Pioneer Jumps Most in Three Months After Lifting Output Goal

  • Shale driller posted stronger-than-expected quarterly result
  • Mark-to-market derivatives loss widened to $229 million

Pioneer Natural Resources Co., which has been ramping up drilling while rivals pull back, climbed the most in three months after increasing its full-year output target and exceeding earnings expectations.

Pioneer’s shares rose as much as 5.3 percent, the biggest intraday advance since April 26. Prices were up 3 percent to $155.20 at 10:17 a.m. in New York. Oil and natural gas production growth from Pioneer’s wells will top 13 percent for the year, up from a previous forecast of 12 percent, as gushers in Texas shale fields are pumping more crude than expected, the Irving, Texas-based company said in a statement Wednesday after markets closed.

The supply outlook overshadowed a quarterly loss that widened to $268 million, or $1.63 a share, from a shortfall of $218 million, or $1.46, a year earlier. Excluding one-time items related to the value of derivatives used to shield the company from market volatility, the per-share loss was 22 cents, less severe than the 34-cent average loss estimated in a Bloomberg survey of 37 analysts.

“Overall, very strong showing,” Pearce Hammond, an analyst at Simmons & Company International Ltd., said in a note to clients.

Pioneer booked $229 million in losses on the value of hedging instruments such as swaps and options for the quarter, 16 percent wider than the $197 million loss booked a year earlier, according to the statement.

Hedged Production

As of last month, the company had hedged 85 percent of its expected 2016 crude production and 50 percent of next year’s oil supply; for its gas, the respective figures were 70 percent and 25 percent, it said in a June 23 presentation published on its website.

West Texas Intermediate crude averaged $45.64 a barrel during the second quarter, down 21 percent from a year earlier but 75 percent higher than the 12-year low recorded in February, according to data compiled by Bloomberg.

To cope with the collapse in crude prices since mid 2014, Pioneer and other oil explorers have been trying to lower operating costs. Pioneer’s cost to produce a barrel of oil declined by 26 percent during the first six months of this year compared with the first half of 2015, according to the statement.

Pioneer agreed last month to buy West Texas drilling rights from Devon Energy Corp. for $435 million, predicting gushers in that zone will generate pre-tax returns of 50 percent or more. Pioneer sold about 6 million new shares to finance the deal and boosted its full-year drilling budget by $100 million to $2.1 billion. The company’s rig fleet in the area of the acquisition will be increased by 42 percent later this year.

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