What happened
Shares of Pioneer Natural Resources (PXD 0.10%) fell 10.6% in August, according to data provided by S&P Global Market Intelligence. Among the issues weighing on the energy company last month were low oil prices, earnings, and concerns that production growth in the Permian Basin might run out of steam earlier than previously expected.
So what
Pioneer Natural Resources posted solid second-quarter results overall. It reported $2.01 per share of adjusted earnings, which beat the analysts' consensus estimate by $0.15 per share. Fueling that better-than-expected result was its production in the Permian Basin, which rose 2% and was above the top of its guidance range thanks to strong drilling results. The company also boosted its dividend again: The payout has been increased by an eye-popping 2,100% since the start of 2017.
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However, while Pioneer's results were strong overall, the company did note that its earnings per barrel slumped 8.7% year over year due to weaker oil prices. Crude prices fell another 6% in August. Because of that, earnings in the third quarter will likely be under some additional pressure unless crude bounces back.
Also weighing on the driller last month were concerns about its growth potential. Pioneer's CEO warned on its second-quarter conference call that top-tier, drillable "acreage is being exhausted at a very quick rate" as its peers aggressively drill across the Permian. Recent drilling results from fellow Permian peer Concho Resources (CXO) seemed to confirm those fears. Concho's 23-well Dominator project, in which it tested how closely it could space wells, failed to meet expectations. Because of that, the company will need to drill future wells further apart, which will dent its growth prospects. While Pioneer believes it has at least 10-years of high-return drilling locations left, investors are starting to worry that the Permian's peak might be closer than they initially anticipated.
Now what
At this point, Pioneer is working to offset lower crude oil prices by continuing to drive down costs, and it still has a large inventory of drilling locations remaining.
Because of that, it plans to aggressively take advantage of the current weakness in its stock by repurchasing more shares. It has already spent more than $500 million to retire about 2% of its shares outstanding. However, with $1.5 billion remaining on its current authorization, it could reduce its share count by another 6%. That needle-moving buyback could help boost its share price, especially if oil prices bounce back.
