RETHINKING THE OIL INDUSTRY – PIONEER NATURAL RESOURCES

During recent years when Scott Sheffield ran his fracking company, Pioneer Natural Resources, he always had one predominant goal in mind:  producing a million barrels of oil and gas a day within a decade.

Sheffield retired from the company in 2016, leaving his goal in place and CEO Timothy Dove as the steward of that goal.  As a result of attempting to meet the ambitious goal, Pioneer was pumping a lot but making little and the company was spending hundreds of millions more than budgeted as it strained to meet the goal (ref WSJ).  In February, 2019, the board of directors recognized the inevitable and replaced Dove by asking Sheffield to come out of retirement and engineer a turnaround for Pioneer.  Since that time, Sheffield has been engaged in a serious sequence of belt-tightening actions, such as cutting more than one-quarter of its workforce including senior executives, through layoffs and buyouts.  And Sheffield has shelved the million-barrel-a-day goal for now, saying, “We lost the growth investors and . . .now have to attract a whole other set of investors.” Sheffield has also commented that, although well results had been, on average, consistent with expectations, the company had become overly-focused on goals and “I just don’t think the discipline was there on the capital side.”  Part of the difficulty lies in the fact that shale wells produce a lot of oil and gas, early on, but taper off in their output, requiring drillers to continuously plow money back into the ground to maintain the output.  Sheffield formed Pioneer in 1997 but had little to do with the Parmian Basin during its early years in operation, other than to retain its holdings there.  A decade ago, the company came to realize that new hydraulic fracturing and horizontal drilling could be used to good effect in the Parmian Basin.  Thus, the area took off as an oil and gas generator, with Sheffield and Pioneer at the head of the pack.  In 2014, Sheffield revealed that the company had an inventory of wells to last as many as 150 years – and the one-million-barrels-a-day by 2024 idea was born.  However, it’s the constant nature of businesses that goals must be reviewed and changed, from time-to-time – inevitable, but that’s the way that organizational change operates, in order to ensure that all the moving parts continue to operate in conjunction with one another.  Sheffield is apparently well on his way to making those needed changes.

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