Pioneer Natural Resources (PXD) 5 Aug 202020 Q2 Earnings call transcript

Company Profile

Participants

Neal Shah	Vice President, Investor Relations
Scott Sheffield	President and Chief Executive Officer
Joey Hall	Executive Vice President-Permian Operations
Rich Dealy	Executive Vice President and Chief Financial Officer
Doug Leggate	Bank of America
Arun Jayaram	JPMorgan
John Freeman	Raymond James
Brian Singer	Goldman Sachs
Matt Portillo	TPH
Charles Meade	Johnson Rice
Derek Whitfield	Stifel
Michael Hall	Heikkinen Energy Advisors
Paul Cheng	Scotiabank
Bob Brackett	Bernstein Research
Paul Sankey	Sankey Research

Call transcript

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Operator

Welcome to Pioneer Natural Resources Second Quarter Conference Call.

Joining us today will be Scott Sheffield, President and Chief Executive Officer; Rich Dealy, Executive Vice President and Chief Financial Officer; Joey Hall, Executive Vice President of Permian Operations; and Neal Shah, Vice President, Investor Relations. Pioneer has prepared PowerPoint slides to supplement their comments today. These slides can be accessed over the internet at www.pxd.com. Again, the internet site to access the slides related to today’s call is www.pxd.com. Investors Earnings select Webcast. website, the then and select At recorded. This being call is call A XX, through site replay XXXX. will archived of the be on the internet August The Litigation Reform made of XXXX. forward-looking harbor company’s of Act will the provisions Securities to safe statements Private the comments today pursuant include These the materially in results future of to differ business Pioneer a statements. subject to actual statements of may risks cause the and from forward-looking number and prospects are uncertainties that periods release Securities uncertainties on presentation and described Commission. are the public Pioneer’s news X risks slide Page These and filings in of made and Pioneer’s in with the Exchange this over I to remarks, would Neal for President, call Vice the Relations, Investor turn At Pioneer’s time, Shah. like opening to Please go ahead, sir.

Neal Shah

joining you, us. morning, Shelby. you Thank Good everyone, and for thank

on return that, our your discuss then the questions. sheet best-in-class will Rich strength. production. and for results. of on and He that also performance will for concludes his briefly Scott review drives to cash remarks, financial update the operational call. we you Scott will Joey strong then He’ll will open oil then our focus first. balance framework generation After shareholders. me and will will quarter Pioneer’s discuss return up strong review our second free capital Scott reinvestment strong and to agenda today’s sustainable After call review detail practices. our position to up excellent be Thank Let flow you.

that, with So turn to it I’ll over Scott.

Scott Sheffield

the off XXXX unchanged. of intensity number guidance Despite quarter, hope that we’ve had stats, that’s CapEx a for With flow of Also best deal, for morning. over especially continue our Look delivering bond has guidance months. the while Good be less collapse to cost that and about Also but regard quarter. the first and both I’m quarter. were production, several Permian cash on Texas the later everyone’s we’ve which decrease well about to we’re a X% already estimated regard reduce XX% at according environment using XXXX to than on week $XXX X. Joey we’re later to our improve we’ll Permian and the same we to for you, tough recent And a ago, time the in Basin to increasing up. flow morning. be entire remains of of capital doing to from Slide on Thank million flaring in – during at the much in liquidity. data lease our in will to operating second strip about price of our of had, moved We and to Neal. the New free to start in slide, costs states the $XX.XX their I Rystad, million. data. the compared drive levels, Mexico last for this which the all more the publishes continuing this continue $XXX strip free strip cash about down pretty year, talk expense, Brent’s based at also up $XX, about going

balance It’s day, $XXX Going million pandemic. expense free horizontal getting and the to barrels our the We also and down again, delivered lease great Slide again, quarter, very we’re again, $X the oil BOE, of our sheet. flow of price despite X, operating amazing, cash number maintaining good to a per XXX,XXX BOEs close collapse during per total quarter. XXX,XXX,

and continued the see last just XX to X, a number little it lower Slide lower our about detail bit to been talk focused on to more cost We’ve months, numbers. Going structure. for

to down to drive all-in $X it LOE wells, interest continue range, that our $X.XX total $X.XX, G&A $X.XX, toward for down horizontal at cost of of driving down so cash a We’re then cash $X.XX. costs about

to we’re number budget to our maintaining plan, XXXX billion between $X.X our CapEx Going improving X, billion. $X.X Slide obviously,

have oil fourth to exit that. to here, our don’t range increasing but on production We’re guidance up increasing it quarter XXX,XXX from rate, a we’re of our We XXX,XXX. midpoint XXX,XXX

it I think was XXX,XXX XXX,XXX. I to said last quarter

not We’re to even increasing for frac count, from fourth total price it Again, oil the XXX,XXX, And our quarter. little the day quarter second curtailed our of operating that a up in a quarter. XXX,XXX ago, began second up same. increase, more count to remains is of Again, with fourth but was barrels the vertical wells brought which per barrels to very we plug the average to have back year our costs of rig program more we time. began production range. primarily over deferrals high This to again quarter X,XXX the over to XXX,XXX and regard the production those we day wells, mentioned the a fleet

over back amazing So we’re lease pretty this and talk all the don’t This affects seeing drilling new but very I how at of gains interest Slide efficiency expense, time. about company. it levels, completion little facilities, long-term X, is a it number XXXX. expect capital operating creating Again, our shareholders. throughout value to thesis, much Again, come G&A is the for again, significant slide. I’ll also X,XXX

today, up moving it’s variable That’s XX% plus a made X%, forward. base dividend total over X.X% at We’re a dividend targeting of return.

