Pioneer Natural Resources Company (NYSE: PXD) ('Pioneer' or 'the Company') today reported financial and operating results for the quarter and year ended December 31, 2020.
Pioneer reported fourth quarter net income attributable to common stockholders of $43 million, or $0.26 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the fourth quarter was $177 million, or $1.07 per diluted share. Cash flow from operating activities for the fourth quarter was $537 million. For the full year 2020, the Company reported a net loss attributable to common stockholders of $200 million, or $1.21 per diluted share. Cash flow from operating activities for the full year 2020 was $2.1 billion.
Highlights
Delivered strong fourth quarter and full year 2020 free cash flow1 of $294 million and $689 million, respectively
Achieved a reinvestment rate of 69% in 2020, while maintaining full year Permian oil production at 211 thousand barrels of oil per day (MBOPD)
Returned $521 million of capital to shareholders during 2020, or 76% of full year free cash flow
Averaged fourth quarter oil production of 204 MBOPD, in the upper half of guidance
Averaged fourth quarter production of 364 thousand barrels of oil equivalent per day (MBOEPD), in the upper half of guidance
Initiating a long-term variable dividend2 policy that allows for the distribution of up to 75% of free cash flow, after the base dividend is paid, while maintaining a strong balance sheet
CEO Scott D. Sheffield stated, 'Pioneer delivered an excellent fourth quarter, generating $294 million in free cash flow and continuing our strong track record of execution. While 2020 was a challenging year, our immediate actions kept our employees safe, protected the balance sheet, generated significant free cash flow and ensure that Pioneer is well positioned for the future.
Pioneer's 2021 plan builds on this success, with a program that is capital efficient and is underpinned by our premier acreage position and scale in the Permian Basin. The highly accretive Parsley transaction further strengthens our investment framework, leading to a plan that is expected to generate $2 billion of free cash flow in 2021. As part of our commitment to return capital to shareholders, we are excited to formalize a new variable dividend policy, augmenting our stable and growing base dividend.
Our compelling investment proposition, coupled with our strong focus on environmental, social and governance initiatives, ensures Pioneer will continue to provide low-cost, environmentally friendly energy to the world, while enhancing value for shareholders.'
Financial Highlights
Pioneer continues to maintain a strong balance sheet, with unrestricted cash on hand at the end of the fourth quarter of $1.4 billion and net debt of $1.9 billion. The Company had $2.9 billion of liquidity as of December 31, 2020, comprised of $1.4 billion of unrestricted cash and a $1.5 billion unsecured credit facility (undrawn as of December 31, 2020). After closing the acquisition of Parsley Energy and bond refinancing in January, the Company had net debt of approximately $5.2 billion.
During the fourth quarter, the Company's drilling, completion and facilities capital expenditures totaled $336 million. The Company's total capital expenditures3, including water infrastructure, totaled $351 million. For the full year 2020, the Company's drilling, completion and facilities capital expenditures totaled $1.4 billion. The Company's total capital expenditures for the full year, including water infrastructure, totaled $1.5 billion.
Cash flow from operating activities during the fourth quarter and full year 2020 was $537 million and $2.1 billion, respectively, leading to free cash flow of $294 million for the fourth quarter and $689 million for the full year.
The Company's Board of Directors approved an increase to the Company's quarterly cash dividend to $0.56 per share. The 2021 quarterly dividend increase represents the fourth consecutive year that Pioneer has increased its dividend.
In addition to Pioneer's increase in its quarterly cash dividend to $0.56 per share, the Company is initiating a long-term variable dividend policy in 2021 that is expected to increase the Company's return of capital to shareholders. Consistent with Pioneer's long-term investment framework, the Company expects to annually distribute up to 75% of the prior year's annual free cash flow, after the payment of the base dividend2, assuming the Company's leverage metrics remain low. Pioneer expects to begin to pay the quarterly variable dividend distributions in 2022. For 2022, the Company expects to distribute up to 50% of 2021 free cash flow, after the payment of base dividends, assuming the average 2021 West Texas Intermediate (WTI) oil price is greater than $42 per barrel.
Pioneer continues to capture synergies from the acquisition of Parsley Energy, Inc. (Parsley) and is increasing the Company's synergy target by $25 million to $350 million of expected total annual synergies. These annual synergies include interest savings of $100 million, G&A savings of $100 million and operational synergies of $150 million.
Financial Results
For the fourth quarter of 2020, the average realized price for oil was $40.94 per barrel. The average realized price for natural gas liquids (NGLs) was $18.51 per barrel, and the average realized price for gas was $2.37 per thousand cubic feet. These prices exclude the effects of derivatives.
Production costs, including taxes, averaged $7.01 per barrel of oil equivalent (BOE). Depreciation, depletion and amortization (DD&A) expense averaged $11.81 per BOE. Exploration and abandonment costs were $12 million. General and administrative (G&A) expense was $64 million. Interest expense was $36 million. The net cash flow impact related to purchases and sales of oil and gas, including firm transportation, was a loss of $32 million. Other expense was $48 million, or $15 million excluding unusual items4.
The Company recently identified two marketing contracts that should have been accounted for as derivatives in the Company's historical consolidated financial statements. The contracts provided for the transportation and sale of purchased oil at lower transport and storage costs as compared to similar costs in the Company's other contracts. The contracts were executed during the fourth quarter of 2019, but transactions under the contract did not begin until January 2021. The Company plans to restate its consolidated financial statements for the three and nine months ended September 30, 2020 to reflect the noncash mark-to-market corrections related to the derivative treatment of the contracts. The noncash mark-to-market adjustments to the other periods impacted were not material. The adjustments did not impact the Company's reported cash flows from operating, investing or financing activities for any period.
Contact:
Neal Shah
Tel: 972-969-3900
PIONEER NATURAL RESOURCES COMPANY 
