Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer"
or "the Company") today reported financial and operating results
for the quarter ended June 30, 2023. Pioneer reported second
quarter net income attributable to common stockholders of $1.1
billion, or $4.55 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 second quarter was $1.1 billion, or $4.49 per diluted share.
Cash flow from operating activities for the second quarter was $1.7
billion.
Highlights
- Second quarter oil production averaged 369 thousand barrels
of oil per day (MBOPD), near the top end of quarterly
guidance
- Second quarter total production averaged 711 thousand
barrels of oil equivalent per day (MBOEPD), above the top end of
quarterly guidance
- Increased the midpoints of full-year 2023 oil and total
production guidance to 369 MBOPD and 707 MBOEPD,
respectively
- Reduced the midpoint of full-year 2023 capital1 guidance by
$125 million
- Generated strong second quarter free cash flow2 of $742
million
- Declared a quarterly base-plus-variable dividend of $1.84
per share and repurchased $124 million of shares during the second
quarter (0.6 million shares)
"Pioneer's strong execution delivered excellent second quarter
results, with oil production near the top end of our guidance
range," stated Rich Dealy, President and Chief Operating Officer.
"Additionally, our solid operational results generated significant
free cash flow2 during the second quarter, supporting compelling
shareholder returns.
"Continued strong well productivity and highly efficient
operations underpin our ability to increase full-year production
guidance, while lowering full-year capital1 guidance through a
purposeful reduction in activity. Our improved 2023 outlook is
expected to deliver an even more capitally efficient program.
"Pioneer's greatest competitive advantages remain our deep
inventory of high-return wells paired with our highly efficient
operations and our dedicated employees. We expect this combination
to generate strong corporate returns and significant free cash
flow3 for decades, providing long-term value for shareholders."
Financial Highlights
Pioneer maintains a strong balance sheet, with net debt of $5.2
billion as of June 30, 2023. The Company had $1.9 billion of
liquidity, comprised of $91 million of cash on hand and $1.8
billion available under a $2.0 billion unsecured credit facility,
as of June 30, 2023.
Cash flow from operating activities during the second quarter
was $1.7 billion, leading to free cash flow2 of $742 million.
During the second quarter, the Company's total capital
expenditures1 totaled $1.2 billion.
For the third quarter of 2023, the Company's Board of Directors
has declared a quarterly base-plus-variable dividend of $1.84 per
share, comprised of a $1.25 base dividend and $0.59 variable
dividend. This represents a total annualized dividend yield of
3.3%4.
In addition to a strong dividend payout, the Company continues
to execute opportunistic share repurchases. During the second
quarter, the Company repurchased $124 million of common stock at an
average share price of $207. This total return of capital,
including base-plus-variable dividend and share repurchases,
represents 75% of second quarter free cash flow2, consistent with
the Company's return of capital framework, which creates
significant value for shareholders.
Financial Results
For the second quarter of 2023, the average realized price for
oil was $72.90 per barrel. The average realized price for natural
gas liquids (NGLs) was $22.43 per barrel, and the average realized
price for gas was $1.81 per thousand cubic feet. These prices
exclude the effects of derivatives.
Production costs, including taxes, averaged $10.39 per barrel of
oil equivalent (BOE). Depreciation, depletion and amortization
(DD&A) expense averaged $10.75 per BOE. Exploration and
abandonment expense was $23 million. General and administrative
(G&A) expense was $88 million. Interest expense was $41
million. The net cash flow impact related to purchases and sales of
oil and gas, including firm transportation, was a loss of $59
million. Other expense was $27 million, or $16 million excluding
unusual items. Current income tax provision was $192 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 124 horizontal wells on production
during the second quarter of 2023.
Pioneer's large and contiguous acreage position provides the
opportunity to drive further operational enhancements. 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, well
above our previous estimate of 20%. The Company is expanding the
development of 15,000-foot laterals from 2022 levels and expects to
place more than 100 of these wells on production in 2023. In total,
the Company has over 1,000 future locations with 15,000-foot
lateral lengths in its drilling inventory.
