Pioneer Natural Resources Co. will cut its drilling program in half in 2016 in response to the commodity price outlook, but with a strong balance sheet and improved drilling efficiency, executives said the company is well positioned to endure the downturn and capitalize when prices recover.

Detailing its 4Q2015 results and 2016 capital guidance this week, the Irving, TX-based exploration and production (E&P) company said it will scale down from 24 rigs as of Dec. 31 to 12 by mid-2016, focusing on drilling its acreage along the Spraberry Trend Area Field and Wolfcamp Shale in the Permian Basin.

The company said it will drop from six rigs in the Eagle Ford Shale to none during 1Q2016, with two rigs released last month. It also plans to drop to zero rigs by mid-2016 in the southern area of its Spraberry/Wolfcamp acreage where it entered into a joint venture (JV) with Sinochem Petroleum USA LLC (see NGI, Feb. 4, 2013). Pioneer will also move two pressure-pumping fleets from the Eagle Ford to the Spraberry/Wolfcamp.

Pioneer plans $2 billion in capital expenditures for 2016, down from 2015 guidance of $2.4-2.6 billion and actual spending of about $2.2 billion.

Between cash on the balance sheet, revenue from asset sales and an “additional $1.6 billion from a recent equity offering, we essentially have zero debt today,” CEO Scott Sheffield told analysts during the company’s 4Q2015 earnings conference call Thursday. The company’s financial position is such that if “prices recover by mid 2016, if they recover late 2016, if they recover early 2017, we have tremendous firepower to start up faster than anybody else and get back to our 15% growth profile over the next several years.”

The company expects to bring about 230 wells into production in 2016, most of them in the northern Spraberry/Wolfcamp acreage.

COO Timothy Dove said Pioneer continued a trend of quarter-to-quarter sequential improvement in drilling efficiency throughout 2015, improving from $1,300/perforated lateral foot in 4Q2014 to $905/perforated lateral foot in 4Q2015. Average cumulative production per well increased during the same time frame, reaching 1,250 boe/d in 4Q2015, compared with 830 boe/d in the year-ago period.

Pioneer has achieved “dramatic improvement as a result of our capital efficiency and optimization programs,” Dove said. “So it does give us confidence that we are, in fact, increasing capital efficiency through time, and that allows us to continue drilling today, albeit at a slower rate based on the commodity price deck.”

The E&P will spend about $45 million in gas processing in 2016, Dove said, focusing on completing its Buffalo plant in Martin County, TX, in the second quarter, with “no new plants after that in the foreseeable future.” Dove said a previously announced deal with the city of Odessa to deliver effluent water over a 20-mile pipeline from the city to some of Pioneer’s Midland County, TX, drilling locations started up last week, an arrangement expected to save around $100,000/well. Negotiations continue on a similar arrangement with the city of Midland, he said.

Pioneer reported 4Q2015 production of 214,738 boe/d, compared with 200,953 boe/d in the year-ago quarter. Full-year 2015 production averaged 204,050 boe/d, compared with 182,237 boe/d in 2014. Prices for the quarter averaged $37.92/bbl for oil, $12.16/bbl for natural gas liquids (NGLs) and $2.03/Mcf for natural gas. That’s compared with $66.64/bbl, $18.50/bbl and $3.60/Mcf respectively in the year-ago period.

The company said it is approximately 85% hedged on its oil volumes in 2016 and 20% hedged in 2017. The company is 70% hedged in 2016 on its natural gas volumes.

Pioneer reported a net loss for 4Q2015 of $623 million (minus $4.17/share), compared with a net income of $431 million ($2.91/share) in the year-ago quarter. The loss was driven in part by $846 million in impairments on oil and gas properties and $382 million in depletion, depreciation and amortization.

For full-year 2015, the E&P reported a net loss of $273 million (minus $1.79/share), compared with net income of $930 million for full-year 2014 ($7.17/share).