grow rigs growth Long-term, policy we’re plans we to payable have X% expect plus When to expect do together a long forward. and the intend, look as you begin or be for oil variable as at an year going able plus. at year XXXX. XXXX, oil strip X% XXXX, dividend in looking a and the at rate into at put the $XX fleets Brent for we to XXXX for X% is of then adding specifically XXXX going and frac higher, to We

oil our sheet a We’ll the mechanics in a as for day. the we group, XXXX. X.XX early less oil this have very, generating the less the than we unmatched showing in is balance long-term worked Slide dividend and the at have and of report is payable This And per than strip most less, of or $X that will of and or returns, be we’ll is that for model. I under as mentioned time. barrels strong WTI, earlier $XX slide equivalent, maintaining new number in We’re the nearest breakeven I footprint. that three start base competitor off our our as Brent year at have by that sell-side a XXX billion the had as we’ll again, XXX,XXX an base discussing of strong it very out contiguous, and X, Hub. said We’ll long we that by growing previous variable about higher regard point be $XX also Henry year for be price barrels acres adopting that to dividend times oil that in XX inventory, over have fact XXXX of great

Let it over talk operations. me now turn to about Joey to our

Joey Hall

good And to to on I’m off Scott. starting everybody, Slide going be X. Thanks, morning

gains, and years during As Pioneer on last XX% quarter, performance are already committed I in times want start team see undoubtedly respectively. especially efficiency, their one you our safety, best and the in the did gains like the of and we’re was tremendous I the and you drilling to teams day quarter, When now, terms feet cost achieved XXXX. of completions XXXX can that to performance, the entire And another left, congratulating challenging look off XX% per from repeating reductions. have teams for graphs XXXX of in at the by thanking

these and facilities timing costs we continue teams drastically look service improve at development efficiency. Our made cost our have progress remarkable with our in and capital also gains to down a deflation development and efficiency reducing combined When drive consistent you costs. well strategy,

of approximately see the As $X.X these reductions of XXXX. or have we you side, by sustainable. on the can our two cost well first We believe that cost reduced in hand XX% million are XX% right approximately quarters

Now right then for we X-stream hand the the moving peers oil once left, month starting Pioneer have XX on And side, production. Slide all oil the basis, also to percentage. normalize a moving on over production highest XX, has cumulative to the gross you best on

the to Pioneer basin. and should the has structure low So the to combined peers and Permian our with quarter, compared another two the drills cost for it everyone I’ll in regardless lead wells to highest oiliest congrats again, facts best over returns basin great turn productive our Once of things margins summing two together, most Rich. those These production oil and price. mix to

Rich Dealy

this we slide that XX good position, and to get Joey. This many everybody. basically the highlights of others wells. we growth have morning, which just in net our more our means interest efficient I’m revenue and acreage can benefits produced And we Thanks high one of working really a net every revenue high of all high where of deliver on we interest. start interest Slide in because have to than barrel keep more simple-terms, going

what the and has as inventory to so drill benefit down less to of and It which also our us boils longer. our And leads fewer reduces to wells, our having improves that margins. drilling wells G&A lasting

from great a acreage benefit So our legacy position.

on wells, about optimizing supply the chain really use It’s versus the job great chemical over our the revamping our operating at Turning by overall, Joey program. Scott more coupled internally and last really months. XX% then teams facilities driving alluded maintenance on by that congratulations our terrific chain and of adding a lease XX savings of this and of optimization to operating really that, runtimes XX And third-parties looking doing as been with of our cost teams, so outcome and they’ve last over supply down have driven XX, our Slide to, talked structure to our really months. field done of top using costs who the

be balance our Turning to highlights our many you the before to sheets to to shareholders in relative when relative you’ll that Slide sooner the reiterates position the you of had much their can bottom as our XX, chart at balance there. that Scott It slide outlined. a past just look cash we’ll peers we’ve need return they repair and peers on sheet well, of in this strength is also

debt-to-EBITDA a to that less the So leverage believe it’s target sheet a X.XX, to on a overall, with than be we net balance is very low to less important of that have pristine we basis. long-term which than why view continue ratios,

back to to turn going I’m Scott that, it talk with sustainability. about to So

Scott Sheffield

the On with oil, slides the the Oil of, Slide Rich. it’s of oil, some one study of onshore oil you, Mac, various similar quarters, highest. for past and heavy sources of number being Wood we’ve sands again again sources by these the the XX, showed Thank in conventional emission Shale all lowest and are

the this a XX, Slide to Going is past. slide similar in

first as the board. the benefit time, intensities, but have as peer reduce and in of of showing names noticed – dropped almost we New goes we have there the companies look chart we is both basin. you Permian are their for that the the this again Rystad If of as at striving so reductions everybody’s Companies on flaring into the Mexico to Texas are to this

I’m probably us down X% dividend the most able see leads program to the has very, get Also flared to than think of have also in one finally companies low into in levels. in gas two in able and And Slide I be in earlier which great total has best we we basin in a still place. helped to Permian a to rock returns gas the U.S., reduced of will be start variable sheets regard I fact coming program best and to and being And out stats. XXXX, the optimistic great reduced on And everybody think then on substantially our with in the XX, in of pay in again come XXXX. very have with this be to allows shareholders. the that strong to deliver growth XX-plus a amount base the activity industry industry their to to pipelines balance the is the dividend also for the that new

go We’ll open me there. up Let questions. stop it and for

Operator

America. Doug from Leggate Instructions] you. Bank our of We’ll [Operator with take question Thank first

Doug Leggate

Good you. you in great very a articulate clear see everyone. Thank for Scott, to will Pioneer future. outlook morning, the how And represent it’s

Scott Sheffield

Thanks, Doug.

