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Pioneer shifts priorities to align with shareholders amid solid Q2 results

Pioneer Natural Resources Co. has realigned its focus to highlight efficiency and shareholder returns, CEO Scott Sheffield said during the company's second-quarter earnings call Aug. 7.

Since his return from retirement last year, Sheffield has slashed Pioneer's payroll and increased share buybacks in an effort to increase value. During his comments on the earnings call, Sheffield indicated satisfying investors would remain his chief objective.

"Our priority is aligned now with our shareholders," he said. "When you look at buying back our shares, pro forma dividend and growing [production] mid-teens, we're giving 20% back to the shareholders."

Pioneer held its growth guidance for both the Midland Basin and overall oil production steady at between 12% and 17% year over year but reduced the top end of its capital expenditures budget by $150 million.

"We're at the top end of guidance on production and with significant improved capital efficiency," Sheffield said. "We're already on the top quartile of our peers [in terms of cost structure]. The goal is to stay there."

Pioneer's CEO argued that the company is better positioned than its competitors due to its large holdings in the Permian Basin's Midland Basin, while other producers are more active in the Delaware Basin. While the Delaware Basin will be depleted more quickly, Sheffield said, the Midland Basin will produce at high levels longer.

"The Delaware is being culled aggressively by many more operators, rig count, and Tier I acreage is being exhausted at a very quick rate. Similar reports have Delaware peaking in 2024 because of the aggressive drilling and downspacing because companies are essentially running out of inventory. The same reports are showing the Midland Basin will not be until the mid-2030s," he said.

Although a longtime backer of expanded production in the Permian, Sheffield gave a somewhat dour assessment of both the basin and oil prices for the next several years, even if Pioneer is positioned to withstand it.

"I don't think the world's going to be $55 [per barrel] for the next three years … You're going to see a significant fallback in Permian growth. You'll probably move toward no growth for most people," he said. "We have cash in the balance sheet and we can drill through the cycle if we choose. So we're sticking with our mid-teens growth long term, adding two to three rigs per year."

For the second quarter, Pioneer reported adjusted net income of $340 million, or $2.01 per share. That easily topped the S&P Global Market Intelligence consensus estimate of $1.86 per share and was 60 cents per share higher than the second quarter of 2018. The company said its quarterly production averaged 334,167 barrels of oil equivalent per day, up from 327,704 boe/d in the second quarter of 2018.