Scott Sheffield – Petroleum Pioneer in the Eagle Ford

Scott Sheffield

For many, the word “pioneer” evokes iconic imagery of the first American settlers — romantically rugged and sun-soaked — who braved new, unforgiving terrain and adverse conditions in the name of posterity and prosperity.

These early pioneers are responsible for igniting the evolution of the United States from a fledgling, uncharted territory into the world power that it is today, and they embody the first notions of pursuing the American dream.

But what comes to mind when thinking of modern-day pioneers, and do any even still exist? To answer this question, look no further than an impressive, granite-covered office complex in Irving, Texas.

Scott Sheffield — an unassuming, down-to-earth yet phenomenally successful businessman in his early 60s — is truly a modern-day pioneer, a title he appropriately shares with the large, independent oil and gas company that he leads as chief executive officer and chairman of the board.

Sheffield’s forward-thinking leadership and intuition, fine-tuned by nearly a lifetime of experience in the industry, have positioned the company as a leader in the oil and gas sector

Pioneer Natural Resources was officially formed in 1997, when the Parker & Parsley Petroleum Company, formerly headed by Sheffield, merged with MESA Inc. Since that time, Pioneer has grown to become one of the most prominent independent producers in the country with approximately 4,000 employees and annual revenue exceeding $4 billion.

Even in the midst of a cyclical industry downturn, the company is poised to continue its growth and revenue trajectories.

Pioneer’s success is largely attributed to Sheffield, although his humility would never allow him to take all of the credit. Sheffield’s forward-thinking leadership and intuition, fine-tuned by nearly a lifetime of experience in the industry, have positioned the company as a leader in the oil and gas sector.

Next Frontier: Oil Exports

Repealing Restrictions

One new horizon Sheffield is pursuing is crude oil exports. Not only is the CEO at the forefront of the debate, rallying the troops in an effort to repeal the 40-year-old federal ban, he also chartered the discovery of a new conduit for U.S. companies to move petroleum products abroad.

On December 22, 1975, President Gerald Ford signed into law the Energy Policy and Conservation Act, which, in part, banned the export of American crude oil, ostensibly in response to the Arab oil embargo of the 1970s.

In the decades since, the global landscape has changed dramatically. Geopolitical powers have shifted and re-shifted, regimes have risen and fallen, and the discovery of domestic unconventional resources has led to a tremendous increase in the amount of oil and natural gas the U.S. is producing.

In fact, the U.S. Energy Information Administration reports that the surge in oil production growth in 2014 was the largest volume increase since record keeping began more than 100 years ago, a staggering 1.2 million barrels of oil equivalent per day (BOEPD) increase to equal a total of 8.7 million BOEPD for the year.

With this huge boost in production, the U.S. has surpassed historically top oil producers, such as Russia and Saudi Arabia. A report from Columbia University’s Center on Global Energy Policy lays out the argument: “Increased U.S. crude production can weaken the economic power, fiscal strength and geopolitical influence of other large oil producing countries.” The report also notes that allowing crude oil exports will provide for “greater U.S. diplomatic leverage in future application of sanctions or pursuits of other objectives.”

Lifting the ban would mean huge economic benefits for the U.S. as well. According to IHS Energy, allowing exports could spur investments of nearly $750 billion, as well as increase the GDP by $135 billion as a result of the uptick in production. Additionally, the balance of trade would be significantly impacted, narrowing the trade deficit by $22.3 billion in 2020, according to ICF International.

Scott Sheffield Pioneer Natural Resources Forbes

The repeal has the potential to create thousands of new jobs and put money directly back into consumers’ pockets. It’s projected that U.S. consumers could save, on average, up to $5.8 billion per year over the next two decades as a result of lower gas or fuel prices. Predictions on job growth range from about 300,000 to 400,000 newly created jobs, with the highest estimate peaking around 1 million in 2018. And investment-led economic expansion and lower unemployment rates would lead to a significant boost in American households’ disposable income.

By far the most significant benefit is to domestic oil producers, who are undeniably on an uneven playing field with the rest of the world. West Texas Intermediate (WTI), the light sweet crude oil produced in the state, has seen a price differential of as much as $20 less than Brent, the typical benchmark for pricing on the international market.

“It’s our domestic price versus the world price,” Sheffield explains. “Just a $10 swing will make a difference of whether we’re increasing production 2 million barrels a day long-term, or decreasing production 2 million barrels a day.”

