Additionally, Pioneer is reducing its budgeted water infrastructure spending to approximately US$100 million, resulting in a total 2020 capital budget range of US$1.7 billion to US$1.9 billion. The company expects its revised capital programme to be fully funded from forecasted cash flow of approximately US$2.3 billion and generate free cash flow of approximately US$500 million (at the midpoint of capital guidance), assuming WTI oil prices average US$35/bbl for the remainder of 2020. The free cash flow is forecasted to be used to fund the company’s quarterly dividend and maintain its strong balance sheet. In this challenging environment, Pioneer believes its plan to preserve low leverage and generate free cash flow positions the company to be stronger when the global economy rebounds.
As a result, Pioneer plans to take immediate action in response to current commodity prices and will reduce its operated rig count from 22 currently to 11 operated rigs within the next two months. In addition, the company plans to reduce its contracted completion crews from six currently to two to three completion crews during the same time period. Pioneer expects full-year 2020 oil production to be similar to the company’s 2019 Permian oil production average of approximately 211 000 bpd. Pioneer will release additional details during its 1Q20 earnings conference call.
In addition to the company’s strong balance sheet, Pioneer recently enhanced its derivative position to provide additional downside protection. For the remainder of 2020, Pioneer has derivative coverage for approximately 90% of its revised 2020 oil production estimate. In addition, the company has increased its derivative coverage for 2021 to include approximately 94 000 bpd.
President and CEO Scott D. Sheffield stated: “As they have in the past, global headwinds and macroeconomic factors are impacting commodity prices. After successfully managing through the previous five cycles, it is apparent to me companies that maintain strong balance sheets and low leverage during these difficult times will prosper when economies eventually rebound and commodity prices recover.
“As such, during this challenging environment, Pioneer will protect our pristine balance sheet and focus on free cash flow generation by cutting our capital budget by approximately 45%. Our balance sheet is among the best in the energy sector and provides us ample financial flexibility to manage through a period of prolonged low oil prices. We are making these capital reductions based on a US$30 to US$35 WTI oil price outlook, but will continue to monitor the fluid macro environment and adjust our capital programme as needed to preserve our strong financial position, while maintaining a focus on the health and safety of our employees.
“With the significant reduction in energy investment over the past five years, exacerbated by the expected decline in shale production, I expect oil prices to recover once the global economy stabilises and Pioneer to emerge in a stronger, more enviable position through the actions we are taking today.”
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/17032020/pioneer-natural-resources-to-reduce-2020-capital-spending/
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