On Monday, after the close of the New York market, Permian Basin oil shale power Pioneer Natural Resources (PXD) reported third quarter earnings of $2.07 a share, 39 cents a share above the Wall Street consensus projection. Revenue climbed 112.2% year over year to $2.48 billion against an analyst consensus of $2.24 billion.
Production climbed by 5% from the second quarter to 288 thousand barrels of oil equivalent a day. Third quarter production was at the top end of Pioneer’s guidance for 278 thousand to 288 thousand barrels of oil equivalent a day. The Permian Basin accounted for the bulk of the company’s production with Pioneer reporting Permian Basin production of 186 thousand barrels per day, an increase of 7%.
In its guidance for the fourth quarter Pioneer told analysts to expect production costs to average $9 to $11 per barrel of oil equivalent.
Pioneer is riding the roller coaster that is the oil market right now. On the one hand, oil prices fall with projections of increased U.S. production and higher crude inventories, the condition that the Energy Information Administration reported on Wednesday. On the other hand, Pioneer’s revenue climbs with increased production from the Permian Basin oil shale and the company’s increased concentration on that geology. Thanks to the company’s position in the still very low cost Permian Basin, I think Pioneer is in a good position to ride that roller coaster. The indicator to watch is the rising cost trend among U.S. oil shale producers. As long as costs don’t spiral upwards at a time when oil prices are plunging, then Pioneer’s position is solid. But watch those projected costs….
Shares of Pioneer climbed to $161.71 on November 7, the day after earnings, from $148.52 on November 6 ahead of earnings. The shares gave back some of that gain in the general oil sector retreat today. The stock closed at $156.48 today, November 8, down 3.23% on the day.