May 21, 2019 / 9:00 PM / a month ago

Pioneer Natural sees crude exports rising from U.S. Gulf Coast -CFO

HOUSTON, May 21 (Reuters) - Pioneer Natural Resources Co is moving about 200,000 barrels per day (bpd) of crude from the Permian basin to the U.S. Gulf Coast, with about 80 percent of that loaded on ships for export, Chief Financial Officer Rich Dealy said on Tuesday.

The percentage of volumes being exported is expected to grow over time, Dealy told Reuters on the sidelines of the RBN Energy Export conference in Houston.

After Dealy spoke with Reuters, Pioneer announced it was laying off a quarter of its workforce, or 230 employees, to save $100 million.

Shale firms have pushed U.S. oil output to record levels. But years of heavy spending led to investor pressure to reduce spending and use the cash to provide payouts, rather than produce more oil.

The shale boom has made the United States the biggest oil producer in the world, with exports averaging nearly 3 million bpd, according to U.S. Energy Department figures, less than four years since the lifting of a ban late in 2015.

Pioneer’s exports would represent about 6 percent of average U.S. crude exports this year, based on Reuters calculations from U.S. government data.

About half of Pioneer’s crude exports over the past three to four quarters have gone to Asia with the other half shipped to Europe, Dealy said, to about 20 different customers.

Pioneer is looking to sign long-term deals with foreign buyers but the market has not “evolved” to that point yet, Dealy said.

“So many of the buyers trade the barrels and move the cargoes around, they haven’t been there yet for long-term deals but it will eventually evolve to that.”

The company sends about a third of its barrels to Corpus Christi, Texas, a third to Houston and the rest to Nederland, Texas.

Pioneer, a pure play Permian producer, exclusively ships West Texas Intermediate crude produced in Midland WTC-WTM. Prices for the Midland crude have weakened over recent months, and notably slumped in the second half of last year as production growth in the Permian basin, the biggest U.S. oilfield, outpaced pipeline capacity.

Pioneer has benefited from selling at international pricing for its oil instead. By selling at prices linked to international benchmark Brent rather than Midland, Pioneer has added about $600 million in cash flow over the past five quarters, Dealy said.

Currently, Midland-based crude is priced at about $11 per barrel discount to Brent. The benefit will shrink as more pipes come on and the difference between Midland and Gulf Coast prices is less pronounced, Dealy said.

Pioneer switched to solely using Brent last year for its hedging program, where companies use financial contracts to manage risk, instead of exclusively using U.S. crude futures .

“The market is based on Brent today. It’s the easiest way to hedge.”

Reporting by Devika Krishna Kumar in Houston; Editing by Lisa Shumaker

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