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Pioneer to continue with monthly rig additions, even with lower oil prices: CEO
DateTime: 2015-8-6 13:51:12    

Pioneer Natural Resources said it will stick to its plan to add two rigs a month in the northern Spraberry/Wolfcamp formation in second half of 2015, its CEO said Wednesday, even as the price of oil has dropped in recent weeks.

Crude prices are now in the mid-$40s/barrel, down more than 20% compared with about six weeks ago, and less than half the level of mid-2014 prices that topped $100/b.

But "internal rates of return are most important in this type of price environment," Pioneer CEO Scott Sheffield said during a company earnings conference call.

At current strip prices, the company's returns for wells in its Spraberry/Wolfcamp play in West Texas are 45%-60%, Sheffield said. And "even in a flat $50 [/b] environment, we still get a 30%-35% return."

Pioneer has already added two rigs in the play in both July and August. Pioneer also will add eight rigs in the first quarter of 2016, six of them in the northern Spraberry/Wolfcamp and two in the Eagle Ford Shale in south Texas.

The rig additions should bring the company's horizontal drilling activity back to the level prior to the oil price collapse in late 2014, and is expected to result in compound annual production growth of over 15% and oil output growth of more than 20% in the 2016-2018 period.

Pioneer produced 197,000 b/d of oil equivalent in the second quarter of 2015, up 12% from 176,000 boe/d in the same quarter a year ago. Some 51% of the most recent period's output was oil.

In addition, the company continued to export condensate from its Eagle Ford Shale operations, with 20,000 b/d gross shipped out in Q2, he said. Pioneer also exported 6,000 b/d of condensate in June on a spot basis.

The price of received for the exported condensate is a significant improvement on current US prices, he said.

Condensate is a form of ultralight oil that even under a general US ban on oil exports can be shipped overseas if it has been minimally processed through a distillation unit.

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