Q4 2022 Pioneer Natural Resources Co Earnings Call

February 23, 2023

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Please standby we're about to begin.

Good day, everyone and welcome to the pioneer natural resources fourth quarter earnings conference call. Joining us today will be Scott, Sheffield Chief Executive Officer, Rich Daly, President and Chief operating Officer, and Neil Shah Senior Vice President and Chief Financial Officer.

Pioneer has prepared presentation slides to supplement comments made today. These slides are available on the internet at Www Dot P X D Dot com again, the Internet website to access the slides presented in today's call is www.

Stop he X T dot com navigate to the Investor tab found at the top of the webpage and then select quarterly results.

Today's call is being recorded every play of the call will be archived on www Dot P X C dot com through March 23rd 2023.

Yeah.

The company's comments today will include forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, these statements and the business.

Prospects of pioneer are subject to a number of risks and uncertainties that may cause actual results in future periods to differ materially from those forward looking statements.

Risks and uncertainties are described in Pioneer's news release on page two of the slide presentation and in Pioneer's public filings made with the Securities and Exchange Commission.

At this time for opening remarks, I would like to turn the call over to Pioneer's Senior Vice President and Chief Financial Officer Neal Shah. Please go ahead Sir.

Thank you April good morning, everyone and thank you for joining us for Pioneer's fourth quarter earnings call.

Today, we will discuss the strong fourth quarter and full year 2022 results pioneer delivered which resulted in a record 30% return on capital employed and the generation of over $8 billion of free cash flow.

These results were underpinned by our world class assets, our dedicated employees and efficient operations.

We're also excited to highlight our 2020 and a strong efficiencies. The teams continue to deliver we will then open up the call for your questions with that I will turn it over to Scott.

Thank you Neil good morning.

On today's call, we'll be discussing our fourth quarter and full year 'twenty two results as well as the outlook for 2023.

Pioneer delivered strong results in 'twenty, two as seen through the many accomplishments on slide number three.

During 2002 pioneer was the most active driller in the largest oil producer in the state of Texas.

Achieved our fifth straight year of drilling and completion efficiency gains.

Also upon here delivered a record year on total production also achieving our return on capital employed of 30% a record.

Strengthening our fortress like balance sheet and remain disciplined with our reinvestment rate at approximately 30% of our cash flow.

These strong results results supportive probably attractive free cash flow generation of which we return greater than 95% of free cash flow to shareholders.

Through our 26, a share in dividends and $1 65 billion in share repurchases.

We plan to build on the strong 22 results and expect to deliver a compelling 'twenty three with nearly two months of strong execution already completed we remain highly constructive on oil prices I am still very optimistic that we will move back into that 90 to $100 range sometime earlier this summer as we move it and get away.

From the <unk> 78 to $88 swing in Brent prices.

Turning to slide four.

During the fourth quarter pioneer generated $1 7 billion in free cash flow.

Bring on yearly free cash flow to $8 4 billion of which we returned approximately 8 billion through dividends and share repurchases throughout the year.

For the fourth quarter, we are returning just over 100% of our free cash flow.

Apprised of our first quarter.

Just highlighted underpin our ability to return substantial capital to shareholders. As you can see from the chart in 2022 pioneer returned the highest percentage of free cash flow to investors in compared to peers. This includes returning more than 95% of our free cash flow to shareholders through dividends and share repurchases.

Our strong balance sheet disciplined reinvestment rate and compelling corporate returns enables our ability to return significant capital to shareholders.

Turning to slide seven pioneer continues to offer a compelling dividend with one of the highest dividend yields in the S&P 500, all of our first quarter dividend dividend Anita.

All participants are now muted.

Please proceed.

11%, which as you can see from this slide exceeds our energy peers, the majors and every S&P 500 sector.

Turning to slide eight in addition to the strong dividend payout, we continue to see attractive value in repurchasing our shares we believe traded a significant discount to our intrinsic value demonstrating this commitment during the fourth quarter pioneer repurchased $400 million of stock further reducing shares outstanding which benefits long term share returns and importantly.

<unk>.

Improve as per share metrics. In addition to the fourth quarter share repurchases, we completed an additional $250 million of share repurchases. During the first quarter of 'twenty three under our <unk>, one plan exhibiting our willingness to actively repurchase shares.

In total pioneer has repurchased $1 9 billion in equity since the beginning of 2022, reducing shares outstanding by approximately three 5%.

With $2 1 billion remaining under our 4 billion authorization, we have additional opportunities to reduce our share count further in 2023.

Sure.

