

First
Quarter

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Average daily oil production associated with derivatives (Bbl):

 

 

 

 

 

 

 

 

 

Brent swap contracts:

 

 

 

 

 

 

 

 

 

Volume

3,407

 

 

 

 

 

 

 

 

 

Price

$

60.86

 

 

$

 

 

$

 

 

$

 

 

$

 

Brent collar contracts with short puts:

 

 

 

 

 

 

 

 

 

Volume

145,500

 

 

135,500

 

 

115,500

 

 

115,500

 

 

7,000

 

Price:

 

 

 

 

 

 

 

 

 

Ceiling

$

68.46

 

 

$

68.84

 

 

$

69.78

 

 

$

69.78

 

 

$

65.37

 

Floor

$

61.64

 

 

$

61.76

 

 

$

62.06

 

 

$

62.06

 

 

$

60.00

 

Short put

$

53.45

 

 

$

53.48

 

 

$

53.56

 

 

$

53.56

 

 

$

52.00

 

Brent call contracts sold:

 

 

 

 

 

 

 

 

 

Volume per day (Bbl) (a)

 

 

 

 

 

 

 

 

13,000

 

Price per Bbl

$

 

 

$

 

 

$

 

 

$

 

 

$

72.10

 

Average daily gas production associated with
derivatives (MMBtu):

 

 

 

 

 

 

 

 

 

Swap contracts:

 

 

 

 

 

 

 

 

 

Volume

 

 

30,000

 

 

30,000

 

 

16,739

 

 

2,466

 

NYMEX price

$

 

 

$

2.41

 

 

$

2.41

 

 

$

2.43

 

 

$

2.46

 

Basis swap contracts:

 

 

 

 

 

 

 

 

 

Permian Basin index swap volume (b)

 

 

30,000

 

 

30,000

 

 

16,739

 

 

2,466

 

Price differential ($/MMBtu)

$

 

 

$

(1.68

)

 

$

(1.68

)

 

$

(1.59

)

 

$

(1.46

)

_________________________________

(a)

The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar contracts with short puts.

(b)

The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells its Permian Basin gas and the NYMEX index price used in swap contracts.

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION

Derivative Gain (Loss), Net

(in millions)

 

 

Three Months Ended
December 31, 2019

 

Twelve Months Ended
December 31, 2019

Noncash changes in fair value:

 

 

 

Oil derivative loss, net

$

(134

)

 

$

(34

)

Gas derivative gain, net

5

 

 

21

 

Total noncash derivative loss, net

(129

)

 

(13

)

 

 

 

 

Net cash receipts on settled derivative instruments:

 

 

 

Oil derivative receipts

20

 

 

75

 

Gas derivative payments

(7

)

 

(28

)

Total cash receipts on settled derivative instruments, net

13

 

 

47

 

Total derivative gain (loss), net

$

(116

)

 

$

34

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION

PROVED RESERVES

 
 

 

Total Company

Oil (MBbls):

 

Balance as of December 31, 2018

565,010

 

Revisions of previous estimates

(30,216

)

Purchases of minerals-in-place

46

 

Discoveries and extensions

167,022

 

Production

(77,509

)

Sales of minerals-in-place

(20,603

)

Balance as of December 31, 2019

603,750

 

Natural Gas Liquids (MBbls):

 

Balance as of December 31, 2018

240,914

 

Revisions of previous estimates

29,415

 

Purchases of minerals-in-place

15

 

Discoveries and extensions

60,069

 

Production

(26,398

)

Sales of minerals-in-place

(22,032

)

Balance as of December 31, 2019

281,983

 

Natural Gas (MMcf):

 

Balance as of December 31, 2018

1,458,574

 

Revisions of previous estimates

94,767

 

Purchases of minerals-in-place

92

 

Discoveries and extensions

293,507

 

Production

(145,026

)

Sales of minerals-in-place

(202,401

)

Balance as of December 31, 2019

1,499,513

 

Equivalent Barrels (MBOE):

 

Balance as of December 31, 2018

1,049,020

 

Revisions of previous estimates (a)

14,994

 

Purchases of minerals-in-place

76

 

Discoveries and extensions

276,009

 

Production (b)

(128,078

)

Sales of minerals-in-place

(76,369

)

Balance as of December 31, 2019

1,135,652

 

_________________________________

(a)

Revisions of previous estimates includes 11 MMBOEs of negative price revisions and 26 MMBOEs of positive technical revisions.

(b)

Production includes 2.0 MMBOE related to field fuel.
 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION

PROVED RESERVES (continued)

 
 

 

Twelve Months Ended
December 31, 2019

 

(in millions)

Costs incurred for oil and gas producing activities:

 

Property acquisition costs:

 

Proved

$

2

 

Unproved

26

 

 

28

 

Exploration costs

2,199

 

Development costs

743

 

Total costs incurred (a)

$

2,970

 

 

 

Reserve replacement percentage (b)

227

%

 

 

Drillbit reserve replacement percentage (c)

235

%

 

 

Finding and development costs per BOE of proved reserves added (d)

$

10.20

 

 

 

Drillbit finding and development costs per BOE of proved reserves added (e)

$

9.76

 

_________________________________

(a)

Costs incurred includes $2 million of capitalized interest, $85 million of asset retirement obligation increases and $44 million of G&G/G&A.

(b)

The summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place and discoveries and extensions divided by annual production of oil, NGLs and gas, on a BOE basis.

(c)

The summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates (excluding price revisions) and discoveries and extensions divided by annual production of oil, NGLs and gas, on a BOE basis.

(d)

Total costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place and discoveries and extensions. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.

(e)

The summation of exploration and development costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates (excluding price revisions) and discoveries and extensions. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.

 

Source: Pioneer Natural Resources Company

Pioneer Natural Resources Company
Investors
Neal Shah - 972-969-3900
Tom Fitter - 972-969-1821
Michael McNamara - 972-969-3592

Media and Public Affairs
Tadd Owens - 972-969-5760

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