Pioneer sees Q3 profit, anticipates loss on Delaware basin asset sale

Nov. 4, 2021
Continental Resources will pay more than $3.2 billion for assets Pioneer picked up with Parsley buy.

Pioneer Natural Resources Co. executives have signed an agreement to sell their Delaware Basin assets to Continental Resources Inc. for more than $3.2 billion, a move that focuses the company entirely on its Midland Basin properties.

The deal with Continental, which is expected to close before yearend, includes about 92,000 net acres with production of about 50,000 boe/d, roughly 70% of which is oil. Pioneer Chief Executive Officer Scott Sheffield said the transaction will give his team more options to strengthen its balance sheet and return capital to its shareholders, including via share buybacks.

For his part, Continental Chief Executive Officer Bill Berry said the planned purchase “will complement our existing deep inventory portfolio in the Bakken, Oklahoma, and most recently, the Powder River basin.” At current prices, the Continental team said the Delaware assets should generate $500 million of free cash flow in 2022.

Pioneer expects to recognize a pre-tax loss of $900 million to $1.1 billion on the sale, which will have the company divest the Delaware assets it acquired in January as part of its roughly $7 billion acquisition of Parsley Energy Inc. (OGJ Online, Oct. 20, 2020). In a quarterly filing with the Securities and Exchange Commission earlier this year, Pioneer executives noted the Delaware assets have a higher operating cost than their Midland Basin peers.

Sheffield and his team announced the Continental deal along with third-quarter results, which showed that Pioneer produced a new profit of more than $1 billion—up from a small loss in the same period a year earlier—on revenues of nearly $4.5 billion. They also hiked Pioneer’s base dividend more than 10% and declared a variable dividend of a little more than $3 per share and added that they’d placed on production 142 horizontal wells.

Pioneer averaged third-quarter oil production of 389,000 b/d, in the upper half of guidance, and averaged third-quarter production of 676,000 boe/d, also in the upper half of guidance.

During the quarter, the operator’s drilling, completion, and facilities capital expenditures totaled $960 million. Total capital expenditures, including water infrastructure, totaled $982 million.

Cash flow from operating activities during the quarter was $2 billion.

Fourth-quarter 2021 oil production is forecasted to average 388,000-403,000 b/d and total production is expected to average 670,000-695,000 boe/d, reflecting the impact of the Glasscock acreage divestiture to Laredo Petroleum that closed in October (OGJ Online, Sept. 20, 2021).

Pioneer shares (Ticker: PXD) were down about 2% early on Nov. 4; they have risen more than 15% over the past 6 months. Shares of Continental (Ticker: CLR) were down more than 4% but are still up 60% since May.