Pioneer CEO: Oil will likely stay above $100/bbl for 5-plus years

Pioneer Natural Resources Corp. chief executive officer Scott Sheffield got to the point within 40 seconds of starting his formal remarks at an investor conference hosted by JPMorgan.

“We’re [Pioneer] only going to grow 5% per year; I’ve been asked that in every meeting today,” Sheffield told attendees at the June 22 event. “We’re not going to grow 7, 8, 9, 10, 12%," he said, noting that the company told the Biden administration the same thing when asked to increase production. "We said no to them also," Sheffield continued. "We’re trying to get them to understand the model and the reasons the model changed," he said, in discussing a past model of boom-bust cycles in which the oil and gas industry responded by ramping up production that ended in oversupply. 

Sheffield, who helped launch Pioneer in the late 1990s, said the Dallas-based company’s oil production in the second quarter will be in its previously provided range of 623,000-648,000 boe/d and that investors can expect it to further grow its dividend. Helping drive that trend, he said, are his expectations that oil prices will not retreat much if at all for much of this decade.

Sheffield said it wouldn't surprise him if oil prices stay above $100/bbl over the next 5 years or more, adding that he views stimulus spending and supply chain constraints as the major drivers behind a possible recession.

Sheffield is forecasting that oil prices will stay in the triple digits for the foreseeable future despite his team’s estimation that production from the Permian basin is likely to steadily grow to 8 million boe/d by 2030 from about 5 million boe/d.

“I’m optimistic about oil. I’m optimistic about gas,” he said. “I don’t think the US shale model is going to change," he said, speaking of the more recent capital-discipline focused industry.

Oil changing hands at or near its current levels, Sheffield added, is not going to materially hurt the economy although he acknowledged the political considerations behind the public debate about production and refining capacity and proposals for tax holidays and windfall profits tax. But, he added, gasoline purchases account for smaller shares of consumers’ budgets these days than in past economic cycles.

“I’m a firm believer that $100, $110, $120 oil is not going to cause demand destruction,” he said. “People forget that between 2010 and 2014, we had $100, $110 oil. We saw very little demand destruction at that point in time.”

Addressing the competitive landscape, Sheffield said chatter about private operators materially moving the market is premature, adding that many of those operators are small, don’t own prime acreage, and are not in a position to invest in new rigs. Asked about a possible deal-making wave, he said inventory levels – Pioneer claims to have more than 20 years of high-quality inventory – will be the key indicator to watch.

“You can’t find buyers and sellers in today’s marketplace,” Sheffield said. “I see the next step of M&A [mergers and acquisitions] as people running out inventory over the next 5 years. People will consolidate regardless of the oil price environment.”

Shares of Pioneer (Ticker: PXD) fell more than 3% June 22 to roughly $229 but were recovering June 23. Year to date, shares have risen more than 20%, growing Pioneer’s market capitalization to more than $55 billion.