Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer”
or “the Company”) today reported financial and operating results
for the quarter ended June 30, 2018.
Pioneer reported second quarter net income attributable to
common stockholders of $66 million, or $0.38 per diluted share.
Without the effect of noncash mark-to-market (MTM) derivative
losses of $170 million after tax, or $0.99 per diluted share, and
asset divestiture related net charges of $7 million, or $0.04 per
diluted share, adjusted income for the second quarter was $243
million after tax, or $1.41 per diluted share.
Second quarter financial and operating highlights included:
- producing 280 thousand barrels oil
equivalent per day (MBOEPD) in the Permian Basin (272 MBOEPD after
adjusting for the unanticipated impact of certain items1); Permian
Basin oil production increased to 175 thousand barrels of oil per
day (MBOPD) (177 MBOPD after adjusting for the same items2);
placing 67 horizontal wells on production;
- producing 328 MBOEPD companywide (320
MBOEPD after adjusting for the same items3); adjusted production
was near the top end of Pioneer’s second quarter production
guidance range of 312 MBOEPD to 322 MBOEPD;
- continuing to maintain a strong balance
sheet with cash on hand at the end of the second quarter of $1.5
billion (including liquid investments); cash on hand reflects the
repayment of $450 million of senior notes in May 2018; net debt to
forecasted 2018 operating cash flow was 0.2 times and net
debt-to-book capitalization was 6% at the end of the second
quarter;
- repurchasing $51 million of common
stock during the first half of 2018; purchases were attributable to
the Company’s $100 million authorized share repurchase program and
share-based employee awards that vested in 2018; share purchases
are intended to offset dilution associated with employee stock
awards;
- delivering approximately 165 MBOPD of
the Company’s Permian Basin oil production to the Gulf Coast under
firm transportation (FT) contracts; the Company exported 103 MBOPD
of the total volumes delivered to the Gulf Coast; FT uplift
associated with Gulf Coast refinery and export sales added $69
million of incremental cash flow; greater than 90% of Pioneer’s
forecasted Permian Basin oil production is covered under FT
contracts through early 2021, with these volumes receiving
Brent-related pricing;
- executing contract option to receive
West Texas Intermediate (WTI) Cushing pricing on the Company’s
Permian Basin oil production volumes in excess of Gulf Coast FT
commitments; beginning in September 2018, Pioneer will have no
exposure to Midland oil pricing through 2020;
- delivering approximately 70% of the
Company’s Permian Basin gas production under firm pipeline
contracts tied to the southern California gas price index; the
remainder is sold primarily under term contracts at Waha pricing;
southern California priced sales received an uplift of $0.25 per
thousand cubic feet of gas (MCF) versus Waha sales; and
- placing a three-well Wolfcamp D pad on
production in the southern Wolfcamp joint venture acreage utilizing
Version 3.0 completions; pad delivered 90-day cumulative production
of 373 MBOE (60% oil), representing an improvement of approximately
75% over 2014 and 2015 Wolfcamp D wells drilled and completed in
this area.
Pioneer’s full-year 2018 update includes:
- operating 20 horizontal rigs in the
Permian Basin; planning to add four rigs to support the 2019 plan,
two in August and two during the fourth quarter of 2018; expecting
to place 250 to 275 wells on production during 2018; drilling wells
in the Permian Basin that deliver strong cash operating margins and
high rates of return;
- expecting to add approximately 60
Version 3.0+ completions4 during the second half of 2018; Version
3.0+ completions to date continue to show strong results and
improved economics;
- planning to place 19 wells in the
Spraberry horizontal appraisal program on production in second half
of 2018; program will help determine the optimal long-term
development strategy for the Middle Spraberry Shale, Jo Mill and
Lower Spraberry Shale;
- expecting noncore asset divestiture
process to be completed by year end, resulting in Pioneer becoming
a Permian Basin “pure play”; closed sales of Raton Basin and
selected Eagle Ford acreage for $182 million; signed purchase and
sale agreement to sell West Panhandle field for $201 million, with
the sale expected to close during the third quarter of 2018;
progressing divestiture of Eagle Ford and other South Texas
assets;
- adjusting 2018 capital program to $3.3
billion to $3.4 billion (excluding acquisitions, asset retirement
obligations, capitalized interest, geological and geophysical
G&A and IT system upgrades); capital spending to be funded from
forecasted operating cash flow of approximately $3.3 billion at
current strip prices for the remainder of 2018 ($69 per barrel for
oil and $2.80 per MCF for gas) and proceeds from asset
divestitures; the 2018 capital budget adjustment reflects adding
four rigs in support of the 2019 plan, adding approximately 60
Version 3.0+ completions4 in the second half of 2018 and the
effects of operating in a higher oil price environment; and
- forecasting Permian Basin production
growth in 2018 of 19% to 24% compared to 2017; production is
currently trending toward the upper half of this range.