Sheffield points out that it is not just the oil producers who are getting a lesser deal per barrel, but also individual royalty owners — who collect payments on a percentage of oil sales — and the federal and state governments that hold production on publicly owned lands.

“[Lifting the crude oil export ban] gets what should be a fair price for all constituents of the oil and gas industry,” Sheffield says.

He has long been an outspoken advocate for exports and has made multiple trips to Washington, D.C. with his team and other energy CEOs. In March, Sheffield testified before the U.S. House Subcommittee on Energy and Power in support of lifting the outdated restrictions.

“I think the comments were very well received,” Sheffield says, adding that the critical impacts on national security and job creation, and the importance of getting a competitive price were key points in the discussions.

In conjunction with legislative efforts in D.C., Sheffield is a founding member of the Producers for American Crude Oil Exports (PACE), an industry group aimed at sharing factual information with elected officials and the public about the benefits of allowing U.S. producers to sell crude oil in global markets.

“Ryan Lance, the chairman and CEO of ConocoPhillips, and I got together about a year ago,” Sheffield recalls of the group’s organic origins. “We had a discussion about this point, and we began soliciting members to join the group.”

PACE membership also includes Anadarko Petroleum, Apache, Chesapeake Energy, Concho Resources, Devon Energy, Encana, EOG Resources, EP Energy, Hess, Laredo Petroleum, Marathon Oil, Noble Energy, Occidental Petroleum and WPX Energy.

“We hope that we can get a bipartisan bill through both the Senate and the House sometime this fall,” Sheffield says, although he knows there are still significant obstacles to overcome in the meantime.

First, not everyone agrees that exporting crude oil is the best move for the U.S., specifically some inland refiners.

Consumers and Refiners United for Domestic Energy (CRUDE) was recently formed by four refiners — Philadelphia Energy Solutions, Alon USA Energy, PBF Energy and Monroe Energy — with the purpose of maintaining the current restriction on crude oil exports. The group says reversing the ban will actually cause gasoline prices to go up — not down — and cites potential unintended consequences to the economy, energy independence and national security.

But Sheffield sees it differently.

“Their point is that if U.S. crude gets the same price as world crude, they’ll go under,” the oil executive says.

Yet prohibiting crude exports puts the oil industry in a precarious position, which is further compounded by the current pricing slump, as well as oversupply and lack of storage.

“If current trends continue and the export ban is not lifted, U.S. shale oil production will flatten or decline by disproportionate volumes versus our overseas competitors, diminishing the profound benefits of the shale revolution,” Sheffield said in a testimony before Congress.

He is also concerned with the timing of when such a bill would go before Congress.

“The biggest concern, sad to say, is that most politicians are worried about the price of gasoline,” Sheffield says, referring to elected officials’ hesitancy to cause discontent among voters, who often have knee-jerk reactions to any increase at the pump.

In reality, U.S. gasoline is priced off global gasoline prices, not domestic crude prices, and Sheffield points to various independent studies that show that repealing the crude oil export ban will benefit U.S. consumers by putting downward pressure on gasoline prices due to increased global oil supplies.

Nevertheless, Sheffield admits that the vote could easily be delayed if the price of gasoline is going up at the time.

Ideally, he says, Congress would approve the repeal within the next few months, but he realistically gives it a 50-50 chance of passing this year.

Pioneering Condensate Exports

While Pioneer’s chairman homed in on the larger issue of crude oil exports, that didn’t distract him from finding a clever way around it.

In 2011, while other oil producers were riding high on solid prices and a newfound abundance of shale resources, Sheffield was beginning to see the writing on the wall.

The excess oil produced domestically must go somewhere, typically to the Gulf Coast or Cushing, Oklahoma — the delivery point for WTI futures contracts.

“I was worried about the storage issues like they’re having today and moving [oil] down to the Gulf Coast,” he says about his early calculations.

And he was right to be concerned. This March, crude oil storage at Cushing reached 54.4 million barrels, the highest volume on record. The 70.8 million barrels of storage capacity represents more than 60 percent of crude oil working storage space in the Midwest.

In addition to the glut at Cushing, West Texas has been grappling with production that is outpacing takeaway capacity. In May, the region also experienced significant pipeline disruptions. This created record levels of stockpiles and forced oil to be diverted to Cushing instead of the Gulf Coast, further compounding storage issues.

But back before this congestion was making headlines, Sheffield had the keen insight to anticipate such events.

“We researched the 1975 law in regard to the ban on oil exports and realized there was a mechanism that if you had condensate that was processed, like we have in the Eagle Ford play, there’s a chance that the Commerce Department would agree with us and consider it processed condensate,” Sheffield recalls.

