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
Exclusive: What’s Needed to ‘Get Things Moving’ with CCS
2024-03-05 - CCS momentum is brewing, says Katja Akentieva, vice president of New Energy Solutions for the Western Hemisphere at TGS. Now it's time to capitalize on that momentum in this Hart Energy LIVE Exclusive with Jordan Blum.
Occidental Reports ‘Great Progress’ on Net-zero Pathway, DAC
2024-02-21 - Most of Occidental Petroleum’s planned $600 million investment in emerging low-carbon ventures for 2024 will go to direct air capture facility STRATOS, CEO Vicki Hollub says.
Trace Carbon Solutions Applies for First Phase of Class VI Wells at Evergreen Hub
2024-03-12 - Trace is applying for its subsidiary Evergreen Sequestration Hub to be allowed to permanently sequester CO2 in underground geological formations in Louisiana.
Red Trail Energy Issues Carbon Removal Credits
2024-03-06 - Red Trail Energy’s CO2 removal credits is the largest durable carbon removal project registered on the Puro Registry to date.
No Silver Bullet: Chevron, Shell on Lower-carbon Risks, Collaboration
2024-04-26 - Helping to scale lower-carbon technologies, while meeting today’s energy needs and bringing profits, comes with risks. Policy and collaboration can help, Chevron and Shell executives say.