Pioneer CEO Warns US Shale Can’t Increase Supply Even If Biden Asks

Drilling economics has never been better as oil prices could soon cross the $100 a barrel mark if global supplies remain tight and demand robust, along with the prospects of Russia’s crude exports derailed by tensions with Ukraine. Even with this bullish macro backdrop, a top U.S. oil and gas exploration and production company said they wouldn’t raise oil production even if prices increased further.

Pioneer CEO Scott Sheffield told analysts Thursday morning that its strategy to boost oil production from 0% to 5% won’t be affected even if oil prices surpass $100. “There’s no change for us,” he said, adding, “$100 oil, $150 oil, we’re not going to change our growth rate.”

Sheffield said Pioneer favors stock buybacks more than acquisitions and has raised stock buyback authorization to $4 billion. He expects the company to focus on profitability, returning money to shareholders, and avoiding oversupplied conditions like the decade before. 

He noted private producers in the Permian Basin need to be “reined in” for their high growth rates. He said a few private firms are raising output “at 15-20% are going to run out of inventory fairly quickly.” High growth output isn’t sustainable, he continued. 

Sheffield made a surprising comment that Pioneer wouldn’t be able to increase production if the Biden administration requested. He warned that high inflation inhibits shale growth. 

According to the Energy Information Administration (EIA), U.S. oil production remains well below a pre-pandemic level of about 11.60 million barrels per day versus 13 million months before the 2020 lockdowns. Sheffield doesn’t believe total US production will roar back anytime soon. 

Even though total US production is languishing, the EIA shows that parts of the shale patch, including the Bakken Region, Eagle Ford Region, and Permian Region, are growing at exceptional rates. 

Bakken Region

Eagle Ford Region

Permian Region

Private companies operating in the shale regions above are the ones Sheffield wants production to be dialed back. He also spoke to Bloomberg, reiterating how there would be no production increase if war broke out, and the company would focus on returning money to shareholders. 

With Morgan Stanley joining Goldman Sachs and calling for $100 oil, and Bank of America’s commodity strategist Francisco Blanch laying out the idea of $120 oil… JPMorgan has one-upped everyone with an adverse geopolitical event between Russia and Ukraine could easily spark $150 oil. 

Separately, Reuters’ commodity analyst John Kemp warned, “U.S. distillate fuel oil stocks are on course to fall critically low between now and the middle of the year, creating conditions for a potential spike in both crude and fuel prices.”

Soaring gas prices have been terrible for President Biden’s polling data ahead of midterms. 

Sheffield’s comments dash any hopes the Biden administration could see falling energy prices in the near term. Their attempt at the global coordinated SPR release failed and Biden’s begging OPEC+ to increase production rapidly has yet to materialize. Now it’s up to the Federal Reserve to crash the economy via aggressive tightening measures to tame inflation and get energy prices under control.