Page 6 - NorthAmOil Week 09

NorthAmOil COMMENTARY NorthAmOil
Shale’s heavy hitters seen weathering the storm
Leading shale-focused independents EOG Resources and Pioneer Natural Resources beat analyst expectations for fourth-quarter profits, and are well-positioned to outperform their peers as the industry downturn continues
US
WHAT:
EOG and Pioneer have both beaten analyst expectations with their fourth-quarter profits.
WHY:
Higher production has offset lower oil prices for both companies.
WHAT NEXT:
Both Pioneer and EOG plan to increase their capital spending this year.
TWO of the US’ largest shale-focused independ- ent producers – EOG Resources and Pioneer Natural Resources – appear to be weathering the ongoing oil industry downturn better than some of their peers. Both companies recently announced fourth-quarter results that beat analyst expectations, and both are intending to raise their capital spending somewhat this year as other shale producers scale back.
The two companies’ performances were both boosted by higher production offsetting the impact of lower crude prices. The results demon- strate that companies with a large inventory of productive acreage still stand to do well, even as West Texas Intermediate (WTI) prices languish, hovering at around $47 per barrel on March 4.
Pioneer
Announcing its latest results on February 19, Permian Basin-focused Pioneer cited “strong” efficiency gains in both drilling and comple- tions during the fourth quarter of 2019. The company said that over the course of the whole year, both drilling and completions efficiencies had increased by more than 30% compared with 2017, averaging around 1,000 drilled feet (305 metres) per day and 1,600 completed feet (488 metres) per day in 2019.
The company said the greater efficiencies were coupled with well costs that were lower by around 30% and production of 363,364 barrels of oil equivalent per day (boepd) during the fourth quarter. Oil accounted for 220,326 barrels per day (bpd) of this. Both output figures marked year-on-year increases, from 199,193 bpd of oil and 319,633 boepd in total in the final quarter of 2018.
Pioneer’s net income totalled $344mn in the fourth quarter of 2019, up from $324mn a year ago. However, net income for the whole of 2019 fell 22% to $756mn from $978mn the pre- vious year. The company’s annual revenues of $9.3bn for 2019 were only slightly lower than the $9.4bn it reported for 2018, while fourth-quarter
revenues were $2.6bn, compared with $2.7bn a year ago.
Pioneer’s president and CEO, Scott Sheffield, described 2019 as “an excellent year for Pio- neer”, characterised by “strong cash flow, robust free cash flow generation and top tier corporate returns”.
Looking ahead to the rest of 2020, Pioneer announced a 2020 capital expenditure budget of $3.15-3.45bn, up from $3.0bn in 2019. The increase is notable because other shale drillers have been trimming their capex budgets. For example, Marathon Oil announced earlier in February that it was cutting its capex budget for 2020 by 10%, to $2.4bn from $2.6bn last year. Concho Resources is also lowering its capex budget by 10%, to $2.6-2.8bn for 2020.
“Our 2020 plan builds on our strong 2019 performance and is structured to deliver a cap- itally efficient programme that prioritises free cash flow,” Sheffield said.
Pioneer predicts its 2020 oil production to
reach 235,000-245,000 bpd of oil, and 383,000- The results
403,000 boepd in total.
EOG
demonstrate that companies with a large inventory
Like Pioneer, Houston-based EOG also benefit-
ted from higher production in the Permian – in
the Delaware sub-basin. However, its perfor-
mance can also be attributed to output growth of productive in North Dakota’s Bakken play.
EOG’s oil production rose 8% y/y to 468,900 bpd in the fourth quarter of 2019. Its total out- put – including some volumes in Trinidad and other overseas locations – amounted to 850,300 boepd, up from 764,500 boepd in the fourth quarter of 2018. Over the whole of 2019, EOG’s US crude volumes expanded by 15% to 455,500 bpd, natural gas liquids (NGLs) production rose 16% and gas volumes grew 12%.
The company’s net income for the fourth quarter of 2019 fell to $637mn from $893mn a year ago. For the whole of 2019, EOG reported net income of $2.7bn, down y/y from $3.4bn.
acreage still stand to do well.
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w w w . N E W S B A S E . c o m Week 09 05•March•2020