Pioneer Natural Resources is dramatically cutting back on drilling in Texas but says its balance sheet is among the best in the country and strong enough to survive the downturn in oil prices.
The Irving-based company will reduce its capital expenditures by 45 percent to $1.85 billion and operate only 16 drilling rigs in the Permian Basin and Eagle Ford Shale oil fields through the first part of the year, the company said during its earnings conference call Wednesday.
CEO Scott Sheffield said the company had strong production growth in 2014, driven by impressive well performance in the Eagle Ford, Spraberry and Wolfcamp fields. But the low price of oil requires a cutback in drilling, he said.
Because Pioneer has operating cash flow of $1.7 billion, $1 billion in cash on hand and a debt-to-operating cash flow ratio of 16 percent — what the company called “the strongest balance sheet of anybody in the United States” — it will be well-positioned when oil prices rebound, he said.
Cutting back on activity, and working hard to cut other costs by 10 to 20 percent, will “keep the balance sheet strong,” officials said.
“Pioneer is positioned as well as anybody to weather the storm, whether it’s 12 months, 24 months, six months. We’re ready to ramp up activity when things improve, ” Sheffield said.
He made his comments after Pioneer closed out a profitable year. The company earned $431 million in the fourth quarter, compared with a loss of $1.3 billion the previous year, and made $930 million for all of 2014.
Sheffield and other officials said they expect production across the U.S. to flatten out early in 2015 and actually decline in the latter part of the year, which will likely drive up the price of oil in 2016.
“I feel like we’re in a $60-to-$80 price world instead of an $80-to-$100 price world. ... Once this thing settles out, we’re probably going to be in the $60-to-$80 range for a while,” Sheffield said.
The U.S. Energy Information Administration, in its short-term outlook released Tuesday, continued to predict that crude oil prices will average $58 a barrel in 2015 and $75 in 2016.
The price of oil fell 70 cents to $49.33 a barrel in New York at midday, meaning that oil has lost more than half its value since June. Pioneer shares (ticker: PXD) dropped $6.15, or about 4 percent, to $146.97.
Pioneer was producing about 201,000 barrels of oil a day at the end of the fourth quarter, and its average production last year was 182,000 barrels, company documents show. The production levels reflect discontinuation of activity in the Barnett Shale and Hugoton natural gas fields.
Even with the cutback in drilling activity, Pioneer expects production to increase 20 percent.
Max B. Baker, 817-390-7714