Shale producers Pioneer Natural and Devon are cutting budgets due to a significant drop in profits.
Shale producers Pioneer Natural and Devon are cutting budgets due to a significant drop in profits.
Shale Producers Pioneer Natural Resources Co and Devon Energy Corp Facing Challenges Amidst Falling Oil and Gas Prices
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August 1, 2023 – In the face of falling oil and gas prices, shale producers Pioneer Natural Resources Co and Devon Energy Corp are tightening their budgets and warning of lower drilling and completions activity in the coming months. This comes after a drop in profits during the second quarter, forcing these companies to adapt to the changing landscape of the industry.
U.S. shale producers have been forced to reduce the number of rigs in operation and delay well completions as profits have fallen from bumper 2022 levels after crude prices eased from multi-year highs. Both Pioneer and Devon, two prominent players in the shale business, have been impacted by these changes and are taking measures to navigate the challenging circumstances.
Pioneer, a top producer in the Permian shale basin, has made significant adjustments to its budget for 2023. The company has cut its drilling and completions budget by $125 million, now ranging between $4.375 billion to $4.575 billion. Furthermore, Pioneer plans to operate an average of 23 to 25 horizontal drilling rigs in Permian’s Midland basin for the year, down by one from its previous forecast. Additionally, the company expects to place 490 to 520 wells on production, falling short of the April forecast of 500 to 530 wells.
Devon, operating in Permian’s Delaware basin, is also experiencing the impact of falling prices. The company forecasts a capital spending of about $900 million in the third quarter, lower than the second quarter, largely due to dropping one temporary fracking crew from the basin. The challenges faced by both Pioneer and Devon are indicative of the broader trends impacting the shale industry as a whole.
The weakening North American oilfield activity in the second half of the year has been flagged by top oilfield service companies. However, recent strength in oil prices has led some companies to forecast a recovery in drilling and fracking later this year. These contrasting viewpoints reflect the uncertainty and volatility in the industry, making it challenging for companies like Pioneer and Devon to plan for the future.
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Despite the challenges, both Pioneer and Devon have maintained their production forecasts. Devon expects to produce 643,000 to 663,000 barrels of oil equivalent per day (boepd) throughout the year. On the other hand, Pioneer raised its output estimate by 3% at its midpoint, projecting a range of 697,000 to 717,000 boepd. While these projections offer some optimism, the companies are still cautious about the changing market conditions.
In terms of financial performance, Pioneer’s second-quarter profit more than halved to $4.49, but it beat analysts’ consensus estimate of $4.18. This positive result has boosted Pioneer’s shares by 1.2% to $227.90 in extended trading. Conversely, Devon’s adjusted income fell over 50% to $1.18, which is in line with analysts’ estimates. As a result, the company’s shares fell 2.2% to $52.50.
Navigating the unpredictable landscape of oil and gas markets is undoubtedly challenging for shale producers like Pioneer Natural Resources Co and Devon Energy Corp. Their adaptation strategies will likely enable them to weather the storm caused by falling prices. As the industry evolves, these companies will continue to refine their approaches to ensure sustained growth and profitability.