Additionally, Pioneer has delivered significant cost and
efficiency improvements from the utilization of simulfrac
completions and localized sand mines. The Company added a third
simulfrac fleet in the first quarter of 2023 and a second localized
sand mine commenced operations during the second quarter.
Consistent with the Company's commitment to sustainable operations,
Pioneer expects 100% of its completions fleets to be either
electric or dual-fuel powered in the second half of 2023.
Extended laterals, utilization of simulfrac fleets, localized
sand and the transition of completions fleets from diesel-only fuel
are a few examples of the many continuous improvement efforts that
the Company's operational teams are progressing.
Improved 2023 Outlook
Pioneer is lowering the midpoint of its 2023 drilling,
completions, facilities and water infrastructure capital budget1 by
$125 million to an updated range of $4.375 billion to $4.575
billion. Additionally, the Company expects its capital budget for
exploration, environmental and other capital to range between $150
million to $200 million in 2023, principally related to drilling
four Barnett/Woodford formation wells in the Midland Basin,
additional testing of the Company's enhanced oil recovery (EOR)
project and adding electric power infrastructure for future
drilling, completions and production operations. Pioneer expects
its capital program to be fully funded from 2023 cash flow5. The
reduction in the Company's 2023 capital budget is primarily
attributable to strong production results and highly efficient
operations resulting in reduced activity in the second half of
2023.
During 2023, the Company now plans to operate an average of 23
to 25 horizontal drilling rigs in the Midland Basin, including a
three-rig average program in the southern Midland Basin joint
venture area. The revised 2023 capital program is expected to place
490 to 520 wells on production.
This activity level is expected to deliver 2023 oil production
of 364 to 374 MBOPD, an increase of 4.5 MBOPD at the midpoint when
compared to original 2023 guidance. Total production is expected to
range from 697 to 717 MBOEPD, an increase of 22 MBOEPD at the
midpoint when compared to original 2023 guidance.
Third Quarter 2023
Guidance
Third quarter 2023 oil production is forecasted to average
between 367 to 377 MBOPD and total production is expected to
average between 705 to 725 MBOEPD. Production costs are expected to
average $10.50 per BOE to $12.00 per BOE. DD&A expense is
expected to average $10.50 per BOE to $12.00 per BOE. Total
exploration and abandonment expense is forecasted to be $10 million
to $20 million. G&A expense is expected to be $80 million to
$90 million. Interest expense is expected to be $40 million to $45
million. Other expense is forecasted to be $20 million to $40
million. The cash flow impact related to purchases and sales of oil
and gas, including firm transportation, is expected to be a loss of
$20 million to $60 million, based on forward oil price estimates
for the quarter.
The Company's effective income tax rate is expected to be
between 22% to 27%, with the current income tax provision for the
quarter expected to be $175 million to $250 million, representing
pro rata estimated federal and state taxes based on forecasted 2023
taxable income. The Company expects its cash tax rate for the
full-year 2023 to approximate a mid-to-high teens percentage of
book income.
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.
Pioneer recently published its 2023 Sustainability Report
highlighting the Company's focus and significant progress on its
ESG initiatives. The Company incorporated the Task Force on
Climate-related Financial Disclosure (TCFD) framework into this
report to provide a more comprehensive overview of the Company's
sustainability practices. The report details Pioneer's leading ESG
strategy, which includes significant progress on environmental
practices and highlights the Company's continued support for its
employees and local communities.
The Company has multiple initiatives underway that are expected
to result in tangible progress towards Pioneer's net zero emissions
ambition6. In addition to being one of the first U.S. operators to
commit to Oil and Gas Methane Partnership 2.0 Initiative (OGMP),
Pioneer has established a new target for methane intensity of 0.20%
or less in 2025, which places Pioneer on the path to achieving the
OGMP "Gold Standard" designation. The Company has made significant
progress towards its 2030 emissions intensity targets by achieving
a 22% reduction in greenhouse gas emission intensity6 and a 64%
reduction in methane emission intensity, when compared to a 2019
baseline. Additionally, Pioneer achieved a flaring intensity of
0.54% in 2022, well below the Company's goal to limit flaring to 1%
of natural gas produced. Pioneer continues to prioritize
environmental stewardship and plans to end routine flaring by
2025.
