Market Overview

Pioneer Natural Resources Company Reports Second Quarter 2018 Financial and Operating Results

Share:

Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer" or "the
Company") today reported financial and operating results for the quarter
ended June 30, 2018.

Pioneer reported second quarter net income attributable to common
stockholders of $66 million, or $0.38 per diluted share. Without the
effect of noncash mark-to-market (MTM) derivative losses of $170 million
after tax, or $0.99 per diluted share, and asset divestiture related net
charges of $7 million, or $0.04 per diluted share, adjusted income for
the second quarter was $243 million after tax, or $1.41 per diluted
share.

Second quarter financial and operating highlights included:

  • producing 280 thousand barrels oil equivalent per day (MBOEPD) in the
    Permian Basin (272 MBOEPD after adjusting for the
    unanticipated impact of certain items1); Permian Basin oil
    production increased to 175 thousand barrels of oil per day (MBOPD)
    (177 MBOPD after adjusting for the same items2);
    placing 67 horizontal wells on production;
  • producing 328 MBOEPD companywide (320 MBOEPD after
    adjusting for the same items3); adjusted production was
    near the top end of Pioneer's second quarter production guidance range
    of 312 MBOEPD to 322 MBOEPD;
  • continuing to maintain a strong balance sheet with cash on hand at the
    end of the second quarter of $1.5 billion (including liquid
    investments); cash on hand reflects the repayment of $450 million of
    senior notes in May 2018; net debt to forecasted 2018 operating cash
    flow was 0.2 times and net debt-to-book capitalization was 6% at the
    end of the second quarter;
  • repurchasing $51 million of common stock during the first half of
    2018; purchases were attributable to the Company's $100 million
    authorized share repurchase program and share-based employee awards
    that vested in 2018; share purchases are intended to offset dilution
    associated with employee stock awards;
  • delivering approximately 165 MBOPD of the Company's Permian Basin oil
    production to the Gulf Coast under firm transportation (FT) contracts;
    the Company exported 103 MBOPD of the total volumes delivered to the
    Gulf Coast; FT uplift associated with Gulf Coast refinery and export
    sales added $69 million of incremental cash flow; greater than 90% of
    Pioneer's forecasted Permian Basin oil production is covered under FT
    contracts through early 2021, with these volumes receiving
    Brent-related pricing;
  • executing contract option to receive West Texas Intermediate (WTI)
    Cushing pricing on the Company's Permian Basin oil production volumes
    in excess of Gulf Coast FT commitments; beginning in September 2018,
    Pioneer will have no exposure to Midland oil pricing through 2020;
  • delivering approximately 70% of the Company's Permian Basin gas
    production under firm pipeline contracts tied to the southern
    California gas price index; the remainder is sold primarily under term
    contracts at Waha pricing; southern California priced sales received
    an uplift of $0.25 per thousand cubic feet of gas (MCF) versus Waha
    sales; and
  • placing a three-well Wolfcamp D pad on production in the southern
    Wolfcamp joint venture acreage utilizing Version 3.0 completions; pad
    delivered 90-day cumulative production of 373 MBOE (60% oil),
    representing an improvement of approximately 75% over 2014 and 2015
    Wolfcamp D wells drilled and completed in this area.

Pioneer's full-year 2018 update includes:

  • operating 20 horizontal rigs in the Permian Basin; planning to add
    four rigs to support the 2019 plan, two in August and two during the
    fourth quarter of 2018; expecting to place 250 to 275 wells on
    production during 2018; drilling wells in the Permian Basin that
    deliver strong cash operating margins and high rates of return;
  • expecting to add approximately 60 Version 3.0+ completions4
    during the second half of 2018; Version 3.0+ completions to date
    continue to show strong results and improved economics;
  • planning to place 19 wells in the Spraberry horizontal appraisal
    program on production in second half of 2018; program will help
    determine the optimal long-term development strategy for the Middle
    Spraberry Shale, Jo Mill and Lower Spraberry Shale;
  • expecting noncore asset divestiture process to be completed by year
    end, resulting in Pioneer becoming a Permian Basin "pure play"; closed
    sales of Raton Basin and selected Eagle Ford acreage for $182 million;
    signed purchase and sale agreement to sell West Panhandle field for
    $201 million, with the sale expected to close during the third quarter
    of 2018; progressing divestiture of Eagle Ford and other South Texas
    assets;
  • adjusting 2018 capital program to $3.3 billion to $3.4 billion
    (excluding acquisitions, asset retirement obligations, capitalized
    interest, geological and geophysical G&A and IT system upgrades);
    capital spending to be funded from forecasted operating cash flow of
    approximately $3.3 billion at current strip prices for the remainder
    of 2018 ($69 per barrel for oil and $2.80 per MCF for gas) and
    proceeds from asset divestitures; the 2018 capital budget adjustment
    reflects adding four rigs in support of the 2019 plan, adding
    approximately 60 Version 3.0+ completions4 in the second
    half of 2018 and the effects of operating in a higher oil price
    environment; and
  • forecasting Permian Basin production growth in 2018 of 19% to 24%
    compared to 2017; production is currently trending toward the upper
    half of this range.

