Pioneer Natural Resources Co., Dallas, is seeing signs of cooling service costs in its Permian basin operations, president and chief operating officer Rich Dealy said Apr. 27 after the company’s first-quarter earnings report.
“It won’t be [for] lack of trying on our part,” Dealy said on a conference call about possibly locking in lower prices on 2024 contracts. “Things have moderated; the pace of change is slowing so that’s a positive.”
Dealy said Pioneer isn’t yet seeing widespread substantial price drops in costs and that it’s too early for the company to make any changes to its plans. But he added that “signs are starting to look positive” that well costs in 2024 will be lower.
Pioneer came into 2023 forecasting service cost inflation of 10% after even higher inflation for labor, equipment, and supplies in 2022. The dynamic has a driver to improve efficiency in the field: First-quarter production costs/boe came in at $10.82, below guidance, thanks to the addition of a third simulfrac fleet, more localized sand mines, and drilling of longer laterals. Dealy—who will at yearend take over as chief executive officer from Scott Sheffield—said he expects further well productivity gains as 2023 progresses (OGJ Online, April 26, 2023).
Oil production during the first quarter averaged 361,000 b/d while total production averaged 680,000 boe/d, up from 351,000 and 662,000, respectively, in fourth-quarter 2022, and in line with full-year guidance for both metrics. For the current quarter, forecast midpoints from Sheffield, Dealy, and the Pioneer team are 364,500 b/d for oil production and 688,000 boe/d for total output.
Those numbers helped Pioneer post Q1 profits of $1.2 billion, down from $2.0 billion in the same period of 2022 when oil prices were higher, on revenues of $4.5 billion versus nearly $6.2 billion. Operating cash flows slipped 10% to $2.3 billion.
Another topic of conversation on Pioneer’s conference call was recent speculation about ExxonMobil’s interest in a possible acquisition. Sheffield sidestepped questions about conversations with the industry giant by saying the board will consider what’s in the best interests of shareholders, adding that the company veered from its usual no-comment policy 2 months ago when chatter about it weighing the purchase of Range Resources Corp. hurt its stock price.
Sheffield, who is 71, told analysts and investors that his retirement shouldn’t be connected to merger and acquisition talk. He said he has been working on succession planning since rejoining Pioneer in early 2019, but that the COVID pandemic delayed the transition.
Around midday Apr. 27, shares of Pioneer (Ticker: PXD) were changing hands near $213.50, down 4% on the day. Over the past 6 months, shares have lost 20% of their value, trimming the company’s market capitalization to about $50 billion.
