August 7, 2018 / 8:19 PM / 11 days ago

Pioneer Natural Resources profit hurt by higher costs, hedging loss

HOUSTON (Reuters) - Pioneer Natural Resources Co posted lower-than-expected quarterly profit on Tuesday and provided a tepid outlook for third-quarter production, despite increasing its spending budget for the year.

Its shares fell about 2.2 percent to $184 apiece in after-hours trading on Tuesday.

Like several of its peers, the oil and gas producer also posted a second-quarter hedging loss that kept it from fully benefiting from the quarter’s higher crude oil prices. It posted a net loss of $358 million on derivatives designed to lock in a price for its production.

Production rose to 327,704 barrels of oil equivalent per day (boe/d), above its May estimate for the quarter of as much as 322,000 boe/d, and up from 259,087 boe/d in the year-earlier quarter.

Its average realized price of production rose 24.5 percent to $43.12 per boe in the quarter, at a time when U.S. crude prices averaged at $74.15 per barrel.

The company raised its capital spending forecast to between $3.3 billion and $3.4 billion, up from its prior estimate of $2.9 billion, reflecting higher operating costs and plans to add four drilling rigs.

Pioneer, which is in the process of selling its non-Permian assets, forecast third quarter production from its core basin of between 278,000 boe/d and 288,000 boe/d, about flat with the 280,000 boe/d reported for its second quarter Permian output.

Once the divestitures are complete, Pioneer “will report stronger cash operating margins and corporate returns due to an increase in revenue per boe and a decrease in operating costs per boe,” said Chief Executive Timothy Dove.

Net income fell to $66 million, or 38 cents per share, in the second quarter ended June 30, from $233 million, or $1.36 per share, a year ago.

Excluding one-time items, the company earned $1.41 per share, while analysts expected $1.49 per share, according to Thomson Reuters I/B/E/S.

Costs rose 83 percent over a year earlier to $2.03 billion in the quarter, in large part on an accounting change on how the company treats costs from third-party processing and transportation companies.

The year-ago quarter included a gain of $195 million, mainly related to the sale of acreage in Texas.

Revenue for the Irving, Texas-based producer rose 44 percent to $2.11 billion, beating average analyst estimates of $1.25 billion.

Reporting by Karan Nagarkatti in Bengaluru and Gary McWilliams in Houston; Editing by Arun Koyyur and Rosalba O'Brien

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