Turning to slide nine we outline our 2023 capital program, which builds on our 2022 successes the company plans to deliver 2023 full year option ranging from 357000 to 370000 2000 barrels of oil per day, and total production ranging from 670.

700000 Boe's per day.

Consistent with my commentary last quarter, our drilling completions and facilities capital budget of $4 45 billion to $4 75 billion reflects approximately 10% inflation.

And two incremental rigs, which helped support our annual production growth targets.

Our exploration environmental and other capital for the year is expected to range from 150 million to $200 million as we've discussed previously key projects within this category includes exploration drilling of four wells targeting the Barnett and Woodford formations in the Midland Basin as well as continued appraisal of our enhanced oil recovery project.

We're looking forward to the Barnett Woodford test.

Early results by some peers have shown some strong early oil rates and we have.

Our significant acreage position in several thousand locations related to Barnett and Woodford potential in the future.

As the economic potential of these projects both the exploration drilling in the EUR projects become more certain those will be included in our future.

Capital. So this is not expected to be recurring capital.

Based on the midpoint of our capital and production ranges at strip pricing, we expect to generate greater than $4 billion of free cash flow in 2023 from approximately $9 billion of projected operating cash flow.

Slide 10 provides some additional detail on our 2023 capital program.

Throughout 2023, and we expect to operate between 24 and 26 drilling rigs in place between 530 wells on production.

This program is expected to deliver quarterly production growth throughout the year, our 2023 drilling and completions activity is distributed across our large contiguous Midland basin acreage with approximately three drilling rigs operating in our joint venture area.

As I discussed in the past the contiguous nature of our acreage position provides multiple operational benefits, including drilling and completing 15000 plus foot laterals with greater than 100 of these expect to be placed on production in 2023. These longer lateral does private improved returns and higher productivity that I'll discuss further in a minute.

We also benefit from the continued utilization of simultaneous operations, which reduces costs by about $200000 per well and provides incremental operational efficiencies.

Additionally, our significant water infrastructure provides diversified disposal and reuse network that spans across most of our acreage position.

Turning to slide 11, as I, just mentioned, our 15000 plus foot.

Lateral length developments deliver strong productivity and increase returns when compared to a 10000 foot lateral wells drilling and completing these long laterals drive significant efficiency gains that reduce capital costs. The D&C savings of approximately 15% on a cost per lateral foot basis. The combination of these savings and strong productivity drive increased.

Returns with Irr's, increasing by more than 20 percentage points when compared to a 10000 foot lateral.

To date, we've identified more than 1000 locations for long lateral development and extract more than 100 of these wells to be placed on production in 2023.

Yes.

Turning to slide 12, and looking at the chart on the left you can see that pioneer's multiyear track record of peer leading completion efficiencies continued during 2022 and in addition to our execution teams great efforts the implementation of simulcast completions as a major contributor to our efficiency improvements and cost savings over the last couple of years.

We continue to build on that success with the deployment of a third fulltime cymose.

Earlier this quarter.

Additionally, during the first half of 2023 minor will utilize to localized sand mines to provide sand to our wells. The use of local sand is expected to deliver average cost savings of approximately $200000 per well principally due to reduced trucking costs as a result of the mines close proximity to our wells.

Consistent with our commitment to sustainable operation Pioneer expects, 100% of our completion placed to be either electric or dual fuel powered by the second half of 2023.

Turning to slide 13, our 2023 development plan remains highly competitive and is underpinned by our best in class assets and highly efficient operations. This combination result in 2023 corporate maintenance breakeven <unk> oil price of $39, a barrel, which includes the impacts of the.

10% inflation that I talked about earlier in estimated cash taxes that are forecasted to be in that mid to high teens of book income for the year.

Including our base dividend our maintenance program is fully funded at $47, Wty, which demonstrates the resilience and durability of our program through cycles.

At strip pricing after funding our 2023 program, we expect to generate substantial free cash flow in.

Juruti of which we plan to return to shareholders through dividends and share repurchases.

Okay.

On Slide 14, you can see on the left that pioneer has the deepest inventory of high quality Permian drilling locations when compared to peers is third party analysis, substantiates pioneer independent oil and gas operator with decades of high quality inventory in the core of the Midland Basin.

As seen on the right pioneers Midland Basin acreage is highly contiguous which is a key driver of the efficiencies that I highlighted earlier, so with that I'll turn it over to Neil.

Thank you rich turning your attention to slide 15, the graph on our left to build on our peer leading inventory depth that rich noted on the previous slide and highlights <unk> combination of this unmatched inventory depth with our ability to generate the highest free cash flow per Boe.

Our attractive free cash flow generation sustained through our deep inventory provides a durable investment through cycle.