Pioneer continues to advance the electrification of field
operations through a large-scale renewable energy project on
Pioneer owned surface acreage in partnership with a subsidiary of
NextEra Energy Resources, LLC. Construction began in 2023 on the
51-turbine, 140-megawatt wind farm project and is expected to begin
supplying power to Pioneer operations in early 2024.
Additionally, Pioneer decreased its dependence on freshwater
used in completions to 23% during 2022. This achievement represents
significant progress in realizing the Company's target to reduce
freshwater used in completions to 20% or less by 2026. Pioneer's
improvement is underpinned by increased recycling capabilities and
the utilization of reclaimed water from the cities of Midland and
Odessa.
For more details, see Pioneer's 2023 Sustainability Report at
www.pxd.com/sustainability.
Earnings Conference Call
On Wednesday, August 2, 2023, at 9:00 a.m. Central Time, Pioneer
will discuss its financial and operating results for the quarter
ended June 30, 2023, with an accompanying presentation.
Instructions for listening to the call and viewing the accompanying
presentation are shown below.
Internet: www.pxd.com
Select "Investors," then "Quarterly Results"
to listen to the discussion, view the presentation and see other
related material.
Telephone: Dial (888) 440-5983 five minutes
before the call.
A replay of the webcast will be archived on Pioneer's website.
An audio only replay will be available via telephone through
September 1, 2023. To access the audio replay, dial (800) 770-2030
and enter passcode 8960822#.
About Pioneer
Pioneer is a large independent oil and gas exploration and
production company, headquartered in Dallas, Texas, with operations
in the United States. For more information, visit www.pxd.com.
Except for historical information contained herein, the
statements in this news release are forward-looking statements that
are made pursuant to the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements and the business prospects of the Company are subject to
a number of risks and uncertainties that may cause the Company's
actual results in future periods to differ materially from the
forward-looking statements. These risks and uncertainties include,
among other things, volatility of commodity prices; product supply
and demand; the impact of armed conflict (including the war in
Ukraine) and related political instability on economic activity and
oil and gas supply and demand; competition; the ability to obtain
drilling, environmental and other permits and the timing thereof;
the effect of future regulatory or legislative actions on Pioneer
or the industry in which it operates, including potential changes
to tax laws; the ability to obtain approvals from third parties and
negotiate agreements with third parties on mutually acceptable
terms; potential liability resulting from pending or future
litigation; the costs, including the potential impact of cost
increases due to inflation and supply chain disruptions, and
results of development and operating activities; the impact of a
widespread outbreak of an illness, such as the COVID-19 pandemic,
on global and U.S. economic activity, oil and gas demand, and
global and U.S. supply chains; the risk of new restrictions with
respect to development activities, including potential changes to
regulations resulting in limitations on the Company's ability to
dispose of produced water; availability of equipment, services,
resources and personnel required to perform the Company's
development and operating activities; access to and availability of
transportation, processing, fractionation, refining, storage and
export facilities; Pioneer's ability to replace reserves, implement
its business plans or complete its development activities as
scheduled; the Company's ability to achieve its emissions
reductions, flaring and other ESG goals; access to and cost of
capital; the financial strength of (i) counterparties to Pioneer's
credit facility and derivative contracts, (ii) issuers of Pioneer's
investment securities and (iii) purchasers of Pioneer's oil, NGL
and gas production and downstream sales of purchased commodities;
uncertainties about estimates of reserves, identification of
drilling locations and the ability to add proved reserves in the
future; the assumptions underlying forecasts, including forecasts
of production, operating cash flow, well costs, capital
expenditures, rates of return, expenses, and cash flow from
downstream purchases and sales of oil and gas, net of firm
transportation commitments; tax rates; quality of technical data;
environmental and weather risks, including the possible impacts of
climate change on the Company's operations and demand for its
products; cybersecurity risks; the risks associated with the
ownership and operation of the Company's water services business
and acts of war or terrorism. These and other risks are described
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2022 and other filings with the United States
Securities and Exchange Commission. In addition, the Company may be
subject to currently unforeseen risks that may have a materially
adverse effect on it. Accordingly, no assurances can be given that
the actual events and results will not be materially different than
the anticipated results described in the forward-looking
statements. The Company undertakes no duty to publicly update these
statements except as required by law.
