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How Will an Increased Rig Count Affect Pioneer Natural Resources’ Production?



Production in 1Q16

For 1Q16, Pioneer Natural Resources (PXD) reported total production of ~221.8 Mboe (thousand barrels of oil equivalent) per day, which was higher than its revised 1Q16 production guidance range of 211 Mboe–216 Mboe per day. PXD’s 1Q16 production was ~14% higher than its 1Q15 production of ~193.8 Mboe per day.

By comparison, S&P 500 (SPY) upstream companies EQT Corporation (EQT) and Occidental Petroleum (OXY) reported ~13% and ~10% YoY (year-over-year) increases in their 1Q16 total respective productions. Apache Corporation (APA) reported a ~9% YoY decline in its 1Q16 production. Notably, the SPDR S&P Oil and Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.

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Production trends

As seen in the above graph, PXD’s total QoQ (quarter-over-quarter) production volumes increased significantly in 2014 and in the second half of 2015. In 1Q16, PXD’s total production was higher by ~7.1 Mboe or ~3% QoQ. PXD’s production growth was driven by its strong Spraberry and Wolfcamp Shale horizontal drilling program in the Midland Basin.

Other upstream companies active in the Midland Basin include Clayton Williams Energy (CWEI) and EOG Resources (EOG). Please note that the Vanguard Energy ETF (VDE) invests in the broader energy market, whereas the ISE-Revere Nat Gas Index Fund (FCG) invests in natural gas producers.

Production guidance

PXD plans to increase its rig count by five rigs in 2016. But the addition of these five rigs is expected to have a minimal impact on PXD’s forecasted 2016 production growth rate of just over 12% due to multi-well pad drilling. Initial production from these five additional rigs is expected in early 2017.

Based on its 17 running rigs in 2017, PXD expects to deliver a production growth rate in a range of 13%–17% that year, with the Spraberry and Wolfcamp area production growth coming in at a range of 28%–32%. For 1Q16, PXD expects total production volume in the range of 224 Mboe–229 Mboe per day.

In the next part, we’ll look into Pioneer’s production mix and realized prices for 1Q16.


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