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Pioneer Increases Hedge Position; Shores Up Liquidity

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   |    Monday,April 06,2020

Pioneer Natural Resources provided the following update on its hedge position and liquidity.  

Hedging Update

As we have pointed to in the past the company often uses three way as most common hedge strategy which in a higher price environment, provides protection, but at current strip ($26+ WTI) the company has very little downside protection.

Hedge coverage has increased to 208.9 Mbpd in 2020 and 154 Mbpd in 2021.  More than 87% of the hedges utilizes three-way collars, exposing the company to strip/Brent + $8 (as of this writing, $41/bbl).  The company now has coverage of 97% based on most recent 2020 oil production guidance.

Liquidity

The company also said it was able to secure a $900 million one-year credit facility which provides additional liquidity.

The Company's open commodity oil and gas derivative positions as of March 31, 2020 are as follows:

       

 

2020

 

Year Ending
December 31,
2021

 

First
Quarter

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Average daily oil production associated with derivatives (Bbl)

 

 

 

 

 

 

 

 

 

Brent collar contracts with short puts: (a)

 

 

 

 

 

 

 

 

 

Volume

145,500

 

135,500

 

115,500

 

115,500

 

—

Price:

 

 

 

 

 

 

 

 

 

Ceiling

$

68.46

 

$

68.84

 

$

69.78

 

$

69.78

 

$

—

Floor

$

61.64

 

$

61.76

 

$

62.06

 

$

62.06

 

$

—

Short put

$

53.45

 

$

53.48

 

$

53.56

 

$

53.56

 

$

—

Swap contracts:

 

 

 

 

 

 

 

 

 

Volume

3,407

 

98,911

 

177,900

 

160,900

 

57,750

Brent price

$

60.86

 

$

37.27

 

$

35.68

 

$

36.43

 

$

43.29

Brent call contracts sold:

 

 

 

 

 

 

 

 

 

Volume per day (b)

—

 

—

 

—

 

—

 

20,000

Price per Bbl

$

—

 

$

—

 

$

—

 

$

—

 

$

69.82

Brent collar contracts with short puts:

 

 

 

 

 

 

 

 

 

Volume

—

 

121,000

 

31,000

 

31,000

 

96,000

Price:

 

 

 

 

 

 

 

 

 

Ceiling

$

—

 

$

36.60

 

$

43.15

 

$

43.15

 

$

47.07

Floor

$

—

 

$

31.12

 

$

34.84

 

$

34.84

 

$

42.50

Short put

$

—

 

$

21.31

 

$

24.84

 

$

24.84

 

$

31.45

Average daily gas production associated with derivatives (MMBtu)

 

 

 

 

 

 

 

 

 

Swap contracts:

 

 

 

 

 

 

 

 

 

Volume

—

 

30,000

 

30,000

 

16,739

 

2,466

NYMEX price

$

—

 

$

2.41

 

$

2.41

 

$

2.43

 

$

2.46

Basis swap contracts:

 

 

 

 

 

 

 

 

 

Permian Basin index swap volume (c)

—

 

30,000

 

30,000

 

16,739

 

2,466

Price differential ($/MMBtu)

$

—

 

$

(1.68)

 

$

(1.68)

 

$

(1.59)

 

$

(1.46)

____________________

(a)

Represents collar contracts with short puts that were entered into prior to March 2020. During March 2020, the Company entered into incremental swap contracts and collar contracts with short puts to provide additional downside protection for the second quarter through fourth quarter 2020 volumes.

(b)

The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar contracts with short puts.

(c)

The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells its Permian Basin gas and the NYMEX index price used in swap contracts.
   

The following table provides the estimated settlement proceeds, under various Brent oil price assumptions, attributable to the Company's open oil derivative positions (as of March 31, 2020) that are scheduled to settle during the second through fourth quarters of 2020:

 

2020

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

(in millions)

Assumed Brent Price ($/Bbl):

 

 

 

 

 

$20.00

$

366

 

 

$

376

 

 

$

362

 

$25.00

$

280

 

 

$

293

 

 

$

288

 

$30.00

$

180

 

 

$

197

 

 

$

199

 

$35.00

$

123

 

 

$

101

 

 

$

111

 

 

 

 

 



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