Pioneer tumbles most since 2008 after "train-wreck" oil wells

By Joe Carroll on 8/3/2017

CHICAGO (Bloomberg) -- Pioneer Natural Resources Co. dropped as much as 16% after “train-wreck” oil wells dashed the company’s growth objectives and shale assets had higher-than-expected natural gas content.

Pioneer started the day as the worst performer in the S&P 500 Index after lowering its crude growth target Tuesday. Shares fell as much as $25.97 to $137.30 in New York, the most since December 2008.

Pioneer lowered its full-year crude production growth target by about 9 percentage points amid drilling delays that will postpone some planned production until 2018, and higher-than-anticipated gas output from new wells. CEO Tim Dove sought to beat back analysts’ assertions that the issues signaled long-term production and profitability challenges.

“The oil is not gone,” Dove said during a conference call with analysts on Wednesday. “It’ll come back when the wells” are placed into production in early 2018.

The company’s drilling crews encountered underground pressure aberrations in West Texas and New Mexico that resulted in “train-wreck wells” that were more difficult to handle and took longer to finish, he said.

Other crude stocks registering losses in Wednesday’s trading included RSP Permian Inc., Parsley Energy Inc., Encana Corp. and Resolute Energy Corp. Three out of every four energy producers in the S&P 500 were trading lower.

Flotek Industries Inc., a maker of fracing fluids and other products used in shale wells, plunged as much as 41%. Pioneer is Flotek’s biggest customer for a line of products known as complex nano-fluids that are used to smash open oil-rich rock formations.

Crude growth

Dove also said the higher gas output from some wells has been positive for the company and hadn’t come at the expense of crude production. “It’s a positive thing when the smoke clears,” he said. The additional gas “produced $20 million in incremental revenue” during the quarter.

Pioneer reduced its 2017 crude growth target to 17% to 18% from the previous forecast of 24% to 28%, according to a statement released after the close of regular U.S. stock trading on Tuesday.

The update “brings added risk to longer-term production targets,” Gordon Douthat, an analyst at Wells Fargo Securities LLC, said in a note to clients on Wednesday. Douthat downgraded his rating on the shares to the equivalent of “hold” and lowered his price target by $30 to $160.

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