UPDATE 3-Pioneer's CEO says consolidation needed to quell U.S. shale production

(Adds analyst comments)

By Liz Hampton and Jennifer Hiller

May 5 (Reuters) - The shale industry needs more consolidation to curb volume increases from smaller producers, Scott Sheffield, chief executive officer of top U.S. shale producer Pioneer Natural Resources, said on Wednesday.

Privately held firms have been adding rigs and increasing oil and gas production in the Permian Basin of west Texas and New Mexico this year, potentially undermining the efforts of publicly traded companies to focus on shareholder returns over volume growth when the market is well supplied.

"I hope other privates are taken out that are growing too much," Sheffield told investors on an earnings call. He was responding to a question on whether Pioneer's deal-making contradicted the company's philosophy of not adding to global oil supply.

U.S. oil prices have climbed to almost $66 a barrel, from under $20 a year ago, helped by coronavirus vaccine roll-outs and output cuts from the Organization of the Petroleum Exporting Countries (OPEC).

Sheffield said an uptick in drilling by private firms is not yet at the point when it could undo the impact of OPEC supply curbs.

Shares of Pioneer were up 3% by midday to $163.32.

Pioneer aims to expand its output about 5% annually, adding one or two drilling rigs. Some publicly traded peers, such as Diamondback Energy, have said they plan to hold production flat through 2021.

Pioneer this week closed a $6.4 billion acquisition of privately held DoublePoint Energy, a few months after acquiring rival Parsley Energy for $4.5 billion.

Analyst Paul Sankey in a report Wednesday said attitudes towards the DoublePoint deal among his clients had been negative because Pioneer previously had implied no additional acreage was needed after its Parsley Energy purchase.

An uptick in offerings this year in the Permian and other shale fields is "mainly a result of higher crude prices" making more acreage potentially profitable to drill, said Andrew Dittmar, M&A analyst at Enverus. Sale processes are easier to run as U.S. COVID-19 cases subside, he added.

Deals "should serve to further consolidate the Permian and therefore dampen production growth, hopefully with a bullish outcome for oil prices," Dittmar said. (Reporting by Liz Hampton in Denver and Jennifer Hiller in Houston; editing by Barbara Lewis, Kirsten Donovan and Lincoln Feast.)