Pioneer Natural Resources Company

Welcome to Pioneer Natural Resources' second quarter earnings conference call. Joining us today will be Scott Sheffield, Chief Executive Officer, Rich Daley, President and Chief Operating Officer, and Neil Shaw, Executive Vice President and Chief Financial Officer. Pioneer has prepared a presentation of slides to supplement comments made today. These slides are available on the internet at www.pxd.com. Again, the internet website to access slides presented in today's call is www.pxd.com. Navigate to the Investors tab found at the top of the webpage and then select Quarterly Results. Today's call is being recorded. A replay of the call will be archived on www.pxd.com through September 1, 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 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 would like to turn the call over to Pioneer's Chief Executive Officer, Scott Sheffield. Please go ahead, sir.

Thank you, JL. Good morning, everyone. It's great to be with you today. Before we highlight Pioneer Strong's second quarter results, I wanted to briefly speak to the current macro outlook and its impact on oil prices. As you all know, crude has been range-bound between $65 and $80 over the previous several months. It has been suppressed by SBR releases, recessionary fears, and weak economic data from China. The recent upward move in oil prices reflects the expectation for tightening supply-demand fundamentals in the second half of this year. The major contributors to this include the Fed's success in managing inflationary pressures and preventing a recession. likely resulting in a soft landing for the U.S. economy. China actually taking measures to bolster its economy through stimulus programs. Limited U.S. oil shale supply. The end of substantial U.S. SPR releases, which has resulted in a 40-year low inventories. This outlook is further supported by Saudi Arabia's production cuts and ABS's preference to stabilize Brent oil prices at 90 or higher. I do expect Saudi to extend their 1 million barrel day cut they initiated July 1st toward the end of 23. I see these factors leading to demand outpacing supply, resulting in global inventory draws during the second half of 23. The expected demand increase combined with the underinvestment by industry over the last several years are both supportive for oil pricing in the $80 to $100 range for the remainder of 23 and through 24. Now turning to Pioneer's performance, we delivered excellent second quarter results thanks to the safe and highly efficient operations of the Pioneer team. I applaud the great work and efforts of all of our employees. I know that Rich and the team's focus on top tier execution will continue to deliver strong results throughout the year as highlighted in the presentation that Rich and Neil will speak into more detail. Again, it's great to be with you all today. I will now hand over the call to Rich.