President and CEO Timothy L. Dove stated, "The Company delivered another
great quarter, with healthy earnings, solid execution, strong production
growth and excellent horizontal well performance in the Permian Basin.
Our world-class Permian Basin asset is considered by many to be the top
oil shale play in North America. We are drilling the most productive
wells in the Basin, resulting in strong cash operating margins and high
rates of return."

"The Company's marketing strategy continues to provide incremental cash
flow and margin improvements that flow directly to our bottom line. Our
firm transportation agreements on greater than 90% of our Permian Basin
oil volumes continue to be a key differentiator. These contracts for oil
transportation to the Gulf Coast not only expose us to Brent-related
pricing, but also insulate us from domestic oil price and differential
volatility. In addition, the execution of a contract option will allow
us to receive WTI Cushing pricing through 2020 on the remaining Permian
Basin oil volumes in excess of our Gulf Coast firm transportation
commitments. As a result, beginning next month, the Company will have no
exposure to Midland oil pricing."

"Our transition to a Permian Basin ‘pure play' is expected to be
complete by year end. We have closed the sales of both the Raton Basin
assets and selected Eagle Ford Shale acreage, plus we have signed a
purchase and sale agreement to sell the West Panhandle field. Once the
divestitures of the non-Permian assets are complete, the Company will
report stronger cash operating margins and corporate returns due to an
increase in revenue per barrel oil equivalent (BOE) and a decrease in
operating costs per BOE."

Permian Basin Operations Update and Outlook

Pioneer is the largest acreage holder in the Midland Basin, with
approximately 550,000 gross acres in the northern portion of the play
and approximately 200,000 gross acres in the southern Wolfcamp joint
venture area. Pioneer's contiguous acreage position and substantial
resource potential allow for decades of drilling horizontal wells with
lateral lengths ranging from 7,500 feet to 14,000 feet.

The Company implemented a completion optimization program during 2015 in
the Permian Basin that combines longer laterals with optimized stage
lengths, clusters per stage, fluid volumes and proppant concentrations.
The objective of the program was to improve well productivity by
allowing more rock to be contacted closer to the horizontal wellbore. In
2013 and 2014, the Company's initial fracture stimulation design
(Version 1.0) consisted of proppant concentrations of approximately
1,000 pounds per foot, fluid concentrations of 30 barrels per foot,
cluster spacing of 60 feet and stage spacing of 240 feet. Beginning in
mid-2015, the Company enhanced its fracture stimulation design (Version
2.0), which consisted of larger proppant concentrations of approximately
1,400 pounds per foot, larger fluid concentrations of 36 barrels per
foot, tighter cluster spacing of 30 feet and shorter stage spacing of
150 feet. Beginning in the first quarter of 2016, Pioneer commenced
testing further-enhanced completion designs (Version 3.0), which
included larger proppant concentrations of approximately 2,000 pounds
per foot, larger fluid concentrations up to 50 barrels per foot, tighter
cluster spacing down to 15 feet and shorter stage spacing down to 100
feet.

Pioneer placed 38 Version 3.0 wells on production during the second
quarter of 2018. The Company also placed 29 wells on production during
the second quarter of 2018 that utilized higher intensity completions
compared to Version 3.0 wells. These are referred to as Version 3.0+
completions. Results from the 65 Version 3.0+ wells completed in 2017
and the first half of 2018 are outperforming production from nearby
offset wells with less intense completions. Based on the success of the
higher intensity completions to date, the Company is adding
approximately 60 Version 3.0+ completions4 in the second half
of 2018.

