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Pioneer Natural Resources warns of $832 million derivatives loss

By Reuters

By Liz Hampton

-U.S. independent shale producer Pioneer Natural Resources on Tuesday warned it would be hit by an $832 million second-quarter loss on oil and gas derivatives.

Many producers locked in sales when oil prices rose above $40 a barrel last year, but are now facing losses after crude prices jumped above $60 a barrel during the quarter.

For the first half of the year, Pioneer will face $1.523 billion in total net losses on derivatives, the majority of which stem from oil contracts, it said in a regulatory filing.

During the first quarter, U.S. oil firms were expected to face an aggregate $7 billion in hedging losses, according to consultancy Enverus. Oil and gas producers use derivative instruments as a form of insurance to lock in prices for their future output.

Pioneer said it paid $570 million to settle contracts during the second quarter. The company had a non-cash derivative loss of $262 million related to changes in fair value of other contracts during that quarter, the filing said.

The company also anticipates reporting a non-cash loss of $25 million for its investment in hydraulic fracturing firm ProPetro Holding Corp for the second quarter. Pioneer owns 16.6 million shares of ProPetro.

Shares of Pioneer were down 2.05% to $141.70 in midday trading.

Pioneer will release its second-quarter earnings on Aug. 2.