Footnote 1: Excludes acquisitions, asset retirement obligations,
capitalized interest, geological and geophysical G&A,
information technology, corporate facilities and vehicles.
Footnote 2: Second quarter 2023 free cash flow is a non-GAAP
financial measure. As used by the Company, free cash flow is
defined as net cash provided by operating activities, adjusted for
changes in operating assets and liabilities, less capital
expenditures1. See the supplemental schedules for a reconciliation
of second quarter 2023 free cash flow to the comparable GAAP
number.
Footnote 3: Forecasted free cash flow numbers are non-GAAP
financial measures. Due to their forward-looking nature, management
cannot reliably predict certain of the necessary components of the
most directly comparable forward-looking GAAP measures, such as
working capital changes. Accordingly, Pioneer is unable to present
a quantitative reconciliation of such forward-looking non-GAAP
financial measures to their most directly comparable
forward-looking GAAP financial measures. Amounts excluded from this
non-GAAP measure in future periods could be significant.
Footnote 4: Calculated by dividing the Company's annualized
third quarter 2023 total dividend per share by the Company's
closing stock price on July 28, 2023. Future dividends, whether
base or variable, are authorized and determined by the Company's
Board of Directors in its sole discretion. Decisions regarding the
payment of dividends are subject to a number of considerations at
the time, including without limitation the Company's liquidity and
capital resources, the Company's results of operations and
anticipated future results of operations, the level of cash
reserves the Company maintains to fund future capital expenditures
or other needs, and other factors that the Board of Directors deems
relevant. The Company can provide no assurance that dividends will
be authorized or declared in the future or the amount of any future
dividends. Any future variable dividends, if declared and paid,
will by their nature fluctuate based on the Company's free cash
flow and share repurchases, which will depend on a number of
factors beyond the Company's control, including commodity prices
and the Company's stock price.
Footnote 5: Forecasted cash flow is a non-GAAP financial
measure. The 2023 estimated cash flow number represents January
through December 2023 actual and forecasted operating cash flow
(before working capital changes) based on strip pricing and
internal forecasts of 2023 production. Due to their forward-looking
nature, management cannot reliably predict certain of the necessary
components of the most directly comparable forward-looking GAAP
measures, such as working capital changes. Accordingly, Pioneer is
unable to present a quantitative reconciliation of such
forward-looking non-GAAP financial measures to their most directly
comparable forward-looking GAAP financial measures. Amounts
excluded from this non-GAAP measure in future periods could be
significant.
Footnote 6: Includes Scope 1 and Scope 2 emissions.
Note: Estimates of future results, including cash flow and free
cash flow, are based on the Company's internal financial model
prepared by management and used to assist in the management of its
business. Pioneer's financial models are not prepared with a view
to public disclosure or compliance with GAAP, any guidelines of the
United States Securities and Exchange Commission or any other body.
The financial models reflect numerous assumptions, in addition to
those noted in this news release, with respect to general business,
economic, market and financial conditions and other matters. These
assumptions regarding future events are difficult, if not
impossible to predict, and many are beyond Pioneer's control.
Accordingly, there can be no assurance that the assumptions made by
management in preparing the financial models will prove accurate.