To everyone’s surprise, the U.S. Commerce Department issued a private ruling approving Pioneer’s request to export condensate in less than a month.

Sheffield and his team were the first to uncover an overlooked loophole, buried deep in various sections of archaic laws and government codes. Section 754.2(a) of the Export Administration Regulations states: “Lease condensate that has been processed through a crude oil distillation tower is not crude oil but a petroleum product.” As long as the crude oil has undergone stabilization and distillation, it can be considered a refined petroleum product, and therefore may be exported with far fewer restrictions.

In July 2014, Pioneer exported its first shipment of condensate, making it the first U.S. company to export the petroleum product under current restrictions

Sheffield admits that credit must be given to the Obama administration as well.

“Instead of lifting the ban outright, which is what they should do, they’re giving a little bit to the industry to allow this [oversupply] problem to at least get pushed back,” Sheffield explains.

In July 2014, Pioneer exported its first shipment of condensate, making it the first U.S. company to export the petroleum product under current restrictions. The company exported 10,000 barrels per day (BPD) of Eagle Ford condensate to Asia and Europe last year. In 2015, Pioneer is exporting approximately 20,000 BPD, with significantly improved pricing compared to domestic sales.

Scott Sheffield Pioneer Natural Resources Forbes
NEW YORK, NY – AUGUST 22: Chairman and CEO Scott Sheffield of Pioneer Natural Resources rings the Opening Bell at the New York Stock Exchange on August 22, 2012 in New York City. (Photo Ben Hider/NYSE Euronext)

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After news of the Commerce Department’s ruling broke, several companies followed suit. Enterprise Products Partners, Royal Dutch Shell, BHP Billiton, BP, Trafigura, Cima Energy (a Texas-based Mitsubishi Corporation affiliate), NuStar and Cheniere Energy are currently exporting or in the process of exporting condensate.

a pioneer in the making

Sheffield’s rise to the upper echelons of the oil industry was not by chance or luck, and it certainly did not happen overnight. His journey to the top has been nearly a lifetime in the making.

His father, Hugh D. Sheffield, was a petroleum engineer and executive at Atlantic Richfield Company, also known as ARCO. Sheffield was born in Dallas, and in 1966, the family moved to Tehran, Iran, where Sheffield attended high school.

From his time in Iran, the future CEO learned several lessons about life and the world that have undoubtedly shaped his perspective today.

“You learn to appreciate foreign cultures when you live there,” the Texas native says. “You have to learn to live in and appreciate their environment.”

This heightened sense of respect is a trait that Sheffield has maintained throughout his life, and one of the attributes that makes him so beloved by his employees at Pioneer.

Time abroad also provided an enhanced understanding and unique perspective on the geopolitical intricacies that have an impact on foreign relations and the oil industry, as well as an ingrained sense of gratitude for life back home.

“You get a greater appreciation for the U.S. … all the things that we have in this country that we don’t think about versus living in a foreign culture,” Sheffield says.

Upon graduating from high school in 1970, Sheffield returned to the U.S. to attend college at The University of Texas at Austin. Although he loved math and science, the college freshman initially felt the urge to carve his own path.

“I rebelled against my father and signed up for pre-law,” Sheffield says somewhat jokingly.

It didn’t take long for Sheffield, and the university, to realize that pre-law was not the right fit. “I flunked out of college,” Sheffield admits with a grin, quickly clarifying, “they called it a forced withdrawal.”

Although Sheffield came close to joining the ranks of modern-day millionaires who never graduated from college, his father stepped in and gave his son a harsh dose of reality. In what Sheffield calls “a game-changing event,” he was sent to roughneck on an offshore rig for about four months.

“You need to focus and get an education is what it taught me, and not party and have fun,” Sheffield reflects.

He returned to school after his semester off with new zest, switched majors and surpassed minimum requirements for continued enrollment, achieving an almost perfect grade point average that semester.

Sheffield graduated from The University of Texas in 1975 with a Bachelor of Science in petroleum engineering and went to work as a production and reservoir engineer for Amoco in Odessa, Texas. He stayed with the company for about four and a half years, primarily working on enhanced oil recovery projects in West Texas.

In 1979, fate came knocking. Sheffield accepted a position at the Parker & Parsley Petroleum Company, a small, independent oil company, making him the fifth employee and the only engineer on staff at that time. The intimate environment was exactly what the young engineer needed to flourish.