The Company delivered approximately 165 MBOPD under firm pipeline
commitments to the Gulf Coast during the second quarter, of which 103
MBOPD was exported. The Company expects export volumes in the third
quarter of 2018 to be higher compared to the second quarter as Pioneer's
export capacity increases to 165 MBOPD. Pioneer's oil volumes under firm
transportation contracts increase through early 2021 commensurate with
the Company's forecasted Permian Basin oil production growth. Firm
pipeline contracts insulate Pioneer from the widening of the
Midland/Cushing oil price differential by moving over 90% of the
Company's forecasted oil production to the Gulf Coast, where the Company
receives Brent-related pricing, with the balance of the Company's oil
production volumes being priced at WTI Cushing beginning in September
2018.

In the second quarter of 2018, the Company reported a $69 million cash
flow uplift from sales to Gulf Coast refinery and export markets at
Brent-related pricing. The reported cash flow uplift from these sales
reflects the Brent/WTI differential at the time the sales contract was
signed, which is typically two months prior to the actual delivery. As a
result, the significantly wider Midland/Cushing and Brent/WTI
differentials experienced in May through July of 2018 are expected to
result in a substantial cash flow uplift in the third quarter compared
to second quarter of 2018.

The Company also remains well positioned to move its Permian Basin gas
production. Approximately 70% of Pioneer's second quarter Permian Basin
gas production was transported under firm pipeline contracts tied to the
southern California gas price index. The remainder is primarily sold at
Waha pricing under term contracts. Additional firm pipeline
transportation has been secured on Kinder Morgan's Gulf Coast Express
pipeline, which is anticipated to be placed into service early in the
fourth quarter of 2019. Firm transportation on the Gulf Coast Express
pipeline will provide access to LNG exports terminals, refineries,
petrochemical facilities and Mexican markets. The Company's 2018
revenues from gas sales are expected to be approximately 5% of
forecasted 2018 Permian oil, natural gas liquids (NGL) and gas revenues.

Second Quarter 2018 Financial Review

Sales volumes for the second quarter of 2018 averaged 328 MBOEPD. Oil
sales averaged 185 thousand barrels per day (MBPD), NGL sales averaged
64 MBPD and gas sales averaged 466 million cubic feet per day (MMCFPD)3.

Similar to other companies, the Company adopted the new revenue
recognition standard Accounting Standards Update No. 2014-09 (ASC 606),
"Revenue from Contracts with Customers," effective January 1, 2018.
Under this new rule, gas processing fees and associated downstream
fractionation and transportation fees that were previously reflected as
a reduction in the Company's reported NGL and gas revenues are now
required to be recognized as an expense in the Company's production
costs. As a result of the new rule, reported NGL and gas revenues in
2018 and associated price realizations will be higher than historical
price realizations, with an equivalent offsetting increase to production
costs. Adoption of ASC 606 results in no change to the Company's cash
operating margins.

The average realized price for oil was $61.20 per barrel. The average
realized price for NGLs was $28.83 per barrel, and the average realized
price for gas was $1.97 per MCF. Adjusting for the benefit of Gulf Coast
refinery and export sales under the Company's firm transportation
contracts, the average realized oil price would have increased by $4.10
per barrel to $65.30. These prices exclude the effects of derivatives.

Production costs averaged $10.50 per BOE. Depreciation, depletion and
amortization (DD&A) expense averaged $12.69 per BOE. Exploration and
abandonment costs were $28 million, including $4 million for drilling,
acreage and other abandonments, $7 million for seismic purchases and $17
million for personnel costs. General and administrative expense totaled
$95 million. Interest expense was $32 million. Other expense was $76
million, including $44 million of charges associated with excess firm
gathering and transportation commitments and $9 million of charges
related to the Company's asset divestitures. Accretion of discount on
asset retirement obligations was $4 million. The Company's effective
income tax rate was 23%.

Third Quarter 2018 Financial Outlook

The Company's third quarter 2018 outlook for certain operating and
financial items is provided below.

Based on the ongoing asset divestiture process, the Company is only
providing Permian Basin specific estimates for production, production
costs and DD&A expense for the third quarter.

Permian Basin production is forecasted to average between 278 MBOEPD to
288 MBOEPD. Production costs are expected to average $9.50 per BOE to
$11.50 per BOE. DD&A expense is expected to average $12.50 per BOE to
$14.50 per BOE.

Exploration and abandonment expense is forecasted to be $20 million to
$30 million. General and administrative expense is expected to be $95
million to $100 million. Interest expense is expected to be $30 million
to $35 million. Other expense is forecasted to be $60 million to $70
million and is expected to include $45 million to $50 million of charges
associated with excess firm gathering and transportation commitments.
Accretion of discount on asset retirement obligations is expected to be
$4 million to $7 million.

The Company's effective income tax rate is expected to range from 21% to
25%. Current income taxes are expected to be less than $5 million.