Turning to slide 16.

Yes.

Pioneers peer leading free cash flow per Boe from the previous slide supported by our best in class margins. These robust margins are generated through our top tier price realizations oil hedges and low operating cost inclusive of G&A and interest expense. Additionally, a comprehensive infrastructure highly diversified marketing strategy in <unk>.

Fishing operations underpinned and contribute to the strong results.

Yes.

On slide 17.

It illustrates the compelling free cash flow generation and durability of our program through cycle, which is the product of our world class assets oil growth and our highly efficient operations.

This free cash flow provides ample opportunity returned significant capital to our shareholders through dividends and share repurchases at various oil prices and a sustained by our low corporate breakeven that rich discussed earlier.

Yes.

Now turning to slide 18.

At current strip prices, we expect to deliver an attractive ROE CE exceeding all sectors within the S&P 500 of the majors and the overall energy sector.

Additionally, pioneer continues to offer a discounted valuation despite generating this high <unk> when compared to the S&P 500.

In summary, we believe our leading corporate return profile paired with our inexpensive valuation results in a compelling investment opportunity and with that I'll hand, it back to rich. Thanks, Neil as you can see on slide 19, we've continued to our commitment to sustainable operations. In 2022, you can say we joined <unk>.

<unk> 2.0, as Scott talked about earlier partnered with Nextera energy to develop a 140 megawatt wind generation project that should be online in 2024 and.

And additionally, during the fourth quarter, we published our 2020 to climate risk report, which accompanies our previously published 2022 sustainability report both reports highlight pioneer's focus.

And significant progress on ESG initiatives and their impact on our business.

We believe these actions demonstrate our commitment and focus on ESG and further strengthens pioneers position as a leader in the industry you can find our both our sustainability report and our climate risk report on our website.

Turning to slide 'twenty pioneer continues to provide low emissions barrels to the market producing some of the most sustainable barrels in the world behind only Norway on a C O two intensity basis as you can see from the chart.

When combined with our low breakeven oil price pioneer provides exceptionally resilient production that we expect we will have a place in the global market for decades to come.

Lastly, concluding on slide 21, you can see the pioneers key characteristics on this slide there that support our commitment to creating significant value for our shareholders and so with that I'll step it up the call for questions.

Thank you if you would like to ask a question simply press the star key followed by the digit one on your telephone keypad also of your user does speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again press star one at this time, we will pause for a moment.

And we'll first hear from Doug Leggate of Bank of America.

Okay.

And Doug Your line is open.

Hello can you hear me.

Yes.

Yes Lucky here.

Hey, Doug go ahead.

Doug.

I've got two questions here.

First one is just on the spending budget for the year.

You guys have a very deep set of inventory location.

Best in the industry, but you are spending $200 million on exploration can you dive into some of the detail about what youre planning to spend on this year and why you feel the need to spend on exploration this year.

Sure Yes.

Yes, I think as we look at as I talked about we've got several thousand locations.

Our existing footprint in the Midland Basin, and we think it's important with four more wells to really understand what their productivity is going to look like what the economics are going to look like and how it would compete for capital with our rest of our portfolio. So we think it's money well spent just to understand that this.

This year as part of our ongoing operations and so we've seen as I mentioned on the comments. Some good results from peers. So far so we're excited to see what those results look like theyre going to be in the second half of the year.

That's why we're focused on spending on it and then the other one I'd just add is in our enhanced oil recovery project, we've talked about that in prior quarters, we had a positive.

In 2022, and we wanted to do some more cycles on that and see what uplift we can get in 2023 from those projects as well.

Hopefully that helps.

Pat.

The second question.

Jeff on deferred tax.

There was a benefit here in the fourth quarter and it looks like that benefit continues to show up here in the first quarter given guidance.

Can you talk about the trajectory of cash stack that you see it playing out there did calendar 'twenty three.

Hey, good morning, It's Neal Shah again, our taxable income.

It's dependent on oil prices, but at current strip prices as rich said earlier, our effective tax cash tax rate relative to book income is going to be in that mid to high teens range throughout the year. So first quarter cash taxes are a little bit lower than that range. As a result of us using the safe harbor provision for our tax our.

Our cash tax payment in the first quarter, but youll see.

Going forward Q2, Q3, and Q4 that it's going to moderate back to that mid to high teens on a go forward basis.

That's great I appreciate the answers.

Thank you.

Next we'll hear from Neil Mehta of Goldman Sachs.

Yeah. Good morning team. Thanks for taking our questions. The first is that it's been a lot of focus on well productivity.