President and CEO Timothy L. Dove stated, “The Company delivered
another great quarter, with healthy earnings, solid execution,
strong production growth and excellent horizontal well performance
in the Permian Basin. Our world-class Permian Basin asset is
considered by many to be the top oil shale play in North America.
We are drilling the most productive wells in the Basin, resulting
in strong cash operating margins and high rates of return.”
“The Company’s marketing strategy continues to provide
incremental cash flow and margin improvements that flow directly to
our bottom line. Our firm transportation agreements on greater than
90% of our Permian Basin oil volumes continue to be a key
differentiator. These contracts for oil transportation to the Gulf
Coast not only expose us to Brent-related pricing, but also
insulate us from domestic oil price and differential volatility. In
addition, the execution of a contract option will allow us to
receive WTI Cushing pricing through 2020 on the remaining Permian
Basin oil volumes in excess of our Gulf Coast firm transportation
commitments. As a result, beginning next month, the Company will
have no exposure to Midland oil pricing.”
“Our transition to a Permian Basin ‘pure play’ is expected to be
complete by year end. We have closed the sales of both the Raton
Basin assets and selected Eagle Ford Shale acreage, plus we have
signed a purchase and sale agreement to sell the West Panhandle
field. Once the divestitures of the non-Permian assets are
complete, the Company will report stronger cash operating margins
and corporate returns due to an increase in revenue per barrel oil
equivalent (BOE) and a decrease in operating costs per BOE.”
Permian Basin Operations Update and
Outlook
Pioneer is the largest acreage holder in the Midland Basin, with
approximately 550,000 gross acres in the northern portion of the
play and approximately 200,000 gross acres in the southern Wolfcamp
joint venture area. Pioneer’s contiguous acreage position and
substantial resource potential allow for decades of drilling
horizontal wells with lateral lengths ranging from 7,500 feet to
14,000 feet.
The Company implemented a completion optimization program during
2015 in the Permian Basin that combines longer laterals with
optimized stage lengths, clusters per stage, fluid volumes and
proppant concentrations. The objective of the program was to
improve well productivity by allowing more rock to be contacted
closer to the horizontal wellbore. In 2013 and 2014, the Company’s
initial fracture stimulation design (Version 1.0) consisted of
proppant concentrations of approximately 1,000 pounds per foot,
fluid concentrations of 30 barrels per foot, cluster spacing of 60
feet and stage spacing of 240 feet. Beginning in mid-2015, the
Company enhanced its fracture stimulation design (Version 2.0),
which consisted of larger proppant concentrations of approximately
1,400 pounds per foot, larger fluid concentrations of 36 barrels
per foot, tighter cluster spacing of 30 feet and shorter stage
spacing of 150 feet. Beginning in the first quarter of 2016,
Pioneer commenced testing further-enhanced completion designs
(Version 3.0), which included larger proppant concentrations of
approximately 2,000 pounds per foot, larger fluid concentrations up
to 50 barrels per foot, tighter cluster spacing down to 15 feet and
shorter stage spacing down to 100 feet.
Pioneer placed 38 Version 3.0 wells on production during the
second quarter of 2018. The Company also placed 29 wells on
production during the second quarter of 2018 that utilized higher
intensity completions compared to Version 3.0 wells. These are
referred to as Version 3.0+ completions. Results from the 65
Version 3.0+ wells completed in 2017 and the first half of 2018 are
outperforming production from nearby offset wells with less intense
completions. Based on the success of the higher intensity
completions to date, the Company is adding approximately 60 Version
3.0+ completions4 in the second half of 2018.