“I basically was taught by the founders at Parker & Parsley everything you can know about the oil and gas industry,” Sheffield says. “I learned more just in a year with them than I did [in] five years with a major oil company.”

Two years after joining the company, Sheffield was named vice president of engineering. In 1985, the founders of Parker & Parsley sold their interest in the business, and Sheffield stepped up as president and a director on the board.

In 1989, Sheffield and his management team made the prudent decision to purchase the company from the owner at the time, a financial real estate company that was teetering on bankruptcy. Shortly after gaining control of the company, Sheffield was named chairman of the board of directors and CEO. In 1991, the new leader took the company public.

In 1997, Sheffield skillfully navigated the merger between Parker & Parsley Petroleum Company and MESA Inc., forming Pioneer Natural Resources. Today, he is the CEO and chairman of the board of directors of one of the top-performing oil and gas producers in the country.

Secret to Success

As a seasoned veteran of the industry, the current oil pricing slump is not exactly Sheffield’s first rodeo. “Going through five downturns, you gain experience,” he says.

Through that experience, the oil executive has perfected the recipe for success in the industry. Simply put: good rocks, good books and, most importantly, good people.

Good Rocks

“We have some of the best shale rocks in the country, in both the Permian Basin in West Texas and the Eagle Ford,” Sheffield says.

But that wasn’t always the case. If not for Sheffield’s sensibility and intuitive decision-making, Pioneer very well could have missed some of its greatest opportunities.

In the mid-1990s, major oil companies began divesting large portions of their U.S. acreage, convinced that domestic production had matured, and diverted attention and resources overseas.

Sheffield chose a slightly different path.

“That time period is when we made most of our acquisitions from the major oil companies in the Spraberry and Wolfcamp field,” Sheffield says. Located in the Permian Basin, the Spraberry and Wolfcamp Shale play is one of the nation’s oldest producing oil fields and was often overlooked at the time.

Oooguruk Island Scott Sheffield Pioneer Natural Resources Forbes

The company also dabbled in the international arena, achieving success in the deepwater Gulf of Mexico, Africa and Argentina.

But by the early 2000s, the newly discovered Barnett Shale in North Texas was turning attention back home, as it was the first shale formation heavily produced by the combination of horizontal drilling and hydraulic fracturing. Shale plays quickly became the new hot topic.

“In 2005, we made the decision to exit, over time, all of those [international] businesses and refocus our staff,” Sheffield says, noting that Pioneer was somewhat late to the party in the Barnett Shale. “We said there has to be shale under our South Texas and Permian Basin properties.”

A handful of years later, in 2009, the first horizontal well was drilled in the Eagle Ford Shale in South Texas, unleashing a frenzy of drilling activity in the once-quiet region.

While the CEO was right in thinking there may be shale under Pioneer’s South Texas properties, the real breakthrough was yet to come.

“I saw a presentation in 2011 by our geosciences staff that was sort of the game changer for the company,” Sheffield remembers. “The game changer was really the Permian Basin: the Spraberry and Wolfcamp field.”

That presentation revealed that Pioneer was already sitting on billions of barrels of recoverable oil, literally right under their feet.

“This was a 10-billion-barrel discovery on our own lands, most of it held by production, right outside of Midland, Texas,” Sheffield remarks of the tremendous find.

Today, Pioneer is the largest acreage holder in the Permian Basin, boasting a 100-year-plus inventory and more than 20,000 drilling locations. From its first well drilled in 2011 to 2014, Spraberry/Wolfcamp production has more than doubled, increasing from 45,000 to 99,000 BOEPD.

It could be said that Sheffield initiated the resurgence of the mighty Permian Basin.

Last year, Pioneer added proved reserves from horizontal drilling activities in the Permian Basin and Eagle Ford totaling 157 million BOE, and oil production was up 25 percent year over year.

Even with the decline in oil prices and activity, Pioneer still projects production growth of 10 percent for 2015, with estimated production in the second quarter of this year averaging 198,000 to 203,000 BOEPD.

Good Books

Possibly the most essential lesson Sheffield has learned throughout his decades in the industry is the importance of being financially secure.

His cardinal rule: “Always have a great balance sheet, because you don’t know when the price of oil is going to change.”

To protect against inevitable volatility in oil prices, Sheffield says one of the most important steps is securing good hedges.

Pioneer is currently 90 percent hedged at $71 per barrel, which has resulted in roughly an extra $20 per barrel on the majority of sales so far this year. Sheffield estimates it could provide somewhere in the ballpark of $400 million to $500 million overall for 2015. The company is also heavily hedged next year, according to the CEO, well over 50 percent at $70 or higher, potentially adding another $350 million in 2016.

