Page 10 - NorthAmOil Week 19

NorthAmOil COMMENTARY NorthAmOil
within our means to protect our strong balance sheet,” EOG’s chairman and CEO, Bill Thomas, stated. “This is intended to preserve EOG’s busi- ness value and position the company to thrive in an upturn.”
Pioneer
Pioneer, for its part, reported a net profit of $289mn, but this marked a 15% y/y decline from $350mn and came with a warning that the company was bracing for even more challenging times ahead. Pioneer also recorded a 6% drop in revenue, to $2.3bn in the first quarter of 2020, from $2.4bn a year ago.
The company outlined plans to cut a further $300mn from its capex budget, bringing it to a revised range of $1.4-1.6bn. This represents a reduction of roughly 55% from Pioneer’s orig- inal capex budget for 2020.
The Permian Basin-focused producer said it expected to operate an average of 5-8 horizontal rigs in the region’s Midland sub-basin during the remaining quarters of 2020, and an average of 2-3 fracturing fleets. The company said it would assess its activity levels monthly, adjusting as necessary if market conditions require it.
Pioneer now anticipates its revised 2020 pro- duction averaging 341,000-359,000 barrels of oil equivalent per day (boepd), down roughly 11% on original guidance, with oil produc- tion accounting for 198,000-208,000 bpd. This updated guidance includes voluntary curtail- ments of around 7,000 bpd, with Pioneer noting that based on past experience, it does not expect any well performance issues when the curtailed wells are returned to production.
The company has suspended its quarterly
production guidance as a result of market volatility.
“Pioneer entered this difficult environment with one of the strongest balance sheets in the sector and it is our plan to emerge from this downturn in a similar position,” Pioneer’s pres- ident and CEO, Scott Sheffield, said. “As evi- denced by our additional capital reduction and other cost reduction initiatives, our business plan remains flexible and responsive to eco- nomic conditions.”
Pioneer said it would cut corporate overhead costs by up to $90mn and lower production costs by up to $70mn this year. Among other cost-cut- ting measures, Pioneer has also rolled out pay cuts for its executives, including Sheffield him- self, who is taking a 20% cut off his $1.25mn base salary. According to a filing with the US Secu- rities and Exchange Commission (SEC), other executives are taking a 15% cut and company officers are taking a 10% cut.
What next?
Pioneer and EOG are generally thought to be among the stronger players in the shale industry, and while executives will always seek to empha- sise the positives in quarterly earnings, these two companies’ results were generally well received by investors, with their share prices rising.
Not all shale drillers will survive this new rout, and new bankruptcy filings have been anticipated since oil prices fell in March. Indeed, Bakken-fo- cused Whiting Petroleum filed for Chapter 11 bankruptcy protection in April, and there are growing expectations that Chesapeake Energy will soon follow, among others. (See: Chesapeake considering bankruptcy filing, page 14) ™
This represents a reduction of roughly 55% from Pioneer’s original capex budget for 2020.
Both Pioneer and EOG have reduced the number of rigs they have in operation.
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Week 19 14•May•2020