Pioneer Natural Resources Co., Dallas, plans to concentrate its development work in 2023 and beyond on higher-potential locations after a year in which executives said they have not been satisfied with the company’s performance.
Pioneer produced a third-quarter net profit of nearly $2.0 billion, a 90% jump from the same period in 2021, as revenues climbed 37% to $6.1 billion. While per-share profits fell short of analysts’ forecasts, the company’s cash flow from operations climbed nearly 50% to nearly $3.0 billion as its average price/boe rose to $69.93 from less than $53, more than offsetting a 3% drop in average daily sales volume.
Pioneer’s conference call with analysts focused on new parameters guiding development after a 2022 in which it set out to work on sites that had been previously set aside.
“The delayed targets have underperformed where we would have anticipated,” chief operating officer Rich Dealy told analysts. “They still have great returns. It is just we have better locations in our portfolio. As we've gotten […] results over the course of this year, we've decided that that's not satisfactory to us and we want to move forward the higher thresholds. So we've just reshuffled the deck.”
Dealy and chief executive officer Scott Sheffield were short on specifics about the strategy shift, which will drive production growth of less than 5% in 2023. Beyond noting that the new threshold is “a significant step change” and adding that they expect to top 2021’s development productivity, they did not quantify how much more productive future development might be than this year’s work. Dealy did say that there will likely be some geographic drift in Pioneer’s activity.
“We will move things around to maximize the return thresholds by the geographic areas we're in,” he said. “We're going to go to locations in areas that have the highest rates of return, and that will move to a certain extent, a little bit north.”
Looking to the nearer-term future, Pioneer expects to produce an average 346,500-361,500 b/d of oil in the fourth quarter – versus roughly 354,000 in the 3 months ended Sept. 30 – and for total production to come in between 655,000 and 680,000 boe/d compared to nearly 656,000 in the third quarter.
Dealy also addressed inflation on the call, noting that suppliers of steel and casings – which he labeled Pioneer’s biggest price headache this year – say increases are “flattening a bit.” On the whole, Pioneer is expecting 2023 inflation at around 10%, down from this year.
Shares of Pioneer (Ticker: PXD) were down more than 2% to about $259 in afternoon trading Oct. 28. Over the past 6 months, however, they are still up about 10%, a move that has grown the company’s market capitalization to nearly $62 billion.