The Company's financial and derivative MTM results and open derivatives
positions are outlined on the attached schedules.

Earnings Conference Call

On Wednesday, August 8, 2018, at 9:00 a.m. Central Time, Pioneer will
discuss its financial and operating results for the quarter ended June
30, 2018, with an accompanying presentation. Instructions for listening
to the call and viewing the accompanying presentation are shown below.

Internet: www.pxd.com
Select
"Investors," then "Earnings & Webcasts" to listen to the discussion,
view the presentation and see other related material.

Telephone:
Dial 888-224-1005 and confirmation code 4760373 five minutes before the
call. View the presentation via Pioneer's internet address above.

A replay of the webcast will be archived on Pioneer's website. This
replay will be available through September 03, 2018. Click
Here
to register for the call-in audio replay and you will receive
the dial-in information.

Pioneer is a large independent oil and gas exploration and production
company, headquartered in Dallas, Texas, with operations in the United
States. For more information, visit www.pxd.com.

Except for historical information contained herein, the statements in
this news release are forward-looking statements that are made pursuant
to the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements and the business
prospects of Pioneer are subject to a number of risks and uncertainties
that may cause Pioneer's actual results in future periods to differ
materially from the forward-looking statements. These risks and
uncertainties include, among other things, volatility of commodity
prices, product supply and demand, competition, the ability to obtain
environmental and other permits and the timing thereof, other government
regulation or action, the ability to obtain approvals from third parties
and negotiate agreements with third parties on mutually acceptable
terms, completion of planned divestitures, litigation, the costs and
results of drilling and operations, availability of equipment, services,
resources and personnel required to perform the Company's drilling and
operating activities, access to and availability of transportation,
processing, fractionation, refining and export facilities, Pioneer's
ability to replace reserves, implement its business plans or complete
its development activities as scheduled, access to and cost of capital,
the financial strength of counterparties to Pioneer's credit facility,
investment instruments and derivative contracts and purchasers of
Pioneer's oil, natural gas liquids and gas production, uncertainties
about estimates of reserves and resource potential, identification of
drilling locations and the ability to add proved reserves in the future,
the assumptions underlying production forecasts, quality of technical
data, environmental and weather risks, including the possible impacts of
climate change, cybersecurity risks, ability to implement planned stock
repurchases, the risks associated with the ownership and operation of
the Company's industrial sand mining and oilfield services businesses
and acts of war or terrorism. These and other risks are described in
Pioneer's Annual Report on Form 10-K for the year ended December 31,
2017, and other filings with the Securities and Exchange Commission. In
addition, Pioneer may be subject to currently unforeseen risks that may
have a materially adverse impact on it. Accordingly, no assurances can
be given that the actual events and results will not be materially
different than the anticipated results described in the forward-looking
statements. Pioneer undertakes no duty to publicly update these
statements except as required by law.

1) Permian Basin second quarter 2018 production of 280 MBOEPD
includes approximately 35 MMCFPD, or 5.8 MBOEPD, attributable to the
first quarter of 2018 and approximately 36 MMCFPD, or 6.0 MBOEPD,
attributable to the second quarter related to the adoption of the
revenue recognition standard (Accounting Standards Update No. 2014-09,
(ASC 606) "Revenue from Contracts with Customers") that became effective
January 1, 2018.
Additionally, second quarter Permian Basin
production was impacted by approximately 1.8 MBOEPD and 1.6 MBOEPD from
severe weather and high field line pressures, respectively.
Without
these items, second quarter Permian Basin production would have been
approximately 272 MBOEPD.

2) Permian Basin second quarter 2018 oil production of 175
MBOPD was impacted by approximately 1.3 MBOPD and 0.7 MBOPD from severe
weather and high field line pressures, respectively.
Without
these items, second quarter Permian Basin oil production would have been
approximately 177 MBOPD.

3) Total Company second quarter 2018 production of 328 MBOEPD
includes approximately 35 MMCFPD, or 5.8 MBOEPD, attributable to the
first quarter of 2018 and approximately 36 MMCFPD, or 6.0 MBOEPD,
attributable to the second quarter related to the adoption of the
revenue recognition standard (Accounting Standards Update No. 2014-09,
(ASC 606) "Revenue from Contracts with Customers") that became effective
January 1, 2018.
Additionally, second quarter Permian Basin
production was impacted by approximately 1.8 and 1.6 MBOEPD from severe
weather and high field line pressures, respectively.
Without
these items, second quarter total Company production would have been
approximately 320 MBOEPD.

