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Pioneer Natural Resources Company Reports Second Quarter 2020 Financial and Operating Results

DALLAS--(BUSINESS WIRE)--Aug. 4, 2020-- Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer" or "the Company") today reported financial and operating results for the quarter ended June 30, 2020. Pioneer reported a second quarter net loss attributable to common stockholders of $439 million, or $2.66 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, the non-GAAP adjusted loss for the second quarter was $54 million, or $0.32 per diluted share. Cash flow from operating activities for the second quarter was $328 million.

Highlights

  • Delivered strong second quarter free cash flow1 of $165 million
  • Averaged second quarter oil production of 215 thousand barrels of oil per day (MBOPD)
  • Averaged second quarter production of 375 thousand barrels of oil equivalent per day (MBOEPD)
  • Reported capital expenditures2 of $235 million during the second quarter, underspending revised capital budget
  • Reduced second quarter lease operating expense (LOE) per barrel oil equivalent (BOE) by 16% from the first quarter
  • Maintained 2020 capital expenditure guidance, while increasing 2020 oil production guidance by approximately 2.5%; continuing the trend of improved capital efficiency

President and CEO Scott D. Sheffield stated, "Although the macroeconomic environment presented challenges, Pioneer delivered another excellent quarter, with continued strong operational execution. The Company generated $165 million of free cash flow1 through significant cost reductions and operational efficiency improvements. The improvements in capital efficiency during the second quarter led to a 2.5% increase in our full-year oil production guidance, while maintaining our previous capital spending range.

Pioneer is also initiating a long-term investment framework that is underpinned by a cash flow reinvestment rate between 70% to 80%, prioritizing free cash flow generation and return of capital, while maintaining a strong balance sheet. Based on current strip pricing, this framework targets a total return to shareholders of 10% or greater, consisting of a competitive and growing base dividend, a variable dividend and oil growth of five percent plus. I am confident this framework will allow us to return a significant amount of capital to shareholders, while providing the flexibility to manage through commodity price cycles, strengthening Pioneer's investment proposition."

Financial Highlights

Pioneer maintains a strong balance sheet, with unrestricted cash on hand at the end of the second quarter of $180 million and net debt of $2.0 billion. The Company had $1.7 billion of liquidity as of June 30, 2020, comprised of $180 million of unrestricted cash and a $1.5 billion unsecured credit facility (undrawn as of June 30, 2020).

During the second quarter, the Company’s drilling, completion and facilities capital expenditures totaled $211 million. The Company’s total capital expenditures2, including water infrastructure, totaled $235 million.

Cash flow from operating activities during the second quarter was $328 million, leading to free cash flow1 of $165 million for the quarter.

Financial Results

For the second quarter, the average realized price for oil was $23.16 per barrel. The average realized price for natural gas liquids (NGLs) was $12.65 per barrel, and the average realized price for gas was $1.15 per thousand cubic feet. These prices exclude the effects of derivatives.

Production costs, including taxes, averaged $6.27 per BOE. Depreciation, depletion and amortization (DD&A) expense averaged $12.21 per BOE. Exploration and abandonment costs were $10 million. General and administrative (G&A) expense was $60 million. Interest expense was $33 million. Other expense was $90 million, or $12 million excluding unusual items3.

Operations Update

Pioneer continued to see strong efficiency gains during the second quarter, enabling the Company to place 75 horizontal wells on production. During the first half of 2020, drilling operations averaged approximately 1,125 drilled feet per day and completion operations averaged approximately 1,775 completed feet per day, continuing to surpass original full-year 2020 expectations.

Pioneer's well costs continue to benefit from these efficiency gains and service cost deflation, leading to cost reductions of approximately $1.8 million per well, or approximately 20%, when compared to the Company's original 2020 budget. The trend of reducing well costs continues to significantly improve capital efficiency. Pioneer expects approximately 60% of the achieved well cost savings this year to be sustainable through commodity price cycles.

The Company's production costs also remain a focus and continue to trend lower. Horizontal LOE was $2.17 per BOE during the second quarter, a 13% decrease when compared to the first quarter of 2020 and a 27% decrease from the first quarter of 2019. The improved cost structure continues to drive strong margins and provide incremental cash flow for Pioneer.