It is expected that there will be differences between actual and
estimated or modeled results, and actual results may be materially
greater or less than those contained in the Company's financial
models.
PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
June 30, 2023
December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
91
$
1,032
Accounts receivable, net
1,513
1,853
Inventories
448
424
Investment in affiliate
137
172
Prepaids and other
153
245
Total current assets
2,342
3,726
Oil and gas properties, using the
successful efforts method of accounting
46,924
44,473
Accumulated depletion, depreciation and
amortization
(16,174
)
(14,843
)
Total oil and gas properties, net
30,750
29,630
Other property and equipment, net
1,624
1,658
Operating lease right-of-use assets
366
340
Goodwill
242
243
Other assets
170
143
$
35,494
$
35,740
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
2,380
$
2,637
Interest payable
48
33
Income taxes payable
25
63
Current portion of debt
311
779
Derivatives
72
44
Operating leases
145
125
Other
218
206
Total current liabilities
3,199
3,887
Long-term debt
5,010
4,125
Derivatives
85
96
Deferred income taxes
4,102
3,867
Operating leases
243
236
Other liabilities
855
988
Equity
22,000
22,541
$
35,494
$
35,740
PIONEER NATURAL RESOURCES
COMPANY
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share
data)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenues and other income:
Oil and gas
$
2,977
$
4,639
$
6,142
$
8,570
Sales of purchased commodities
1,583
2,366
3,014
4,583
Interest and other income (loss), net
43
(56
)
7
69
Derivative loss, net
(1
)
(65
)
(45
)
(200
)
Gain (loss) on disposition of assets,
net
(3
)
36
22
70
4,599
6,920
9,140
13,092
Costs and expenses:
Oil and gas production
487
478
942
894
Production and ad valorem taxes
185
271
393
495
Depletion, depreciation and
amortization
695
620
1,359
1,234
Purchased commodities
1,642
2,382
3,127
4,534
Exploration and abandonments
23
11
38
24
General and administrative
88
88
172
161
Accretion of discount on asset retirement
obligations
4
4
8
8
Interest
41
33
70
70
Other
27
5
67
83
3,192
3,892
6,176
7,503
Income before income taxes
1,407
3,028
2,964
5,589
Income tax provision
(305
)
(657
)
(640
)
(1,209
)
Net income attributable to common
stockholders
$
1,102
$
2,371
$
2,324
$
4,380
Net income per share attributable to
common stockholders:
Basic
$
4.71
$
9.78
$
9.90
$
18.03
Diluted
$
4.55
$
9.30
$
9.55
$
17.15
Weighted average shares outstanding:
Basic
234
242
234
242
Diluted
242
254
243
255
PIONEER NATURAL RESOURCES
COMPANY
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Cash flows from operating activities:
Net income
$
1,102
$
2,371
$
2,324
$
4,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion, depreciation and
amortization
695
620
1,359
1,234
Exploration expenses
1
1
1
6
Deferred income taxes
113
513
223
1,045
(Gain) loss on disposition of assets,
net
3
(36
)
(22
)
(70
)
Loss on early extinguishment of debt
—
—
—
47
Accretion of discount on asset retirement
obligations
4
4
8
8
Interest expense
3
2
6
5
Derivative-related activity
(18
)
(27
)
18
40
Amortization of stock-based
compensation
27
20
50
39
Investment valuation adjustments
(18
)
65
35
(49
)
Other
32
14
84
41
Changes in operating assets and
liabilities:
Accounts receivable
(123
)
38
338
(659
)
Inventories
39
(115
)
(24
)
(241
)
Other assets
114
(44
)
51
(44
)
Accounts payable
38
(90
)
(342
)
88
Interest payable
30
17
14
(13
)
Income taxes payable
(263
)
(25
)
(38
)
(8
)
Other liabilities
(66
)
(110
)
(58
)
(50
)
Net cash provided by operating
activities
1,713
3,218
4,027
5,799
Net cash used in investing activities
(1,262
)
(755
)
(2,466
)
(2,065
)
Net cash used in financing activities
(1,552
)
(2,272
)
(2,502
)
(5,033
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(1,101
)
191
(941
)
(1,299
)