Thank you, Scott, and good morning. I will begin on slide three. As you can see, Pioneer delivered an excellent second quarter with oil production near the top end of our guidance range. As we expected, we are seeing improved well performance relative to 2022, and the teams continue to operate at a very high level. As a result of our strong well productivity and highly efficient operations, we are increasing full-year 2003 production guidance while simultaneously lowering our full-year 2023 capital guidance to reflect our intentional activity reductions and some deflation. This combination of higher production and lower capital drives an improved 2023 plan and further enhances Pioneer's capital efficiency. Along with these solid results and strengthened full-year outlook, we continue to return significant capital to shareholders with 75% of our free cash flow being returned through excuse me, our base plus variable dividend and opportunistic share repurchases. Additionally, we remain committed to sustainable and socially responsible operations as evidenced by our newly established methane intensity target of 0.2% or less in 2025 in accordance with Oil and Gas Methane Partnership 2.0 initiative. Additional details on our progress and continuing efforts can be found on our recently published 2023 sustainability report. Turning to slide four, the team's continued focus on execution resulted in strong second quarter production with oil production near the top end of second quarter guidance at 369,000 barrels of oil per day and total production exceeding the guidance range at 711,000 barrels of oil equivalent per day. Our significant free cash flow generation is bolstered by our strong production, top tier price realizations, and low horizontal lifting costs, which drive our best in class margins that Neil will talk about further later in the presentation. Turning to slide five, as I highlighted on the first slide, we are raising our full year 2023 production guidance while concurrently decreasing our drilling, completions, and facilities capital guidance. The midpoint of our oil guidance increases to 369,000 barrels of oil per day, and the midpoint of our drilling, completions, and facilities capital budget is now lower by 125 million from our original 2023 outlook. This improved 2023 plan is driven by strong well productivity and highly efficient execution by operations teams, resulting in a more capital-efficient program. Turning to slide six, as seen through the company's increased full-year 2023 production guidance, Pioneer expects to deliver oil production ranging from 364,000 to 374,000 barrels of oil per day, and total production ranging from 697 to 717,000 barrels of oil equivalent per day, consistent with our investment framework that delivers moderate annual production growth of up to 5%. Our reduced drilling, completions, and facilities capital budget is expected to range between 4.375 and 4.575 billion as a result of our reduced activity and operational efficiencies, which are being driven by longer laterals, simul-fract operations, and utilization of localized sand mines, to name a few. Our exploration, environmental, and other capital expectations remain unchanged. As we previously discussed, this capital is allocated to four exploration wells targeting the Barnet wood formations in the Midland Basin, adding infrastructure to further electrify the field, allowing us to move more of our activity to the grid, as well as our continued appraisal of our enhanced oil recovery project. Our 2023 rig count is now expected to average 23 to 25 rigs due to our intentional activity reductions. As a result, the projected number of wells placed on production during 2023 now ranges from 490 to 520. Turning to slide seven, looking at the chart on the left, as expected, our 2023 average and average well productivity is trending significantly above 2022. and is expected to surpass 2021 levels over the first 24 months of production. Our strong 2023 production, paired with robust execution, underpins our increased full-year production expectations. We are focused on full-stack development, which improves long-term recoveries and optimizes returns. As seen on the right, Pioneer has one of the deepest inventories of low break-even, high-margin locations amongst our peers. Overall, as we've discussed in the past, we have roughly 15,000 high rate of return locations with low breakevens. This deep inventory of highly productive wells enables our best in class development for decades to come. Turning to slide eight, as part of our low breakeven inventory, Pioneer has an extensive inventory of extended lateral length wells. This slide highlights the benefits of long lateral length development. both lower costs per lateral foot and increased production levels. 15,000 foot lateral length well development generates significant efficiencies in both drilling and completions. These developments require fewer well bores along with less drilling rig and frac fleet mobilizations. The combination of these benefits results in a capital savings of approximately 15% per lateral foot. These capital savings paired with optimized artificial lift have further increased with IRRs increasing by more than 35% when compared to 10,000-foot laterals. Our strong well results and artificial lift refinements have improved the average IRR uplift to 35%, well above our previous estimate of 20%. Our highly contiguous acreage position contains more than 1,000 future locations with 15,000-foot or longer laterals. and we expect more than 100 of these wells to be placed on production in 2023, including some wells that have lateral lengths in excess of 18,000 feet, further improving returns. Our land team continues to do a great job to optimize our land position by actively working trades to strategically increase our significant long lateral inventory, again demonstrating the benefits of Pioneer's unique contiguous acreage position. Turning to slide nine, Pioneer's completions efficiencies are industry-leading, with Pioneer's average completed feet per day being approximately 80% better than peers and U.S. majors. These peer-leading efficiencies are a testament to the hard work and focus of our teams. In addition to our focus on operational efficiencies, we are driving additional capital savings through the utilization of localized sand mines and simulfrac technology. We are now operating three full-time simulfrac fleets, which continue to be a major contributor to our high efficiencies, delivering average cost savings of $200,000 per well. Pioneer began the second localized sand mine during the second quarter. These localized sand mines reduce road traffic, lower CO2 emissions, and provide average capital savings of $200,000 per well. Consistent with our commitment to sustainable operations, we expect 100% of our completion fees to be either electric or dual fuel powered in the third quarter of 2023, allowing us to both reduce emissions and capture fuel cost savings. I will now turn it over to Neil.