The Company continues to proactively curtail lower-margin, higher-cost vertical well production in the current commodity price environment, benefiting operating costs. Pioneer curtailed approximately 7 MBOPD of net production during the second quarter and expects approximately 6 MBOPD to remain curtailed in the current commodity price environment. Decisions to bring curtailed production back online are economically driven and evaluated on a well-by-well basis.

Full-Year 2020 Update

The Company is maintaining its 2020 drilling, completions and facilities capital budget range of $1.3 billion to $1.5 billion, with an additional approximately $100 million budgeted for Pioneer's differentiated water infrastructure, resulting in a total 2020 capital budget2 range of $1.4 billion to $1.6 billion.

Pioneer is increasing its guidance for 2020 oil production to a range of 203 to 213 MBOPD and total production range of 356 to 371 MBOEPD. The revised production guidance reflects the current voluntary curtailments that are expected to average approximately 6 MBOPD in the current commodity price environment. The Company continues to monitor the fluid macroeconomic environment and will remain flexible and responsive to changing market conditions to preserve its strong balance sheet.

The Company's previous activity guidance remains unchanged. From April through December 2020, the Company expects to operate an average of five to eight horizontal drilling rigs in the Midland Basin, including one horizontal drilling rig in the southern joint venture area, and operate an average of two to three frac fleets. Pioneer will continue to evaluate drilling and completion activity on an economic basis, with future activity levels assessed regularly.

Pioneer is redefining its investment proposition to prioritize free cash flow generation and return of capital. This capital allocation framework is intended to create long-term value for shareholders by optimizing the reinvestment of cash flow to a rate of 70% to 80%, which accelerates the Company's free cash flow profile, while continuing to generate strong corporate returns. The Company is targeting a 10% or greater total annual return to shareholders, inclusive of a strong and growing base dividend4, a variable dividend4 and high-return oil growth. The Company believes this differentiated strategy will position Pioneer to be competitive across sectors.

Pioneer continues to maintain substantial oil derivative coverage in order to protect the balance sheet, providing the Company with operational and financial flexibility throughout this period. The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined in the attached schedules.

Third Quarter 2020 Guidance

Third quarter 2020 oil production is forecasted to average between 191 to 201 MBOPD and total production is expected to average between 341 to 356 MBOEPD. Production costs are expected to average $6.25 per BOE to $7.75 per BOE. DD&A expense is expected to average $12.00 per BOE to $14.00 per BOE. Total exploration and abandonment expense is forecasted to be $5 million to $15 million. G&A expense is expected to be $58 million to $68 million. Interest expense is expected to be $31 million to $36 million. Other expense is forecasted to be $20 million to $30 million, excluding stacked drilling rig fees, idle frac fleet fees and other fees associated with reduced activity levels. 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 a loss of $20 million to $60 million, based on forward oil price estimates for the quarter. The Company’s effective income tax rate is expected to be less than 21%. Current income taxes are expected to be nominal.

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 protects 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 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 facilities aerially for leak detection and repair (LDAR) 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 Wednesday, August 5, 2020, at 9:00 a.m. Central Time, Pioneer will discuss its financial and operating results for the quarter ended June 30, 2020, 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 (800) 353-6461 and enter confirmation code 9285881 five minutes before the call.

A replay of the webcast will be archived on Pioneer’s website. This replay will be available through August 31, 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, the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company’s drilling and operating activities, access to and availability of transportation, processing, fractionation, refining, 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 forecasts, including forecasts of production, cash flow, well costs, capital expenditures, rates of return to shareholders, expenses, cash flows from purchases and sales of oil and gas net of firm transportation commitments, quality of technical data, environmental and weather risks, including the possible impacts of climate change, cybersecurity risks, ability to implement 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, 2019, Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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.

Footnote 1: Free cash flow is a non-GAAP measure. See reconciliation to comparable GAAP number in supplemental schedules.

Footnote 2: Excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical G&A and corporate facilities.