And you talked a lot about the flattening providing an outlook for 2023 to 2027 and the improvements that you anticipate just love to hear where we are in that journey talk about on the ground what changes have been made to execute against that plan and when do you see it really manifesting itself in 2023 numbers.

Sure Neal I appreciate it and good morning, So I would say you know our 2023 program is off to a really a great start and we expect to deliver a much more productive program this year and really in future years, given the depth of our inventory.

Going forward. So we look forward to reporting on the progress of that but I would say that we made those changes in the fall you're going to see a little limited activity in the second quarter, but then you know second half of the year, you'll see that.

Benefits of those.

While called changes, but it was really just.

Emphasizing full stack development across the basin.

Alright, so all going according to plan.

Okay.

That's helpful on that.

We'll keep our eyes open for the follow up.

With just around capital this quarter.

We saw a bigger payout.

And then what most of US model just talk about how youre thinking about.

Our normalized dividend payout and then as it relates to buybacks.

We continue to take a more countercyclical approach.

When shares are sold off thank you.

Yes, Thanks, Neil Scott.

We'll continue as I've said on past calls the visit with our shareholder base annually to solicit their thoughts and feedback are committed to returning significant capital to shareholders and see the benefits above dividends.

Backs going forward.

So that will continue more of the segment as you've seen us.

And was there anything operator.

Next we'll hear from John Freeman of Raymond James.

Good morning, guys.

John John .

The first question, it's good to see that in the second half of the year.

Please feel free to all be electric or dual fuel power is the plan still to be.

100% electric by 2024, I think you will need to install three electric substations, just sort of an update maybe on that timeline.

Yes, I Wouldnt say by 'twenty four I mean, I think we'll we're moving that way, but it's probably more 25 when you get to.

Most of our activity will be to provide is just depends on the build out of that but it's all progressing as you know just takes time working with the transmission facilities and providers to to get that done, but that's part of that $150 million to $200 million is also to help allow us to be in a position to have the field electrified when the power is available to us so.

It is all moving forward as we would've expected and really probably a bigger focus in 25, but there'll be some in 'twenty four.

Great and then just my follow up question on the <unk>.

You also you're kind of assuming a 10%.

Cost inflation at the time of Yours last earnings call I believe you all said it about.

Somewhere around $35, 40% of your of your services. This year, we're under under fixed price contracts versus kind of floating rate or spot.

Can you sort of give an update as we stand today like how much of your contracts are fixed versus.

Versus floating or spot.

Yes, I'd say that 100% of our activity is contracted at this point and then 55% to 60% is what I'd say is.

Pretty well fixed at this point and the rest is really just subject to what I'd call. Your WTS prices that are linked to that or.

Steel prices are linked to those things and so most of US and is tied to commodities, which is that's going to drive the most of the rest of it.

So it can fluctuate some labor.

So those are the main things that are still out there that will fluctuate.

Great. Thanks, very much I appreciate it.

Sure.

Okay.

As a reminder, star one if you would like to ask a question or make a comment.

Next we'll hear from Scott Gruber of Citigroup.

Yes, good morning.

Good morning, Scott Scott.

Just kind of.

Vacation question here on the budget for this year.

In comparison, the maintenance capital you guys cite on slide 13 of $3 9 billion I think that's just the D&C portion, but it is about $700 million or so below the midpoint of the D&C budget for this year.

Can you guys talk about we're running two more rigs this year because it looks like that $700 million gap is bigger than two rigs maybe closer to a four rig rate sure.

Sure I'm missing some pieces can you guys just help kind of bridge the gap between.

The maintenance capital three nine in the DNC budget for this year.

Yes, I really think about as we talked about the two rigs being roughly 200 million a piece. So that's $400 million of the Delta you look in there and that's really just a matter of.

Timing of how activity comes it ebbs and flows in there and then the fact that some of our capital program even for this year, where there was towards the end of this year would've generated growth into 2023, and so really Scott that's really the Delta difference is just the timing of things that happen between years to draw.

Give that different so there's nothing magical about it is just you know just how the math works out.

And timing okay.

Okay. No I appreciate that that was all thank you.

Sure.

And next we'll hear from Neil.

England of choice.

Good morning, everyone.

Our first questions with respect to Nextera energy and 140 megawatts.

Texas Wind project, you elaborate a bit more on what are the steps.

Yes in terms of identifying the general contractor.

Yes.

That construction start.

On the second part two is just.

More of a catch.

Actual expansion on this one.

On this wind project.

Yes, Neil maybe a couple of things here one the construction starting this year and with the idea of being in service in 2024 next era is one that we're constructing it where they're the owner of the project and we will be taking the.