Cash, cash equivalents and restricted
cash, beginning of period
1,192
2,394
1,032
3,884
Cash, cash equivalents and restricted
cash, end of period
$
91
$
2,585
$
91
$
2,585
PIONEER NATURAL RESOURCES
COMPANY
UNAUDITED SUMMARY PRODUCTION,
PRICE AND MARGIN DATA
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Average Daily Sales Volumes:
Oil (Bbls)
369,070
347,964
365,214
351,597
Natural gas liquids ("NGLs") (Bbls)
181,098
160,183
174,329
156,576
Gas (Mcf)
963,064
808,181
936,595
792,847
Total (BOE)
710,678
642,844
695,643
640,314
Average Prices:
Oil per Bbl
$
72.90
$
110.56
$
74.00
$
102.54
NGLs per Bbl
$
22.43
$
44.21
$
24.76
$
42.83
Gas per Mcf
$
1.81
$
6.72
$
2.77
$
5.79
Total per BOE
$
46.03
$
79.31
$
48.78
$
73.94
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Margin Data ($ per BOE):
Average price
$
46.03
$
79.31
$
48.78
$
73.94
Production costs
(7.53
)
(8.18
)
(7.47
)
(7.72
)
Production and ad valorem taxes
(2.86
)
(4.63
)
(3.13
)
(4.27
)
$
35.64
$
66.50
$
38.18
$
61.95
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTARY EARNINGS PER SHARE INFORMATION
(in millions, except per share data)
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 stockholders, the Company's basic net income per share
attributable to common stockholders is computed as (i) net income
attributable to common stockholders, (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 stockholders is computed as (i) basic net
income attributable to common stockholders, (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 stockholders, securities or other contracts
to issue common stock would be dilutive to loss per share;
therefore, conversion into common stock is assumed not to
occur.
The Company's net income attributable to common stockholders is
reconciled to basic and diluted net income attributable to common
stockholders as follows:
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income attributable to common
stockholders
$
1,102
$
2,371
$
2,324
$
4,380
Participating share-based earnings
(2
)
(6
)
(5
)
(11
)
Basic net income attributable to common
stockholders
1,100
2,365
2,319
4,369
Adjustment to after-tax interest expense
to reflect the dilutive impact attributable to convertible senior
notes
1
1
2
3
Diluted net income attributable to common
stockholders
$
1,101
$
2,366
$
2,321
$
4,372
Basic weighted average shares
outstanding
234
242
234
242
Convertible senior notes dilution
8
12
9
13
Diluted weighted average shares
outstanding
242
254
243
255
Net income per share attributable to
common stockholders:
Basic
$
4.71
$
9.78
$
9.90
$
18.03
Diluted
$
4.55
$
9.30
$
9.55
$
17.15
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (in
millions)
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income
$
1,102
$
2,371
$
2,324
$
4,380
Depletion, depreciation and
amortization
695
620
1,359
1,234
Exploration and abandonments
23
11
38
24
Accretion of discount on asset retirement
obligations
4
4
8
8
Interest expense
41
33
70
70
Income tax provision
305
657
640
1,209
(Gain) loss on disposition of assets,
net
3
(36
)
(22
)
(70
)
Loss on early extinguishment of debt
—
—
—
47
Derivative-related activity
(18
)
(27
)
18
40
Amortization of stock-based
compensation
27
20
50
39
Investment valuation adjustments
(18
)
65
35
(49
)
Other
32
14
84
41
EBITDAX (a)
2,196
3,732
4,604
6,973
Cash interest expense
(38
)
(31
)
(64
)
(65
)
Current income tax provision
(192
)
(144
)
(417
)
(164
)
Discretionary cash flow (b)
1,966
3,557
4,123
6,744
Cash exploration expense
(22
)
(10
)
(37
)
(18
)
Changes in operating assets and
liabilities
(231
)
(329
)
(59
)
(927
)
Net cash provided by operating
activities
$
1,713
$
3,218
$
4,027
$
5,799
_____________
(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; noncash amortization of
stock-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