Footnote 3: Unusual items include the following: (i) COVID-19 operational plan changes of (a) $41 million related to idle frac fleet fees, stacked drilling rig charges and drilling rig early termination charges, (b) $6 million of underutilization and restructuring charges associated with the Company's well services business and (c) $4 million in sand take-or-pay deficiencies and (ii) $27 million of early extinguishment of debt charges associated with the Company's second quarter of 2020 debt refinancing activities. See reconciliation in supplemental schedules.

Footnote 4: The declaration and payment of future dividends is at the discretion of the Company’s board of directors and will depend on, among other things, the Company's earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the board of directors deems relevant.

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

 

 

June 30, 2020

 

December 31, 2019

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

180

 

 

$

631

 

Restricted cash

69

 

 

74

 

Accounts receivable, net

566

 

 

1,035

 

Income taxes receivable

21

 

 

7

 

Inventories

170

 

 

205

 

Derivatives

72

 

 

32

 

Investment in affiliate

85

 

 

187

 

Other

32

 

 

20

 

Total current assets

1,195

 

 

2,191

 

Oil and gas properties, successful efforts method of accounting

23,794

 

 

23,028

 

Accumulated depletion, depreciation and amortization

(9,349)

 

 

(8,583)

 

Total oil and gas properties, net

14,445

 

 

14,445

 

Other property and equipment, net

1,622

 

 

1,632

 

Operating lease right of use assets

216

 

 

280

 

Goodwill

261

 

 

261

 

Derivatives

3

 

 

 

Other assets

164

 

 

258

 

 

$

17,906

 

 

$

19,067

 

 

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

 

 

 

Accounts payable

$

852

 

 

$

1,411

 

Interest payable

26

 

 

53

 

Income taxes payable

4

 

 

3

 

Current portion of long-term debt

139

 

 

450

 

Derivatives

88

 

 

12

 

Operating leases

110

 

 

136

 

Other

365

 

 

431

 

Total current liabilities

1,584

 

 

2,496

 

Long-term debt

2,054

 

 

1,839

 

Derivatives

27

 

 

8

 

Deferred income taxes

1,403

 

 

1,389

 

Operating leases

124

 

 

170

 

Other liabilities

974

 

 

1,046

 

Equity

11,740

 

 

12,119

 

 

$

17,906

 

 

$

19,067

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Revenues and other income:

 

 

 

 

 

 

 

Oil and gas

$

600

 

 

$

1,196

 

 

$

1,695

 

 

$

2,332

 

Sales of purchased oil and gas

541

 

 

1,183

 

 

1,456

 

 

2,292

 

Interest and other income (loss), net

48

 

 

(11)

 

 

(158)

 

 

181

 

Derivative gain (loss), net

(336)

 

 

43

 

 

117

 

 

29

 

Gain (loss) on disposition of assets, net

6

 

 

(488)

 

 

6

 

 

(498)

 

 

859

 

 

1,923

 

 

3,116

 

 

4,336

 

Costs and expenses:

 

 

 

 

 

 

 

Oil and gas production

167

 

 

219

 

 

343

 

 

440

 

Production and ad valorem taxes

47

 

 

69

 

 

120

 

 

136

 

Depletion, depreciation and amortization

416

 

 

412

 

 

850

 

 

833

 

Purchased oil and gas

572

 

 

1,102

 

 

1,600

 

 

2,059

 

Exploration and abandonments

10

 

 

15

 

 

19

 

 

35

 

General and administrative

60

 

 

80

 

 

116

 

 

174

 

Accretion of discount on asset retirement
obligations

2

 

 

2

 

 

5

 

 

5

 

Interest

33

 

 

29

 

 

60

 

 

59

 

Other

90

 

 

211

 

 

175

 

 

358

 

 

1,397

 

 

2,139

 

 

3,288

 

 

4,099

 

Income (loss) before income taxes

(538)

 

 

(216)

 

 

(172)

 

 

237

 

Income tax benefit (provision)

99

 

 

47

 

 

22

 

 

(56)

 

Net income (loss) attributed to common
stockholders

$

(439)

 

 

$

(169)

 

 

$

(150)

 

 