Electricity that generate from their project and using in our operations and our gas plant operations with Targa.

And then in terms of.

Future, we still have three other large.

Branches out there that we will look to for other renewable projects in the future on and so we still have a lot of potential to add incremental renewable projects that we could use that electricity in our operations over the course of time. So we're not stopping here continuing to progress it just take some time.

It's out there as a follow up question I was curious in stacking up all these projects.

The wind.

I was also curious is around carbon capture and sequestration. How is how these carbon capture stacking up relative to the other projects that you have.

Thanks, and I'd say, our bigger focus today is on as I talked earlier about electrifying the field and really moving more of our operations to the grid. So that's the biggest emissions thing. We can do first I mean, I think we're assessing carbon capture in it over time, but and sequestration, but for the most part today our focus is on really.

Getting more of our operations electrified.

It sounds great that sounds great. There thanks very much.

Sure.

And it appears there are no further questions at this time I will turn the call back over to Scott Sheffield for any additional or closing comments.

Again, thank you very much for listening on this call and look forward to visiting.

With everybody on the May call. Thank you.

That does conclude today's call. Thank you all for your participation you may now disconnect.

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Thank you.

Good day, everyone and welcome to the pioneer natural resources fourth quarter earnings Conference call.

Joining us today will be Scott, Sheffield Chief Executive Officer, Rich Daly, President and Chief operating Officer, and Neal Shah Senior Vice President and Chief Financial Officer.

Pioneer has prepared presentation slides to supplement comments made today. These slides are available on the internet at Www Dot PX D. Dot com again, the Internet website to access the slides presented in today's call is www.

Dot PX T dot com navigate to the Investor tab found at the top of the web page and then select quarterly results.

Today's call is being recorded a replay of the call will be archived on www dot <unk> dot com through March 23rd 2023.

The company's comments today will include forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Statements and the business.

Prospects of pioneer are subject to a number of risks and uncertainties that may cause actual results in future periods to differ materially from those forward looking statements. These risks and uncertainties are described in Pioneer's news release.

Page two of the slide presentation and in Pioneer's public filings made with the Securities and Exchange Commission.

At this time for opening remarks, I would like to turn the call over to Pioneer's Senior Vice President and Chief Financial Officer Neal Shah. Please go ahead Sir.

Thank you April good morning, everyone and thank you for joining us for Pioneer's fourth quarter earnings call.

Today, we will discuss the strong fourth quarter and full year 2022 results at pioneer delivered which resulted in a record 30% return on capital employed and the generation of over $8 billion in free cash flow.

These results were underpinned by our world class assets, our dedicated employees and efficient operations.

We're also excited to highlight our 2020 and a strong efficiencies. The teams continue to deliver we will then open up the call for your questions with that I will turn it over to Scott.

Thank you Neil.

<unk>.

On today's call, we'll be discussing our fourth quarter and full year 'twenty two results as well as the outlook for 2023.

Pioneer delivered strong results in 'twenty, two as seen through the many accomplishments on slide number three.

During 2002 pioneer was the most active driller and largest oil producer in the state of Texas.

Achieved our fifth straight year of drilling and completion efficiency gains.

Oscar also pioneer delivered a record year on total production.

So achieving a return on capital employed of 30% a record <unk>.

<unk>, our fortress like balance sheet and remain disciplined with our reinvestment rate at approximately 30% of our cash flow.

The strong <unk> results supportive Holly attractive free cash flow generation of which we return greater than 95% of free cash flow to shareholders.

Through our 26 per share in dividends and 165 billion in share repurchases.

We plan to build on the strong 22 results and expect to deliver a compelling 23 with.

With nearly two months of strong execution already completed we remain highly constructive on oil prices I am still very optimistic that we will move back into that 90 to $100 range sometime earlier. This summer as we move and get away from the 78 to $88 swing in Brent prices.

Yes.

Turning to slide four during.

During the fourth quarter pioneer generated $1 7 billion in free cash flow, bringing yearly free cash flow of $8 4 billion of which we returned approximately 8 billion through dividends and share repurchases throughout the year.

For the fourth quarter, we are returning just over 100% of our free cash flow.

Comprised of our first quarter.

Okay.

Balance sheet disciplined reinvestment rate and compelling corporate returns enables our ability to return significant capital to shareholders.

Turning to slide seven pioneer continues to offer a compelling dividend with one of the highest dividend yields in the S&P 500, our first quarter dividend dividend neither.

Call participants are now muted.

Please proceed.

11%, which as you can see from this slide exceeds our energy peers, the majors and every S&P 500 sector.

Yes.