The Company delivered approximately 165 MBOPD under firm
pipeline commitments to the Gulf Coast during the second quarter,
of which 103 MBOPD was exported. The Company expects export volumes
in the third quarter of 2018 to be higher compared to the second
quarter as Pioneer’s export capacity increases to 165 MBOPD.
Pioneer’s oil volumes under firm transportation contracts increase
through early 2021 commensurate with the Company’s forecasted
Permian Basin oil production growth. Firm pipeline contracts
insulate Pioneer from the widening of the Midland/Cushing oil price
differential by moving over 90% of the Company’s forecasted oil
production to the Gulf Coast, where the Company receives
Brent-related pricing, with the balance of the Company’s oil
production volumes being priced at WTI Cushing beginning in
September 2018.
In the second quarter of 2018, the Company reported a $69
million cash flow uplift from sales to Gulf Coast refinery and
export markets at Brent-related pricing. The reported cash flow
uplift from these sales reflects the Brent/WTI differential at the
time the sales contract was signed, which is typically two months
prior to the actual delivery. As a result, the significantly wider
Midland/Cushing and Brent/WTI differentials experienced in May
through July of 2018 are expected to result in a substantial cash
flow uplift in the third quarter compared to second quarter of
2018.
The Company also remains well positioned to move its Permian
Basin gas production. Approximately 70% of Pioneer’s second quarter
Permian Basin gas production was transported under firm pipeline
contracts tied to the southern California gas price index. The
remainder is primarily sold at Waha pricing under term contracts.
Additional firm pipeline transportation has been secured on Kinder
Morgan’s Gulf Coast Express pipeline, which is anticipated to be
placed into service early in the fourth quarter of 2019. Firm
transportation on the Gulf Coast Express pipeline will provide
access to LNG exports terminals, refineries, petrochemical
facilities and Mexican markets. The Company’s 2018 revenues from
gas sales are expected to be approximately 5% of forecasted 2018
Permian oil, natural gas liquids (NGL) and gas revenues.
Second Quarter 2018 Financial
Review
Sales volumes for the second quarter of 2018 averaged 328
MBOEPD. Oil sales averaged 185 thousand barrels per day (MBPD), NGL
sales averaged 64 MBPD and gas sales averaged 466 million cubic
feet per day (MMCFPD)3.
Similar to other companies, the Company adopted the new revenue
recognition standard Accounting Standards Update No. 2014-09 (ASC
606), “Revenue from Contracts with Customers,” effective January 1,
2018. Under this new rule, gas processing fees and associated
downstream fractionation and transportation fees that were
previously reflected as a reduction in the Company’s reported NGL
and gas revenues are now required to be recognized as an expense in
the Company’s production costs. As a result of the new rule,
reported NGL and gas revenues in 2018 and associated price
realizations will be higher than historical price realizations,
with an equivalent offsetting increase to production costs.
Adoption of ASC 606 results in no change to the Company’s cash
operating margins.
The average realized price for oil was $61.20 per barrel. The
average realized price for NGLs was $28.83 per barrel, and the
average realized price for gas was $1.97 per MCF. Adjusting for the
benefit of Gulf Coast refinery and export sales under the Company’s
firm transportation contracts, the average realized oil price would
have increased by $4.10 per barrel to $65.30. These prices exclude
the effects of derivatives.
Production costs averaged $10.50 per BOE. Depreciation,
depletion and amortization (DD&A) expense averaged $12.69 per
BOE. Exploration and abandonment costs were $28 million, including
$4 million for drilling, acreage and other abandonments, $7 million
for seismic purchases and $17 million for personnel costs. General
and administrative expense totaled $95 million. Interest expense
was $32 million. Other expense was $76 million, including $44
million of charges associated with excess firm gathering and
transportation commitments and $9 million of charges related to the
Company’s asset divestitures. Accretion of discount on asset
retirement obligations was $4 million. The Company’s effective
income tax rate was 23%.
Third Quarter 2018 Financial
Outlook
The Company’s third quarter 2018 outlook for certain operating
and financial items is provided below.
Based on the ongoing asset divestiture process, the Company is
only providing Permian Basin specific estimates for production,
production costs and DD&A expense for the third quarter.