$

181

 

 

 

 

 

 

 

 

 

Net income per share attributable to common
stockholders:

 

 

 

 

 

 

 

Basic and diluted net income (loss) per share
attributable to common stockholders

$

(2.66)

 

 

$

(1.01)

 

 

$

(0.91)

 

 

$

1.07

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

165

 

 

168

 

 

165

 

 

168

 

Diluted

165

 

 

168

 

 

165

 

 

169

 

 
 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

(439)

 

 

$

(169)

 

 

$

(150)

 

 

$

181

 

Adjustments to reconcile net income (loss) to net
cash provided by operating activities:

 

 

 

 

 

 

 

Depletion, depreciation and amortization

416

 

 

412

 

 

850

 

 

833

 

Impairment of inventory and other property
and equipment

 

 

2

 

 

1

 

 

31

 

Exploration expenses, including dry holes

1

 

 

3

 

 

3

 

 

4

 

Deferred income taxes

(88)

 

 

(47)

 

 

(11)

 

 

56

 

(Gain) loss on disposition of assets, net

(6)

 

 

488

 

 

(6)

 

 

498

 

Loss on early extinguishment of debt

27

 

 

 

 

27

 

 

 

Accretion of discount on asset retirement
obligations

2

 

 

2

 

 

5

 

 

5

 

Interest expense

13

 

 

2

 

 

18

 

 

3

 

Derivative-related activity

464

 

 

(37)

 

 

52

 

 

(20)

 

Amortization of stock-based compensation

17

 

 

38

 

 

33

 

 

62

 

Investment in affiliate valuation adjustment

(44)

 

 

3

 

 

101

 

 

(171)

 

South Texas contingent consideration valuation
adjustment

1

 

 

13

 

 

64

 

 

13

 

South Texas deficiency fee obligation

 

 

 

 

69

 

 

 

Other

36

 

 

25

 

 

64

 

 

76

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

(11)

 

 

86

 

 

468

 

 

17

 

Inventories

18

 

 

(22)

 

 

34

 

 

(58)

 

Other assets

8

 

 

(1)

 

 

26

 

 

(16)

 

Accounts payable

(29)

 

 

(8)

 

 

(313)

 

 

(69)

 

Interest payable

8

 

 

29

 

 

(27)

 

 

 

Other liabilities

(66)

 

 

(30)

 

 

(154)

 

 

(52)

 

Net cash provided by operating activities

328

 

 

789

 

 

1,154

 

 

1,393

 

Net cash used in investing activities

(423)

 

 

(325)

 

 

(1,106)

 

 

(1,020)

 

Net cash used in financing activities

(514)

 

 

(257)

 

 

(504)

 

 

(480)

 

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

(609)

 

 

207

 

 

(456)

 

 

(107)

 

Cash, cash equivalents and restricted cash,
beginning of period

858

 

 

511

 

 

705

 

 

825

 

Cash, cash equivalents and restricted cash, end of
period

$

249

 

 

$

718

 

 

$

249

 

 

$

718

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUMMARY PRODUCTION, PRICE AND MARGIN DATA

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Average Daily Sales Volume:

 

 

 

 

 

 

 

Oil (Bbls)

214,959

 

 

207,438

 

 

218,808

 

 

206,850

 

Natural gas liquids ("NGLs") (Bbls)

90,184

 

 

67,076

 

 

87,271

 

 

67,073

 

Gas (Mcf)

416,516

 

 

357,917

 

 

412,704

 

 

359,261

 

Total (BOE)

374,563

 

 

334,167

 

 

374,863

 

 

333,800

 

 

 

 

 

 

 

 

 

Average Price:

 

 

 

 

 

 

 

Oil per Bbl

$

23.16

 

 

$

55.50

 

 

$

34.58

 

 

$

52.47

 

NGLs per Bbl

$

12.65

 

 

$

19.63

 

 

$

13.55

 

 

$

21.20

 

Gas per Mcf

$

1.15

 

 

$

0.89

 

 

$

1.38

 

 

$

1.69

 

Total per BOE

$

17.61

 

 

$

39.35

 

 