Improving per share metrics. In addition to the fourth quarter share repurchases, we completed an additional $250 million of share repurchases. During the first quarter of 'twenty three under our <unk>, one plan exhibiting our willingness to actively repurchase shares.

In total pioneer has repurchased $1 9 billion in equity since the beginning of 2022, reducing shares outstanding by approximately three 5%.

With $2 1 billion remaining under our $4 billion authorization, we have additional opportunities to reduce our share count further in 2023.

Turning to slide nine we outline our 2023 capital program, which builds on our 2022 successes the company plans to deliver 2023 full year auction ranging from 357000 to 372000 barrels of oil per day, and total production ranging from 600.

70000, 700000 Boe's per day.

Consistent with my commentary last quarter, our drilling completions and facilities capital budget of $4 45 billion to $4 75 billion reflects approximately 10% inflation.

And two incremental rigs, which helped support our annual production growth targets.

We're looking forward to the Barnett Woodford test.

Early results by some peers have shown some strong early oil rates and we have.

Our significant acreage position in several thousand locations related to Barnett and Woodford potential in the future.

As the economic potential of these projects, both the exploration drilling and the EUR projects become more certain and those will be included in our future.

Capital. So this is not expected to be recurring capital.

Slide 10 provides some additional detail on our 2023 capital program.

Throughout 2023, and we expect to operate between 24 and 26 drilling rigs in place between <unk> 530 wells on production. This program is expected to deliver quarterly production growth throughout the year, our 2023 drilling and completions activity is distributed across our large contiguous Midland basin acreage with approximately three drilling rigs operating in our joint.

To ensure area.

As I discussed in the past the contiguous nature of our acreage position provides multiple operational benefits, including drilling and completing 15000 plus foot laterals with greater than 100 of these expect to be placed on production in 2023. These longer lateral does private improve returns and higher productivity that I'll discuss further in a minute.

We also benefit from the continued utilization of simultaneous operations, which reduces costs by about $200000 per well and provides incremental operational efficiencies.

Additionally, our significant water infrastructure provides diversified disposal and reuse network that spans across most of our acreage position.

Turning to slide 11, as I, just mentioned, our 15000 plus foot.

Lateral link developments deliver strong productivity and increase returns when compared to a 10000 foot lateral wells drilling and completing these long laterals drive significant efficiency gains that reduce capital costs. The D&C savings of approximately 15% on a cost.

Per lateral foot basis, the combination of these savings and strong productivity to drive increased returns with irr's, increasing by more than 20 percentage points when compared to a 10000 foot lateral.

To date, we've identified more than 1000 locations for long lateral development and extract more than 100 of these wells to be placed on production in 2023.

Yes.

Turning to slide 12, and looking at the chart on the left you can see that pioneer's multiyear track record of pure leading completion efficiencies continued during 2022.

And in addition to our execution teams great efforts the implementation of simultaneous completions as a major contributor to our efficiency improvements and cost savings over the last couple of years, we continue to build on that success with the deployment of a third fulltime simulcast fleet earlier this quarter.

Additionally, during the first half of 2023 minor will utilize to localized sand mines to provide sand to our wells. The use of local sand is expected to deliver average cost savings of approximately $200000 per well principally due to reduced trucking cost as a result of the mines close proximity to our wells.

Consistent with our commitment to sustainable operation Pioneer expects, 100% of our completion placed to be either a electric or dual fuel powered by the second half of 2023.

10% inflation that I talked about earlier in estimated cash taxes that are forecasted to be in that mid to high teens of book income for the year.

Including our base dividend our maintenance program is fully funded at $47, Wty, which demonstrates the resilience and durability of our program through cycles.

At strip pricing after funding our 2023 program, we expect to generate substantial free cash flow the majority of which we plan to return to shareholders through dividends and share repurchases.

Okay.

Highly contiguous which is a key driver of the efficiencies that I highlighted earlier, so with that I'll turn it over to Neil.

Thank you rich turning your attention to slide 15.

The graph on our left to build on our peer leading inventory depth that rich noted on the previous slide and highlights <unk> combination of this unmatched inventory depth with our ability to generate the highest free cash flow per Boe.

Our attractive free cash flow generation sustained through our deep inventory provides a durable investment through cycle.

Turning to slide 16.

Yes.

Pioneers peer leading free cash flow per Boe from the previous slide are supported by our best in class margins. These robust margins are generated through our top tier price realizations oil hedges are low operating cost inclusive of G&A and interest expense. Additionally, a comprehensive infrastructure highly diversified marketing strategy in <unk>.

Fishing operations underpinned and contribute to the strong results.