Sheffield took additional steps to strengthen the balance sheet in direct anticipation of the Organization of the Petroleum Exporting Countries (OPEC) meeting last fall, at which the group decided to maintain current production levels, further depressing prices brought on by oversupply and weakening demand globally.

Scott Sheffield Pioneer Natural Resources Forbes

“We raised a billion in equity back before the OPEC meeting,” Sheffield says.

Since the meeting, several companies again followed Pioneer’s lead. Sheffield predicts in the six to eight weeks prior to our discussion in April, approximately $12 billion to $13 billion of equity had been raised by the industry.

In 2014, Pioneer also divested of three nonessential business components in an effort to boost cash flow. The sale of its Alaska, Barnett Shale and Hugoton assets resulted in net proceeds of $745 million. Additionally, the company is currently in the final stages of negotiating the sale of the Eagle Ford midstream business.

In response to the decline in oil prices, Pioneer, like many companies, has significantly reduced the number of rigs operating across the state. Currently, it has 16 horizontal rigs online — 10 in the Permian Basin region and six in the Eagle Ford.

However, because of Sheffield’s ability to keep the company financially lean and well-positioned in regard to acreage, it is poised to rebound much faster than most once prices stabilize.

Sheffield predicts the company could start adding rigs sometime in the second half of this year, although that’s contingent upon several factors.

First, the CEO expects the sale of the Eagle Ford midstream business will close during the second quarter, providing another cash infusion to the balance sheet.

Additionally, Sheffield wants to be sure the worst is not yet to come in terms of oil prices.

“I’m optimistic that we saw the bottom when it hit $42 to $44 twice,” Sheffield says.

The third factor is achieving ambitious reductions in key budgetary items, namely drilling and completion costs. The company announced drilling and completion costs had already reached the targeted 15 percent reduction in the first quarter, with the most significant of these reductions in materials, such as drilling mud, chemicals, guar and water; fuel charges; labor and transportation; rental equipment, such as blowout preventers and coil tubing; and well services, such as wireline, direction and cementing services.

To achieve such goals, the company is cutting down to two-string casing from three-string in several areas, utilizing dissolvable bridge plugs for increased efficiency in each stage of stimulation, drilling near existing tank batteries and drilling multiple wells from a single pad to reduce costs.

By the end of the year, Pioneer expects to achieve an overall 20 percent reduction in these costs, with the key contributors being casing and tubing, well stimulation and drilling rig costs.

Additionally, Pioneer projects the cost to construct new facilities, particularly horizontal tank batteries, and lease operating expenses in 2015 to be 15 percent and 10 percent lower, respectively, than the prior year. As of the first quarter, the company had already realized a 5 percent reduction in lease operating expenses.

The company is also implementing additional cost-cutting methods to maintain profitability and productivity. For example, Pioneer made the decision in mid-February to exclusively utilize Pioneer Pumping Services, eliminating the need for a third-party service company.

Pioneer also recently announced the closing of its Denver office and streamlined operations in the Raton Basin.

In February, Pioneer shut down the vertical drilling program in the Permian Basin, as it was no longer necessary to hold acreage and provides lesser returns compared to horizontal wells.

Pioneer’s CEO sees a strong, continued presence for years to come in the Permian Basin and the Eagle Ford Shale.

Good People

Acreage wasn’t the only valuable asset Pioneer was scooping up from major oil companies as they were moving internationally in the ’90s.

“We went to the majors and hired a lot of employees from them,” Sheffield says, explaining one reason for the company’s relocation to Irving. “It was easier to attract them in the Dallas-Fort Worth area than it was in Midland.”

With the ramp up in industry activity over the past decade, hiring the best in the business has become an increasingly competitive sport for oil and gas companies, who are offering even more enticing compensation packages.

Pioneer offers a two-for-one match on employee retirement plans, up to 5 percent of an employee’s salary, as well as stock purchase plans, an annual incentive bonus program and an employee referral awards program. It also provides a tuition reimbursement plan, employee-assistance plan and affordable insurance coverage for employees, including medical, life and disability programs.

Pioneer goes a step further than most by making it as convenient as possible for its employees to achieve a healthy work-life balance.

The company’s recently constructed office complex in Midland boasts a free day care center, two workout rooms and a cafeteria where employees enjoy complimentary lunch together.

