Dallas-based Pioneer Natural Resources Co. stopped drilling natural gas wells in its core Raton Basin and Midcontinent properties in the first six months of this year, but it continues to test a smattering of potential U.S. gas plays, including the Eagle Ford Shale in South Texas, the company said late Tuesday.
The independent reported a net loss of $92 million (minus 80 cents/share) from a year ago, and revenues plunged 42% to $371 million. Excluding a noncash derivatives loss of $110 million, Pioneer said adjusted income in 2Q2009 would have been $18 million (16 cents/share).
Pioneer plans to focus most of its spending on oil prospects in the United States and internationally into 2010, said CEO Scott Sheffield. The sale of its remaining Gulf of Mexico assets should be completed by the end of September, and its capital spending is down $300 million from a year ago. However, production still is expected to grow at least 5% from 2008, the CEO said.
“The improving outlook for oil prices, coupled with our strong derivative positions, provide confidence in achieving cash flow of approximately $1 billion in 2010,” Sheffield said. The company will launch an “oil-focused” drilling program at the beginning of 2010, but gas development won’t disappear, he said.
Pioneer plans to “actively assess the resource potential of the Eagle Ford Shale play” in South Texas, said Sheffield. The first horizontal well in the play, where the company holds 310,000 acres gross, was fracture stimulated in the quarter. There were mechanical problems, but the well still delivered an initial flow rate of 3.7 MMcfe/d with only two of five fracture stimulation stages contributing, the company said.
A multi-well drilling program will be implemented in the Eagle Ford Shale over the next two months to delineate the play and assess its resource potential. However, because of low gas prices, production across the entire South Texas leasehold, which extends across the Edwards Trend, is expected to decline 5% year/year. The leasehold was producing 82 MMcf/d at the end of last year.
Gas drilling in Pioneer’s other gas-rich domestic plays — the Raton Basin of the Rockies and the Midcontinent — came to a halt at the beginning of this year, the company said. The pullback resulted in a 4% reduction in Raton’s quarterly output, which fell to 191 MMcf/d. In the Midcontinent, gas production fell 8% to 111 MMcf/d from the year-ago period.
The “drilling program is curtailed until gas prices improve,” Pioneer said.
Pioneer’s total gas sales in 2Q2009 averaged 391 MMcf/d, while oil sales averaged 31,406 b/d. Natural gas liquids sales on average were 18,921 b/d. The average realized price for gas was $3.43/Mcf, including 35 cents/Mcf related to deferred revenue from volumetric production payments.
Management is “aggressively” implementing initiatives to reduce lease operating expenses (LOE) this year, said Sheffield. LOE in 2Q2009 was 15% lower sequentially from 1Q2009 on “significant reductions in electricity, water disposal, well servicing, facilities and compression costs.”
Since the end of September, Pioneer said it has reduced more than 30% of its domestic drilling and completion costs because of current market conditions. General and administrative expenses were down 4% from the first three months of this year, again reflecting a focus on reducing costs.
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