2022 has been a good year for Pioneer Natural Resources, but the Irving-based company plans to emphasize longer lateral drilling and make 2023 much better.
In Pioneer’s third quarter earnings call, President-COO Rich Dealy said from Irving that it will generate over $12 billion in operating cash flow and deliver more than $8 billion of free cash flow for the year.
“Our average activity level remains unchanged and we plan to run between 22 and 24 rigs and approximately six frac fleets for the remainder of the year,” Dealy said. “Consistent with this DNA inside the company, we have not been satisfied with 2022’s well performance and have made a significant change going forward.
“This material threshold increase will substantially improve well productivity for 2023 and subsequent years.”
Dealy said Pioneer’s development strategy “has fully transitioned to a full stack approach, which includes drilling up to six highly productive zones.
“We’ve also significantly reduced our delayed developments and are taking advantage of our contiguous acreage position to drill extended 15,000-foot laterals that generate 20 percent higher returns than a 10,000-foot well,” he said.
“Given the quality and depth of our inventory, this higher threshold program is consistent and highly repeatable for many years.”
Dealy said 15,000-foot lateral drilling brings improved returns and strong productivity. “Developing these long laterals provides significant efficiency gains that reduce capital costs, resulting in an average drilling and completion savings of approximately 15 percent per lateral foot,” he said.
“The combination of these savings and the strong productivity see internal rates of return increasing by more than 20 percentage points when compared to 10,000-foot laterals.”
Dealy said Pioneer’s nearly one million contiguous acres in the Midland Basin support its development of high-return 15,000-foot lateral wells.
“To date, we have identified more than 1,000 locations for long lateral development and we expect to place more than 100 of those wells online in 2023, up from 50 in 2022,” he said. “Pioneer has the longest duration of high-quality inventory when compared to peers.
“This third-party data highlights Pioneer as a premier independent oil and gas company with decades of high-quality inventory in the core of the Midland Basin.”
CEO Scott Sheffield said his company generated over $1.7 billion in free cash flow during the third quarter and returned $1.9 billion to its shareholders.
“Additionally, we continue to execute on opportunistic share repurchases with $500 million of shares retired in the third quarter at an average price of $218, representing 2.3 million shares,” Sheffield said. “This strong return of capital through both dividends and share repurchases represents approximately 108 percent of our third quarter free cash flow.
“Including all shares repurchased to date and dividends to be paid, we will return $7.5 billion to shareholders this year.
“Our core investment thesis remains unchanged, underpinned by low leverage, strong corporate returns and a low reinvestment rate. This delivers moderate oil production growth but generates significant free cash flow.”
Sheffield said Pioneer is using its own service acreage for a 140-magawatt wind generation project with the NextEra Corp. “This project will generate renewable energy that we will utilize in our operation,” he said.
