Pioneer Natural Resources Reports Third Quarter 2023 Financial and Operating Results
Source
Company Press Release
Company
Pioneer Natural Resources Company ExxonMobil
Tags
Corporate: Corporate Results, Guidance, Overview/Strategy, Country: United States, Financial - Costs & Metrics: Capital Expenditures, Upstream: Drilling Activity, Upstream News
Date
November 02, 2023
Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer" or "the Company") today reported financial and operating results for the quarter ended September 30, 2023. Pioneer reported third quarter net income attributable to common shareholders of $1.3 billion, or $5.41 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the third quarter was $1.4 billion, or $5.83 per diluted share. Cash flow from operating activities for the third quarter was $2.1 billion.
Third Quarter Highlights
Third quarter oil production averaged 377 thousand barrels of oil per day (MBOPD), at the top end of quarterly guidance
Third quarter total production averaged 721 thousand barrels of oil equivalent per day (MBOEPD), near the top end of quarterly guidance
Generated strong third quarter free cash flow1 of $1.2 billion
Declared a quarterly base-plus-variable dividend of $3.20 per share
Updated Full-Year 2023 Guidance
Increased the midpoints of full-year 2023 oil and total production guidance with ranges of 370 to 373 MBOPD and 708 to 713 MBOEPD, respectively
Decreased full-year 2023 drilling, completions, facilities and water infrastructure capital guidance2 to $4.375 billion to $4.475 billion
Lowered full-year 2023 capital guidance for exploration, environmental and other capital to $150 million
Financial Highlights
Pioneer maintains a strong balance sheet, with net debt of $4.8 billion as of September 30, 2023. The Company had $2.1 billion of liquidity, comprised of $98 million of cash on hand and a $2.0 billion unsecured credit facility (undrawn) as of September 30, 2023.
During the third quarter, the Company's total capital expenditures2 totaled $1.1 billion.
Cash flow from operating activities during the third quarter was $2.1 billion, leading to free cash flow1 of $1.2 billion when adjusted for changes in operating assets and liabilities and deducting capital expenditures.
For the fourth quarter of 2023, the Company's Board of Directors has declared a quarterly base-plus-variable dividend of $3.20 per share, comprised of a $1.25 base dividend and $1.95 variable dividend. This represents a total annualized dividend yield of 5.4%3. As outlined in the recently announced merger agreement with ExxonMobil, the fourth quarter variable dividend component represents 75% of the variable dividend as calculated under Pioneer's dividend policy. Additionally, the first quarter of 2024 variable dividend component is expected to represent 50% of the variable dividend as calculated under Pioneer's dividend policy4. Quarterly dividends subsequent to the first quarter of 2024 are expected to be comprised solely of the $1.25 per share base dividend component4 under Pioneer’s dividend policy until the merger closing date.
Pursuant to the merger agreement, Pioneer will not repurchase shares of its stock prior to the merger closing date.
Financial Results
For the third quarter of 2023, the average realized price for oil was $81.33 per barrel. The average realized price for natural gas liquids (NGLs) was $24.79 per barrel, and the average realized price for gas was $2.48 per thousand cubic feet. These prices exclude the effects of derivatives.
Production costs, including taxes, averaged $11.58 per barrel of oil equivalent (BOE). Depreciation, depletion and amortization (DD&A) expense averaged $10.97 per BOE. Exploration and abandonment expense was $18 million. General and administrative (G&A) expense was $87 million. Interest expense was $44 million. The net cash flow impact related to purchases and sales of oil and gas, including firm transportation, was a gain of $19 million. Other expense was $25 million. Current income tax provision was $248 million. The Company's effective tax rate was 22% for the quarter.
