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Pioneer's Case Hints At Oil Market Trends


Given productivity gains in resource recoveries and operations, fewer rigs are needed in the future.

Pioneer's contiguous acreage in the Wolfcamp/Spraberry allows longer laterals to be drilled, which enhances recoveries and economics.

Oil prices appear to have bottomed out, and a moderately-paced production era may be upon the shale industry operators for a period.

Oil demand predictions combined with oil supply conditions speak to a potentially tightening market in the second half of 2016.

After the earnings call by Pioneer Natural Resources (NYSE:PXD), the road ahead for the firm in a doldrums pricing environment appears more stable. In spite of lower oil prices bouncing around the mid- to upper-$40s since early September and $50-$60 in June and July, CEO Sheffield believes the bottom has been reached. As long as the bottom isn't breached, their 2016 plans will resemble current 2015 plans.

Pioneer's capital program and production growth can be characterized as moderate growth mode. Pioneer's estimated capital expenditure for 2015 is just under $2 billion. Seventy-five percent will place in the Spraberry/Wolfcamp fields, where Pioneer has an outsized position relative to other peers. (I don't know if any other firm can claim a 100-year inventory.) For 2015, production results reveal an 11% increase over an expected 10%. They will fund their capital program from cash on hand and the proceeds of a recent Eagle Ford midstream asset divestiture.

From the call, production specifics were:

Third quarter production [was] 211,000 barrels of oil equivalent per day, 52% oil [of Pioneer's total production]. It was 7% above the second quarter and above the top end of guidance of 205,000 to 210,000 [BOE per day] for that quarter. Obviously [that was] driven by the...