Texas-based Pioneer Natural Resources is slashing its 2020 capital budget of $3.0-3.3bn by nearly 45% owing to lower oil prices and the global uncertainty around macroeconomics.
Following the reduction, the 2020 drilling, completion, and facilities capital budget for the company comes down to $1.6-1.8bn.
The company has been engaged in exploration and production activities in the Permian Basin.
In line with the reduced budget, the company is bringing down its budgeted water infrastructure spending to nearly $100m. As a result, the company’s total 2020 capital budget will be in the range of $1.7-1.9bn.
Originally, Pioneer Natural Resources allocated $125m for its differentiated water infrastructure for the year 2020.
The Texan oil and gas company expects its revised capital programme to be funded fully from forecasted cash flow of about $2.3bn and create free cash flow of nearly $500m. The numbers have been estimated based on the assumption that the West Texas intermediate (WTI) oil prices will average $35 per barrel for the rest of the year.
The company said that given the challenging environment, its plan is to preserve low leverage and create free cash flow to position itself to be stronger once the global economy revives.
Pioneer Natural Resources to halve its rig count to 11
Pioneer Natural Resources said that in response to the prevailing commodity prices, it will bring down its operated rig count from 22 to 11 in the next two months. Apart from that, the company will look to cut down its contracted completion crews.
The company anticipates its full-year oil production for 2020 to be similar to its Permian oil production average in 2019, which was about 211 thousand barrels of oil per day (MBOPD).
Pioneer Natural Resources president and CEO Scott Sheffield said: “After successfully managing through the previous five cycles, it is apparent to me companies that maintain strong balance sheets and low leverage during these difficult times will prosper when economies eventually rebound and commodity prices recover.
“As such, during this challenging environment, Pioneer will protect our pristine balance sheet and focus on free cash flow generation by cutting our capital budget by approximately forty-five percent.
“Our balance sheet is among the best in the energy sector and provides us ample financial flexibility to manage through a period of prolonged low oil prices.”