Operations Update
Pioneer's continued operational excellence in the Midland Basin enabled the Company to place 95 horizontal wells on production during the third quarter of 2023. More than 100 wells with lateral lengths of 15,000 feet or greater were placed on production during the first three quarters of 2023. These longer-lateral wells have contributed to Pioneer’s strong results. The development of wells with lateral lengths in excess of 15,000 feet provides significant capital savings on a per foot basis and is expected to generate an internal rate of return (IRR) that is on average 35% higher than a comparable 10,000-foot lateral well. In total, the Company has over 1,000 future locations with 15,000-foot lateral lengths in its drilling inventory.
During the third quarter, Pioneer benefited from its utilization of three simulfrac fleets and two localized sand mines. Additionally, the Company transitioned 100% of its completions fleets to either electric or dual-fuel powered and progressed its electrification efforts through the successful execution of drilling and completions trials utilizing grid-supplied electricity.
Pioneer’s strong operational results support the Company’s annual production growth framework of approximately 5% and 8% for oil and total production, respectively.
Guidance
Due to the pending merger with ExxonMobil, Pioneer has discontinued providing quarterly guidance. Accordingly, investors are cautioned not to rely on historical forward-looking statements regarding guidance as those forward-looking statements were the estimates of management only as of the date provided and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.
Environmental, Social & Governance (ESG)
Pioneer views sustainability as a multidisciplinary effort that balances economic growth, environmental stewardship and social responsibility. The Company emphasizes developing natural resources in a manner that protects surrounding communities and preserves the environment.
For more details, see Pioneer's 2023 Sustainability Report at pxd.com .
Earnings Conference Call
Due to the pending merger with ExxonMobil, Pioneer will not host a conference call or webcast to discuss its third quarter 2023 results.
PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
September 30, 2023
December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
98
$
1,032
Accounts receivable, net
1,850
1,853
Inventories
496
424
Investment in affiliate
176
172
Prepaids and other
165
245
Total current assets
2,785
3,726
Oil and gas properties, using the successful efforts method of accounting
48,024
44,473
Accumulated depletion, depreciation and amortization
(16,876
)
(14,843
)
Total oil and gas properties, net
31,148
29,630
Other property and equipment, net
1,639
1,658
Operating lease right-of-use assets
376
340
Goodwill
242
243
Other assets
170
143
$
36,360
$
35,740
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
2,670
$
2,637
Interest payable
16
33
Income taxes payable
43
63
Current portion of debt
44
779
Derivatives
158
44
Operating leases
156
125
Other
196
206
Total current liabilities
3,283
3,887
Long-term debt
4,880
4,125
Derivatives
152
96
Deferred income taxes
4,231
3,867
Operating leases
245
236
Other liabilities
850
988
Equity
22,719
22,541
$
36,360
$
35,740
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Three Months Ended
Nine Months Ended
2023
2022
2023
2022
Revenues and other income:
Oil and gas
$
3,460
$
4,224
$
9,603
$
12,794
Sales of purchased commodities
1,681
1,833
4,695
6,416
Interest and other income (loss), net
52
(12
)
59
57
Derivative gain (loss), net
(190
)
13
(235
)
(187
)
Gain on disposition of assets, net
1
35
23
105
5,004
6,093
14,145
19,185
Costs and expenses:
Oil and gas production
564
562
1,506
1,457
Production and ad valorem taxes
205
260
598
755
Depletion, depreciation and amortization
728
641
2,087
1,874
Purchased commodities
1,662
1,968
4,789
6,502
Exploration and abandonments
18
8
56
32
General and administrative
87
90
259
252
Accretion of discount on asset retirement obligations
4
4
12
12
Interest
44
30
114
100
Other
25
36
93
118
3,337
3,599
9,514
11,102
