Pioneer Natural Resources cuts spending, shuts drilling amid rout

IRVING, Texas (Bloomberg) -- Pioneer Natural Resources canceled a budget increase and shut down drilling in two fields after swinging to a loss in the fourth quarter.

In response to tumbling energy markets, the Texas shale explorer scrapped plans to increase outlays for drilling announced early last month, and instead will reduce spending about 9% from last year, according to an earnings report Wednesday. The company took a charge of $846 million for the lower value of oil fields and other assets.

The worst crude price collapse in three decades has left producers worldwide short of cash needed to fund drilling, pay dividends and service debts. Oil has fallen more than 70% in New York since mid-2014, and the rout has so far shown no signs of abating as U.S. supplies remain near record levels.

Pioneer, which sold new shares last month to raise cash, gave up on plans to boost spending to as much as $2.6 billion, from about $2.2 billion last year, and instead will budget $2 billion for new projects this year.

The drilling will be paid for with cash flow, cash on hand and proceeds leftover from a pipeline sale last year, according to the statement. The company’s cash flow estimate assumes crude will average about $36/bbl this year. Oil closed at $27.45/bbl in New York on Wednesday, down 26% this year.

Quarterly Loss

A fourth-quarter net loss of $623 million, or $4.17 a share, compared with profit of $431 million, or $2.91, a year earlier, Irving, Texas-based Pioneer said. Excluding one-time items, the per-share loss of 18 cents was better than the 34-cent average loss of 38 analyst estimates compiled by Bloomberg.

Despite the spending cut, Pioneer said oil and gas production from its wells will expand by at least 10% this year. The statement was released after the close of regular U.S. equity trading. Pioneer has fallen about 29% in the past year.