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(continued) (in millions, except per share data)
Adjusted income attributable to common stockholders 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 stockholders (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 stockholders 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 June 30,
2023
Ref
After-tax
Amounts
Per Diluted
Share
(in millions)
Net income attributable to common
stockholders
$
1,102
$
4.55
Noncash MTM adjustments:
ProPetro investment gain ($18 million
pretax)
(14
)
(0.06
)
Derivative gain, net ($18 million
pretax)
(14
)
(0.06
)
Adjusted income excluding noncash MTM
adjustments
1,074
4.43
Unusual items:
Impairment of long-lived assets ($11
million pretax)
(a)
9
0.04
Loss on disposition of assets ($4 million
pretax)
(b)
3
0.01
Net loss on settlement of convertible debt
conversion option derivatives ($3 million pretax)
(c)
2
0.01
Adjusted income excluding noncash MTM
adjustments and unusual items
$
1,088
$
4.49
_____________
(a)
Represents impairment expense of
an unoccupied field office.
(b)
Represents a loss on nonmonetary
transactions in which the Company exchanged ownership interests in
certain developed and undeveloped properties in the Midland Basin
with unaffiliated third parties.
(c)
Represents a realized net
derivative loss on settled convertible debt conversion options.
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(continued)
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 June 30,
2023
Six Months Ended June 30,
2023
(in millions)
Net cash provided by operating
activities
$
1,713
$
4,027
Changes in operating assets and
liabilities
231
59
Less: Capital expenditures (a)
(1,202
)
(2,396
)
Free cash flow
$
742
$
1,690
_____________
(a)
Capital expenditures are calculated as
follows:
Three Months Ended June 30,
2023
Six Months Ended June 30,
2023
(in millions)
Costs incurred
$
1,219
$
2,602
Excluded items (a)
(34
)
(232
)
Other property, plant and equipment
capital (b)
17
26
Capital expenditures
$
1,202
$
2,396
_____________
(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
UNAUDITED SUPPLEMENTAL INFORMATION Open Derivative
Positions as of June 30, 2023
Commodity derivatives. As of June 30, 2023, the Company's
outstanding commodity derivative contracts include 3,000 barrels of
oil per day of Brent basis swaps for January 2024 through December
2024. The basis swap contracts fix the basis differential between
the West Texas Intermediate ("WTI") index price (the price at which
the Company buys Midland Basin oil for transport to the Gulf Coast)
and the Brent index price (the price at which a portion of the
Midland Basin purchased oil is sold in the Gulf Coast market) at a
weighted average differential of $4.33.
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 June 30,
2023, $71 million of the principal amount of the Company's
Convertible Notes remained in the Settlement Period.
PIONEER NATURAL RESOURCES
COMPANY
UNAUDITED SUPPLEMENTAL
INFORMATION (continued)
Derivative Gain (Loss),
Net
Three Months Ended June 30,
2023
Six Months Ended June 30,
2023
(in millions)
Noncash changes in fair value:
Marketing derivative gain (loss), net
$
20
$
(16
)
Convertible debt conversion option
derivative loss, net
(2
)
(2
)
Total noncash derivative gain (loss),
net
18
(18
)
Cash payments on settled derivative
instruments:
Marketing derivative payments
(16
)
(31
)
Convertible debt conversion option
derivative receipts (payments), net
(3
)
4
Total cash payments on settled derivative
instruments, net
(19
)
(27
)
Total derivative loss, net
$
(1
)
$
(45
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230801423212/en/
Pioneer Natural Resources Company Contacts:
Investors Greg Wright - 972-969-1770 Chris Leypoldt -
972-969-5834
Media and Public Affairs Christina Voss -
972-969-5706
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