Income before income taxes
1,667
2,494
4,631
8,083
Income tax provision
(366
)
(510
)
(1,006
)
(1,719
)
Net income attributable to common shareholders
$
1,301
$
1,984
$
3,625
$
6,364
Net income per share attributable to common shareholders:
Basic
$
5.56
$
8.29
$
15.47
$
26.36
Diluted
$
5.41
$
7.93
$
14.96
$
25.11
Weighted average shares outstanding:
Basic
233
239
234
241
Diluted
240
250
242
253
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Three Months Ended
Nine Months Ended
2023
2022
2023
2022
Cash flows from operating activities:
Net income
$
1,301
$
1,984
$
3,625
$
6,364
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation and amortization
728
641
2,087
1,874
Exploration expenses
—
—
1
6
Deferred income taxes
118
202
341
1,248
Gain on disposition of assets, net
(1
)
(35
)
(23
)
(105
)
Loss on early extinguishment of debt
—
—
—
47
Accretion of discount on asset retirement obligations
4
4
12
12
Interest expense
3
2
8
7
Derivative-related activity
151
(135
)
169
(95
)
Amortization of share-based compensation
20
20
70
59
Investment valuation adjustments
(40
)
32
(4
)
(17
)
Other
28
28
112
69
Changes in operating assets and liabilities:
Accounts receivable
(337
)
406
1
(253
)
Inventories
(49
)
186
(73
)
(55
)
Other assets
(46
)
(52
)
5
(96
)
Accounts payable
216
(348
)
(126
)
(260
)
Interest payable
(31
)
(19
)
(17
)
(32
)
Income taxes payable
18
8
(20
)
—
Other liabilities
(11
)
27
(69
)
(23
)
Net cash provided by operating activities
2,072
2,951
6,099
8,750
Net cash used in investing activities
(1,067
)
(846
)
(3,533
)
(2,911
)
Net cash used in financing activities
(998
)
(3,368
)
(3,500
)
(8,401
)
Net increase (decrease) in cash, cash equivalents and restricted cash
7
(1,263
)
(934
)
(2,562
)
Cash, cash equivalents and restricted cash, beginning of period
91
2,585
1,032
3,884
Cash, cash equivalents and restricted cash, end of period
$
98
$
1,322
$
98
$
1,322
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUMMARY PRODUCTION, PRICE AND MARGIN DATA
Three Months Ended
Nine Months Ended
2023
2022
2023
2022
Average Daily Sales Volumes:
Oil (Bbls)
377,304
354,043
369,289
352,421
Natural gas liquids ("NGLs") (Bbls)
182,219
162,372
176,988
158,529
Gas (Mcf)
971,736
841,005
948,437
809,076
Total (BOE)
721,479
656,582
704,350
645,796
Average Prices:
Oil per Bbl
$
81.33
$
94.23
$
76.53
$
99.72
NGLs per Bbl
$
24.79
$
38.09
$
24.77
$
41.20
Gas per Mcf
$
2.48
$
7.58
$
2.67
$
6.41
Total per BOE
$
52.13
$
69.93
$
49.94
$
72.57
Three Months Ended
Nine Months Ended
2023
2022
2023
2022
Margin Data ($ per BOE):
Average price
$
52.13
$
69.93
$
49.94
$
72.57
Production costs
(8.50
)
(9.31
)
(7.83
)
(8.27
)
Production and ad valorem taxes
(3.08
)
(4.31
)
(3.11
)
(4.28
)
$
40.55
$
56.31
$
39.00
$
60.02
PIONEER NATURAL RESOURCES COMPANY
The Company uses the two-class method of calculating basic and diluted earnings per share. Under the two-class method of calculating earnings per share, generally accepted accounting principles ("GAAP") provide that share-based awards with guaranteed dividend or distribution participation rights qualify as "participating securities" during their vesting periods. During periods in which the Company realizes net income attributable to common shareholders, the Company's basic net income per share attributable to common shareholders is computed as (i) net income attributable to common shareholders, (ii) less participating share-based earnings (iii) divided by weighted average basic shares outstanding. The Company's diluted net income per share attributable to common shareholders is computed as (i) basic net income attributable to common shareholders, (ii) plus the reallocation of participating earnings, if any, (iii) plus the after-tax interest expense associated with the Company's convertible senior notes that are assumed to be converted into shares (iv) divided by weighted average diluted shares outstanding. During periods in which the Company realizes a net loss attributable to common shareholders, securities or other contracts to issue common shares would be dilutive to loss per share; therefore, conversion into common shares is assumed not to occur.