Permian Basin production is forecasted to average between 278
MBOEPD to 288 MBOEPD. Production costs are expected to average
$9.50 per BOE to $11.50 per BOE. DD&A expense is expected to
average $12.50 per BOE to $14.50 per BOE.
Exploration and abandonment expense is forecasted to be $20
million to $30 million. General and administrative expense is
expected to be $95 million to $100 million. Interest expense is
expected to be $30 million to $35 million. Other expense is
forecasted to be $60 million to $70 million and is expected to
include $45 million to $50 million of charges associated with
excess firm gathering and transportation commitments. Accretion of
discount on asset retirement obligations is expected to be $4
million to $7 million.
The Company’s effective income tax rate is expected to range
from 21% to 25%. Current income taxes are expected to be less than
$5 million.
The Company’s financial and derivative MTM results and open
derivatives positions are outlined on the attached schedules.
Earnings Conference Call
On Wednesday, August 8, 2018, at 9:00 a.m. Central Time, Pioneer
will discuss its financial and operating results for the quarter
ended June 30, 2018, with an accompanying presentation.
Instructions for listening to the call and viewing the accompanying
presentation are shown below.
Internet: www.pxd.comSelect
“Investors,” then “Earnings & Webcasts” to listen to the
discussion, view the presentation and see other related
material.Telephone: Dial 888-224-1005 and confirmation code 4760373
five minutes before the call. View the presentation via Pioneer’s
internet address above.
A replay of the webcast will be archived on Pioneer’s website.
This replay will be available through September 03, 2018. 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, 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, completion of planned divestitures, 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 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 production forecasts, quality of technical
data, environmental and weather risks, including the possible
impacts of climate change, cybersecurity risks, ability to
implement planned stock repurchases, the risks associated with the
ownership and operation of the Company’s industrial sand mining and
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, 2017, 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.
1) Permian Basin second quarter 2018 production of 280 MBOEPD
includes approximately 35 MMCFPD, or 5.8 MBOEPD, attributable to
the first quarter of 2018 and approximately 36 MMCFPD, or 6.0
MBOEPD, attributable to the second quarter related to the adoption
of the revenue recognition standard (Accounting Standards Update
No. 2014-09, (ASC 606) “Revenue from Contracts with Customers”)
that became effective January 1, 2018. Additionally, second quarter
Permian Basin production was impacted by approximately 1.8 MBOEPD
and 1.6 MBOEPD from severe weather and high field line pressures,
respectively. Without these items, second quarter Permian Basin
production would have been approximately 272 MBOEPD.
2) Permian Basin second quarter 2018 oil production of 175 MBOPD
was impacted by approximately 1.3 MBOPD and 0.7 MBOPD from severe
weather and high field line pressures, respectively. Without these
items, second quarter Permian Basin oil production would have been
approximately 177 MBOPD.
3) Total Company second quarter 2018 production of 328 MBOEPD
includes approximately 35 MMCFPD, or 5.8 MBOEPD, attributable to
the first quarter of 2018 and approximately 36 MMCFPD, or 6.0
MBOEPD, attributable to the second quarter related to the adoption
of the revenue recognition standard (Accounting Standards Update
No. 2014-09, (ASC 606) “Revenue from Contracts with Customers”)
that became effective January 1, 2018. Additionally, second quarter
Permian Basin production was impacted by approximately 1.8 and 1.6
MBOEPD from severe weather and high field line pressures,
respectively. Without these items, second quarter total Company
production would have been approximately 320 MBOEPD.
4) Version 3.0+ completions planned during the second half of
2018 are expected to utilize 2,500 pounds per foot of proppant or
greater.
Pioneer may repurchase shares from time to time at management’s
discretion in accordance with applicable securities laws, including
through open market transactions, privately negotiated transactions
or any combination thereof. In addition, shares may also be
purchased pursuant to a trading plan meeting the requirements of
Rule 10b5-1 under the Securities Exchange Act of 1934, as amended,
which would permit shares to be repurchased when the Company might
otherwise be precluded from doing so under insider trading laws.
