uploads///PXDs Presence in the Eagle Ford Shale Play

Why the Eagle Ford is a major focus for Pioneer Resources in 2014

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Dec. 4 2020, Updated 10:42 a.m. ET

Pioneer Resources

Pioneer Resources (PXD), based in Texas, is a major oil and gas in the U.S. PXD is considered to be one of the most active drillers in the Eagle Ford Shale.

Pioneer kicked off full development in the Eagle Ford after signing a joint venture agreement with Reliance Industries (RIL) in June, 2010. Pioneer and Reliance Industries reached a joint venture agreement where Pioneer sold a 45% interest in approximately 212,000 net acres for a total price of $1.15 billion. Reliance paid $266 million initially and will carry future drilling costs of $879 million. The joint venture aims at utilizing horizontal drilling to produce gas and condensate in the liquids-rich portion of the formation.

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Eagle Ford is a major focus area for PXD in 2014. To increase its efficiency further, Pioneer has made some successful changes with cost-cutting. An example of a change is the proppant being used in fracking. Last year, they switched from ceramic proppant to white sand—a move that has saved $1.1 million per well. Also, the shift to pad drilling has allowed Pioneer to save $600–700,000 in completion costs per well. Additionally, PXD plans to downspace to increase the amount of wells that can be drilled on the same amount of land and the amount of recoverable oil.

Performance in 1Q14 growth plans for 2014

As per the latest company presentation, PXD’s proved reserves in the Eagle Ford Shale total 131 MMBoe (million barrels of oil equivalent). Net production in 1Q14 was 43 MMBoe per day, up ~8% from the previous quarter. Full-year production is forecasted to range from 45 MMBoe per day to 49 MMBoe per day—an increase of 18% to 29% compared to 2013.

Pioneer divested a significant amount of assets in other parts of the U.S. last year to reinvest into the Eagle Ford development. These include the sale of assets worth $350 million in Alaska. The company expects to generate an additional $100 million from other asset divestitures as well. The funds from these proceeds would be used to “double-down” on its existing assets in the Eagle Ford. This strategy is expected to generate approximately $2.3 billion in operating cash flow in 2014.

Pioneer has 45 new upper Eagle Ford shale wells planned for 2014 and expects to drill approximately 110 liquids-rich wells in the Eagle Ford Shale. It plans to place a similar number of wells on production (58 wells in the first half of 2014 and 52 wells in the second half). With more rigs and pads in 2014, Pioneer is looking at a 12–18% increase in production.

Consequently, midstream names with operations in the Eagle Ford, stand to benefit from production growth in the area. Confirming the bullish sentiment around the Eagle Ford, several midstream companies have executed major transactions to gain entry into the area. These include Enterprise Product Partners (EPD), Kinder Morgan Partners (KMP) and DCP Midstream Partners (DPM). All these midstream MLPs (master limited partnerships) are a part of the Alerian MLP ETF (AMLP), while PXD is a part of the Energy Select Sector SPDR Fund (XLE).

Continue reading the next sections in this series to learn about major midstream transactions that are being initiated in the Eagle Ford this year.

 

 

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