The Company's net income attributable to common shareholders is reconciled to basic and diluted net income attributable to common shareholders as follows:
Three Months Ended
Nine Months Ended
2023
2022
2023
2022
Net income attributable to common shareholders
$
1,301
$
1,984
$
3,625
$
6,364
Participating share-based earnings
(3
)
(4
)
(5
)
(11
)
Basic net income attributable to common shareholders
1,298
1,980
3,620
6,353
Adjustment to after-tax interest expense to reflect the dilutive impact attributable to convertible senior notes
1
1
3
5
Diluted net income attributable to common shareholders
$
1,299
$
1,981
$
3,623
$
6,358
Basic weighted average shares outstanding
233
239
234
241
Convertible senior notes dilution
7
11
8
12
Diluted weighted average shares outstanding
240
250
242
253
Net income per share attributable to common shareholders:
Basic
$
5.56
$
8.29
$
15.47
$
26.36
Diluted
$
5.41
$
7.93
$
14.96
$
25.11
PIONEER NATURAL RESOURCES COMPANY
EBITDAX and discretionary cash flow ("DCF") (as defined below) are presented herein, and reconciled to the GAAP measures of net income and net cash provided by operating activities, because of their wide acceptance by the investment community as financial indicators of a company's ability to internally fund exploration and development activities and to service or incur debt. The Company also views the non-GAAP measures of EBITDAX and DCF as useful tools for comparisons of the Company's financial indicators with those of peer companies that follow the full cost method of accounting. EBITDAX and DCF should not be considered as alternatives to net income or net cash provided by operating activities, as defined by GAAP.
Three Months Ended
Nine Months Ended
2023
2022
2023
2022
Net income
$
1,301
$
1,984
$
3,625
$
6,364
Depletion, depreciation and amortization
728
641
2,087
1,874
Exploration and abandonments
18
8
56
32
Accretion of discount on asset retirement obligations
4
4
12
12
Interest expense
44
30
114
100
Income tax provision
366
510
1,006
1,719
Gain on disposition of assets, net
(1
)
(35
)
(23
)
(105
)
Loss on early extinguishment of debt
—
—
—
47
Derivative-related activity
151
(135
)
169
(95
)
Amortization of share-based compensation
20
20
70
59
Investment valuation adjustments
(40
)
32
(4
)
(17
)
Other
28
28
112
69
EBITDAX (a)
2,619
3,087
7,224
10,059
Cash interest expense
(41
)
(28
)
(106
)
(93
)
Current income tax provision
(248
)
(308
)
(665
)
(471
)
Discretionary cash flow (b)
2,330
2,751
6,453
9,495
Cash exploration expense
(18
)
(8
)
(55
)
(26
)
Changes in operating assets and liabilities
(240
)
208
(299
)
(719
)
Net cash provided by operating activities
$
2,072
$
2,951
$
6,099
$
8,750
_____________
(a)
" EBITDAX" represents earnings before depletion, depreciation and amortization expense; exploration and abandonments; accretion of discount on asset retirement obligations; interest expense; income taxes; net gain or loss on the disposition of assets; loss on early extinguishment of debt; noncash derivative-related activity; amortization of noncash share-based compensation; noncash valuation adjustments on investment in affiliate and short-term investments; and other noncash items.
(b)
Discretionary cash flow equals cash flows from operating activities before changes in operating assets and liabilities and cash exploration expense.
