Pioneer Natural Resources Co. has been able to avoid the worst of the pipeline capacity crunch in the Permian Basin, executives for the Texas-based oil and gas driller said Aug. 8.
During its second-quarter earnings call, President and CEO Timothy Dove said Pioneer delivered 165,000 barrels of oil per day to the Gulf Coast. The company has also skirted the worst of the negative oil price differentials between Midland, Texas, and Cushing, Okla., in part because about 103,000 bbl/d of the oil it is shipping to the Gulf Coast is being sold for exports at higher Brent crude-linked prices.
"Beginning in September 2018, Pioneer will have no exposure to Midland oil pricing through 2020," the company said in its earnings presentation that highlighted an enviable firm transportation book. Several Permian drillers are shifting spending and rigs away from the booming oil play because they have been unable to move production out of the region.
Pioneer has also been able to avoid much of the gas pipeline crunch, sending about 70% of the gas produced in the Permian to the West Coast. That route not only avoided the glut of gas looking to be shipped to the Gulf coast, but Dove said it added about 25 cents/Mcf to prices.
"I think the important message for gas is that we don't anticipate any issues in moving our gas volumes moving forward for a few years," he said.
Pioneer's overall production was in line with the company's guidance at approximately 327,704 barrels of oil equivalent per day in the second quarter, up from 259,087 boe/d in the second quarter of 2017. Pioneer anticipates production growth of 19% to 24% year over year, with Permian-only production between 278,000 boe/d and 288,000 boe/d in the third quarter.
Even as other companies are looking to temporarily divert capital away from the Permian, Pioneer is continuing its effort to become a Permian-only company. After selling off two noncore areas during the second quarter, the key remaining piece on the block is the company's holdings in the Eagle Ford Shale. Dove declined to give specifics on when a sale might be announced but said progress was being made.
"Importantly, [being Permian-only] will improve our reported margins, our per-barrel and per-BOE metrics and corporate returns when that's all completed. So it's a work in progress, but it's going well," Dove said.
Pioneer reported adjusted income of $243 million, or $1.41 per share, for the second quarter. That was less than the S&P Global Market Intelligence consensus normalized earnings estimate of $1.49 per share, but Pioneer shares were still up slightly in mid-afternoon trading.