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Update September 22. At the Johnson Rice energy conference yesterday, Pioneer Natural Resources (PXD) announced that it plans to add 5 new horizontal drilling rigs to the 12 already at work on its leased acreage in the northern Spraberry/Wolfcamp area of the Permian Basin in Texas.

The company will add the first rig in September, followed by 2 rigs in October, and another two rigs in November.

Now here’s where Pioneer’s plans intersect with the persistent glut on world oil markets. The company projects that the additional 5 rigs will increase production for Pioneer by 13% to 17%.

Why would Pioneeer be interested in adding production during an oil glut? Because the Spraberry/Wolfcamp shale geology is so productive, among the most productive of U.S. oil shale geologies, that Pioneer can make a very substantial profit with oil at $45 a barrel (as currently) or even lower. The company calculates break-even costs for this shale geology at $39 a barrel with current technology. (The company calculates that the U.S. oil shale industry as a whole needs an oil price of $55 to $60 to keep production steady.)

Pioneer puts production costs at Spraberry/Wolfcamp at just $8.36 a barrel in the second quarter of 2016. So the bulk of that $39 a barrel consists of the capital costs of drilling wells. That cost, though, is falling fast in the Spraberry/Wolfcamp geology. Credit Suisse calculates that the drilling and completion cost per lateral foot in the northern Spraberry area has fallen 35% from the fourth quarter of 2014 to the second quarter of 2016, and with the company making the transition to Version 3 wells (and gaining the benefit of lower pricing by rig operators) that rate of decline in drilling costs is likely to continue for Pioneer in this geology.

Fortunately for those cost projections, Pioneer is the largest operator by acreage in the Spraberry/Wolfcamp geology with 730,000 net acres. Shales in the formation run 3,500 to 4,000 feet thick (compared to the very productive Eagle Ford at 300 feet thick.) Projections for the Spraberry/Wolfcamp geology put recoverable reserves at 50 billion barrels of oil equivalent versus the 27 billion in the Eagle Ford and the 13 billion in the Bakken shale regions. And it’s probable that estimates for recoverable reserves will continue to increase.

Shares of Pioneer Natural Resources are up 45.49% in 2016 through the September 21 close at $182.41. Pioneer Natural Resources is up 87.12% since I added it to my long-term Jubak 50 stocks portfolio on January 13, 2012.