$

24.85

 

 

$

38.60

 

 

 

Three Months Ended
June 30, 2020

 

(in $ per BOE)

Margin Data:

 

Average price

$

17.61

 

Production costs

(4.92)

 

Production and ad valorem taxes

(1.35)

 

 

$

11.34

 

 

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 (loss) attributable to common stockholders is reconciled to basic and diluted net income (loss) attributable to common stockholders as follows:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Net income (loss) attributable to common stockholders

$

(439)

 

 

$

(169)

 

 

$

(150)

 

 

$

181

 

Participating share-based basic earnings

 

 

 

 

 

 

(1)

 

Basic and diluted net income (loss) attributable to
common stockholders

$

(439)

 

 

$

(169)

 

 

$

(150)

 

 

$

180

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

165

 

 

168

 

 

165

 

 

168

 

Dilution attributable to stock-based compensation
awards

 

 

 

 

 

 

1

 

Diluted weighted average shares outstanding

165

 

 

168

 

 

165

 

 

169

 

 

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(in millions)

EBITDAX, discretionary cash flow ("DCF") (as defined below) and net debt to trailing twelve months EBITDAX 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, DCF and net debt to trailing twelve months EBITDAX 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 June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

Net income (loss)

$

(439)

 

 

$

(169)

 

 

$

(150)

 

 

$

181

 

Depletion, depreciation and amortization

416

 

 

412

 

 

850

 

 

833

 

Exploration and abandonments

10

 

 

15

 

 

19

 

 

35

 

Impairment of inventory and other property and
equipment

 

 

2

 

 

1

 

 

31

 

Accretion of discount on asset retirement
obligations

2

 

 

2

 

 

5

 

 

5

 

Interest expense

33

 

 

29

 

 

60

 

 

59

 

Income tax (benefit) provision

(99)

 

 

(47)

 

 

(22)

 

 

56

 

(Gain) loss on disposition of assets

(6)

 

 

488

 

 

(6)

 

 

498

 

Loss on early extinguishment of debt

27

 

 

 

 

27

 

 

 

Derivative-related activity

464

 

 

(37)

 

 

52

 

 

(20)

 

Amortization of stock-based compensation

17

 

 

16

 

 

33

 

 

37

 

Investment in affiliate valuation adjustment

(44)

 

 

3

 

 

101

 

 

(171)

 

South Texas contingent consideration valuation
adjustment

1

 

 

13

 

 

64

 

 

13

 

Restructuring charge

 

 

154

 

 

 

 

166

 

South Texas deficiency fee obligation

 

 

 

 

69

 

 

 

Other

36

 

 

25

 

 

64

 

 

76

 

EBITDAX before restructuring charge

418

 

 

906

 

 

1,167

 

 

1,799

 

Restructuring charge

 

 

(132)

 

 

 

 

(141)

 

EBITDAX (a)

418

 

 

774

 

 

1,167

 

 

1,658

 

Cash interest expense

(20)

 

 

(27)

 

 

(42)

 

 

(56)

 

Current income tax benefit

11

 

 

 

 

11

 

 

 

Discretionary cash flow (b)

409

 

 

747

 

 

1,136

 

 

1,602

 

Cash exploration expense

(9)

 

 

(12)

 

 

(16)

 

 

(31)

 

Changes in operating assets and liabilities

(72)

 

 

54

 

 

34

 

 

(178)

 

Net cash provided by operating activities

$

328

 

 

$

789

 

 

$

1,154

 

 

$

1,393

 

 
_____________

(a)

"EBITDAX" represents earnings before depletion, depreciation and amortization expense; exploration and abandonments; impairment of inventory and other property and equipment; accretion of discount on asset retirement obligations; interest expense; income taxes; net (gain) loss on the disposition of assets; loss on early extinguishment of debt; noncash derivative related activity; amortization of stock-based compensation; noncash valuation adjustments on investments, contingent consideration and deficiency fee obligations; 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 ratios)

 
 

 

Trailing Twelve Months
Ended June 30, 2020

Net income

$

425

 

Depletion, depreciation and amortization

1,728

 

Exploration and abandonments

42

 

