Pioneer (NYSE:PXD) reported after the close Wednesday, and shares are outperforming Thursday as the Company pivots away from growth and plans for significantly higher shareholder returns. Management held a call with investors Thursday that focused on shareholder returns and the macro environment:
- Dividends – “due to our unhedged opposition and strong commodity prices, our second quarter variable dividend is poised to increase by greater than 60% from the first quarter. Payable in the second quarter will equate to about 11% yield.”
- Production growth – “long term, we’re still in that 0% to 5%. It’s going to vary. We’re not going to change, as I said, at $100 oil, $150 oil, we’re not going to change our growth rate.”
- Private E&P production – “they’ve announced growth rates in the 15% to 25% per year range. As I’ve stated, eventually, they’re going to run out of inventory as written by the Wall Street Journal article that came out in the last two weeks.”
- Supply / Demand – “demand is stronger than it ever has been in the world and OPEC and OPEC Plus is going to run out of capacity by the end of ’22…that’s ignoring the Iran and the Ukraine situation.”
- M&A – “we have no need to do anything on a material large-scale M&A, and we’re not looking and do not plan to look. We think that strongest return we can realize at this point is to repurchase our stock.”
CEO Sheffield also eluded to shale growth from Chevron (NYSE:CVX) and Exxon (NYSE:XOM) being driven by a draw down of drilled-but-uncompleted wells “DUCs.” This followed similar comments from Devon earlier in the week, and suggests that shale growth rates from the two majors could slow in future years, as excess well inventory is worked off. With production falling and shareholder returns rising, the value proposition for E&Ps is rapidly shifting.