Pioneer Natural Resources Co.’s first-quarter results will be hit by a $691 million loss on oil and gas derivatives, the company said in a securities filing April 27, becoming the latest U.S. shale oil company to warn of charges due to hedging.
Many producers raced to lock in sales when crude oil prices rose to over $40 per barrel last year but are now faced with losses after oil prices climbed to above $58 per barrel for the quarter.
Consultancy Enverus estimates top U.S. shale firms will report an aggregate of $7 billion in hedging losses for the quarter. Oil and gas producers use hedges as a form of insurance to lock in prices for future production.
RELATED: Oil Hedges to Crimp US Shale Producers’ First-quarter Profit
Pioneer said it paid $321 million to settle contracts during the quarter and has a non-cash or unrealized loss of $370 million on other contracts. Offsetting some of the losses, Pioneer also will report a non-cash gain of $54 million on its investment in fracking provider ProPetro Holding Corp. for the quarter, according to the securities filing.
Shares were up 1% at $150.49 in afternoon trading.
The company will report its first-quarter results May 4.
Pioneer has 54,000 barrels per day (bbl/d) of production tied to Magellan East Houston (MEH) swaps for the second quarter at $41.85, according to the filing. The company also has 102,000 bbl/d of Brent swap contracts for the second quarter at a price of $46.48. Brent futures are currently trading around $66.50 per barrel.
The company also said it expects cash costs of $80 million during the quarter for natural gas sales made during a Texas winter storm that shut in production. Most of its production was offline for a week during that storm, which prompted it to suspend contracts through force majeure notices to customers, the company said.
Recommended Reading
Texas LNG Export Plant Signs Additional Offtake Deal With EQT
2024-04-23 - Glenfarne Group LLC's proposed Texas LNG export plant in Brownsville has signed an additional tolling agreement with EQT Corp. to provide natural gas liquefaction services of an additional 1.5 mtpa over 20 years.
US Refiners to Face Tighter Heavy Spreads this Summer TPH
2024-04-22 - Tudor, Pickering, Holt and Co. (TPH) expects fairly tight heavy crude discounts in the U.S. this summer and beyond owing to lower imports of Canadian, Mexican and Venezuelan crudes.
What's Affecting Oil Prices This Week? (April 22, 2024)
2024-04-22 - Stratas Advisors predict that despite geopolitical tensions, the oil supply will not be disrupted, even with the U.S. House of Representatives inserting sanctions on Iran’s oil exports.
Association: Monthly Texas Upstream Jobs Show Most Growth in Decade
2024-04-22 - Since the COVID-19 pandemic, the oil and gas industry has added 39,500 upstream jobs in Texas, with take home pay averaging $124,000 in 2023.
What's Affecting Oil Prices This Week? (Feb. 5, 2024)
2024-02-05 - Stratas Advisors says the U.S.’ response (so far) to the recent attack on U.S. troops has been measured without direct confrontation of Iran, which reduces the possibility of oil flows being disrupted.