Analyzing Pioneer Natural Resources’ 4Q15 Earnings Call
Pioneer Natural Resources: What Sets It Apart?
Pioneer Natural Resources’ 4Q15 earnings call
In response to continuously weak oil prices, Pioneer Natural Resources (PXD) decided to reduce its horizontal drilling activity by 50%. PXD will reduce its total number of rigs, which stood at 24 at the end of 2015, to 12 by mid-2016. While commenting on this in the company’s 4Q15 earnings call, PXD chairman and chief executive officer Scott Sheffield said that “obviously we’ve made a change since early January. The primary reason for that change is that the entire strip for 2016 has dropped over $10 during that timeframe. Much faster than I had thought.” He added that “we wanted to get our capital budget down about $2 billion, so there’s nothing magic about it, but what’s amazing is that we’re still growing 50%, 10% plus by cutting half of our rigs.”
Other upstream players such as Diamondback Energy (FANG), Occidental Petroleum (OXY), Energen (EGN), Chesapeake Energy (CHK), and Apache (APA) have also announced significant reductions in their drilling and completion activities for 2016. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.
PXD’s oil export strategy
In the 4Q15 earnings call, Sheffield mentioned that the first WTI ( West Texas Intermediate) cargo, sent by another producer, went out to the Caribbean recently and PXD is keen to export some of its production. He added that the company was “working with midstream partners to have our oil export facilities along the gulf coast operational by mid-2016.”
PXD’s recent equity offering
On January 11, 2016, PXD closed a public offering of 10.5 million shares of its common stock at $117 per share. Additionally, the underwriters purchased 1.8 million shares of the common stock on the same terms. While commenting on the equity offering, Pioneer executive vice president and chief financial officer Rich Dealy said that “at the end of the year, we had net debt of $2.3 billion,” adding that “if you take into account the equity offering of $1.6 billion of proceeds, the incremental $500 million of proceeds from the EFS midstream sale that we’ll get midyear, our net debt is basically $200 million at the end of the year.” Continue to the next part of this series for a rundown of Wall Street’s reaction.
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