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Pioneer Natural Resources Reports Second Quarter 2021 Financial and Operating Results
We are witnessing strong oil demand growth as the global macroeconomic environment continues to improve, with a corresponding improvement in commodity prices. As a result of the improved commodity price outlook, which is expected to further strengthen our balance sheet, we have accelerated and increased our variable dividend return framework with the declaration of our inaugural variable dividend.
This inaugural variable dividend, combined with our base dividend, represents a significant return of capital to shareholders, with approximately 80% of our second quarter free cash flow being returned to shareholders. This announcement accelerates our long-term commitment to return capital to shareholders under our investment framework. Over the next six years, we expect to generate in excess of
Pioneer maintains a strong balance sheet, with unrestricted cash on hand at the end of the second quarter of
During the second quarter, the Company’s drilling, completion and facilities capital expenditures totaled
Cash flow from operating activities during the second quarter was
The rebound in global oil demand has led to higher commodity prices, further strengthening Pioneer’s balance sheet and enabling the Company to accelerate its first variable dividend payment from the first quarter of 2022. The Company now expects to distribute a quarterly variable dividend of up to 75% of the prior quarter’s free cash flow after deducting the base dividend paid during the quarter2. In light of the improved outlook, the Board of Directors has declared Pioneer's inaugural variable dividend of
Pioneer continues to capture the expected annual synergies from the acquisition of Parsley Energy Inc. (Parsley) and DoublePoint Energy (DoublePoint), with expected combined annual synergies totaling
For the second quarter of 2021, the average realized price for oil was
Production costs, including taxes, averaged
During the second quarter, Pioneer continued to deliver strong operational efficiency gains that enabled the Company to place 157 horizontal wells on production. Drilling and completion efficiencies continued to improve, with an increase of greater than 65% drilled feet per day and 75% completed feet per day when compared to 2017 averages. The Company continues to see benefits of utilizing simulfrac technology and now plans to run two simulfrac fleets during the second half of 2021. These efficiency and cost improvements in drilling and completions continue to benefit the Company’s overall capital efficiency and dampen inflationary pressures. Additionally, Pioneer continues to upgrade the acquired Parsley and DoublePoint facilities to Pioneer's high operational and environmental standards.
The Company expects its 2021 drilling, completions and facilities capital budget to range between
During 2021, the Company plans to operate an average of 22 to 24 horizontal drilling rigs in the
Pioneer's investment framework prioritizes free cash flow generation and return of capital to shareholders. This capital allocation strategy is intended to create long-term value by optimizing the reinvestment of cash flow to accelerate the Company's free cash flow profile. The Company expects its reinvestment rate to be between 50% to 60%, generating increased free cash flow. This investment framework is expected to deliver a mid-teens total annual return, inclusive of a strong and growing base dividend, a variable dividend and high-return oil growth of up to five percent. The Company believes this differentiated strategy positions Pioneer to be competitive across industries.
The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined in the attached schedules.
Third Quarter 2021 Guidance
Third quarter 2021 oil production is forecasted to average between 380 to 395 MBOPD and total production is expected to average between 660 to 685 MBOEPD. Production costs are expected to average
Environmental, Social & Governance (ESG)
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.
Consistent with Pioneer's sustainable practices, the Company has incorporated greenhouse gas (GHG) and methane emission intensity reduction goals into its ESG strategy, with goals to reduce the Company's GHG emissions intensity by 25% and methane emissions intensity by 40% by 2030. These emission intensity reduction targets are aligned with the
In addition, the Company is building on its leadership position related to minimizing flaring and has formally adopted a goal to maintain the Company's flaring intensity to less than 1% of natural gas produced. Pioneer also plans to end routine flaring, as defined by the
Socially, Pioneer maintains a proactive safety culture, supports a diverse workforce and inspires teamwork to drive innovation. The Board of Directors and its committees provide director-level oversight of these activities. These committees help to promote a culture of continuous improvement in the Company’s diversity, equity and inclusion practices, along with the Company’s safety and environmental practices. Consistent with the high priority placed on Health, Safety and Environment (HSE) and ESG, the Board of Directors has increased the executive annual incentive compensation weighting for these metrics from 10% to 20% for 2021.
