The weakness in the oil market was on full display when Pioneer Natural Resources (NYSE:PXD) reported first-quarter results after the market closed on Tuesday. The Texas-focused oil driller lost money and missed estimates as it pushed out production to cut costs. It's also maintaining a muted outlook for 2015. However, it does see the potential for better results as the calendar turns a page to 2016.
Drilling down into results
Pioneer Natural Resources produced an average of 193,823 barrels of oil equivalent per day, or BOE/d, which was well above the 165,653 BOE/d the company averaged in the first quarter of last year. While that was within its guidance range, production could have been even higher if not for three negative impacts during the quarter. First, severe winter weather in West Texas resulted in the loss of about 3,000 BOE/d of production because of downtime. Second, about 5,000 BOE/d of production was lost because of ethane rejection. Finally, the company made a decision in mid-February to use only its Pioneer Pumping Services to complete wells in the Permian Basin to save money, which will push completions back throughout the year.
As a result of weak commodity prices, Pioneer Natural Resources reported a loss of $78 million, or $0.52 per share. However, adjusting for a few one-time items, the company lost only $5 million, or $0.03 per share. That loss was a bit unexpected, as analysts thought the company would earn two pennies a share.
Despite the loss, Pioneer Natural Resources did do a solid job on the cost side, as the company was able to get its production costs down to $12.56 per BOE, which was under the lower end of its guidance range. Further, most of the company's other costs were within its guidance range.
A look ahead
Because Pioneer is choosing to use only its Pioneer Pumping Services to complete wells, the company is slightly altering its guidance for 2015. The company is basically taking production that was scheduled to come on line in the second quarter and pushing it later into the year. This decision will yield production in a range of 198,000 to 203,000 BOE/d in the second quarter, which is down from its previous outlook. However, full-year production guidance remains the same.
In addition, Pioneer is expecting to add two more rigs starting in July, as long as the oil price outlook remains positive and it completes the sale of its Eagle Ford Shale midstream business. The wells drilled by these rigs aren't expected to meaningfully add to production in 2015 because of the timing of multi-well pad drilling. However, the rigs will deliver production growth in 2016 instead of the flat production that would be produced through its current rig count.
Pioneer Natural Resources' results were about what was to be expected. While the company lost some money during the quarter, that's more on the accounting side of things, as it's still generating cash flow from its oil and gas wells. The company is also a bit more optimistic about oil prices, which is why it's planning to add two more rigs later this summer to drive production growth in 2016, when the company expects oil prices to improve even further.