4) Version 3.0+ completions planned during the second half of
2018 are expected to utilize 2,500 pounds per foot of proppant or
greater.

Pioneer may repurchase shares from time to time at management's
discretion in accordance with applicable securities laws, including
through open market transactions, privately negotiated transactions or
any combination thereof.
In addition, shares may also be
purchased pursuant to a trading plan meeting the requirements of Rule
10b5-1 under the Securities Exchange Act of 1934, as amended, which
would permit shares to be repurchased when the Company might otherwise
be precluded from doing so under insider trading laws.
The amount
and timing of repurchases are subject to a number of factors, including
stock price, trading volume and general market conditions, and the
program may be modified, suspended or terminated at any time by
Pioneer's Board of Directors.
The Company intends to fund
repurchases under the program from existing cash flow, proceeds from
asset divestitures or cash and cash equivalents.

Cautionary Note to U.S. Investors --The SEC prohibits oil and gas
companies, in their filings with the SEC, from disclosing estimates of
oil or gas resources other than "reserves," as that term is defined by
the SEC.
In this news release, Pioneer includes estimates of
quantities of oil and gas using certain terms, such as "resource
potential," "net recoverable resource potential," "recoverable
resource," "estimated ultimate recovery," "EUR," "oil in place" or other
descriptions of volumes of reserves, which terms include quantities of
oil and gas that may not meet the SEC's definitions of proved, probable
and possible reserves, and which the SEC's guidelines strictly prohibit
Pioneer from including in filings with the SEC.
These estimates
are by their nature more speculative than estimates of proved reserves
and, accordingly, are subject to substantially greater risk of being
recovered by Pioneer.
U.S. investors are urged to consider
closely the disclosures in the Company's periodic filings with the SEC.

Such filings are available from the Company at 5205 N. O'Connor
Blvd., Suite 200, Irving, Texas 75039, Attention: Investor Relations,
and the Company's website at
www.pxd.com.
These filings also can be obtained from the SEC by calling
1-800-SEC-0330.

   

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

 
June 30, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 792 $ 896
Short-term investments 391 1,213
Accounts receivable, net 853 645
Income taxes receivable 7 7
Inventories 236 212
Assets held for sale 155
Derivatives 2 11
Other 23   23  
Total current assets 2,459   3,007  
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of
accounting
20,560 20,962
Accumulated depletion, depreciation and amortization (8,070 ) (9,196 )
Total property, plant and equipment 12,490   11,766  
Long-term investments 313 66
Goodwill 269 270
Other property and equipment, net 1,805 1,762
Other assets, net 113   132  
$ 17,449   $ 17,003  
 
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 1,523 $ 1,282
Interest payable 53 59
Current portion of long-term debt 449
Liabilities held for sale 74
Derivatives 512 232
Other 100   106  
Total current liabilities 2,262   2,128  
Long-term debt 2,285 2,283
Derivatives 89 23
Deferred income taxes 947 899
Other liabilities 382 391
Equity 11,484   11,279  
$ 17,449   $ 17,003  
   

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in
millions, except per share data)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

2018   2017 2018   2017
Revenues and other income:
Oil and gas $ 1,286 $ 768 $ 2,552 $ 1,577
Sales of purchased oil and gas 1,095 349 2,166 664
Interest and other 9 16 26 30
Derivative gains (losses), net (358 ) 135 (566 ) 286
Gain on disposition of assets, net 79   194   83   205  
2,111   1,462   4,261   2,762  
Costs and expenses:
Oil and gas production 243 147 456 288
Production and ad valorem taxes 70 51 146 99
Depletion, depreciation and amortization 378 341 735 678
Purchased oil and gas 1,026 363 2,080 697
Impairment of oil and gas properties 77 77 285
Exploration and abandonments 28 26 63 59
General and administrative 95 81 185 165
Accretion of discount on asset retirement obligations 4 5 8 10
Interest 32 35 68 81
Other 76   59   133   119  
2,029   1,108   3,951   2,481  
Income before income taxes 82 354 310 281
Income tax provision (19 ) (121 ) (69 ) (90 )
Net income 63 233 241 191
Net loss attributable to noncontrolling interests 3     3    
Net income attributable to common stockholders $ 66   $ 233   $ 244   $ 191  
 
Basic and diluted net income per share attributable to common
stockholders
$ 0.38   $ 1.36   $ 1.42   $ 1.11  
 
Weighted average shares outstanding:
Basic 170   170   170   170  
Diluted 171   170   171   170  
 
