Pioneer to slow drilling, production growth

20 February 2019, Week 07, Issue 444

Pioneer Natural Resources – a leading shale driller and a major operator in the Permian Basin – expects its 2019 Permian drilling, completions and facilities capital budget to be US$2.8-3.1 billion. Announcing its fourth-quarter results, the company said its total capital programme was anticipated to be US$3.1-3.4 billion, including investments in Permian gas processing facilities and water infrastructure.

The Irving, Texas-based company is planning to operate an average of 21-23 horizontal rigs in the Permian during 2019. This programme is expected to place 265-290 wells on production, compared with 270 wells brought online during 2018. The average lateral length planned for 2019 will be roughly 9,800 feet (2,987 metres).

Around 40% of Pioneer’s 2019 pads will be “large-scale developments”, consisting of four or more wells, compared with only 10% in 2018. Many of these projects will be “Pioneer Pads”, where 24 wells will be drilled and completed from the same pad. This can reduce surface utilisation by over 80%, according to the company.

Pioneer anticipates Permian production of 320,000-335,000 boepd this year, representing growth of roughly 12-17% over 2018 output levels. However, this would also mark a slowing in production growth, as well as in spending. The company’s oil and gas output rose 20% in 2018. 

Pioneer produces about 181,000 bpd of tight oil in the Permian, which accounts for around 5% of the region’s unconventional crude output. Total Permian oil production – including some limited conventional output – is expected to reach 3.85 million bpd this month, according to the US Energy Information Administration (EIA).

Pioneer’s president and CEO, Timothy Dove, told analysts on the company’s quarterly earnings call that the company anticipates its average drilling and completion costs to have risen by 4-5% by the end of 2019. Pioneer has narrowed its focus to the Permian recently, but it is also still active in the Eagle Ford shale play, in South Texas. 

The company reported an adjusted profit of US$1.18 per share in the fourth quarter of 2018, missing analysts’ estimates by US$0.36, according to IBES data from Refinitiv. Hedging because of falling oil prices in the fourth quarter cut into the value of Pioneer’s sales. Its fourth-quarter revenue was up, however, totalling US$2.68 billion compared with US$1.53 billion a year earlier. 

The company estimated its total Permian proven reserves at 977 million boe as of December 31, 2018, with proven, developed reserves accounting for 94% of this. Oil accounted for 56% of these proven reserves, with natural gas liquids (NGLs) comprising 23% and gas making up 21%.

 

Edited by

Anna Kachkova

Editor

Any questions? Please get in touch