Permian Giant Pioneer Removes 2022 Hedges in Bullish Oil Outlook

(Bloomberg) -- Pioneer Natural Resources Co., the biggest oil producer in the Permian Basin, closed out almost all its hedges for this year, indicating a bullish outlook for crude prices. 

The move will cost $328 million spread over the course of 2022, Pioneer said in a filing Wednesday, but leaves the company well positioned to bank any uplift in oil prices. The company also said it bought back $250 million of its own shares during the fourth quarter.

“The hedge monetization strategically positions PXD for further strength in 2022 oil prices,” RBC Capital Markets analysts Scott Hanold said in a note. 

U.S. shale drillers use financial instruments like swaps and options to hedge oil and natural gas production and make sure they have enough cash to cover drilling costs and debt payments. The strategy that paid off handsomely during 2020's crude-price collapse turned painful in 2021 as the market surged. 

READ: Pioneer CEO to End Hedging on Bullish Crude-Price Outlook (2)

Pioneer incurred losses valued more than $2 billion last year as crude prices rose and hedges acquired during the early days of the pandemic moved underwater.  

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