Yes.

On slide 17.

It illustrates the compelling free cash flow generation and durability of our program through cycle, which is the product of our world class assets oil growth and our highly efficient operations.

This free cash flow provides ample opportunity have returned significant capital to our shareholders through dividends and share repurchases at various oil prices and a sustained by our low corporate breakeven that rich discussed earlier.

Now turning to slide 18.

At current strip prices, we expect to deliver an attractive ROE CE exceeding all sectors within the S&P 500 of the majors and the overall energy sector.

Additionally, pioneer continues to offer a discounted valuation despite generating this high <unk> when compared to the S&P 500.

GMP 2.0, as Scott talked about earlier partnering with Nextera energy to develop a 140 megawatt wind generation project that should be online in 2024 and.

And significant progress on ESG initiatives and their impact on our business.

We believe these actions demonstrate our commitment and focus on ESG and further strengthens <unk> position as a leader in the industry you can find our both our sustainability report and our climate risk report on our website.

Turning to slide 'twenty pioneer continues to provide low emissions barrels to the market producing some of the most sustainable barrels in the world behind only Norway on a <unk> intensity basis as you can see from the chart.

When combined with our low breakeven oil price pioneer provides exceptionally resilient production that we expect we will have a place in the global market for decades to come.

Lastly, concluding on slide 21, you can see the pioneers key characteristics on the slide there that support our commitment to creating significant value for our shareholders and so with that I'll stop and up the call for questions.

Thank you if you would like to ask a question simply press the star key followed by the digit one on your telephone keypad Silvio.

Sylvia user does speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.

Once again press star one at this time, we will pause for a moment.

And we'll first hear from Doug Leggate of Bank of America.

Okay.

And Doug Your line is open.

Yes.

Hello can you hear me.

Sure.

Yes, Hello can you hear me.

Hey, Doug go ahead.

Okay.

Two questions here. So the very first one is just on the spending budget for the year.

You guys have a very deep set of <unk>.

<unk> location.

That's in the industry, but you are spending $200 million on exploration can you dive into some of the detail about what youre planning to spend on this year and why you feel the need to spend on exploration this year.

Sure.

Yes, I think as we look at as I talked about we've got several thousand locations.

Our existing footprint in the Midland Basin, and we think it's important with four more wells to really understand what that productivity is going to look like what the economics are going to look like and how it would compete for capital with our rest of our portfolio. So we think it's money well spent just to understand that this.

That's why we're focused on spending on it and then the other one I'd just add is in our enhanced oil recovery project, we've talked about that in prior quarters, we had a positive.

In 2022, and we wanted to do some more cycles on that and see what uplift we can get in 2023 from those projects as well.

Hopefully that helps.

You bet.

The second question.

Jeff on deferred tax.

Thank you Derek the benefit here in the fourth quarter and it looks like that benefit continues to show up here in the first quarter given guidance.

Can you talk about the trajectory of cash stack that you see.

Laying out their day calendar 'twenty three.

Hey, good morning, It's Neal Shah again, our taxable income.

Our cash tax payment in the first quarter, but youll see.

Going forward Q2, Q3, and Q4 that it is going to moderate back to that mid to high teens on a go forward basis.

That's great I appreciate the answers.

Thank you.

Next we'll hear from Neil Mehta of Goldman Sachs.

Yeah, good morning team.

For taking our questions. The first is there's been a lot of focus on well productivity.

Talked a lot about this lapping providing an outlook for 2023 to 2027 and the improvements that you anticipate that just love to hear where we are in that journey talk about on the ground what changes have been made to execute against that plan and when do you see it really manifesting itself in 2023 numbers.

Sure Neal I appreciate it and good morning, So I would tell you. Our 2023 program is off to a really a great start and we expect to deliver a much more productive program this year and really in future years, given the depth of our inventory.

Well called changes, but it was really just.

Emphasizing full stack development across the basin.

Alright, good morning.

Ian.

Okay.

That's helpful on that.

We'll keep our eyes open for the follow up with.

With just around capital this quarter.

We saw a bigger payout.

And then what most of US model just talk about how youre thinking about.

Our normalized dividend payout and then as it relates to buybacks.

We continue to take a more countercyclical approach.

Chairs have sold off thank you.

Yes, Thanks, Neil Scott.

We will continue as I've said on past calls to visit with our shareholder base annually to solicit their thoughts and feedback are committed to returning significant capital to shareholders and see the benefits of both dividends buyback.

Buybacks going forward.

So that will continue more of the second that as you've seen us.

And was there any operator.

Next we'll hear from John Freeman of Raymond James.