   

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in
millions)

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Cash flows from operating activities:
Net income $ 63 $ 233 $ 241 $ 191
Adjustments to reconcile net income to net cash provided by
operating activities:
Depletion, depreciation and amortization 378 341 735 678
Impairment of oil and gas properties 77 77 285
Impairment of inventory and other property and equipment 6 1 6 1
Exploration expenses, including dry holes 2 8 9 18
Deferred income taxes 19 121 69 90
Gain on disposition of assets, net (79 ) (194 ) (83 ) (205 )
Accretion of discount on asset retirement obligations 4 5 8 10
Interest expense 1 1 2 2
Derivative related activity 219 (111 ) 355 (251 )
Amortization of stock-based compensation 24 21 41 43
Other noncash items 19 14 39 40
Change in operating assets and liabilities:
Accounts receivable, net (27 ) (65 ) (208 ) 27
Income taxes receivable 2 2
Inventories (29 ) 8 (35 ) (11 )
Investments 2 (1 ) 6 1
Other current assets (4 ) 7 (7 ) 1
Accounts payable 227 111 218 (42 )
Interest payable 16 20 (5 ) (9 )
Income taxes payable (1 )
Other current liabilities (15 ) (39 ) (12 ) (24 )
Net cash provided by operating activities 902 483 1,456 847
Net cash used in investing activities (622 ) (479 ) (1,026 ) (777 )
Net cash used in financing activities (489 ) (7 ) (534 ) (528 )
Net decrease in cash and cash equivalents (209 ) (3 ) (104 ) (458 )
Cash and cash equivalents, beginning of period 1,001   663   896   1,118  
Cash and cash equivalents, end of period $ 792   $ 660   $ 792   $ 660  
 
   
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUMMARY PRODUCTION, PRICE AND MARGIN DATA
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Average Daily Sales Volumes (a):
Oil (Bbls) 185,495 146,884 184,015 146,255
Natural gas liquids ("NGL") (Bbls) 64,473 53,268 65,324 50,066
Gas (Mcf) 466,414 353,612 422,880 346,149
Total (BOEs) 327,704 259,087 319,819 254,012
 
Average Prices (a):
Oil (per Bbl) $ 61.20 $ 45.00 $ 61.42 $ 47.01
NGL (per Bbl) $ 28.83 $ 16.91 $ 28.28 $ 18.03
Gas (per Mcf) $ 1.97 $ 2.62 $ 2.25 $ 2.70
Total (per BOE) $ 43.12 $ 32.56 $ 44.08 $ 34.31
  Three Months Ended June 30, 2018

Permian
Horizontals

 

Permian
Verticals

  Eagle Ford   Other Assets   Total
($ per BOE)
Margin Data:
Average prices $ 45.73 $ 44.91 $ 35.18 $ 23.78 $ 45.11
Production costs (4.68 ) (23.83 ) (11.83 ) (13.43 ) (8.15 )
Production and ad valorem taxes (2.52 ) (2.55 ) (1.58 ) (1.14 ) (2.35 )
$ 38.53   $ 18.53   $ 21.77   $ 9.21   $ 34.61  
Percent Oil 63 % 63 % 36 % 14 % 59 %
_______________

(a)

On January 1, 2018, the Company adopted ASC 606, "Revenue from
Contracts with Customers." Changes in oil and gas revenue, gas
production volumes and oil and gas production costs are due to the
conclusion under the control model in the new revenue rule that
the third-party processor or transporter is only providing gas
processing or transportation services, and that the Company
remains the principal owner of the commodity until sold to the
ultimate purchaser. Results for the three and six months ended
June 30, 2018 are presented in accordance with the new rule, while
results for the three and six months ended June 30, 2017 continue
to be reported in accordance with historical accounting rules.

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTARY EARNINGS PER SHARE INFORMATION

 

The Company uses the two-class method of calculating basic and diluted
earnings per share. Under the two-class method of calculating earnings
per share, generally acceptable accounting principles ("GAAP") provide
that share-based awards with guaranteed dividend or distribution
participation rights qualify as "participating securities" during their
vesting periods. During the periods in which the Company realizes net
income attributable to common shareholders, the Company's basic net
income per share attributable to common stockholders is computed as
(i) net income attributable to common stockholders, (ii) less
participating share-based basic earnings (iii) divided by weighted
average basic shares outstanding and the Company's diluted net income
per share attributable to common stockholders is computed as (i) basic
net income attributable to common stockholders, (ii) plus the
reallocation of participating earnings, if any, (iii) divided by
weighted average diluted shares outstanding. During periods in which the
Company realizes a net loss attributable to common stockholders,
securities or other contracts to issue common stock would be dilutive to
loss per share; therefore, conversion into common stock is assumed not
to occur.

