Thursday, November 14, 2013

Pioneer Is Eyeing Significant Growth But Has A Tough Road Ahead

Pioneer Natural Resources (NYSE:PXD) is eyeing significant growth on the back of its impressive acreage but the high cost of drilling at the Permian and the weakness in oil prices pose a significant challenge

The Permian Basin focused Pioneer Natural Resources (PXD) has recently announced the sale of its wholly owned subsidiary in Alaska, called Pioneer Natural Resources Alaska, to privately held Caelus Energy for $550 million cash. The transaction is expected to close by the year end. The proceeds from the sale will be used to fund its promising shale oil field at Spraberry-Wolfcamp field of Permian Basin. Pioneer Natural Resources is eying significant growth from this region, which, it believes, is hiding one of the biggest oil and gas discoveries of the world. However, relatively expensive operations at the Permian Basin, coupled with the weakness in oil prices, will make things difficult for the operator. 

So What Is the Permian Basin?

The 250-miles wide and 300-miles long Permian Basin, located in West Texas, is home to some of the biggest oil reserves in North America and is the biggest oil producing region of the U.S. According to the Texas Railroad Commission, so far, more than 75 trillion cubic feet of natural gas and 29 billion barrels of oil has been produced from here. Various producing
formations such as the Spraberry, Wolfcamp, Yeso, San Andres, Bone Spring, are part of the Permian Basin. In 2010 this region produced more the 270 million barrels of oil, which rose to 280 million barrels in 2011 and a staggering 312 million barrels in 2012. According to the U.S Energy Information Administration, Permian’s oil production rose to 1.3 million barrels per day in October, easily ahead of any other oil play in the U.S. Some analysts think Permian can touch 2 million bpd in the …. Read full article at GuruFocus