Doug Leggate

different extent But can, value us how buybacks, about may, I Obviously, said give I of I a can you methods got if walk a mechanism, little potential more balance as phone. delay the growth, you sorry, bit beyond to couple One around, my us I detail got as of questions. sheet, you’ll actually on the you to that you’ve share well obviously, guess. is a on the variable Scott, through returning of dividend? think a shareholders

Scott Sheffield

Yes.

stated think I in conferences. I’ve of energy some these past

prices. destroyed the stock that most the have at I XX, value buying think has years over XX too companies history higher our industry, by shown back last

So, I know to do XXXX. base likely, why of our to of we at variable have this for flow flow arrears stock we what after the certain, any for thing in the Most in it using buybacks. will calculation because That’s model. point free only is not in time, anticipate cash dividend going dividend go be cash our free the mechanics, paid the through we’re

So as dividend, we make variable in following paid we start calculation. the be after the it’ll the year

would approved will and in about XXXX most be it a pay all So has this dividend in at The we likely this quarterly, point at point the but be year variable time. that Board not time. it’ll that’s

XXXX the variable over about in quarters. We’re in give detail next the several discussions policy more structure. the We’ll dividend to discuss

will several the going can’t $XX high But to plus say into, to be production obviously, activity, but want to dividend structure growth, we on so saying We that hit frac That we oil paid free the DUC we’re don’t next it and years some money growth. activity. just on and our maybe our flexibility, price activity, will we’ll production and it maybe we’re some plus rig that years some dividend, X% cash the maybe years helps. a And we number base. based X%, it to of just Hope X% say production tie again, years. environment, X%, years some X%, use but over X%, X% over maybe X%, to variable payout the a more every change growing growth fleet some out the maybe get $XX, be small years base we we above it So, more flow. anticipate want on it not X%, so one year, if

Doug Leggate

numbers came those in lower. company, you’ve It’s does. It reset about to to some the thinking think Scott, I’d obviously Look, growth But because are a like you’re I this, since Yes. And again. tremendous. ask as execution growth. the products for love back, to leading all into time. question industry get just and done you The terrific I the you related would you fantastic

you’ve growth, way this strategy, out phrase built I guess would think, the is it. the for Now XX% I come but with thought-leading I company is

Pioneer Do in organization And of you So what terms can you I’ll tell leave the to adapt forward, us size about rightsize Thanks. need there. company? of of to the to the structure going strategy? the this it newer

Scott Sheffield

Yes.

we’ve year Doug, know, a had a program growth. you coming restructuring As plus X% production obviously already and last with out

production it’s with – X% organization to evaluation size a have details come as need over to we under time. We plus growth what for more

Doug Leggate

Okay. so it I’ll leave Thanks much. there.

Operator

from Arun JPMorgan. We’ll take our question Jayaram next with

Arun Jayaram

Scott. morning, Good Yes.

maybe Just follow-up a question. to Doug’s

Scott Sheffield

Hey, Arun.

Arun Jayaram

any policy And wondering market walk was investment kind was this are could basis? how if you I this – to this you so studied, a that decision to to clues there on plan move I long-term call look of implemented for if framework. where a being have you special in do it, dividend, analogs we like could a yes, through could just on guys go-forward today wondering the the you

Scott Sheffield

I seeing it how starts mean, the XX volatile being Yes. is. for it with and years industry in

destroyed value very of you look whether has much industry fast stock our or it So high And too that. at history the at how with buying past starts growing prices.

should there variable S&P that looked XX dividend, So our the look not other And was at companies, we’ve at of up XX about companies history are it giving last industry credit look sector, at you over XX, that in you and months XXX have – learned people a in have to and other industries. got we the the what change.

cyclical we’ve companies a So dividend, looked variable business. at they but those and a we pay how have do commodity

One our of the you price to in be. predict issues business, it’s hard the is to know, what going commodity as

of dollars over to – billions commodity years. of hundreds be what year, hundreds five knowing spending the going next not is of we’re billions So our every

the And but tried already word a onetime dividend, see is were issued from the the don’t told mechanics And special Doug away than main special, a and variable factor. of saw it Devon to on we we what much special. the get event. detail so have I more I I being

when oil year a every So dividend we variable you a for have $XX next at strip, look several years. will the

know we $XX. it. dividend average let’s say years So that see so and we’re at at Brent, see to be $XX variable some The going – so dividend, anticipated I we’re to our some see under years I but $XX going base greater and Brent, that than we model, much to

for eventually commodity believe or dividend. credit three I price, of in have it a get years So two it people think will credit we that but for start and variable once you we’ll getting certain

stop there. So I’ll

Arun Jayaram

is Great. Scott. just That’s My helpful, thinking XXXX. follow-up about question

your expect oil in to targeting, call rate you be thinking it, a if KBD. XXX Under I would help that mid-single you, year wondering the growth you’re mentioned think the it, that could was You call digits terms you would it oil XXX next plus us about prepared appear framework, spending comments base. your in how fourth next put year. of quarter XXX about

$X.X mentioned you that us but billion you’ve adding rig just you frac billion spending could that disclosed to $X.X and wondering if think you’d capital help crew relative I think activity, about previously? sustaining be to some number the

Scott Sheffield

range that there. forecasted a of put XX% use flow. We We Yes. in cash

are $XX. $XX, up was at Brent strip $XX, $XX, running and already Now strips to that the

begin rate that and are and starting planning so add growth growth our are to XXX. if we rate X% frac above to year, So holding you look growth next us at we of rigs fleets rates

X% to year for midpoint, and expect our XXX XXXX. the would to I that the add Street take basically So

year our use go calculate fleet that To frac $XX rigs And you only so was the we’ll be CapEx, but into to adding XXXX. strips. that XX%, we as and can $XX

XX% since maybe so idea to will strip you drop CapEx an give to all depends be, maybe we our February. XX%. XX%, continuing guidance is – So the CapEx It drop, move up, on our that out the it’ll to it until where won’t – where is, strip will just but give

Arun Jayaram

it. Got

reinvestment just Brent? about $XX XX% mechanically, So, at thinking

Scott Sheffield

exactly. Yes,

Arun Jayaram

Great.