Employees also have the chance to bond and be active in the Corporate Challenge, an eight-week, Olympics-style tournament held each fall in which companies and organizations in the Dallas area compete in a number of sports and events, such as badminton, golf, tennis, volleyball, flag football, and more. The proceeds go to support the Special Olympics.

Sheffield says everyone involved has a great time and really gets into the competitive spirit — it seems himself included. “[We’re] three-time champions!”

But the real draw boils down to the leadership, and Sheffield’s belief in open communication, trust and humility. The chief executive says his office is always open to all employees, and he constantly stresses to treat everyone with the same level of respect.

“Don’t sit there and do something differently for me that you wouldn’t do for somebody working out in the field or a file clerk,” Sheffield says. “Treat everyone the same — everybody is important in this company.”

Throughout our conversation, Sheffield often seemed to downplay his role in Pioneer’s accomplishments, rarely using the word “I” — instead saying “we.”

“I feel like I’m just another employee,” the CEO admits.

“I always say it started with my parents,” Sheffield says. “That’s what I was taught, and so it’s natural to be that way.”

The proof is in the pudding. Pioneer has consistently been recognized as a top employer for several years running.

It’s one of only 12 companies to land on The Dallas Morning News’ “Top 100 Places to Work” since the program was started in 2009, receiving the coveted No. 1 spot in 2014. Pioneer has also been named one of the “Best Companies to Work for in Texas” every year since 2010, which holds special significance as it is based on employees’ feedback.

Good to the Core

One of the underlying reasons Pioneer is consistently recognized as a great place to work is the strong corporate culture Sheffield established and maintains within the company. For Pioneer, core values aren’t just a colorful poster on the wall. Community involvement, charitable giving, safety and sustainability are a way of life.

Community Involvement and Charitable Giving

Giving back to the communities in which they live and operate is an important focal point for Pioneer’s CEO and employees. In addition to the considerable tax revenue and employment the company provides, Pioneer is actively involved in local charities and places significant importance on providing educational opportunities for the betterment of communities and to prepare a future Texas workforce.

In the Permian Basin region where Pioneer has long been active, Sheffield is regarded as a highly respected member of the community, in part because of his philanthropic endeavors. Pioneer donated $1 million to the Permian Basin Petroleum Museum in 2011 for renovations, expansion and much-needed improvement of the nation’s largest museum dedicated to the petroleum industry. The company has made financial contributions toward the construction of the Bush Tennis Center, which opened in 2012 in Midland. Employees also team up annually with Christmas for Our Troops to pack almost 3,000 gift boxes for service members stationed in Iraq and Afghanistan during the holiday season, as well as sending small care packages and letters to members of the military throughout the year.

But perhaps the largest and most meaningful contributions have gone to Midland area schools. In 2012, Pioneer made a four-year commitment of $1 million to the Early College High School at Midland College, a program in which high school students can concurrently take college-level courses and receive a high school diploma and an associate degree upon graduation. The same year, Sheffield publicly endorsed the $163 million elementary school bond initiative, which passed largely thanks to support by the industry and community leaders like Sheffield. Last year, Pioneer and a small coalition of local companies collectively dedicated $6.25 million to the Midland ISD Education Foundation; $3.25 million went to new teacher signing bonuses, and the remainder was used for re-signing bonuses. This donation was intended to help the district attract and retain quality teachers, which has been difficult given the cost of living and fluctuations in enrollment.

Youth and education are also a charitable focus in Pioneer’s South Texas operating area. The company partners with local colleges, such as Coastal Bend College in Beeville and Victoria College, to ensure courses are meeting the industry’s needs and sufficiently preparing students to work in their chosen fields. Pioneer also partners with local junior highs and high schools to help meet needs in math and science, from delivering graphing calculators to helping acquire new microscopes and lab equipment.

Each June, Pioneer and the Victoria Business and Education Coalition host the YOUth LEADership Conference, a five-day program at which middle school students are taught essential leadership skills to help them succeed in school and their future careers. And as Pioneer is a founding member of the South Texas Energy & Education Roundtable (STEER), STEER and its employees support youth livestock shows by sending letters of encouragement to students and contributing funds.

In the company’s new home of North Texas, Pioneer has collaborated with Habitat for Humanity, building 16 new homes in the area, as well as participating in A Brush with Kindness, a Habitat sub-program that assists the elderly and disabled with minor home repairs and helps revitalize local neighborhoods. Each spring, Pioneer sponsors a fundraising campaign to assist the North Texas Food Bank, as well as co-hosting the annual Dallas CASA Classic golf tournament, the highest grossing one-day charity tournament in the Dallas-Fort Worth area. In 2014, the event raised more than $1.7 million for the Court Appointed Special Advocates nonprofit organization.

