Shale Producer Eyes Drilling With Artificial Intelligence …

Pioneer Natural Resources expects AI to be the future, and as it looks to produce 1 million barrels of oil equivalent per day by 2026, it wont need to hire a lot more people. ( amarinchenko106/stock.adobe.com)

Pioneer Natural Resources (PXD) said using artificial intelligence could help ensure it always drills for oil in the best places, as the energy sector embraces technologies that are transforming transportation, e-commerce and finance.

While Tesla (TSLA) has been pursuing autonomous driving and Amazon (AMZN) is pushing its Alexa bot as a personal shopper, the oil industry has been slower to go high tech. But more companies are applying data analytics to oil exploration and production.

Pioneer Natural Resources said Thursday that it isn't using AI yet, though it's been using predictive analytics.

AI would help "narrow the outcomes on these wells," meaning Pioneer could always drill in the sweet spot and avoid duds, Chris Cheatwood, the company's executive vice president for business development and geoscience, told analysts on a conference call.

Pioneer expects AI to be the future, and as it looks to produce 1 million barrels of oil equivalent (BOE) per day by 2026, it won't need to hire a lot more people, he added.

The company and Oak Ridge National Laboratory are also working together to look at advanced materials and coatings, smart parts and sensors, advanced material design, and additive manufacturing, according to a March statement from the lab.

Shares of Pioneer fell 3% to 165.63on the stock market today as a sell-off in oil prices overshadowed its strong quarterly report late Wednesday. Pioneer hit a nine-month low intraday.

U.S. crude sank 4.8% to a five-month low of $45.52 a barrel, back to where prices were before OPEC began its production cuts.

The shale producer swung to an adjusted profit of 25 cents per share in Q1, beating analyst views by 8 cents. Revenue jumped to $1.47 billion, also above views.Total production costs eased to $6.31 per BOEfrom $6.42 in Q4, but costs for Permian horizontal wells climbed 19% sequentially to $2.33 per BOE, and Permian vertical costs rose 2.5% to $14.36. Eagle Ford costs dipped 1.5% sequentially to $10.71.

Production rose 3% vs. Q4 to 249,000 BOE per day, and management sees Q2 output of 254,000-259,000 BOE a day. While some analysts questioned if that guidance was light, Pioneer said its planned addition of wells is weighted toward the latter part of Q2 and the latter part of the year.

Despite the uptick in Permian-area costs, Pioneer doesn't see cost inflation affecting its bottom line this year, noting it has long-term contracts for sand used in fracking and has access to cheap water, though it sees water use in the Permian doubling in 2017 vs. 2014 levels. Labor costs are up 2%-3%.

Also late Wednesday, Continental Resources (CLR) reported adjusted EPS of 2 cents vs. a loss of 41 cents a year ago, in line with Wall Street views. Revenue was $685.43 million, above views for$642.83 million. Production expenses rose 5% vs. Q4 to $3.78 per BOE but were little changed vs. a year ago.

On Thursday, CEO Harold Hamm told analysts during a conference call that service costs are only seeing a slight uptick in a few areas and have stabilized.

Continental seesQ2 production of 220,000-225,000 BOEper day, up from 213,755 in Q1. Fracking crews in the Bakken formation will rise to nine by midyear from seven now.

Despite the recent dive in crude prices, Hamm noted "signs pointing toward better prices very quickly" but added that fracking crews could be withdrawn promptly, depending on market conditions.

Shale companies can extract oil profitably at lower prices due to new technologies and techniques that have improved efficiencies. Continental expects to be cash-flow neutral with U.S. crude at $50-$55 a barrel. Last quarter, it said a price of $55 was the threshold, and in 2015, it was $60.

Shares tumbled 5.1% to 40, hitting their lowest levels sine May 2016.

Also Wednesday, Concho Resources (CXO) reported EPS that crushed Wall Street views but its revenue fell short.

Concho sees full-year production up 21%-25% vs. a prior outlook for growth of 20%-24%. Oil and natural gas production expense per barrel of oil equivalent is now $5.50-$6.00, down from a prior outlook of $5.75-$6.25.

Shares dropped 1.3% to 127.11.

On Tuesday, Diamondback Energy (FANG) reportedQ1 results above views as production rose 61%. Devon Energy (DVN) also reported a profit and announced $1 billion in asset sales primarily in the Barnett Shale basin.

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