Scott. Okay. Thanks lot, a

Operator

we’ll John with from And Freeman question take next James. Raymond our

John Freeman

morning. Good

Scott Sheffield

Hey, John.

John Freeman

to a mentioned. just just that, I follow-up Scott, question where had you

as $XX, XX% And like that So reinvestment to current of strip. XX% almost the on rate. sounds end it is reinvestment the down, based environment, an XX% strip. view we the the to if you just right, the you to higher rate got $XX, for Is something And like into that, that’s happens that like oil just throttle the it XX% be range Scott?

Scott Sheffield

strip a And Exactly. ago. was that Exactly. week Exactly.

last So that Moderna, about and it’s I think is this also got news the up vaccines all week run strip to moved Russia, market with people I also XX in significantly Oxford slide. in the the made since we the in up has just this excited and days oil the India, think

John Freeman

it Great. of rate. kind moderate was And organization then Doug long-term kind about with a alludes what of follow-up more rightsizing this asking growth – was kind to of for the question,

sort really or normalized maybe how about on about all highlighted long-term need acreage, of kind inventory variable and the maybe kind acreage? X, a going top moderate a supplement of to Slide in of the how for time, it more your sort policy. I to in would you this necessarily to to maybe a a all all moving of potential kind guess more around peers complement You long valuable in sort that commodity but a lot again, environment, got not of You’re growth some to you normalized tier divestments of massive all of maybe target. of but environment, more commodity think get inventory potential, way and be dividends think a for now, position you more not

Scott Sheffield

cash John, anybody. I done deals is no by market Yes. the essentially right dead think There now. is being

just we have on start see actual some And trades so deals. to until we’re to waiting going

sold have we so past. And in acreage the

not but will we’re away. to it the future, sell We in acreage going give

no that today. up, divestments So acreage overtime of large all there as equity tier continue. there various but But will Midland if essentially will some market, know, market Basin is still a the operators doing ever area, be on we And and you is two opens are dead. fringes with market the the trades our our core private

John Freeman

All I right. Scott. appreciate so much, Well, really thanks it.

Operator

from with take Sachs. Brian we’ll Goldman Singer And question our next

Brian Singer

Thank you. Good morning.

Scott Sheffield

morning, Brian. Good

Brian Singer

the view to costs falling price do impact breakeven mentioned on as What of thresholds? meet You your Brent. $XX oil your the you return

Permian You’ve growth to XXXX. got comfort plus mode in a increasing rig activity early the X% in

that’s elsewhere? versus differences And as of so then just wondered reduction on what the that occurring cost you what’s the you drivers do in see comment can leverage, to broadly that, beyond And I had. more the impact if Pioneer unique the

Scott Sheffield

Yes. Rich?

Rich Dealy

Hey, has Brent, for last our really still about basis call, breakeven Brian. On in team we that Brent capital the high-XXs the our as what with low-XXs as what the, is breakeven, efficiencies I’ll done pre-dividend for XXXX. the it’s talked call a for well on

that it’s little gotten only better the So of team. bit hasn’t the because a changed, really efforts of

from don’t where your second you having changed that of again. leverage, So really I we that maybe on ask question before. And one in terms were see

Brian Singer

next of X may a It’s the in do Permian the I on you well. your the in rest to be just leverage. see as reason as increase ask costs. your year based that of that see industry? to of Pioneer drivers do activity expectations of willing versus I to And that for how whether on cost guys going actually wondered what’s supply you part And is the others beginning you unique reflective reductions are the have you What

Rich Dealy

of the other know similar companies unique doing. on I all than structure. we’re that focus It’s cost internally don’t the to a we’ve got Yes. all what board strong aspects across are

as to costs that make it’s relentlessly And whether all LOE, those interest, it’s whether drive G&A, Scott we it’s capital, whether down. attacking whether sure we’re it’s outlined, so, those

internally doing whether internally all costs it’s microscopic to just a to it’s And focus it’s level those it’s differently, really we a down it’s can reviewed of on a those whether and are drive costs everybody level that make and so those how move sure do for just chain, over each supply me, things lower efficiencies, lower things time. of whether we at getting

Scott Sheffield

Brian, we’re one simply starting have sheet. we a And I’ll add, balance reason, great earlier primary for

earlier of peers. So that’s starting most than the our we’re reason

three the it’s of peers are going think the to I markets deleveraging to because years equity or are company obvious their have that two spend closed.

so have use their they’re to And going to to flow whatever debt new are. to delever excess targets cash

to We or return type good have X.XX rate X.X maintained The great except and are the everybody, our growth any maybe reason. for of debt three one the next returns EBITDA than that’s less year, companies can’t but for two people to U.S. just or of in