PIONEER NATURAL RESOURCES COMPANY
Adjusted income attributable to common shareholders excluding noncash mark-to-market ("MTM") adjustments and unusual items are presented in this earnings release and reconciled to the Company's net income attributable to common shareholders (determined in accordance with GAAP), as the Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of the Company's business that, when viewed together with its GAAP financial results, provide a more complete understanding of factors and trends affecting its historical financial performance and future operating results, greater transparency of underlying trends and greater comparability of results across periods. In addition, management believes that these non-GAAP financial measures may enhance investors' ability to assess the Company's historical and future financial performance. These non-GAAP financial measures are not intended to be a substitute for the comparable GAAP financial measure and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Noncash MTM adjustments and unusual items may recur in future periods; however, the amount and frequency can vary significantly from period to period.
The Company's net income attributable to common shareholders as determined in accordance with GAAP is reconciled to income adjusted for noncash MTM adjustments, including (i) the Company's equity investment in ProPetro Holding Corp. ("ProPetro") and (ii) the Company's derivative positions, and unusual items is as follows:
Three Months Ended September 30, 2023
After-tax
Per Diluted
(in millions)
Net income attributable to common shareholders
$
1,301
$
5.41
Noncash MTM adjustments:
ProPetro investment gain ($40 million pretax)
(31
)
(0.13
)
Derivative loss, net ($151 million pretax)
118
0.49
Adjusted income excluding noncash MTM adjustments
1,388
5.77
Unusual items:
Net loss on settlement of convertible debt conversion option derivatives ($18 million pretax)
14
0.06
Adjusted income excluding noncash MTM adjustments and unusual items
$
1,402
$
5.83
PIONEER NATURAL RESOURCES COMPANY
Free cash flow ("FCF") is a non-GAAP financial measure. As used by the Company, FCF is defined as net cash provided by operating activities, adjusted for changes in operating assets and liabilities, less capital expenditures. The Company believes this non-GAAP measure is a financial indicator of the Company's ability to internally fund acquisitions, debt maturities, dividends and share repurchases after capital expenditures.
Three Months Ended
Nine Months Ended
(in millions)
Net cash provided by operating activities
$
2,072
$
6,099
Changes in operating assets and liabilities
240
299
Less: Capital expenditures (a)
(1,105
)
(3,501
)
Free cash flow
$
1,207
$
2,897
_____________
(a)
Capital expenditures are calculated as follows:
Three Months Ended
Nine Months Ended
(in millions)
Costs incurred
$
1,125
$
3,727
Excluded items (a)
(41
)
(273
)
Other property, plant and equipment capital (b)
21
47
Capital expenditures
$
1,105
$
3,501
_____________
(a)
Comprised of proved and unproved acquisition costs, asset retirement obligations and geological and geophysical general and administrative costs.
(b)
Includes other property, plant and equipment additions related to water and power infrastructure.
PIONEER NATURAL RESOURCES COMPANY
Marketing derivatives. The Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell, at an oil terminal in Midland, Texas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027.
The price the Company pays to purchase the oil volumes under the purchase contracts is based on a Midland WTI price and the price the Company receives for the oil volumes sold is a weighted average sales price that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges.
Conversion option derivatives. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025 (the "Convertible Notes"). Certain holders of the Convertible Notes have exercised their conversion options per the terms of the notes indenture. The Company elected to settle the conversions in cash, with settlement occurring 25 trading days from the notice of conversion (the "Settlement Period"). The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as a derivative instrument not designated as a hedge. As of September 30, 2023, $44 million of the principal amount of the Company's Convertible Notes remained in the Settlement Period.
PIONEER NATURAL RESOURCES COMPANY
Three Months Ended
Nine Months Ended
(in millions)
Noncash changes in fair value:
Marketing derivative loss, net
$
(155
)
$
(170
)
Convertible debt conversion option derivative gain, net
4
1
Total noncash derivative loss, net
(151
)
(169
)
Cash payments on settled derivative instruments:
Marketing derivative payments
(21
)
(52
)
Convertible debt conversion option derivative payments, net
(18
)
(14
)
Total cash payments on settled derivative instruments, net
(39
)
(66
)
Total derivative loss, net
$
(190
)
$
(235
)
Source: EvaluateEnergy®
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