In both North and West Texas, the company is also deeply involved with the United Way. Employees donate on an individual basis through payroll deductions and through other means, and every dollar donated is matched by Pioneer. Employees enjoy organizing creative fundraising events, even turning two floors of the Midland office into a nine-hole miniature golf course to help raise money for the Midland United Way. In Irving, the company hosts an in-office event in which employees race their homemade, food-constructed model cars against one another to raise money for Meals on Wheels, one of United Way’s agencies. The company was recognized for its efforts and unique fundraising approach, receiving the 2013 Trendsetter Award from the United Way of Metropolitan Dallas.

Pioneer provides economic benefits to communities by providing stable employment and substantial tax revenue. It is the No. 1 taxpayer in Midland County and employs roughly 2,000 West Texans in its Permian Basin operations. In South Texas, the company employs about 530 workers; and it paid almost $71 million in production taxes and $31.5 million in ad valorem taxes in 2013. Pioneer also employs more than 1,000 people in the Irving headquarters, contributing over $4 million in production taxes and close to $2 million in ad valorem taxes to North Texas communities in 2013.

Safety

Safety is a critical component of every operation, and Pioneer devotes significant time and resources to ensuring all employees are well-versed in safety practices and procedures.

In 2012, Pioneer’s Health, Safety and Environment team spent more than 16,000 person-hours training more than 1,300 employees. The following year, the Pioneer Pumping Services training department initiated a comprehensive two-week, on-site new hire training program, in which participants attend OSHA courses and equipment training, as well as receiving hands-on experience with PPS-specific equipment and field and yard inspections.

Over the past year, Pioneer has featured a series of three targeted training programs; the most recent is the WeBelieve program, which was created by company staff and features participant polling, group discussions, case studies and interactive videos.

Sheffield believes corporate culture starts at the top; and as such, Pioneer’s top supervisors and managers regularly attend the award-winning DuPont Sustainable Solutions Managing Safety courses. In 2013, more than 150 managers attended the two-day training session.

Pioneer’s board of directors has also established the Health, Safety and Environment Committee to provide oversight of these practices within the company and monitor management’s efforts in maintaining a culture based on safety and environmental protection.

Vehicle safety is another area of focus, especially considering the substantial amount of time employees spend on the road. In 2012, employees drove a total of 43 million miles and completed more than 17,000 person-hours of driver safety training courses. Approximately 1,700 of Pioneer’s fleet vehicles are equipped with GPS tracking technology, which monitors safe driving practices and helps optimize routes and reduce mileage.

In 2012, for every million miles driven by Pioneer employees, there were on average 2.05 preventable vehicle accidents. Last year, Pioneer’s OSHA recordable injury rate and lost-time accident rate dropped to an eight-year low.

Sustainability and Environmental Stewardship

In terms of sustainability, Pioneer utilizes a multidisciplinary approach to balancing economic growth, social progress and environmental stewardship.

Pioneer’s Sustainable Development department works to reduce its environmental footprint and provide cost-effective solutions through scientific analyses of information and knowledge. The company is also expanding the role of its Corporate Environmental team.

Overall, the company’s sustainability efforts coalesce around three key issues: water, air and surface.

In regard to water, Pioneer has made tremendous strides in sustainability through several initiatives. For one, the company is increasingly using brackish, non-drinkable groundwater for its drilling operations. Because of the consistent occurrence of droughts in Texas, Sheffield assembled a team of geologists about three or four years ago to examine alternative sources of water, specifically brackish water.

“We found a lot of brackish water in the Santa Rosa formation,” Sheffield says. “We’ve been very successful there as the first area to replenish and supplement fresh water.”

To further avoid the use of fresh water in its West Texas operations, Pioneer has created a unique partnership with the city of Odessa to purchase effluent water from the municipality. While this type of agreement is not commonly seen in Texas, Sheffield notes it is a mutually beneficial one.

This relationship provides Pioneer with a steady supply of water to produce wells and significant cost benefits. Sheffield estimates that moving away from fresh water could save the company about $300,000 to $400,000 per well in drilling and trucking costs.

For the city, the financial commitment secures funding for the construction and maintenance of such infrastructure. Odessa is able to build a sophisticated new treatment plant capable of processing water to the standards Pioneer needs, but the plant will also serve the needs and residents of the greater area for years to come.