The amount and timing of repurchases are subject to a number of
factors, including stock price, trading volume and general market
conditions, and the program may be modified, suspended or
terminated at any time by Pioneer’s Board of Directors. The Company
intends to fund repurchases under the program from existing cash
flow, proceeds from asset divestitures or cash and cash
equivalents.
Cautionary Note to U.S. Investors --The SEC prohibits oil and
gas companies, in their filings with the SEC, from disclosing
estimates of oil or gas resources other than “reserves,” as that
term is defined by the SEC. In this news release, Pioneer includes
estimates of quantities of oil and gas using certain terms, such as
“resource potential,” “net recoverable resource potential,”
“recoverable resource,” “estimated ultimate recovery,” “EUR,” “oil
in place” or other descriptions of volumes of reserves, which terms
include quantities of oil and gas that may not meet the SEC’s
definitions of proved, probable and possible reserves, and which
the SEC's guidelines strictly prohibit Pioneer from including in
filings with the SEC. These estimates are by their nature more
speculative than estimates of proved reserves and, accordingly, are
subject to substantially greater risk of being recovered by
Pioneer. U.S. investors are urged to consider closely the
disclosures in the Company’s periodic filings with the SEC. Such
filings are available from the Company at 5205 N. O'Connor Blvd.,
Suite 200, Irving, Texas 75039, Attention: Investor Relations, and
the Company’s website at www.pxd.com. These filings also can be
obtained from the SEC by calling 1-800-SEC-0330.
PIONEER NATURAL RESOURCES
COMPANYUNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS(in millions)
June 30, 2018 December 31, 2017 ASSETS
Current assets: Cash and cash equivalents $ 792 $ 896 Short-term
investments 391 1,213 Accounts receivable, net 853 645 Income taxes
receivable 7 7 Inventories 236 212 Assets held for sale 155 —
Derivatives 2 11 Other 23 23 Total current assets
2,459 3,007 Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of
accounting 20,560 20,962 Accumulated depletion, depreciation and
amortization (8,070 ) (9,196 ) Total property, plant and equipment
12,490 11,766 Long-term investments 313 66 Goodwill
269 270 Other property and equipment, net 1,805 1,762 Other assets,
net 113 132 $ 17,449 $ 17,003
LIABILITIES AND EQUITY Current liabilities: Accounts
payable $ 1,523 $ 1,282 Interest payable 53 59 Current portion of
long-term debt — 449 Liabilities held for sale 74 — Derivatives 512
232 Other 100 106 Total current liabilities 2,262
2,128 Long-term debt 2,285 2,283 Derivatives 89 23
Deferred income taxes 947 899 Other liabilities 382 391 Equity
11,484 11,279 $ 17,449 $ 17,003
PIONEER NATURAL RESOURCES
COMPANYUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in millions, except per share data)
Three Months EndedJune
30,
Six Months EndedJune 30,
2018 2017 2018 2017
Revenues and other income: Oil and gas $ 1,286 $ 768 $ 2,552 $
1,577 Sales of purchased oil and gas 1,095 349 2,166 664 Interest
and other 9 16 26 30 Derivative gains (losses), net (358 ) 135 (566
) 286 Gain on disposition of assets, net 79 194 83
205 2,111 1,462 4,261 2,762
Costs and expenses: Oil and gas production 243 147 456 288
Production and ad valorem taxes 70 51 146 99 Depletion,
depreciation and amortization 378 341 735 678 Purchased oil and gas
1,026 363 2,080 697 Impairment of oil and gas properties 77 — 77
285 Exploration and abandonments 28 26 63 59 General and
administrative 95 81 185 165 Accretion of discount on asset
retirement obligations 4 5 8 10 Interest 32 35 68 81 Other 76
59 133 119 2,029 1,108
3,951 2,481 Income before income taxes 82 354 310 281
