Pioneer Natural Resources Company

Good day, ladies and gentlemen, and welcome to Pioneer Natural Resources' second quarter earnings conference call. Joining us today will be Scott Sheffield, Chief Executive Officer, Richard 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.pxd.com. Again, the internet website to access this slide's presentation for today's call is www.pxd.com. Navigate to the Investors tab at the top of the webpage and then select Investor Presentations. For information, today's conference is being recorded and a replay of the call will be archived on www.pxd.com through August 28, 2021. 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 the forward-looking statements. These 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 turn the call over to Pioneer's Senior Vice President and Chief Financial Officer, Mr. Neil Shaw. Please go ahead, sir.

Thank you, George. Good morning, everyone, and thanks for joining us for Pioneer's second quarter earnings call. Today we will be discussing Pioneer's strong second quarter financial and operating results and our peer leading return of capital strategy. We will also detail our best in class margins and unmatched depth of high quality inventory, along with our leading ESG strategy, which is also detailed in our recently published 2022 sustainability report. We will then open the call for your questions. With that, I will turn it over to Scott.

Thank you, Neil. Good morning. We'll be starting on slide three. Pioneer delivered strong results, generating $2.7 billion in free cash flow in the second quarter. Additionally, this quarter, we increased our base dividend by more than 40%, which is supported by our high-quality assets, deep inventory, peer-leading margins, and strong balance sheet. This is the third base dividend increase in the previous four quarters. and represents a greater than 95% increase to the base dividend over the previous 12 months. This annualized base dividend of $440 per share has a yield that exceeds the S&P 500 average at our current share price. Inclusive to this base increase, the quarter's base plus variable dividend results in a total dividend payout of $857 per share to be paid in mid-September. As I've always said, we would aggressively repurchase shares when the market presented opportunity. Consistent with this, we repurchased $750 million since the end of the first quarter, including $500 million during the second quarter, an additional $250 million repurchased in July at an average share price of $213 million. Since reinitiating stock buybacks in the fourth quarter of last year, we have retired approximately 2.5% of our shares outstanding. Additionally, we recently published our 2022 sustainability report, which highlights our focus and significant progress on ESG initiatives, including accelerating our target to end routine clearing to 2025 and joining the Oil and Gas Methane Partnership 2.0. Pioneer places a high priority on environmental stewardship and continues to make progress toward our goals. Going to slide number four, Pioneer's strong execution continued during the second quarter. with total production in the upper half of our guidance range, supporting significant free cash flow generation of $2.7 billion. Our horizontal LOE continues to be low, and our strong balance sheet is one of the best in the sector. Going to slide number five, we believe that maintaining a strong and growing base dividend is the foundation of our capital return strategy. As I mentioned earlier, we have further strengthened our base dividend with a significant increase of greater than 40% from last quarter. This material increase is underpinned by our balance sheet strength and our durability of our cash flow across commodity price cycles. Inclusive of this increase, our base dividend has grown by an average of 95% annually over the previous six years. This increase significantly outpaces both peers and majors over the same period, many of which have cut or suspended their dividend. On to slide number six. Complementing our strong shareholder cash returns through dividends, we continue to repurchase our shares opportunistically. We've executed 1.25 billion since the fourth quarter of 2021, an average share price of 218. This represents a reduction of total shares outstanding by approximately 2.5%. Consistent with our statements to be aggressive during market opportunities, We repurchased an additional $250 million of stock during the market pullback in July at an average share price of $213. As evidenced by the repurchase during July, we will continue to utilize 10B-5 programs to take advantage of market opportunities. To date, we have utilized one quarter of our current $4 billion authorization, leaving $3 billion remaining. Going to slide number seven, we remain committed to our core investment thesis underpinned by low leverage strong corporate return, and low reinvestment rate. This delivers all production growth of up to 5% annually and generates significant free cash flow. The majority of this free cash flow was returned to shareholders in the form of base plus variable dividends, with total cash return being dividends representing approximately 80% of our free cash flow. This compelling cash return is enhanced by opportunistic share repurchases and continued balancing fortification. When including second quarter share repurchases, we're returning greater than 95% of second quarter free cash flow, which equates to an annualized yield of approximately 19%. Going to slide number eight, Pioneer's capital return framework remains best in class. With the return of capital framework described on the prior slide, you can see here Pioneer is forecasting to lead all peers in the percentage of free cash flow being returned to shareholders through dividend and share repurchases. Going to slide number nine, dividends through cycle, pioneer high-quality assets, low break-even, disciplined oil growth of up to 5% provides ability to return significant free cash flow through dividends over a wide range of commodity prices, inclusive of the impact of expected cash taxes. As seen on the graph, if all prices were to average $60 per barrel over the next five years, Pioneer shareholders would receive approximately 5% annual yield at current share prices. This yield is over 2.5 times more than the S&P 500 average. Again, that is $60 WTI flat. At a $100 WTI flat, which I believe will be the most likely outcome over the next five years as we march forward, As demand continues to increase with minimal supply increases, the yield is 12%. So significant upside. On to slide number 10, the third quarter dividend payments outlined previously results in an extremely compelling annualized yield of approximately 15%. This yield exceeds all peers, majors, and the average yield of the S&B 500. Going to slide number 11, Pioneer's 15% annualized dividend yield surpasses the S&P 500 average by greater than seven times. Looking beyond our peer group to the broader market, Pioneer's dividend yield exceeds every S&P 500 sector and remains higher than any individual company in the S&P 500. With our double-digit dividend yield, complementary share repurchases, and up to 5% oil growth, The case for owning Pioneer stock is compelling. I will now turn it over to Rich. Thanks, Scott.