The largest oil producer in the Permian has shuttered all of its hedges on the commodity for the year, indicating a vanilla bullish outlook on the price of oil in 2022.
Pioneer Natural Resources said in a filing on Wednesday that removing the hedges would cost $328 million but would leave the company positioned to capitalize off of a continued rise in oil prices. The company also bought back $250 million of its own shares, Yahoo Finance and Bloomberg reported.
RBC Capital Markets analysts Scott Hanold commented: “The hedge monetization strategically positions PXD for further strength in 2022 oil prices.”
Most companies like Pioneer use instruments like swaps and options to help hedge against volatility in prices. The hedges help ensure that producers have enough capital to meet their costs of doing business.
Hedges worked as saviors for many companies during 2020 and 2021, when oil prices collapsed.
Riding oil prices higher, hedges can sometimes wind up capping companies’ upside. Pioneer, for example, lost more than $2 billion last year as oil prices rose and its hedges plunged underwater.
The company’s announcement this week makes it very clear what Pioneer’s outlook for oil is heading into 2022: plain ole’ bullish.