Pioneer Natural Resources’ production mix
Pioneer Natural Resources (PXD) is tilted towards liquid production. Its total liquid production stands at ~72%. Typically, upstream companies with more liquid production have better operating margins.
Pioneer Natural Resources’ production mix trend
As seen in the above chart, in 4Q15, Pioneer Natural Resources’ production mix was ~53% crude oil, ~19% natural gas liquids, and ~28% natural gas. The percentage of crude oil in PXD’s production mix increased from ~31% in 1Q11 to ~53% in 4Q15, with an average rate of increase of ~3% quarter-over-quarter. In 4Q15, the percentage of crude oil in PXD’s production mix increased by ~5% from 4Q14. For 2016, PXD expects the crude oil percentage of production to average around 56%.
Other upstream companies from the S&P 500 (SPY) that have a higher liquid percentage in their production mixes are Energen (EGN), Occidental Petroleum (OXY), Murphy Oil (MUR), and Noble Energy (NBL). These companies contain ~78%, ~75%, ~72%, and ~47% liquids in their production mixes, respectively. The volatility in oil prices also impacts ETFs and ETNs such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).
PXD’s realized prices
Excluding the effect of hedges, PXD’s average realized crude oil price in 4Q15 was $37.92 per barrel, down ~43% from $66.64 per barrel in 4Q14. In 4Q15, PXD’s average realized price for natural gas liquid production decreased ~34% to $12.16 per barrel, compared with $18.50 for the same period in 2014.
In 4Q15, PXD’s average realized price for natural gas production decreased ~44% to $2.03 per thousand cubic feet, compared with $3.60 per thousand cubic feet for the same period in 2014. PXD’s lower realized prices were compensated for partially by its gains on commodity derivatives. We’ll study PXD’s hedges in the next part of this series.