Good morning, guys.

Yes, John John .

The first question, it's good to see that.

Second half of the year, but yes, the completion fleets will all be electric or dual fuel.

Is the plan still to be.

Personal electric by 2024, I think you will need to install three electric substations, just sort of an update maybe on that timeline.

Yes, I Wouldnt say by 'twenty, four I mean I think.

We're moving that way, but it's probably more 25, when you get to.

Most of our activity will be to provide is just you know it depends on the build out of that but it's all progressing as you know just takes time working with the transmission facilities and providers to to get that done, but that's part of that $150 million to $200 million is also to help allow us to be in a position to have the field electrified when the power is available to us so.

It's all moving forward as we would've expected and really probably a bigger focus in 25, but there'll be some in 'twenty four.

Great and then just my follow up question on the <unk>.

Ajay you all you all said you're kind of assuming a 10%.

Cost inflation at the time of Yours last earnings call I believe you all said it about <unk>.

Somewhere around $35, 40% of your of your services. This year, we're under under fixed price contracts versus kind of floating rate or spot.

Can you just sort of give an update as we stand today like how much of your contracts are fixed versus.

Versus floating your spot.

Yes, I would say that 100% of our activity is contracted at this point and then 55% to 60% is what I'd say is.

Pretty well fixed at this point and the rest is really just subject to what I'd call. Your WTS prices that are linked to that or.

Steel prices that are linked to those things and so most of it is tied to commodities, which is that's going to drive the most of the rest of it.

It would fluctuate some labor.

So those are the main things that are still out there that will fluctuate.

Great. Thanks, Rich I appreciate it.

Sure.

Okay.

As a reminder, star one if you would like to ask a question or make a comment.

Next we'll hear from Scott Gruber of Citigroup.

Yes, good morning.

Good morning, Scott This is Scott.

Just kind.

Kind of a clarification question here on the budget for this year.

In comparison, the maintenance capital you guys cite on slide 13 of $3 9 billion I think thats, just the D&C portion, but it is about $700 million or so below the midpoint of the D&C budget for this year.

Can you guys talk about running two more rigs this year because it looks like that $700 million gap is bigger than two rigs maybe closer to the four rig but sure I'm missing. Some pieces can you guys just help kind of bridge the gap between the maintenance capital three nine in the DNC budget for this year.

Yes, I really think about as we talked about the two rigs being roughly $200 million pace. So that's $400 million of the Delta you're looking there and that's really just a matter of.

The timing of how activity comes ebbs and flows in there and then the fact that some of our capital program. Even for this year, where there was towards the end of this year would've generated growth into 2023, and so really Scott that's really the Delta difference is just the timing of things that happen between years.

To drive that different so there's nothing magical about it is just you know just how the math works out.

And timing okay.

Okay I appreciate that that was all thank you.

Sure.

And next we'll hear from Neil.

Brinkmann of choice.

Good morning, everyone.

Our first questions with respect to Nextera energy 140 megawatts.

Texas Wind project.

Can you elaborate a bit more on what are the steps.

In terms of identifying the general contractor.

And again to that construction start.

The second part two is just.

There is a bit more.

Potential expansion on this one.

On this wind project.

Yes, Neil maybe a couple of things here one the construction starting this year and with the idea of being in service in 2020 for Nextera is one that we're constructing it where they're the owner of the project and we will be taking.

Electricity, that's generated from the project and using in our operations and our gas plant operations with Targa and then in terms of.

Future, we still have three other large.

Ranch's out there that we will look to for other renewable projects in the future on and so we still have a lot of potential to add incremental renewable projects that we could use that electricity in our operations over the course of time so.

Stopping here continuing to progress it just takes some time.

Good stuff there.

So a question of <unk>.

Curious in stacking up all these projects.

Whether it's the wind.

I was also curious is around carbon capture and sequestration.

Is how.

Ill just carbon capture stacking up relative to the other projects that you have.

Thanks, and I'd say, our bigger focus today is on as I talked earlier about electrifying the field and really moving more of our operations to the grid. So that's the biggest emissions thing. We can do first I mean, I think we're assessing carbon capture and it overtime, but and sequestration, but for the most part today our focus is on.

Getting more of our operations electrified.

It sounds great sounds great there thanks very much.

Sure.

And it appears there are no further questions at this time I will turn the call back over to Scott Sheffield for any additional or closing comments.

Again, thank you very much for listening on this call and look forward to visiting.

With everybody on the May call. Thank you.

That does conclude today's call. Thank you all for your participation you may now disconnect.

Q4 2022 Pioneer Natural Resources Co Earnings Call

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