The following table is a reconciliation of the Company's net income
attributable to common stockholders to basic and diluted net income
attributable to common stockholders for the three and six months ended
June 30, 2018 and 2017:

  Three Months Ended
June 30,
  Six Months Ended
June 30,
2018   2017 2018   2017
(in millions)
Net income attributable to common stockholders $ 66 $ 233 $ 244 $ 191
Participating basic earnings   (2 ) (2 ) (2 )
Basic and diluted net income attributable to common stockholders $ 66   $ 231   $ 242   $ 189  

The following table is a reconciliation of basic weighted average shares
outstanding to diluted weighted average shares outstanding for the three
and six months ended June 30, 2018 and 2017:

  Three Months Ended
June 30,
  Six Months Ended
June 30,
2018   2017 2018   2017
(in millions)
Basic weighted average shares outstanding 170 170 170 170
Dilution attributable to stock-based compensation awards 1     1  
Diluted weighted average shares outstanding 171   170   171   170
 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

(in millions)

 

EBITDAX and discretionary cash flow ("DCF") (as defined below) are
presented herein, and reconciled to the GAAP measures of net income and
net cash provided by operating activities, because of their wide
acceptance by the investment community as financial indicators of a
company's ability to internally fund exploration and development
activities and to service or incur debt. The Company also views the
non-GAAP measures of EBITDAX and DCF as useful tools for comparisons of
the Company's financial indicators with those of peer companies that
follow the full cost method of accounting. EBITDAX and DCF should not be
considered as alternatives to net income or net cash provided by
operating activities, as defined by GAAP.

  Three Months Ended
June 30,
  Six Months Ended
June 30,
2018   2017 2018   2017
Net income $ 63 $ 233 $ 241 $ 191
Depletion, depreciation and amortization 378 341 735 678
Exploration and abandonments 28 26 63 59
Impairment of oil and gas properties 77 77 285
Impairment of inventory and other property and equipment 6 1 6 1
Accretion of discount on asset retirement obligations 4 5 8 10
Interest expense 32 35 68 81
Income tax provision 19 121 69 90
Gain on disposition of assets, net (79 ) (194 ) (83 ) (205 )
Derivative related activity 219 (111 ) 355 (251 )
Amortization of stock-based compensation 24 21 41 43
Other 19   14   39   40  
EBITDAX (a) 790 492 1,619 1,022
Cash interest expense (31 ) (34 ) (66 ) (79 )
Discretionary cash flow (b) 759 458 1,553 943
Cash exploration expense (26 ) (18 ) (54 ) (41 )
Changes in operating assets and liabilities 169   43   (43 ) (55 )
Net cash provided by operating activities $ 902   $ 483   $ 1,456   $ 847  

_______________

(a) "EBITDAX" represents earnings before depletion, depreciation and
amortization expense; exploration and abandonments; impairment of
oil and gas properties; impairment of inventory and other property
and equipment; accretion of discount on asset retirement
obligations; interest expense; income taxes; net gain on the
disposition of assets; noncash derivative related activity;
amortization of stock-based compensation and other items.
(b) Discretionary cash flow equals cash flows from operating activities
before changes in operating assets and liabilities and cash
exploration expense.
 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)

(in millions, except per share data)

 

Adjusted income excluding noncash mark-to-market ("MTM") derivative
losses, and adjusted income excluding noncash MTM derivative losses and
unusual items, as presented in this press release, are presented and
reconciled to Pioneer's net income attributable to common stockholders
(determined in accordance with GAAP) because Pioneer believes that these
non-GAAP financial measures reflects an additional way of viewing
aspects of Pioneer's business that, when viewed together with its
financial results computed in accordance with GAAP, provide a more
complete understanding of factors and trends affecting its historical
financial performance and future operating results, greater transparency
of underlying trends and greater comparability of results across
periods. In addition, management believes that these non-GAAP financial
measures may enhance investors' ability to assess Pioneer's historical
and future financial performance. These non-GAAP financial measures are
not intended to be a substitute for the comparable GAAP measure and
should be read only in conjunction with Pioneer's consolidated financial
statements prepared in accordance with GAAP. Noncash MTM derivative
gains or losses and unusual items will recur in future periods; however,
the amount and frequency can vary significantly from period to period.
The table below reconciles Pioneer's net income attributable to common
stockholders for the three months ended June 30, 2018, as determined in
accordance with GAAP, to adjusted income excluding noncash MTM
derivative losses and adjusted income excluding MTM derivative losses
and unusual items for the quarter.