Income tax provision (19 ) (121 ) (69 ) (90 ) Net income 63 233 241
191 Net loss attributable to noncontrolling interests 3 —
3 — Net income attributable to common
stockholders $ 66 $ 233 $ 244 $ 191
Basic and diluted net income per share attributable to
common stockholders $ 0.38 $ 1.36 $ 1.42 $
1.11 Weighted average shares outstanding: Basic 170
170 170 170 Diluted 171 170
171 170
PIONEER NATURAL RESOURCES
COMPANYUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(in millions)
Three Months EndedJune 30, Six Months
EndedJune 30, 2018 2017 2018
2017 Cash flows from operating activities: Net income
$ 63 $ 233 $ 241 $ 191 Adjustments to reconcile net income to net
cash provided by operating activities: Depletion, depreciation and
amortization 378 341 735 678 Impairment of oil and gas properties
77 — 77 285 Impairment of inventory and other property and
equipment 6 1 6 1 Exploration expenses, including dry holes 2 8 9
18 Deferred income taxes 19 121 69 90 Gain on disposition of
assets, net (79 ) (194 ) (83 ) (205 ) Accretion of discount on
asset retirement obligations 4 5 8 10 Interest expense 1 1 2 2
Derivative related activity 219 (111 ) 355 (251 ) Amortization of
stock-based compensation 24 21 41 43 Other noncash items 19 14 39
40 Change in operating assets and liabilities: Accounts receivable,
net (27 ) (65 ) (208 ) 27 Income taxes receivable — 2 — 2
Inventories (29 ) 8 (35 ) (11 ) Investments 2 (1 ) 6 1 Other
current assets (4 ) 7 (7 ) 1 Accounts payable 227 111 218 (42 )
Interest payable 16 20 (5 ) (9 ) Income taxes payable (1 ) — — —
Other current liabilities (15 ) (39 ) (12 ) (24 ) Net cash provided
by operating activities 902 483 1,456 847 Net cash used in
investing activities (622 ) (479 ) (1,026 ) (777 ) Net cash used in
financing activities (489 ) (7 ) (534 ) (528 ) Net decrease in cash
and cash equivalents (209 ) (3 ) (104 ) (458 ) Cash and cash
equivalents, beginning of period 1,001 663 896
1,118 Cash and cash equivalents, end of period $ 792
$ 660 $ 792 $ 660
PIONEER NATURAL RESOURCES COMPANY UNAUDITED SUMMARY
PRODUCTION, PRICE AND MARGIN DATA Three Months
EndedJune 30, Six Months EndedJune 30,
2018 2017 2018 2017
Average Daily Sales Volumes (a): Oil (Bbls) 185,495 146,884 184,015
146,255 Natural gas liquids ("NGL") (Bbls) 64,473 53,268 65,324
50,066 Gas (Mcf) 466,414 353,612 422,880 346,149 Total (BOEs)
327,704 259,087 319,819 254,012 Average Prices (a): Oil (per
Bbl) $ 61.20 $ 45.00 $ 61.42 $ 47.01 NGL (per Bbl) $ 28.83 $ 16.91
$ 28.28 $ 18.03 Gas (per Mcf) $ 1.97 $ 2.62 $ 2.25 $ 2.70 Total
(per BOE) $ 43.12 $ 32.56 $ 44.08 $ 34.31
Three Months
Ended June 30, 2018
PermianHorizontals
PermianVerticals
Eagle Ford Other Assets
Total ($ per BOE) Margin Data: Average prices $ 45.73
$ 44.91 $ 35.18 $ 23.78 $ 45.11 Production costs (4.68 ) (23.83 )
(11.83 ) (13.43 ) (8.15 ) Production and ad valorem taxes (2.52 )
(2.55 ) (1.58 ) (1.14 ) (2.35 ) $ 38.53 $ 18.53 $
21.77 $ 9.21 $ 34.61 Percent Oil 63 % 63 % 36
% 14 % 59 % _______________
(a)
On January 1, 2018, the Company adopted
ASC 606, "Revenue from Contracts with Customers." Changes in oil
and gas revenue, gas production volumes and oil and gas production
costs are due to the conclusion under the control model in the new
revenue rule that the third-party processor or transporter is only
providing gas processing or transportation services, and that the
Company remains the principal owner of the commodity until sold to
the ultimate purchaser. Results for the three and six months ended
June 30, 2018 are presented in accordance with the new rule, while
results for the three and six months ended June 30, 2017 continue
to be reported in accordance with historical accounting rules.
