Pioneer gains $879mn from oil, gas, NGL hedges

Pioneer Natural Resources made a net gain of $879mn from hedges in 2015, cushioning the impact of the sharp plunge in crude prices.

For the full year the independent made a net gain of $744mn from its oil derivatives, $114mn from natural gas hedges and $18mn from natural gas liquids (NGL) hedges. In the fourth quarter the net gain was $262mn, of which $240mn was from oil, $29mn from gas and $11mn from NGL.

Hedging has helped Pioneer stand out as one of the few US shale-focused producers that has added rigs and projected steady output growth despite the plummet in oil prices to 12-year lows. Its net income rose to $646mn in the third-quarter from $374mn a year earlier. Without the effect gains from derivatives and one-time items, it posted a net loss of $1mn.

Unfazed by the fall in oil to sub-$30/bl, Pioneer is continuing with its hedging strategy into 2016. That includes 35,000 b/d under a swap contract at a WTI price of $59.88/bl for both the first and second quarter of this year. In addition, it has 63,000 b/d covered under a collar contract for the first quarter at a WTI ceiling price of $73.29/bl and a floor of $63.04/bl. For the second quarter, it has 68,000 b/d at a WTI ceiling of $72.43/bl and a floor of $62.08/bl.

Earlier this month, the independent said it is boosting its production guidance for the fourth quarter of 2015, driven by new rigs in its Spraberry/Wolfcamp acreage in the Permian basin. Output should be 213,000–215,000 b/d of oil equivalent (boe/d), higher than previous guidance of 206,000-211,000 boe/d.

Pioneer expects full-year 2015 production growth of 12pc compared to 2014, an increase from previous guidance of 11pc. Growth in 2016 is expected to be 10pc-15pc compared to 2015.

The company plans to raise its 2016 capital expenditure (capex) budget to $2.4bn-$2.6bn from $2.2bn in 2015.