Brian Singer

and framework Great, that Pioneer of a think about an returning than importance degree of that model think thanks. variable of or you highlighted, the there’s within on? less dividend the about how not would than the hedge so to X% risk And cash company others, then shareholders hedging? and greater commodity we Should when and plus, have necessarily to the the a to the do flexibility take more ability X.XX, that lot growth balance does because expect for you price managing you to sheet, as

Scott Sheffield

planning XXXX, – important policy. to our our of second balance Yes, into going three downturns, it great major be then an and fact XXXX, quarter. with I to had we’ve has affected hedging the Even period, Pioneer due this part was that the think to XXXX, continue be sheet

involved on MBS, today. and could $XX getting Trump and oil $XX, for have wasn’t Putin it still calling if So we

by $XX, oil months. would for $XX affected have So been even Pioneer several

worldwide, on model business And OPEC We’ve OPEC just XXXX, in so industry depend we seen affect can’t both and entire for the long-term. our this year. XXXX,

to issue to with. have an it’s going we’re so And deal

think a going are we’re to look we still have but three going look and – more I I still And still to companies at and swaps cost price think at got collars, as run look have hedge. ways. to and at everybody’s lower to case, more to –

to an continue So hedging have important as part. we’ll

Now per up years. year it $X next does move over about several the

it part that backwardation. be know certain policy, is, of would gets price once don’t contango. still still So will it’ll a sheet. our of it’s anticipate into our in but go to hedging when balance regardless I important I that

Brian Singer

Thank you. Great.

Operator

next take question Portillo we’ll our And TPH. from with Matt

Matt Portillo

all. Good morning,

Scott Sheffield

Matt. Hey,

Matt Portillo

dividend, question of around a component the Just a forward. common going is to growth going quick big the obviously, be variable

over you the how take to think driver of is as common the cash like the really and you time? progression going curious dividend of that grow the free variable excess might Just about flow? primary over Or where to

Scott Sheffield

today X% base which is the still above of Yes, next average, each very little dividend, XXX base. is obviously, years. with that several year the S&P over anticipate the slightly a about strong the over bit growing average We a

it’s that important dividends. grow, So variable I show primary the think will to base driver the continue to be will the but

significantly payout time. dividend So the I of would over exceed dividend anticipate base the variable the

Matt Portillo

Great. growth discussed as follow-up question, And then a you the over time. X-plus percent for crude oil

the recycle there $XX try flow a environment to higher all returns, more as pieces? balance you moving we about able cash to if more is a to would expect and to price commodity of were kind talked the as crude in limit you to free being a rate price you Just see curious to environment, in growth shareholder $XX

Scott Sheffield

X% years, I we’d actually to see like it just if supply. next I be happen don’t crude That’s a a the just and world, – said, may plus several swing years, even in that see such to or in could the for five don’t Basin that to us see next to don’t I I crude changing only $XX scenario past the add us we’re have shortage oil of us factor just policy. Permian our only it for the where gets but increase an of so which three have don’t the I we scenario extreme oil short No, the to type growth to scenario rate. I $XX, see it mean, have

change going not we’re to over our So time. policy

Matt Portillo

at on we of Or the a should XX% that really clarify growth to mentioned to just is as reinvestment it you about cash it a X%. kind that, going X% X% And just X% of to flow think range? XX% think be I function to to rate?

Scott Sheffield

No, our rigs, we’re to want frac as when that it’s of exact so DUC we I add plays promise we function when X% us, X%, to really add said, bank, just don’t fleets, all saying I a into, plus.

we So the one are – the the want frac of rig, those the timing and frac govern to want of addition rigs, rigs the of efficiency stuck we going to to fleets rigs, timing of be in fleets, the those number. single adding the don’t

plus. So we’re why saying that’s X%

Matt Portillo

Thank you very it. much. I appreciate

Operator

from question Charles next our take Rice. Meade from Johnson We’ll

Charles Meade

you if X% one to ask and Scott, growth, the it’s advance that… I morning, one more Good but in question whole of your I’ll apologize about team there. things this

Scott Sheffield

There right? variable dividends, are the

Charles Meade

of I one that. in peers, that to about with not maybe to it’s we’ve it’s one different it’s so maybe ask but the it wanted the that, huge won’t though. what subtle compared distinction from that you’re other – certainly a But number of the subtle. a things things been past, different. is I not it’s ask But it’s or dealing

for map a of you give but growth also view So little growth I guys think inventory, part quality conditions guys, that already But versus could X% that that there’s to where out internally is think the part don’t big a as bit wondering X% people depth have I’m factor is you sheet you’ve your of do on highlighted other of growth of I – the into of you you I distinguishing to the a differentiators maybe think said pointed on you of be, most you’ve And you you much. that plan. it’s still return it for the really one you not shareholders, that I and if appreciate thinking puts of that’s other some elaborate for because the could put that balance have that your your any repair. a maybe your sheet and companies, already balance

you that your can deliver sits framework, you So tell us where how mental value? framework about growth your in

Scott Sheffield

Yes.

stated growth X% flow XX% rate significant X about balance, worldwide. the rate back, to I It’s actually market deliver going years higher, than to delivers whole add When and a flow, And delivers inventories. maybe three model, that – Shell free else to XX%. free As XX% was world was to free of the rate cash you get under million company growth issue a XX% a about free it a have X% know, flow for is cash or growth our today. point we more lowered for I years flow. couple the still in XX more glutted it delivers is X.X we rate. growing but million a a to does can’t more months and significantly two to a the everybody cash XX% and day came good actually XX%. reduce in the you And growing period that take U.S. Permian can’t and to is, the cash barrels The the growth

We And is EBITDA. to it’s to think of Most EBITDA, grow picking so a out. it’s growth framework still this important grow industries rate the best grow EBITDA. important but

as increased other all at deliver and excess base have their cycle especially And industries. they too and a companies have it, chosen base and growth be to their then base then they production down gas seen then the trouble is we because industry we’ve with a dividend. not reason throughout S&P happen variable inform flow, have get cut cash doing very oil we’re can provide many efficient that to dividend X% the so something we and XXX, just a of during in The and is and do, basically rate that

our So variable works that’s nature. why the cyclical in

that So I hope helps.

