Pioneer Natural Resources, one of the largest players in the booming Permian Basin oil field, plans to reduce the number of wells that will go into production this year and cut expenses by $100 million. The Irving-based company will still produce more oil and gas than last year, but it is easing up on its expansion plans, in part because of lower oil prices.About 30 oil well completions have been postponed until 2018 after falling behind on plans earlier this year, Pioneer said while announcing its second quarter earnings. The company turned a $38 million profit this quarter, compared to $42 million in losses last quarter. "To maintain efficient operations, we have chosen not to accelerate activity in order to catch up in the second half, especially in light of the current commodity price environment," President and CEO Timothy L. Dove said in a statement.It's unclear what drag Pioneer's cuts would have on the Permian Basin's current boom, which started after oil prices recovered from their last deep slump.Pioneer's earnings report comes soon after oil dropped below $50 per barrel. A day earlier, the price pushed past that mark for the first time in about two months. Elevated global stocks of crude continue to weigh on oil prices, and markets are facing the likelihood that those inventories will persist much longer than expected a few months ago, according to the Dallas Federal Reserve's second quarter Energy Update.The report points out that increased production from the U.S., Libya and Nigeria are offsetting OPEC's 1.8 million barrels per day production cuts.Pioneer has about 800,000 acres leased in the Permian Basin, much of that near the Midland-Odessa area. The company is the biggest player in the Spraberry-Wolfcamp area, the nation's largest oil field, according to the Pioneer website.Pioneer shares were trading marginally up Tuesday before the earnings report was released.Even with Pioneer tapping the brakes, it's still expected to produce 17 to 18 percent more oil than in 2016. That's down from an earlier estimate of 24 percent to 28 percent growth. The company's production has now increased for nine consecutive quarters.The company expects to spend $2.3 billion this year on oil drilling and completion this year, down from an earlier estimate of $2.4 billion.An earlier Barclays Research report wasn't expecting a significant drop for Pioneer since more than 85 percent of this year's oil production is hedged at $50. A report from IHS Markit last week said 10 companies focused on the Permian Basin have hedged 65 percent of the production for the rest of the year. The percentage for non-Permian Basin companies is 19 percent.About 20 percent of production for those Permian Basin companies are hedged for next year at $51."At present, it would be a challenge for the Permian E&Ps to replicate their 2017 hedge positions in 2018, given the weakness in oil prices and the relatively flat futures curve," said Paul O'Donnell, principal equity analyst at IHS Markit in that report.A Dallas Federal Reserve survey from earlier this year found that companies needed between $46 and $50 oil to profitably drill new wells in different parts of the Permian Basin.Pioneer previously announced its ambitious goal of producing the equivalent of 1 million barrels of oil per day by 2026. The company currently produces 259,000 barrels per day.The company is also drilling for natural gas in the Eagle Ford Shale in South Texas. But company officials previous said they are "evaluating" offers to sell 10,500 acres there. Continue reading...
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Pioneer Natural Resources Turns Profit But Dials Back on Permian Basin Plans
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