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Pioneer CEO touts position in the Midland Basin at Barclays conference

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Pioneer CEO touts position in the Midland Basin at Barclays conference

Pioneer Natural Resources Co.'s decision to center its operations in the Midland Basin is providing it with favorable returns, CEO Scott Sheffield said Sept. 4 at the Barclays Energy-Power CEO Conference in New York.

While a large number of independents have invested heavily in the Delaware Basin — the other major unconventional region in the Permian Basin — Pioneer has assembled 680,000 net acres in the Midland Basin. Sheffield said that gives his company an advantage over independents operating in the Delaware Basin.

"It's shallower, lower cost to drill wells … I know that Delaware produces much more water, higher well cost. In some cases, they do get higher [estimated ultimate recoveries] but generally gassier in nature," he said. Sheffield said the West Texas Intermediate crude produced in the Midland Basin is selling for 50 cents to $1.50 per barrel more than crude produced in the Delaware Basin.

Sheffield went on to say Pioneer's large acreage position has the company expecting to produce 500,000 barrels per day by the end of 2020. He also took what could be a veiled shot at competitor Concho Resources Inc., which had to cut its oil growth projections after its efforts to drill more closely were a bust, saying Pioneer has had no problem with well spacing.

"We haven't had the issue that people [have had with wells being too close] … they don't have as longer inventory as Pioneer. They're probably running out of inventory," he said. "They're having to downspace to see how much they can drill."

Pioneer, Sheffield said, is continuing to improve its well completions and is seeing higher production totals as a result. That rate of improvement, he cautioned, is likely to slow in the next several years, but will not completely stop.

"I think we're close to the seventh inning. We are seeing better wells but the percent gain that we've seen from year to year will probably become less over the next two or three years, but we're still gaining and drilling our best wells going forward," he said.

Sheffield, who cut Pioneer's staff by 25% when he returned to the job earlier this year, said Pioneer would remain fiscally disciplined even if oil prices rise or production totals increase. In a clear message to investors, Sheffield claimed Pioneer would live within its means and prioritize shareholder returns.

"The company is not driven by just production growth anymore. It's driven by capital discipline. It's driven by return on capital employed driving that number up, and also internal rate of return and net present value," he said. "So if oil prices run up to $70, you will see Pioneer not add a single rig."