Charles Meade

become on better? XX to it a of are kind at efficiency can you connecting efficiency, thought months improve driving keep appreciate whether but this much the dividend. we a efficiency this That improved a from the it And if your opinion you see capital you how we if or industry other Joey, you guys of possibly has efficient half on mentioned you variable has more ago you the into – XX versus in, estimate capital have what you share are does And than year? of it certainly was guys all much for question, how and looking then, perhaps could but help. the one improved thought just And should whether the to – then lot is months I even and coming any in the leader wondering you whole year peak or we’re outside that I capital back on back the of

Joey Hall

morning, the and question. good So Charles, thanks for

quarter, remember in and you QX, what lines continued indicated X those that exceeded go achieve last to Slide to If QX. on it’s expectations in up XXXX. we had had dotted actually we expected And we in already

forward. our far drilling I look the than just our front, whenever continue at to are to efficiencies, see opportunity we I see still wells, best on better continue wells. go drilling some at average So still

want continue wells. our of wells where to all our to to we So get are best

the On how job. bag in on bit to we’re a pumping front, pump the which XX% it’s we almost mixed a because technical can a completions much already some of time on means we’re location, of cases a limit faster little

those at having completions to that as hat that, or from team. have the that So look of a opportunity like you the those so our of at we’re teams opportunities to go rabbits savings seen simul-frac. higher are come so something in their cost there there XX% But things out there’s rate well. far said whenever are only pump And completions still to the and continue we’ve pull a at, looking XXXX,

So it move-forward. to just continues

partnerships to innovative and that other make pricing to build The don’t continue getting one-time look want at contractors and relief. is happen our in to ask out want we’re We strategy contracting strategies, have technologies. to thing we other just long-term go we’ll a that and for

going we ago, this keeps see have be I where So, wouldn’t if quarters frankly, question but can would’ve us expected as two the you asked I to if up. trajectory you are, me would’ve –

management. just of continuous it’s technology So KPIs focus I be our DNA we’re is going The to you you improvement, and part relentless, charts waterfall that two are were made savings whittling away. chunks. back a of And our dozen up charts we’re items things big ago, quarters of our now in to when tell that, cost and on one of waterfall would thing go

never and and to down. focus have journey ending it’s we’ll still our in So, hopes on to continue continue we’re future cost structure going drive it the that to a I

Charles Meade

Joey. comments, those for Thanks

Operator

And with from our Stifel. question Whitfield Derek take next we’ll

Derek Whitfield

in-light rate investment we about framework years? over new and Thanks. the Scott, think your next rates, how several your for Good morning non-D&C growth run of should all. capital Perhaps

Scott Sheffield

to that Rich answer let question. I’ll Non-D&C,

Rich Dealy

plan, also Midland think Yes, in continued Derek we that and its past with the to facility fairly done it primary close forecasted the to to but has outside been so has to our yet, when smaller it’s continue going we would that getting you years DC&F, the have come of infrastructure. one in It are a been things about come it’s down capital nominal, until being non-D&C level the that water expect to forward. down

Derek Whitfield

follow-up… my for And Great.

Rich Dealy

We year million. saw this with $XXX

going-forward less clearly So a that. $XXX it’s than million than less substantially

Derek Whitfield

Thanks for the volumes, over Joey, challenges the to Rich. there follow-up, I’d those like my bringing your notable in shift And and back remaining are curtailed to restored, any the you’ve price were volumes for curtailments, decision online?

Joey Hall

And may had we and those that we’ve cash ones some some the look fair up, to come well-by-well to continue to when bring back on of economic brought continue add ones in outlook on, quarter so flow, correct the as we at move and makes to already are last on, we’ll we come on. never you back it’s challenges cause on continue it will the it as really amount, back that prices on, positive No sense. will and brought mentioned, that, back some well-by-well but a Scott far

Scott Sheffield

on associated and of back add keenly And anticipation back. they’ve wells and been done just of after shutdown bringing I’ll our those them a of have aware teams preparing great challenges with shutdown bringing Derek vertical job the for wells we’re

So anticipate don’t with any challenges we that.

Derek Whitfield

Great update. Thanks guys.

Joey Hall

Thanks.

Operator

Heikkinen And question Michael from we’ll take Energy Hall from our next Advisors.

