Pioneer Natural Resources to ramp up drilling despite loss

Pioneer Natural Resources says it will ramp up its drilling program in the Permian Basin oil fields even as it loses money because of low prices.

Late Tuesday, the Irving-based energy company reported a second-quarter net loss of $218 million, or $1.46 per diluted share. Without adjustments for noncash derivatives and other unusual items, income for the second quarter was $15 million after taxes, or 10 cents per diluted share, the report said.

CEO Scott Sheffield said the company’s drilling program in the Spraberry and Wolfcamp fields continues to show strong margins and returns in a weak commodity market because of Pioneer’s “aggressive pursuit of cost reductions” and “efficiency gains.”

“As a result, we are putting rigs back to work and plan to return to an activity level in 2016 that can result in a similar growth trajectory that we were delivering in the second half of 2014 before the downturn,” Sheffield said in a statement.

This year, Pioneer announced that it was dramatically reducing drilling in Texas by cutting its capital expenditures by 45 percent to $1.85 billion and by operating only 16 rigs in the Permian Basin and Eagle Ford Shale through the first part of the year.

Now Pioneer plans to boost its drilling budget to $2.2 billion and add an average of two rigs per month in the northern Spraberry and Wolfcamp fields during the second half of 2015 and the first quarter of 2016, the company said in the earnings report.

The company said it has reduced drilling costs by up to 25 percent and hopes to cut them by 30 percent by early 2016.

The cost of drilling wells in the northern Spraberry and Wolfcamp is up to $8.5 million, a price the company hopes to reduce to $7.5 million to $8 million by early next year. A similar reduction is projected for the southern joint-venture area, from about $7.5 million to $6.5 million or $7 million in 2016.

In February, Sheffield said he thought his company was well-positioned to endure lower oil prices because of its operating cash flow of $1.7 billion and its $1 billion in cash on hand. After the sale of its Eagle Ford Shale pipeline business, the company reported having $700 million in the bank.

Pioneer said it’s the largest acreage holder in the Spraberry and Wolfcamp, with about 600,000 gross acres in the northern portion and about 200,000 in the southern joint-venture area.

This story was originally published August 4, 2015 at 11:43 PM with the headline "Pioneer Natural Resources to ramp up drilling despite loss."