   

After-tax
Amounts

Amounts

Per Share

Net income attributable to common stockholders $ 66 $ 0.38
Noncash MTM derivative losses, net ($218 pretax) 170   0.99  
Income adjusted for noncash MTM derivative losses 236 1.37
Unusual items - asset divestiture related charges:
Noncash impairment of Raton ($77 pretax) 60 0.35

Gain on sale of West Eagle Ford ($78 pretax)

(60 ) (0.35 )
Other asset divestiture related charges ($9 pretax) 7   0.04  

Adjusted income excluding noncash MTM derivative losses and
unusual items

$ 243   $ 1.41  
   

PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL
INFORMATION


Open Commodity Derivative Positions
as of June 30, 2018

(Volumes are average daily
amounts)

 
2018

Year Ending
December 31, 2019

Third Quarter   Fourth Quarter
Average Daily Oil Production Associated with Derivatives (Bbl):
Collar contracts:
Volume 3,000 3,000
NYMEX price:
Ceiling $ 58.05 $ 58.05 $
Floor $ 45.00 $ 45.00 $
Collar contracts with short puts:
Volume 154,000 159,000 65,000
NYMEX price:
Ceiling $ 57.70 $ 57.62 $ 60.74
Floor $ 47.34 $ 47.26 $ 52.69
Short put $ 37.31 $ 37.23 $ 42.69
Average Daily NGL Production Associated with Derivatives:
Ethane basis swap contracts (a):
Volume (MMBtu) 6,920 6,920 6,920
Price differential ($/MMBtu) $ 1.60 $ 1.60 $ 1.60
Average Daily Gas Production Associated with Derivatives (MMBtu):

Swap contracts:

Volume 100,000 100,000
NYMEX price $ 3.00 $ 3.00 $
Collar contracts with short puts:
Volume 50,000 50,000
NYMEX price:
Ceiling $ 3.40 $ 3.40 $
Floor $ 2.75 $ 2.75 $
Short put $ 2.25 $ 2.25 $
Basis swap contracts:
Permian Basin index swap volume (b) 60,000 60,000 44,877
Price differential ($/MMBtu) $ (1.46 ) $ (1.46 ) $ (1.46 )
Southern California index swap volume (c) 80,000 66,522 84,932
Price differential ($/MMBtu) $ 0.30 $ 0.50 $ 0.33

_______________

(a) The ethane basis swap contracts reduce the price volatility of
ethane forecasted for sale by the Company at Mont Belvieu,
Texas-posted prices. The ethane basis swap contracts fix the basis
differential on a NYMEX Henry Hub ("HH") MMBtu equivalent basis. The
Company will receive the NYMEX HH price plus the price differential
on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of
ethane.
(b) The referenced basis swap contracts fix the basis differentials
between the index price at which the Company sells its Permian Basin
gas and the NYMEX HH index price used in swap contracts and collar
contracts with short puts.
(c) The referenced basis swap contracts fix the basis differentials
between Permian Basin index prices and southern California index
prices for Permian Basin gas forecasted for sale in Arizona and
southern California.

Marketing derivatives. Periodically, the Company enters into buy
and sell marketing arrangements to fulfill firm pipeline transportation
commitments. As of June 30, 2018, the Company was party to oil basis
swap contracts for 3,000 Bbls per day of July and August 2018
transportation commitments with a price differential of $3.30 per Bbl
between NYMEX WTI and Magellan East Houston oil prices for Permian Basin
oil forecasted for sale in the Gulf Coast Region.

   

PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL
INFORMATION (continued)


Derivative Losses, Net
(in
millions)

 

Three Months Ended
June 30, 2018

Six Months Ended
June 30, 2018

Noncash changes in fair value:
Oil derivative losses $ (203 ) $ (330 )
NGL derivative losses (1 )
Gas derivative losses (12 ) (27 )
Marketing derivative gains (losses) (2 ) 2  
Total noncash derivative losses, net (218 ) (355 )
 
Net cash payments on settled derivative instruments:
Oil derivative payments (140 ) (212 )
Gas derivative receipts 1 2
Marketing derivative payments (1 ) (1 )
Total cash derivative payments on settled derivative instruments, net (140 ) (211 )
Total derivative losses, net $ (358 ) $ (566 )

View Comments and Join the Discussion!