Michael Hall

Thanks.

some but bit questions, little Just a prior quick different follow a the up a of angle. little

in guess, I we going a calibrating put wells that or keep you’re those different pretty just there completing on was in those about I quarter. of I think forward? as in producing way is the guess tremendous just the guys should we mind curious, number You wells wells, models anything

Scott Sheffield

wells kind this Michael, just of getting these open Yes. flowing of back developments for the my days thing of the as there’s in can. one having on Eagleford who front-end as times, them starting possibly a couple they in focused high and people done are these

everybody’s well And on initially so focused performance.

price comes a putting sometimes facilities, We now to capital limits back bit lift take some artificial focus of towards of calculus leveraging wells. lift cost, getting come changed we’ve our existing on wells little that lift, the in a because maybe and in said, has does have sometimes temporary cost. aggressive the And artificial commodity that artificial these on but water a on our efficiency of shifted maybe less lower I an which Like instances aggressive that overbuilding at bent might in some production. some our choke at infrastructure, facilities,

answer, long is, think I So short that’s yes. answer the the

Neal Shah

a is this can from modeling Hi, Neal. I perspective. help you

were been highest for If from XXXX. of the POP at of really capital spent activity quarter. you year, the have POP the on was think second about the indicator that the the our the in of increased half of POPs XX from would remainder previous the cadence the benefiting year, course, QX perspective lagging a

had down May in really stated before activities. of fleets we materially course lot frac XX, that the we fact POPs POPs, reflected decreased QX you’ll saw our see a activity pre-COVID we QX. you stepped our ramping We so So one, of to as QX down that down started vis-à-vis

we seven rebound lower frac as three rigs levels. and QX the recurrently you’re going running are fleets, Now, POPs see from to QX

of hopefully help should your that So calibrate models, some

Michael Hall

guess I year guess the total that now? question, POP guess kind TIL be, full what for of or I we towards orienting is count should the

Scott Sheffield

guidance, the the when the makes suffice and it more activity, guidance. to COVID-XX because we to say, capital we provided guidance difficult gave quick production that kind back, had terms So really reduction count budget initial pulled POP initial count of production in of gave the well in disarray it strict of we to POP So we we

we really how waterfall, So that the you the POPs able take take cadence how your that models. to calibrate help. should Hopefully the in progressed and year, I will that discussed throughout if that you and

Michael Hall

just materially there continued reduce on been though recipe, completion Okay. you driving things discussed efficiency I’m kind structural anything rates, have number to of could costs. the that costs. on loads, reduction that it the water is And in the beyond guys of just propend stages, well follow-up changing be of gains maybe the I have the in completion anything if curious, I well are side guess – relate more

Scott Sheffield

but a material of to completion tweak costs, focus on impact sure well I the say on area have length. performances wouldn’t recipes, been continue is our stage but making to changes, it there’s focusing reduce we’re we doesn’t one significant Yes, that

we and length, stage get of So obviously down. can increase stages our we our costs then pump can number if we reduce the

primary So the that’s thing.

we’re D the most recipes. We’re our on completion Wolfcamp for but Wells, part doing our consistent relatively tweaking some on

Michael Hall

Okay.

production wouldn’t So those foot anything isolation, per reduce, or foot, it enough we change it’s expect material I guess I to let’s say per sound to completions that. and like productivity mean doesn’t

Scott Sheffield

That’s correct.

We’re focused lower cost. on for a same getting production the

Michael Hall

it. appreciate Thanks guys. I Okay.

Operator

We’ll take Cheng our next from with Scotiabank. Paul question

Paul Cheng

slower be the morning. you rate Thank Good also you. growth and future. look with on like growth the Scott, the is the slower – based going rate assume to in

you the going that has way logistics forward? the how So approach on the changed commitments pipeline side

Scott Sheffield

Change the pipeline… part, last the pipeline and the here

Paul Cheng

be commitment changed? will that how that pipeline The

Scott Sheffield

we this they so, barrels to but plenty in Midland market. point the and I access of grow are have locked commitments those know at in

the continue but we’ll and manage it, to extent than production to our concern there’s no they’re commitments So levels. able higher to get the those about being evaluate that – all pipeline

it and watch So manage monitor we’ll and continue to it.

Paul Cheng

itself? that do that point be in nick the commitment the to your could that increase are may feel or commitment at your point, excess and comfortable reach of you X% going growth you on more pipeline some short you at But you your

Scott Sheffield

I commitment point. adding more this Yes, us see don’t to really any

will that we cover commitments have equity production. our We

we’ll buy with And Midland really can that’ll it it. we market. have excess the and barrels in if we we of be a today those stick have So be what would case

Paul Cheng

Okay.

every process, say, XX on the factor like about human pricing or program. gentlemen hedging, the we’ve emotional use hedging whether will eliminate away XX the and hedging months On be this take maybe, program, a the will to to then done think quarter, you to condition in mechanical out

Joey Hall

manage through. Paul we’re going it to we to that continue will I and would something is be say, going monitor, something

So I don’t mechanical. see it as a

that. in earlier I look alluded systematically. for times talked have long-term on, of where put think think to think ideal we’ll history production do time hedges which the those Scott the to a on hedging we it We’ll just but, advance continue and it’s I coming that, versus about to of doing we

Paul Cheng

program, whether one guys see. going-forward forward? final that doing? to a it divestment from for you spacing on has basis, I do trade And growth with become will a And curious but already model, you been new Scott than the decision going me, you mentioned I whether far continue just also think that will more your impact previously I’m aggressive in

Scott Sheffield

the basin operators. trades with think I still think I Paul, No, trades the doing – Midland we’re all

So or we want can. XX,XXX long to drill XX,XXX XX,XXX as as we or lateral, foot

another X,XXX foot to or trading feet. areas X,XXX add we’re So X,XXX

that continue on. So will

that’s do…. alluding we’ll to but were tell continue to, couldn’t I So what you

Paul Cheng

have that backlog to all. actually you ask rate the whether not referring with tail-end – the get I’m slower you you sorry, inventory will that lead one a it at Scott, clearly you target, at tremendous may that growth

been? historically money has you far the assets in forward put to So whether selling you that that aggressive the in more future than become

Scott Sheffield

that two or Paul I I decent sell-off market for right no improve and the going to but buy There will next the continue dead. deals, up. be cash no dead acreage next has But is would now expect to equity companies said years is areas market Tier three is are as companies no two the be right the There’s X Yes, able to cash prices, inventory de-leveraging over to earlier, nobody I years. at to opens now. cash have any what to market and the private three market as call of

Paul Cheng

the in any intact? How form Sure. shape spacing about or Is decision? being that

Scott Sheffield

No.

spacing wide slides, our If we past remember back you a started in XXXX.

a like at we over of not have peers have inventory. our down been less spacing years, that last the So all lot six

Paul Cheng

Thank you.

