The chief executive officer of Pioneer Natural Resources Co., Dallas, said Feb. 17 the regulators of all stripes need to step up their work to limit the amount of gas flaring in the Permian basin, specifically by a number of private operators.
Speaking to analysts and investors on a conference call detailing Pioneer’s fourth-quarter results, Scott Sheffield pointed out that many Permian operators have been able to curtail flaring to less than 1% of their gas withdrawals. Citing a recent report by research firm Rystad Energy, he also said that total flaring in the Permian has in recent years fallen by about three-fourths. Pioneer and a number of its publicly traded peers are helping lead the way, he added —before adding that there are still some notable laggards.
“We need to rein in the privates through regulation—whether it’s EPA, state, investors, bond investors—but the privates need to be reined in,” he said.
Sheffield made his comments after Pioneer reported a fourth-quarter profit of $763 million—versus just $43 million in the last 3 months of 2020—on revenues of more than $4.3 billion. The company produced free cash flow of $1.1 billion during the quarter, when it averaged 687,000 boe/d.
Sheffield talked about flaring while pointing out that Pioneer is producing strong returns while already boasting some of the sector’s lowest greenhouse gas emissions rates. The relatively higher flaring intensities of private companies, whose leaders don’t face as much scrutiny on environmental issues as their public peers, have been noted before: Citing other Rystad research, the International Energy Agency late last year said “operators that sell high-flaring assets are often passing on a problem to other operators that they may be less willing, or less able, to find positive solutions for.”
During Pioneer’s conference call, Sheffield also noted that a number of private operators are looking to grow their outputs far more aggressively than Pioneer and several others active in the Permian. The latter are low-cost producers who have been ramping up dividends and share buybacks rather than production. (By way of illustration, Pioneer’s presentation accompanying its fourth quarter numbers featured seven slides on its dividends and capital return program before getting to its 2022 production outlook.
“We think it’s important to return cash back to the shareholders,” he said, echoing the comments of his peers at Devon Energy Inc. and Marathon Oil Corp. (OGJ Online, Feb. 17, 2022). “In regard to the industry, it’s been interesting watching some of the announcements so far. The public independents are staying in line. I’m confident they will continue to stay in line.”
On the production front, Pioneer’s Midland basin-focused work will look to add 475-505 new wells this year while pushing its average lateral length to about 10,500 ft from 10,000 in recent years. This year’s plans include 50 wells with lengths of about 15,000 ft. Total capital expenditures are forecast to be $3.3-3.6 billion, in line with 2021’s spending of a little more than $3.4 billion.