Pioneer and Parsley are among the largest producers in the Permian Basin.
Photo: nick oxford/ReutersTwo leading shale producers in America’s hottest oilfield are formally asking Texas regulators to consider curtailing crude output in the state as the industry grapples with collapsing demand and plunging prices.
Pioneer Natural Resources Co. and Parsley Energy Inc. sent a letter Monday requesting that the Railroad Commission of Texas hold a hearing on the idea of curbing crude production, something the state hasn’t done since the 1970s. The two are among the largest producers in the Permian Basin of Texas and New Mexico.
“We’re already being prorated by pipelines, so we want fairness in the state of Texas,” Pioneer Chief Executive Scott Sheffield said in an interview.
Matt Gallagher, Parsley’s chief executive, warned that without additional regulation, many producers likely would have to shut down their wells soon.
“If we keep producing until we hit a wall, with no proactive decisions, we’re going to see single-digit prices across the country,” Mr. Gallagher said, adding that an aggressive response by U.S. drillers to curtail production could encourage rivals Saudi Arabia and Russia to do the same.
The Wall Street Journal first reported March 19 that Texas regulators were considering limiting production in response to producer requests. It isn’t clear whether the three-member commission is likely to do so, however. Just one of the commissioners, Ryan Sitton, has publicly supported the idea.
Mr. Sitton tweeted Monday that the commission should hold a hearing on the matter as soon as possible. “You either proactively manage or you simply reactively manage,” he said in an interview.
A spokesman for Wayne Christian, the agency’s chairman, said stabilizing the oil market is essential for the Texas economy and national security.
‘Refiners are cutting back their runs and they don’t need any more product,’ said Pioneer Chief Executive Scott Sheffield.
Photo: Aaron M. Sprecher/Bloomberg News“Chairman Christian looks forward to continue discussing stabilization efforts, including tools like proration, to ensure we are doing everything we can to get Texans back to work,” he said, adding that the state shouldn’t act unilaterally.
Chevron Corp. and Exxon Mobil Corp., two of the largest producers in the Permian, are opposed to any mandated cuts to oil production, according to people familiar with the matter.
Mr. Sheffield said that several of the companies that buy Pioneer’s oil called late Friday requesting that the company reduce output.
“The message was: Everybody needs to slow down and reduce their production. And everybody needs to stop completing wells,” Mr. Sheffield said. “That’s primarily due to the fact that the refiners are cutting back their runs and they don’t need any more product.”
He said he would recommend that the state curtail oil output by 20% until demand rebounds, though that might not be enough.
U.S. benchmark oil prices fell Monday to around $20 a barrel, their lowest level in nearly two decades.
—Collin Eaton contributed to this article.
Write to Rebecca Elliott at rebecca.elliott@wsj.com
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