Even after almost $400 billion in oil company market value was wiped out by investors fleeing the crude rout, Pioneer Natural Resources Co. is betting there’s ample demand for more shale-drilling shares.
Pioneer plans to sell as many as 12.1 million new shares to help finance a 14 percent budget increase and a sixth straight year of production increases. The public offering of 10.5 million shares, plus up to 1.575 million more for underwriters, would expand the pool of available shares for the Dallas-based shale driller by about 8 percent.
Pioneer dropped 3.7 percent upon announcing the equity issuance in a statement Tuesday after the close of regular trading. The issuance will help fund a 2016 drilling budget that is scheduled to range from $2.4 billion to $2.6 billion, up from about $2.2 billion in 2015, Pioneer said in a separate statement Tuesday.
The company is boosting spending while many rivals retrench because oil wells in the Permian Basin in West Texas have outperformed expectations, Pioneer said. The biggest gushers are generating 30 percent returns, despite the 18-month rout that slashed crude prices by two-thirds, according to the statement.
Pioneer isn’t shutting down any drilling in its Permian fields this year and will keep operating all 18 of the rigs currently exploring shale layers known as the Spraberry and Wolfberry, according to the statement. “Well returns in this area continue to be good in the current commodity price environment,” the company said.
The company brought 44 new horizontal wells into production in the Spraberry and Wolfcamp layers of the Permian during the final three months of last year, including nine that are part of a joint venture.
For 2015, full-year output rose 12 percent, exceeding an earlier target of 11 percent, the company said. This year, production is expected to rise another 10 percent to 15 percent, extending a streak of gains that began in 2011.
The company said it will probably post an “unusual non-cash impairment charge” of $800 million to $1 billion when it discloses fourth-quarter results next month. The charges stem from the declining value of oil and gas fields in the Eagle Ford Shale in south Texas as well as a stockpile of pipes the company no longer intends to use.
Pioneer is also in the process of reducing the number of rigs drilling its Eagle Ford assets to four from six at the end of 2015. A phone message left with Pioneer’s media relations department seeking comment for this story wasn’t returned.
Shares of Pioneer fell to $120.50 at 4:46 p.m. in after- hours trading. In 2015, the combined market valuation of the 40 companies in the Standard & Poor’s 500 Energy Index plunged by $392 billion.