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Pioneer Boasts $2 Per Barrel Production Costs

Permian Oil

Scott Sheffield, the chief executive of Pioneer Natural Resources said on Thursday that improved methods of hydraulic fracturing, or fracking, have cut his company’s costs to approximately two dollars on the barrel in some fields.

That’s enough, says Sheffield to be competitive with Saudi Arabia. His comments indicate that the stronger, fitter shale producers in the United States will be able to weather the drop in prices, which was brought on by a move by Saudi Arabia and OPEC in 2014 to up production in a bid to claim market share from producers that operated at higher costs.

Sheffield noted that some production costs have dropped to US$2.25 per barrel, not including taxes. That price was for oil from the west Texas Permian basin. Sheffield stated: “Definitely we can compete with anything that Saudi Arabia has. My firm belief is the Permian is going to be the only driver of long-term oil growth in this country. And it's going to grow on up to about 5 million barrels a day from 2 million barrels.”

He added that the figure even accounts for a situation in which oil is trading for US$55 per barrel. Sheffield noted, however, that other areas, such as North Dakota’s Bakken and the Eagle Ford in Texas may not fare well during the price drop, due to higher production costs. He did not see any way for those areas to return to their previous levels.

Pioneer, on the other hand is forecasting a growth rate of 15 percent per year through 2020, with most of its growth coming from the Permian basin. The company is saving money by doing much of its service work on its own and using effluent water from Odessa Texas for fracking. The company is also using new techniques which allow it to extract more product from the ground.

By Lincoln Brown for Oilprice.com

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  • Joe Brennan on July 31 2016 said:
    $2 a barrel production costs, are you kidding me. How did Pioneer manage to go from just over $1 billion in profit in 2014 to $266 million in red ink at $2 per barrel in 2015? As an aside, insiders sold 3% of their holdings and institution own 94% of the stock. As for the p/e, it's only over 1200! This must be one of those dividend plays in this ZIRP environment, you get a handsome half of one percent or 8 cents on a share trading at $162, great for retirement! Sounds like a great short to me.
  • G. VINCENT FOREMAN on July 30 2016 said:
    I hope his, Sheffield’s, “understanding” of Pioneer’s production cost is better than his comprehension of geography. “Sheffield noted, however, that other areas, such as North Dakota’s Eagle Ford and the Bakken in Texas may not fare well during the price drop, due to higher production costs.” Eagle Ford is in Texas and the Bakken is in North Dakota. The cost quoted is both unrealistic and unfounded. It flies in the face of reality.
    Sheffield’s statement is an example of why money managers approach the oil industry with a “wearied” eye and some consider those managing oilfield companies one step below child molesters. Such individuals can not be trusted. They will say and do anything to obtain the funds necessary to survive.
    It’s purely disgusting.
  • EH on July 30 2016 said:
    Gee, Scott,, think you need a map, for guy in such a high position,, haha! The Eagle Ford's in Tx! Northern Dakota's is the Bakken,, Your just like Politicians,, paid well and know crud about even crude
  • Kr55 on July 29 2016 said:
    While also reporting a $1.63 per share loss, haha.

    $2 a barrel maybe for his fields where the pipeline goes directly into the storage hub to be sold, and of course he is not at all including drilling costs. Very misleading claim designed to mislead and trick investors.

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