PIONEER NATURAL RESOURCES
COMPANY
UNAUDITED SUPPLEMENTARY EARNINGS PER
SHARE INFORMATION
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 the
periods in which the Company realizes net income attributable to
common shareholders, the Company's basic net income per share
attributable to common stockholders 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 and 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 following table is a reconciliation of the Company's net
income attributable to common stockholders to basic and diluted net
income attributable to common stockholders for the three and six
months ended June 30, 2018 and 2017:
Three Months EndedJune 30, Six
Months EndedJune 30, 2018 2017
2018 2017 (in millions) Net income
attributable to common stockholders $ 66 $ 233 $ 244 $ 191
Participating basic earnings — (2 ) (2 ) (2 ) Basic and
diluted net income attributable to common stockholders $ 66
$ 231 $ 242 $ 189
The following table is a reconciliation of basic weighted
average shares outstanding to diluted weighted average shares
outstanding for the three and six months ended June 30, 2018 and
2017:
Three Months EndedJune 30, Six
Months EndedJune 30, 2018 2017
2018 2017 (in millions) Basic weighted
average shares outstanding 170 170 170 170 Dilution attributable to
stock-based compensation awards 1 — 1 —
Diluted weighted average shares outstanding 171 170
171 170
PIONEER NATURAL RESOURCES
COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP
FINANCIAL MEASURES
(in millions)
EBITDAX and discretionary cash flow ("DCF") (as defined below)
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 and DCF 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 EndedJune 30, Six
Months EndedJune 30, 2018 2017
2018 2017 Net income $ 63 $ 233 $ 241 $ 191
Depletion, depreciation and amortization 378 341 735 678
Exploration and abandonments 28 26 63 59 Impairment of oil and gas
properties 77 — 77 285 Impairment of inventory and other property
and equipment 6 1 6 1 Accretion of discount on asset retirement
obligations 4 5 8 10 Interest expense 32 35 68 81 Income tax
provision 19 121 69 90 Gain on disposition of assets, net (79 )
(194 ) (83 ) (205 ) Derivative related activity 219 (111 ) 355 (251
) Amortization of stock-based compensation 24 21 41 43 Other 19
14 39 40 EBITDAX (a) 790 492 1,619
1,022 Cash interest expense (31 ) (34 ) (66 ) (79 ) Discretionary
cash flow (b) 759 458 1,553 943 Cash exploration expense (26 ) (18
) (54 ) (41 ) Changes in operating assets and liabilities 169
43 (43 ) (55 ) Net cash provided by operating
activities $ 902 $ 483 $ 1,456 $ 847
_______________
(a) “EBITDAX” represents earnings before depletion, depreciation
and amortization expense; exploration and abandonments; impairment
of oil and gas properties; 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; noncash derivative related activity;
amortization of stock-based compensation and other 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 (continued)
(in millions, except per share
data)
Adjusted income excluding noncash mark-to-market ("MTM")
derivative losses, and adjusted income excluding noncash MTM
derivative losses and unusual items, as presented in this press
release, are presented and reconciled to Pioneer's net income
attributable to common stockholders (determined in accordance with
GAAP) because Pioneer believes that these non-GAAP financial
measures reflects an additional way of viewing aspects of Pioneer's
business that, when viewed together with its financial results
computed in accordance with GAAP, 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 Pioneer's historical and future financial performance. These
non-GAAP financial measures are not intended to be a substitute for
the comparable GAAP measure and should be read only in conjunction
with Pioneer's consolidated financial statements prepared in
accordance with GAAP. Noncash MTM derivative gains or losses and
unusual items will recur in future periods; however, the amount and
frequency can vary significantly from period to period. The table
below reconciles Pioneer's net income attributable to common
stockholders for the three months ended June 30, 2018, as
determined in accordance with GAAP, to adjusted income excluding
noncash MTM derivative losses and adjusted income excluding MTM
derivative losses and unusual items for the quarter.
