STAGES Analysis: Pioneer Natural Resources

It seems like Pioneer has always been one of the largest operators in the Permian. In the last year, they've become "THE" operator through the addition of Parsley and DoublePoint. The company represents ~10% of the rig activity in the basin and a huge opportunity for service companies tied to their frac activity.

Acquisitions

In October 2020, Pioneer acquired Parsley with an all-stock deal valued at $4.5B. At the time, the combination resulted in 930,000 net acres of premium land with no federal acreage and production of 328 thousand bbls/day (558 in Q2 of 2020). They expect to achieve $350MM in savings annually through $100MM in interest savings, $150MM in operational savings, and $100MM in G&A savings. On the technology side, Pioneer highlighted the technology and procedures that Parsley has developed for efficient drill-outs in longer laterals. They feel that this will aid in increasing their laterals to further reduce their development costs.

In May 2021, Pioneer completed the acquisition of DoublePoint Energy for $6.2B. This added 97,000 acres, increasing their total land to over 1MM acres. DPE also brings an additional 100,000 bbls/oil per day of production. One of the largest benefits of this acquisition is that all the acreage is near or next to the current Pioneer land. This will increase Pioneer's ability to drill longer laterals, leading to more STAGES per well.

Activity

In their Q1, 21' earnings report and conference call Pioneer stated they expected to have an average of 22-24 rigs active in '21. Before the DoublePoint acquisition, their guidance was 18-20, after purchasing DoublePoint they reduced the DP rigs from 7--> 5. The result of this rig activity is 470-510 completions for the year. This represents a total of ~13,000 STAGES through the end of the year.

Because Pioneer is solely focused on the Permian Basin, it is easier for service companies to take advantage of economies of scale. The vast majority of their completions will be performed the same. Same size casing, same pressures, same pump rates, etc.

Operations

The average length of lateral for the wells planned in 2021 is 10,100'. Based on industry average stages per well, this comes out to around 180' for STAGE. They're completing 2,000' per day or 10-11 stages, which is slightly above average for the Permian. This is up from 7-8 stages in 2018. They've had some 15,000' wells this year and are looking to increase their average length to take advantage of savings per foot of lateral.

Simulfrac

Pioneer has been piloting the use of Simulfrac and has seen 200-300k savings per well by using the practice. The average wells in a pad expected in 2021 are 4.1, which is the ideal number of wells for Simulfrac operations.

Inventory

They've reported 15,000 Tier 1 well locations, which at the current rate of completion is 30 years' worth of inventory.

Opportunity

Pioneer will continue to be a larger opportunity for service companies as they continue to increase laterals, stages, and efficiency of their operations.