Impairment of inventory and other property and equipment

8

 

Accretion of discount on asset retirement obligations

10

 

Interest expense

122

 

Income tax provision

153

 

Gain on disposition of assets

(27)

 

Loss on early extinguishment of debt

27

 

Derivative-related activity

85

 

Amortization of stock-based compensation

70

 

Investment in affiliate valuation adjustment

257

 

South Texas contingent consideration valuation adjustment

96

 

South Texas deficiency fee obligation

69

 

Other

94

 

EBITDAX (a)

3,159

 

Cash interest expense

(98)

 

Current income tax benefit

16

 

Discretionary cash flow (b)

3,077

 

Cash exploration expense

(35)

 

Changes in operating assets and liabilities

(166)

 

Net cash provided by operating activities

$

2,876

 

_____________
(a)  

"EBITDAX" represents earnings before depletion, depreciation and amortization expense; exploration and abandonments; impairment of inventory and other property and equipment; accretion of discount on asset retirement obligations; interest expense; income taxes; net gain on the disposition of assets; loss on early extinguishment of debt; noncash derivative related activity; amortization of stock-based compensation; noncash valuation adjustments on investments, contingent consideration and deficiency fee obligations; 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.

   

The Company's net debt to trailing twelve months EBITDAX is calculated as follows:

 

June 30, 2020

Current and long-term portion of long-term debt

$

2,193

Less: Cash and cash equivalents

(180)

Net debt

$

2,013

 

 

Net debt to trailing twelve months EBITDAX

0.6

 

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)
(in millions, except per share data)

Adjusted loss attributable to common stockholders excluding noncash mark-to-market ("MTM") adjustments and loss attributable to common stockholders excluding noncash MTM adjustments and unusual items are presented in this earnings release and reconciled to the Company's net loss 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 loss attributable to common stockholders as determined in accordance with GAAP is reconciled to loss adjusted for noncash MTM adjustments including (i) the Company's derivative positions, (ii) contingent consideration attributable to the 2019 South Texas divestiture and (iii) the Company's equity investment in ProPetro Holding Corp. ("ProPetro"), and unusual items is as follows:

 

 

 

Three Months Ended June 30, 2020

 

Ref

 

After-tax
Amounts

 

Per Diluted
Share

Net loss attributable to common stockholders

 

 

$

(439)

 

 

$

(2.66)

 

Noncash MTM adjustments:

 

 

 

 

 

Derivative loss, net ($464 pretax)

 

 

362

 

 

2.20

 

South Texas contingent consideration loss ($1 pretax)

 

 

1

 

 

0.01

 

ProPetro stock gain ($44 pretax)

 

 

(34)

 

 

(0.21)

 

Adjusted loss excluding noncash MTM adjustments

 

 

(110)

 

 

(0.66)

 

Unusual items:

 

 

 

 

 

COVID-19 related charges ($51 pretax)

(a)

 

40

 

 

0.24

 

Early extinguishment of debt charges ($27 pretax)

(b)

 

21

 

 

0.13

 

Gain on disposition of assets ($6 pretax)

(c)

 

(5)

 

 

(0.03)

 

Adjusted loss excluding noncash MTM adjustments and unusual items

 

 

$

(54)

 

 

$

(0.32)

 

_____________
(a)  

As a result of changes to the Company's drilling plans caused by the COVID-19 pandemic, the Company recognized (i) a $41 million charge associated with idle frac fleet fees, stacked drilling rig charges and drilling rig early termination charges, (ii) a $6 million charge related to underutilization and restructuring of the Company's well services business and (iii) $4 million in charges related to sand take-or-pay deficiencies and other payments.

(b)  

As a result of refinancing of the Company's near-term debt maturities, the Company recognized (i) a $25 million charge associated with partial extinguishment of certain of its senior notes prior to their scheduled maturities, which included a pro-rata charge for deferred financing costs and unamortized debt discounts and (ii) a $2 million charge for financing costs associated with terminating its 364-day credit agreement.

(c)  

Primarily represents a gain on the sale of certain vertical wells and approximately 1,500 net acres.

