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Pioneer Natural Resources (PXD), Valero Energy Corporation (VLO): Three Oil Companies Fueling Growth Prospects

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The volatility of oil prices has brought a lot of uncertainty about the stable revenues for oil and gas companies. This has pushed companies to focus mainly on increasing production to maintain their revenue, even in lower-price scenarios. Let’s take a closer look at three of companies –  Pioneer Natural Resources (NYSE:PXD), Southwestern Energy Company (NYSE:SWN) , and Valero Energy Corporation (NYSE:VLO) – which are increasing their production capacities, either by acquiring new fields or by entering into joint ventures.

Pioneer Natural Resources (NYSE:PXD)

Profitable joint venture

Pioneer Natural Resources (NYSE:PXD) has recently posted the first-quarter results with revenue of $831.6 million, which was $784.5 million a year ago. The reason for its good performance is that it has  surpassed target production numbers. Its first-quarter production was 171,000 barrels of oil equivalent per day, which is up 6,000 barrels a day, or 4%, from the last quarter. This was the result of continued production growth of the company’s three liquids and resource-rich core assets in Texas, the Spraberry vertical, the horizontal Wolfcamp Shale, and the Eagle Ford Shale.

Under its production expansion plan, Pioneer Natural Resources (NYSE:PXD) entered into a Joint Venture with Sinochem Petroleum, a U.S. subsidiary of the Sinochem Group on Jan.30, 2013. Pioneer has a deep resource base and much of it is not explored yet. Under this JV, it has agreed to sell 40% of its 207,000 net acres in the southern portion of the Spraberry Trend. This has helped to increase production to 911 barrels of oil equivalent per day in this quarter from its prior 675 barrels of oil equivalent per day in the previous quarter. Currently, Pioneer is operating seven horizontal rigs in the area and expects to increase it to 10 by the end of the year, and 24 in next five years. Also the horizontal oil wells in the area are expected to reach 86 by the end of this year, 140 in 2014, and 165 in 2015. Sinochem will pay $500 million in cash when the JV closes, expected by the mid-2013, which will enhance the shareholders’ value with the substantial cash flow.

Talking about its Northern Wolfcamp region, Pioneer Natural Resources (NYSE:PXD) is running the $1 billion capital program for 2013-2014 to increase the horizontal well drilling. Presently, there is only one horizontal rig in the area; the company is planning to increase its count to five by the second quarter of 2013 and eight by the end of 2013. Due to the impressive performance of DL Hutt C No.1H – a well – the company decided to increase the rig count. The well has outperformed with the production of 100 million barrels of oil equivalent, or Mboe, over 100 days. These additions will help increase production from Pioneer Natural Resources (NYSE:PXD)’s wide area of operations.

Acquisition of the new profitable areas

In recent quarterly results, Southwestern Energy Company (NYSE:SWN) posted profit of $127.5 million, up from $107.7 million a year earlier. This increase was due to more production within the company, compensating for the weaker natural gas prices. The company’s Fayetteville and Marcellus shale properties showed an impressive rise of 10% in revenue. Looking at the present condition and future growth, Southwestern has increased its production expectation for 2013 to 631 billion to 642 billion of cubic feet equivalent, up from its earlier estimate of 628 billion  to 640 billion of cubic feet equivalent. The revised outlook represents a 13% increase in the production over the 2012 level.

To overcome the impact of natural gas prices, the company recently announced that it has acquired 162,000 Marcellus Shale acres in northeastern Pennsylvania from Chesapeake Energy for $93 million. Southwestern Energy Company (NYSE:SWN)’s purchase has nearly doubled its coverage in the Marcellus Shale, and being in the “dry gas” area of the region will provide a healthy opportunity to extract gas.

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