Pioneer to divest of assets to become Permian pure-play operator

By Patrick C. Miller | February 13, 2018

Pioneer Natural Resources Co. of Dallas plans to become a Permian pure-play operator this year by divesting of some Texas properties and acreage in the Raton Basin of southeastern Colorado.

In its report for the fourth quarter of 2017, Pioneer also said it plans to operate 20 horizontal rigs in the Permian during 2018. It expects to place between 250 and 275 wells into production in the Permian Basin during the year. Oil production is forecast to increase 19 to 24 percent over 2017.

Pioneer is planning capital expenditures for 2018 of $2.9 billion, which includes $2.65 billion for drilling and completion activities and $260 million for water infrastructure, vertical integration, field facilities and vehicles. Funding for the capital program is based on a forecasted cash flow of $2.8 billion—assuming $55 per barrel of oil and $3 per million cubic feet of gas.

Pioneer said it will begin the divestiture process in the first quarter of 2018. The company’s primary asset in south Texas is its Eagle Ford shale acreage where it holds approximately 70,000 net acres by production. The Eagle Ford assets being sold represent all of Pioneer’s 46 percent working interest in the play, including its producing wells and associated infrastructure.

The Raton Basin assets represent all of Pioneer’s interests in the field, including its producing gas wells and other associated infrastructure. Net production from Raton averaged approximately 86 million cubic feet of gas per day during the fourth quarter of 2017. The west Texas Panhandle properties represent Pioneer’s 100 percent working interest in the field, including its producing wells and associated infrastructure.

After the divestitures are completed, the company expects reported revenue per barrel of oil equivalent (BOE) to increase and operating expense per BOE to decrease, significantly improving reported cash operating margins and corporate returns.

“I want to personally thank all of our South Texas, Raton and West Panhandle employees for their commitment and dedication to the continuing strong performance of these assets,” said Timothy Dove, Pioneer’s president and CEO. “They have created significant value for our shareholders over the many years we have owned these assets. After these divestitures are completed, Pioneer’s operations will be solely in the Permian Basin.”

In the fourth quarter of 2017, Pioneer reported net income attributable to common stockholders of $665 million ($3.87 per diluted share). Without the effect of noncash mark-to-market derivative losses of $169 million after tax (99 cents per diluted share) and a noncash benefit related to the reduction in Pioneer’s deferred tax liability resulting from the Tax Cuts and Jobs Act of $625 million ($3.64 per diluted share), adjusted income for the fourth quarter was $209 million after tax ($1.22 per diluted share).