Operator

Bernstein from our next take question Bob Brackett We’ll with Research.

Bob Brackett

new and with it’s realigning conversations if detail investment this be thesis, strategy? management for in. to with direction you had around incentives I’m the thank of that you’ve defining both going aligned wondering the yet also level Again, that the board

Scott Sheffield

Yes. in We’ve had regard. lots of discussions

of a think only committee’s year based increased I’ve year. We’ve I’m this from management plan, CEO on big now level last team, XXX% one the fact, that changes incentive management I In also my up personal our performance it’s made performance. long-term the on

again And and so is stockholder we key went one of think the I XXX%. basically return measures to

in of I’m the paid peer I if for quartile group, my So nothing instance. bottom get

it’s So XXX% a related.

looking the energy time salaries that And at the we’re other the few in that companies know changes has over year, pandemic. you to of some are in regard this one companies already making. regard of reduced changes those that we’re as already So we’re

reduced zero. We our bonuses also to

take one we’re hope the again, Bob. So I of that helps. few action. to immediate

Bob Brackett

of since That it, asked they XXXX? impact be an changes no A cycle. quick thoughts helps. heading whether any one’s Any might into and follow-up there’ll how regulatory into we’re Pioneer going election

Scott Sheffield

now something there’ll Yes. it Biden unless some looks like Right country happens probably Biden is obvious. the be elect significant changes. And leading, elect we’ll it’s – and this could

through of coast. I so our state again will our acreage pipeline Texas delayed, should we of I the fracing. federal lands. what gas But don’t have think lands But be be Gulf know and I infrastructure expect will be all and our on banning about as have would we lines that discussion move unaffected. and in zero is federal noted, lands significantly on on the end we will crossing be. oil most There’s result

issues anticipate So there. no

Bob Brackett

Scott. Thanks,

Operator

Paul And Sankey Sankey we will take our Research. from question with last

Paul Sankey

strategy, regular price wouldn’t the if imply oil X%, cost. you you it Scott, with appreciated. the on stop variable Clearly wonder Thank would dividend point the because you’ve why greatly And X% kudos I very clear dividends. that the the captured side, on variability that increases everybody. to and your be, the it’s visibility My the on you’ve adds would did then very long-term outline growth. much, got for of hedging

that business You’ve got the model doesn’t it. need

be buyback time. wrong do disaster on clearly Surely you the minus your dumping secondly, long-term sheet complex. know way that And would can reporting at it and appear that if very at stock there a $XX is undervalued and increase you dumping that buybacks, essentially least the or a a would Thanks. quarter. that, to value. you overall makes the them additionally, believe if people balance handle wondered been showed dividends because generate on consider the You’ve I and had complex hedging? good Secondly, – just

Scott Sheffield

down – debt on that may if we’ve I the had dropping business, we about but and sheet, Paul balance and three cash consider to in in first the due zero years Yes, billion three had in downturns had I fact have time. had the $X of history more I’ve hedging, three my XX of last the I years. the we’ll XX over anticipate

And so not the balance cash I there, $X sure debt. billion see the of but strategy on we right can point I’m and time. get have to don’t in put sheet it’s Maybe zero a

on. I MBS, for as still President call putting won $XX just if we in earlier, going battle said have there So probably today, I the be oil and $XX, still a

continue career us. my Most And give confidence to to didn’t is been in ways upon we thing we to dependent three of We’ve a so time. ways protect can’t for I downturn We we’re have on heavily think The continue this from important OPEC. dependent hedging. three why that’s upside. do primarily learned it’s OPEC OPEC that long us and

and be several balance continuing we’re have we a so at that on move helpful unless the to we’ll balance no And instruments hedge continue billion look to may different sheet. debt to to with sheet but

second So was toward question that’s –your what… more

Paul Sankey

imply There’s might X% still…. just point a interrupt. growth X% a to volume Sorry there about the in

Scott Sheffield

haven’t this over No, dividend our time, time. at Oh, I growth point we but it what see. base stated in will be we’ll evaluate

Paul Sankey

on I the if mean, right and then buyback, you’re And Yes. fundamentally about? undervalued the stocks

Scott Sheffield

is did I even couldn’t of mean, to – we our Yes. sheets $XX I we in I a stock April, we in – industry or May, was and mean, the best the when I had balance of guess buy bottom what’s sad but it we had not wish hit afford $XX. that one April it

sheets do to the afford we in And time the couldn’t so it my stock, I and of balance one in we it. business that was had best but great heart the knew buy to the a

So, moving to ensure sheet this like a maybe, mean should that X else, said really there happen, XXXX, we’re time. in does I debt when in go and again, Paul? balance volatile I not billion of like cash point but zero to in just XXXX, Anything at situations

Operator

And have we no more questions…

Scott Sheffield

thank we other everyone. next safe. everybody each up we point stays Again, time. to you. can and Thank to We look hopefully seeing want quarter I all start the at Okay. loosen some forward hope and in

I that Everybody care and So forward safe. to take look stay day.

Operator

today’s concludes your call. This you. Thank Thank participation. for you

You disconnect. may now

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