Pioneer CEO: Too many US output forecasts ‘are way too high’

Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield said May 5 he is growing more convinced that oil prices will remain high for the foreseeable future because companies won’t be able to grow production at the pace some observers are expecting.

Asked on Pioneer’s first-quarter earnings conference call about his outlook for US oil production at end 2022, Sheffield told analysts and investors he isn’t in the camp that is forecasting a year-over-year increase of 1 million b/d or more. Pointing to data that shows rig counts started climbing in past months but overall production is staying flat, Sheffield said too many factors are conspiring to keep output from growing as much as some in the market and watching/cajoling the market would like.

“We should have already seen some production growth. And so I think too many think tank firms are way too high on US production,” he said. “And then you put on top of it what's happening now in regard to labor constraints, frac fleet constraints, inflation constraints. I just think it's going to be tough to hit some of the numbers. It […] makes me even more bullish about some of the oil price numbers that are out there.”

Sheffield characterized Pioneer’s production levels – nearly 638,000 boe/d in the first quarter versus 687,143 in a bumper fourth quarter, and an expected 623,000-648,000 boe/d in the second quarter – as “resilient” and said he and his team remain focused primarily on returning capital to the company’s shareholders. The Pioneer board this week authorized a base-plus-variable quarterly dividend totaling $7.38/share, which was nearly double first-quarter's payout and which represents an annualized yield of about 13%. For the quarter, Pioneer posted a net profit of $2.0 billion compared to a small loss in the prior-year period and generated nearly $2.6 billion from operations versus $377 million in early 2021.

Pioneer’s production was disrupted in the first quarter by the outage of a supplier’s sand mine, an event that has carried over to this quarter. To help offset those shortfalls and stay on track with its annual goals, the company has temporarily added a frac fleet. For the year, it plans to run an average 22-24 rigs in the Midland basin and place 475-505 wells on production.

Shares of Pioneer (Ticker: PXD) rose about 1.4% to $256.42 May 5. Year to date, they have climbed more than 35%, growing the company’s market capitalization to nearly $62 billion.