After-taxAmounts
Amounts
Per Share
Net income attributable to common stockholders $ 66 $ 0.38 Noncash
MTM derivative losses, net ($218 pretax) 170 0.99
Income adjusted for noncash MTM derivative losses 236 1.37 Unusual
items - asset divestiture related charges: Noncash impairment of
Raton ($77 pretax) 60 0.35
Gain on sale of West Eagle Ford ($78
pretax)
(60 ) (0.35 ) Other asset divestiture related charges ($9 pretax) 7
0.04
Adjusted income excluding noncash MTM
derivative losses and unusual items
$ 243 $ 1.41
PIONEER NATURAL RESOURCES
COMPANYSUPPLEMENTAL INFORMATIONOpen Commodity
Derivative Positions as of June 30, 2018(Volumes are
average daily amounts)
2018
Year EndingDecember 31,
2019
Third Quarter Fourth Quarter Average Daily
Oil Production Associated with Derivatives (Bbl): Collar
contracts: Volume 3,000 3,000 — NYMEX price: Ceiling $ 58.05 $
58.05 $ — Floor $ 45.00 $ 45.00 $ —
Collar contracts with short
puts: Volume 154,000 159,000 65,000 NYMEX price: Ceiling $
57.70 $ 57.62 $ 60.74 Floor $ 47.34 $ 47.26 $ 52.69 Short put $
37.31 $ 37.23 $ 42.69
Average Daily NGL Production Associated
with Derivatives: Ethane basis swap contracts (a):
Volume (MMBtu) 6,920 6,920 6,920 Price differential ($/MMBtu) $
1.60 $ 1.60 $ 1.60
Average Daily Gas Production Associated with
Derivatives (MMBtu):
Swap contracts:
Volume 100,000 100,000 — NYMEX price $ 3.00 $ 3.00 $ —
Collar
contracts with short puts: Volume 50,000 50,000 — NYMEX price:
Ceiling $ 3.40 $ 3.40 $ — Floor $ 2.75 $ 2.75 $ — Short put $ 2.25
$ 2.25 $ —
Basis swap contracts: Permian Basin index swap
volume (b) 60,000 60,000 44,877 Price differential ($/MMBtu) $
(1.46 ) $ (1.46 ) $ (1.46 ) Southern California index swap volume
(c) 80,000 66,522 84,932 Price differential ($/MMBtu) $ 0.30 $ 0.50
$ 0.33
_______________
(a) The ethane basis swap contracts reduce the price volatility of
ethane forecasted for sale by the Company at Mont Belvieu,
Texas-posted prices. The ethane basis swap contracts fix the basis
differential on a NYMEX Henry Hub ("HH") MMBtu equivalent basis.
The Company will receive the NYMEX HH price plus the price
differential on 6,920 MMBtu per day, which is equivalent to 2,500
Bbls per day of ethane. (b) 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 HH index price
used in swap contracts and collar contracts with short puts. (c)
The referenced basis swap contracts fix the basis differentials
between Permian Basin index prices and southern California index
prices for Permian Basin gas forecasted for sale in Arizona and
southern California.
Marketing derivatives. Periodically, the Company enters into buy
and sell marketing arrangements to fulfill firm pipeline
transportation commitments. As of June 30, 2018, the Company was
party to oil basis swap contracts for 3,000 Bbls per day of July
and August 2018 transportation commitments with a price
differential of $3.30 per Bbl between NYMEX WTI and Magellan East
Houston oil prices for Permian Basin oil forecasted for sale in the
Gulf Coast Region.
PIONEER NATURAL RESOURCES
COMPANYSUPPLEMENTAL INFORMATION (continued)Derivative
Losses, Net(in millions)
Three Months EndedJune 30,
2018
Six Months EndedJune 30,
2018
Noncash changes in fair value: Oil derivative losses $ (203 ) $
(330 ) NGL derivative losses (1 ) — Gas derivative losses (12 ) (27
) Marketing derivative gains (losses) (2 ) 2 Total noncash
derivative losses, net (218 ) (355 ) Net cash payments on
settled derivative instruments: Oil derivative payments (140 ) (212
) Gas derivative receipts 1 2 Marketing derivative payments (1 ) (1
) Total cash derivative payments on settled derivative instruments,
net (140 ) (211 ) Total derivative losses, net $ (358 ) $ (566 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180807005864/en/
Pioneer Natural Resources CompanyInvestors:Neal
Shah, 972-969-3900orTom Fitter, 972-969-1821orMedia and Public
Affairs:Tadd Owens, 972-969-5760orRobert Bobo, 972-969-4020
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