   

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)
(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
June 30, 2020

 

Six Months Ended
June 30, 2020

Net cash provided by operating activities

$

328

 

 

$

1,154

 

Changes in operating assets and liabilities

72

 

 

(34)

 

Less: Capital expenditures (a)

(235)

 

 

(856)

 

Free cash flow

$

165

 

 

$

264

 

 
_____________
(a) Capital expenditures are calculated as follows:
 

 

Three Months Ended
June 30, 2020

 

Six Months Ended
June 30, 2020

Costs incurred

$

220

 

 

$

816

 

Less: Excluded items (a)

(9)

 

 

(15)

 

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

24

 

 

55

 

Capital expenditures

$

235

 

 

$

856

 

 
_____________

(a) Comprised of acquisition costs, asset retirement obligations and geological and geophysical general and administrative costs.

(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 August 3, 2020 

(Volumes are average daily amounts)

 

 

2020

 

Year Ending
December 31,
2021

 

Third Quarter

 

Fourth
Quarter

 

Average daily oil production associated with derivatives (Bbl):

 

 

 

 

 

Brent collar contracts with short puts: (a)

 

 

 

 

 

Volume

115,500

 

 

115,500

 

 

 

Price:

 

 

 

 

 

Ceiling

$

69.78

 

 

$

69.78

 

 

$

 

Floor

$

62.06

 

 

$

62.06

 

 

$

 

Short put

$

53.56

 

 

$

53.56

 

 

$

 

Brent swap contracts:

 

 

 

 

 

Volume

172,200

 

 

155,200

 

 

 

Price

$

35.70

 

 

$

36.47

 

 

$

 

Brent call contracts sold:

 

 

 

 

 

Volume (b)

 

 

 

 

20,000

 

Price

$

 

 

$

 

 

$

69.74

 

Brent collar contracts with short puts:

 

 

 

 

 

Volume

30,000

 

 

30,000

 

 

107,000

 

Price:

 

 

 

 

 

Ceiling

$

43.09

 

 

$

43.09

 

 

$

49.22

 

Floor

$

34.83

 

 

$

34.83

 

 

$

43.74

 

Short put

$

24.83

 

 

$

24.83

 

 

$

33.78

 

Average daily gas production associated with Derivatives (MMBtu):

 

 

 

 

 

NYMEX swap contracts:

 

 

 

 

 

Volume

30,000

 

 

16,739

 

 

132,466

 

Price

$

2.41

 

 

$

2.43

 

 

$

2.64

 

NYMEX collar contracts:

 

 

 

 

 

Volume

 

 

 

 

80,000

 

Price:

 

 

 

 

 

Ceiling

$

 

 

$

 

 

$

3.15

 

Floor

$

 

 

$

 

 

$

2.50

 

Basis swap contracts:

 

 

 

 

 

Permian Basin index swap volume (c)

30,000

 

 

16,739

 

 

2,466

 

Price differential

$

(1.68)

 

 

$

(1.59)

 

 

$

(1.46)

 

 
_____________

(a)

Represents collar contracts with short puts that were entered into prior to the March 2020 oil price decline. During and subsequent to March 2020, the Company entered into incremental swap contracts and collar contracts with short puts to provide additional downside protection for its remaining 2020 volumes.

(b)

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

(c)

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 (continued)

Derivative Gain (Loss) , Net

(in millions)

 
 

 

Three Months Ended
June 30, 2020

 

Six Months Ended
June 30, 2020

Noncash changes in fair value:

 

 

 

Oil derivative loss, net

$

(466)

 

 

$

(52)

 

Gas derivative gain, net

2

 

 

 

Total noncash derivative loss, net

(464)

 

 

(52)

 

 

 

 

 

Net cash receipts on settled derivative instruments:

 

 

 

Oil derivative receipts

128

 

 

191

 

Interest rate derivative payments

 

 

(22)

 

Total cash receipts on settled derivative instruments, net

128

 

 

169

 

Total derivative gain (loss), net

$

(336)

 

 

$

117

 

 

Pioneer Natural Resources Company Contacts:
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

Source: Pioneer Natural Resources Company

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