Pioneer is also in talks with the city of Midland regarding a similar agreement, further increasing the amount of effluent water being utilized. “We hope by 2020 to essentially be using a combination of effluent water and brackish water and not use fresh water at all,” Sheffield says. And the company is exploring several water-recycling projects for the fresh water it does still use, although the economics have slowed the widespread implementation of such initiatives. “So far the recycling projects are very expensive,” the chairman admits. “But over time we think it’s better to recycle, so we’re still working on a couple of [projects], trying to get their costs down.”

To protect existing groundwater, the company is installing covers on selected water storage ponds at well sites to combat evaporation. Pioneer is also adding pressure gauges to monitor and test the annular space of all new wells to ensure well integrity and further protect water resources.

To better understand the company’s impact on air quality and emissions, Pioneer implemented a new program that includes advanced emissions measurements. Improved practices and data collection helped the company achieve a 20 percent decrease in reported gross emissions in 2012. The company has also made improvements to the completion process, specifically in the Eagle Ford Shale, which has resulted in a 79 percent reduction in flaring in this production stage between 2011 and 2012.

As well, Pioneer has converted more than 13 percent of light-duty trucks to natural gas fuel as of mid-2013 — representing roughly 2,000 vehicles. Going a step further, the company is expanding its use of this domestic fuel by converting three drilling rigs in South Texas to natural gas, reducing particulate matter and carbon monoxide emissions.

Pioneer’s efforts are not going unnoticed, as it claims the first oil and gas project to ever receive the Texas Commission on Environmental Quality’s Texas Environmental Award in the Pollution Prevention category.

Deeply committed to surface protection and conservation, one of the company’s key initiatives is reducing well pad footprints by drilling multiple wellbores from a single pad. In South Texas, Pioneer has reduced its average footprint per wellbore from 2.75 acres in 2012 to fewer than 2 acres in 2013.

In 2009, Pioneer was awarded the prestigious Bruno Hanson/Midland College Environmental Excellence Award for achievements in the spill management program and pollution prevention initiatives, extensive training in proactive safety measures and overall demonstration of corporate and environmental stewardship.

Measuring Success

Although his net worth is well into the millions, Sheffield measures success not in dollars and cents. Rather, he prefers the sense of pride he feels when reflecting on the company he’s built and the jobs he’s provided to thousands of Pioneer employees.

Sheffield’s greatest personal accomplishment: “Creating a great company where 4,000 employees really think it’s a fun place to work,” the CEO says.

On a larger scale, Sheffield says his impact on the country’s oil supply, namely finding and participating in one of the world’s largest oil fields, the Permian Basin, gives him personal fulfillment.

“Career wise, [my greatest accomplishment] is that we’ve been the best S&P 500 energy company stock performer over the last five years,” Sheffield says. Pioneer’s stock is also ranked as the 49th top performing stock overall on the S&P 500.

Scott Sheffield Pioneer Natural Resources ForbesSheffield and wife Kimberley reside in Irving. They have five children — Roseanne, Bryan, Kit, Bonnie and Cassandra. Bryan has followed in the family business, founding Parsley Energy in 2008.

In his free time, Sheffield enjoys playing tennis and skiing, a hobby he picked up during his time in Iran.

He is also active in several industry groups and organizations, including the National Petroleum Council, America’s Natural Gas Alliance and The University of Texas’ Cockrell School of Engineering advisory board, and serves as a board member of Southern Methodist University’s Maguire Energy Institute.

In 2012, Sheffield was honored with the prestigious Top Hand Award by the Permian Basin Petroleum Association and was inducted into the Permian Basin Petroleum Museum Hall of Fame the following year.

He is also the recipient of the Texas Oil and Gas Association’s 2014 Distinguished Service Award; the 2012, 2013, and 2014 Texas Top Producers Award in the Best CEO (large company) category from the Texas Independent Producers and Royalty Owners and Texas Monthly; SMU’s 2013 L. Frank Pitts Energy Leadership Award; the 2012 National Multiple Sclerosis Society’s Hope Award; and the 2012 Henry Cohn Humanitarian Award.

Even with countless awards and honors to his name, Scott Sheffield remains humble and dedicated to his work. Leading the energy industry in myriad ways and with constant concern for his employees, the community and the environment, this trailblazing executive continues to make Pioneer Natural Resources a wonderful place to work in Texas and a top-performing company in the energy industry.

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Pioneer Natural Resources is a large independent oil and natural gas company that is focused on helping meet the world’s energy needs. To learn more, visit the company online at www.pxd.com.

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