Pioneer Natural Resources Co. CEO Scott Sheffield expressed a bullish oil price outlook on Thursday (Feb. 23) during the company’s fourth quarter earnings call.
Irving, TX-based Pioneer is the largest producer in the Permian Basin, with operations focused on the Midland sub-basin.
“We remain highly constructive on oil prices,” Sheffield told analysts. “I’m still very optimistic that we’ll move back into that $90 to $100 range sometime earlier this summer as we move and get away from this $78 to $88 swing in Brent prices.”
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Front-month West Texas Intermediate oil futures were trading around $76/bbl on Monday (Feb. 27) morning.
Reduced supply from Russia and the easing of Covid restrictions in China are among the factors driving bullish sentiment for oil demand in the months ahead.
Pioneer, for its part, is expecting its 2023 drilling, completions, facilities and water infrastructure capital expenditures (capex) budget to range from $4.45 to $4.75 billion, up from $3.8 billion last year.
The budget “reflects approximately 10% inflation and two incremental rigs, which help support our annual production growth targets,” Sheffield said.
Another $150 to $200 million is allocated for exploration, environmental and other capital. This portion of the budget is primarily related to drilling four Barnett/Woodford formation wells in the Midland Basin, additional testing of an enhanced oil recovery project, and adding electric power infrastructure for future drilling, completions and production operations, management said.
Pioneer expects to operate an average of 24 to 26 horizontal drilling rigs in the Midland this year, including a three-rig average program at its joint venture area in the southern portion of the play.
The company is aiming to place 500 to 530 wells on production this year, with full-year output expected to average 670,000 to 700,000 boe/d (357,000 to 372,000 b/d of oil). Total production at the midpoint of guidance would be a 5.4% increase from 2022.
Citing “significant capital savings on a per foot basis” of lateral wells in excess of 15,000 feet, Pioneer said it expects to place more than 100 of these extra-long wells on production this year.
Management said that 15,000-foot-plus horizontal wells generate returns “that are on average 20% higher than a 10,000-foot lateral well.”
The company expects 100% of its completions fleets to be either electric or dual-fuel (diesel and natural gas) powered by the second half of this year, management added.
Pioneer also has added a third simultaneous fracturing, aka simul-frac fleet this year, further improving efficiency, the company said.
Record Production, Returns
During 2022, “Pioneer was the most active driller and largest oil producer in the state of Texas,” Sheffield said. He added that Pioneer delivered record total production and a record return on capital employed of 30%, while reinvesting about 30% of cash flow into capex.
Production averaged 661,573 boe/d during the final three months of 2022, down from 687,143 boe/d in the corresponding 2021 period.
Output in 4Q2022 comprised 872,589 MMcf/d natural gas, 350,608 b/d oil and 165,533 b/d natural gas liquids (NGL).
The company placed 483 horizontal wells on production during 2022, including 84 in the fourth quarter.
Full-year production averaged 649,773 boe/d in 2022, versus 617,332 boe/d in 2021.
Pioneer fetched average prices of $4.98/Mcf natural gas, $83.53/b oil and $27.67/b NGL during 4Q. These prices compare to $5.20/Mcf, $76.38/b and $38.45/b, respectively, in the year-earlier period.
The company generated free cash flow of $8.4 billion last year, allowing nearly $8 billion to be returned to shareholders via dividends and share repurchases.
Sheffield attributed the success to Pioneer’s “decades of low-breakeven, high-return inventory that underpins our ability to deliver attractive corporate returns and durable free cash flow through commodity price cycles.”
Revenue totaled $5.11 billion in 4Q2022, up from $4.32 billion in the same quarter of 2021. Full-year revenue swelled to $24.3 billion from $14.6 billion.
Pioneer reported net income of $1.48 billion ($6.23/share) for the fourth quarter, versus profits of $763 million ($3.12) in 4Q2021. Full-year net income rose to $7.85 billion ($32.16/share) from $2.12 billion ($9.06).