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Pioneer looks for oil production spike as Permian-only player

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Pioneer looks for oil production spike as Permian-only player

Pioneer Natural Resources Co. will expand its capital expenditures budget in 2018 as it evolves into a Permian Basin-only operator, company officials said Feb. 7.

During Pioneer's fourth-quarter 2017 earnings call, CEO Timothy Dove said Pioneer's fourth-quarter oil production grew by 19% year-over-year, largely due to its cost-effective horizontal drilling program in the Permian. As Pioneer continues to expand its drilling activity in the Permian, it will look for buyers for its other assets around Texas.

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"That includes our Eagle Ford assets, other South Texas assets, our assets in southeastern Colorado, and our West Panhandle assets in ... Texas. That will result in making Pioneer a pure Permian Basin player," Dove said.

"Taking these steps will be a positive for the company on many fronts," Dove said. "Certainly, once the divestitures are completed, it will increase our reported rate of growth because we'll just be focusing on Permian growth rates. It will increase our reported revenue per [barrels of oil equivalent], reduce our operating expense per BOE and, therefore, [improve] our reported margins and ... our corporate returns."

Dove said the company intends to market the noncore acreage shortly with the hope of having deals in place during the second quarter of 2018. Part of the proceeds from the sales will be used for Pioneer's 2018 capital program, which increased from $2.1 billion last year to an estimated $2.8 billion this year. Dove said the company's Permian production remains well-hedged at 85% of its oil and 65% of its gas production. Pioneer expects oil production to increase significantly as it centers all operations in the Permian's Midland Basin.

"As we look forward, and in particular if you look at the oil growth or the overall growth for 2018, you can see the range is 19% to 24% for this year," Dove said. "That's a robust rate of growth, no doubt. But then if you look even further [at the] remaining nine years in the 10-year plan, we're exhibiting growth rates of 20% plus on our oil growth rates as well as our BOE growth rates."

Pioneer also saw greater cash flow due to the recently passed Tax Cuts and Jobs Act, which cut Pioneer's effective tax rate from 35% to 21%. CFO Richard Dealy said the changes to the tax code were especially beneficial to companies like the Texas producer "given our extensive portfolio drilling locations."

The company reported net income attributable to common stockholders of $665 million, or $3.87 per share. Its adjusted income for the quarter was $209 million, or $1.22 per share. That topped the S&P Global Capital IQ consensus estimate of a profit of 84 cents per share.