In addition to the increased weighting towards HSE and ESG metrics, Pioneer's executive incentive compensation continues to be aligned with shareholder interests. Beginning in 2021, return on capital employed (ROCE) has been included as an incentive compensation metric, along with cash return on capital invested (CROCI), which was added in 2020. These metrics have a combined weighting of 20%, while production and reserves goals previously included as incentive compensation metrics have been removed.
Pioneer has amended executive equity compensation as well, with the S&P 500 index being added into the total stockholder return (TSR) peer group for performance awards beginning in 2021, and for the second consecutive year, the long-term equity compensation for the Company’s Chief Executive Officer will be 100% in performance awards, with 100% of such awards at risk based on performance relative to the TSR peer group. These updates to Pioneer’s executive incentive and equity compensation programs demonstrate the Company’s continuing commitment to aligning total executive compensation with the interests of our shareholders.
For more details, see Pioneer’s 2020 Sustainability Report at pxd.com/sustainability. Pioneer’s comprehensive 2021 Sustainability Report is expected to be published during the third quarter.
Earnings Conference Call
Telephone: Dial (888) 204-4368 and enter confirmation code 6765607 five minutes before the call.
A replay of the webcast will be archived on Pioneer’s website. This replay will be available through
Pioneer is a large independent oil and gas exploration and production company, headquartered in
Except for historical information contained herein, the statements in this 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
Footnote 1: Free cash flow is a non-GAAP financial measure. As used by the Company, free cash flow is defined as net cash provided by operating activities, adjusted for changes in operating assets and liabilities and cash acquisition transaction costs, less capital expenditures. See the supplemental schedules for a reconciliation of second quarter 2021 free cash flow to the comparable GAAP number. Forecasted free cash flow numbers are non-GAAP financial measures. Due to their forward-looking nature, management cannot reliably predict certain of the necessary components of the most directly comparable forward-looking GAAP measures, such as working capital changes. Accordingly, Pioneer is unable to present a quantitative reconciliation of such forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures. Amounts excluded from this non-GAAP measure in future periods could be significant.
Footnote 2: Future dividends, whether variable or base, are authorized and determined by the Company's board of directors in its sole discretion. Decisions regarding the payment of dividends are subject to a number of considerations at the time, including without limitation the Company's liquidity and capital resources, the Company's results of operations and anticipated future results of operations, the level of cash reserves the Company may establish to fund future capital expenditures or other needs, and other factors the board of directors deems relevant. The Company can provide no assurance that dividends will be authorized or declared in the future or the amount of any future dividends. Any future variable dividends, if declared and paid, will by their nature fluctuate based on the Company’s free cash flow, which will depend on a number of factors beyond the Company’s control, including commodities prices.
Footnote 3: Excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical G&A, information technology and corporate facilities.
Footnote 4: Excludes unusual expenses of (i)
Footnote 5: Estimated cash flow numbers are non-GAAP financial measures. The 2021 estimated cash flow number represents first half 2021 cash flow (before changes in operating assets and liabilities and cash acquisition transaction costs) plus July through December forecasted cash flow (before changes in operating assets and liabilities) based on strip pricing and utilizing the midpoint of production guidance. Due to their forward-looking nature, management cannot reliably predict certain of the necessary components of the most directly comparable forward-looking GAAP measures, such as changes in operating assets and liabilities. Accordingly, Pioneer is unable to present a quantitative reconciliation of such forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures. Amounts excluded from this non-GAAP measure in future periods could be significant.
Note: Estimates of future results, including cash flow and free cash flow, are based on the Company’s internal financial model prepared by management and used to assist in the management of its business. Pioneer’s financial models are not prepared with a view to public disclosure or compliance with GAAP, any guidelines of the
Marketing derivatives. The Company's marketing derivatives reflect two long-term marketing contracts that were entered in
Pioneer Natural Resources Company Contacts:
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