Pioneer Natural Resources Company (PXD) lowers its production guidance for the first quarter of 2011 to reflect severe weather impacts on its operations during the first half of the quarter.
The company slashed its first quarter output target to a range of 111–113 thousand barrels of oil equivalent per day (MBoe/d) from its previous expectation of 114–118 MBoe/d, after assessing the impact of severe weather-related downtime during the first half of February 2011. However, management maintained its full-year production guidance at 125–130 MBoe/d, representing a year-over-year increase of 15–19%, fueled by increased drilling operations in Spraberry and Eagle Ford shales.
Weather hindrances affected the company’s operations in Texas, Kansas and Colorado as pipeline freeze-ups, power outages and limited access to well locations reduced production by 2 MBoe/d during the first quarter.
Additionally, a delayed turnaround in March 2011 at a third-party fractionator is expected to hold back some natural gas liquid (NGL) volumes in the Mid-Continent region. This will likely reduce the company’s overall production by an additional 1 MBoe/d.
Pioneer now expects its first quarter 2011 production costs in the range of $13–$14 per barrel oil equivalent (Boe) versus its prior expectation of $11.75–$13.75 per Boe as a result of the decreased production and associated maintenance and repairs. However, Pioneer will also witness a one-time gain in the range of $630 million to $650 million related to the previously announced sale of all of the stock of Pioneer’s Tunisia subsidiaries.
Last quarter, the company registered better-than-expected results on the back of improved crude prices, as well as growth in the Spraberry field and Eagle Ford Shale. The Spraberry trend is the largest operating area for Pioneer. The company continues to speed up its activities in the region through leasehold acquisitions and development of the field.
Irving, Texas-based Pioneer Natural Resources Company is an independent oil and gas exploration and production company with approximately 1,011 million barrels of oil equivalent of proved reserves as of December 31, 2010. Production averaged 109,399 oil-equivalent barrels per day during 2010, comprising 56% gas and 44% crude oil/ liquid hydrocarbons. The company competes with Apache Corp. (APA) and Chesapeake Energy Corporation (CHK).
We maintain our long-term Neutral recommendation for the company. Pioneer holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
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