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Top US shale producer is so confident oil prices will keep rising that it just ditched nearly all hedges

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  • Pioneer Natural Resources is betting crude oil prices will keep rising, Bloomberg reported.
  • As a result, the top shale producer in the US ditched nearly all of its hedges for the year.
  • The firm also disclosed buying back $250 million of its own shares in the last quarter of 2021.
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The top shale producer in the US is betting crude oil prices will keep rising and ditched nearly all of its remaining hedges for 2022.

Pioneer Natural Resources said the move will cost $328 million, which will be spread out over the course of the year, according to a Wednesday filing that Bloomberg first reported.

The Permian Basin giant also disclosed buying back $250 million of its own shares in the last quarter of 2021.

Shale drillers like Pioneer typically use financial instruments to lock in sales contracts and hedge against the potential rising costs of oil and natural gas production.

But last year saw a massive rally in crude oil prices as the economy rebounded from the pandemic. Brent crude and West Texas Intermediate both surged more than 50% in 2021. 

Pioneer’s hedges resulted in more than $2 billion worth of losses last year, and the company removed some hedges last fall. 

After a strong 2021, crude oil prices have already received a boost at the start of 2022. On Tuesday, OPEC+ agreed to continue modestly increasing oil production in February as expected. Brent crude is now back above $80 a barrel.

But Pioneer doesn’t want oil to get too high. On Wednesday, CEO Scott Sheffield said during a Goldman Sachs energy conference that he expects prices in a range of $75-$100 per barrel and hopes they stay there, warning “$110, $120 oil or higher, like what Europe is seeing, is not going to help our industry,” according to Bloomberg.

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