Pioneer Southwest Energy Partners L.P. Reports
Third Quarter 2010 Financial and Operating Results
Dallas, Texas, October 26, 2010 -- Pioneer Southwest Energy Partners L.P. (“Pioneer Southwest” or “the Partnership”) (NYSE:PSE) today announced financial and operating results for the quarter ended September 30, 2010.
Net income for the third quarter was $6 million, or $.20 per common unit (see attached schedule for a description of the earnings per unit calculation). Net income included unrealized mark-to-market derivative losses of $17 million, or $0.51 per common unit. Without the effect of this item, adjusted income for the third quarter would have been $23 million, or $0.71 per common unit. Cash flow from operations for the period was $25 million.
Oil and gas sales for the third quarter averaged 6,631 barrels oil equivalent per day (BOEPD). Third quarter oil sales averaged 3,894 barrels per day (BPD), natural gas liquid (NGL) sales averaged 1,722 BPD and gas sales averaged 6 million cubic feet per day.
The third quarter average reported price for oil was $100.02 per barrel. The average reported price for NGLs was $41.25 per barrel, and the average reported price for gas was $4.53 per thousand cubic feet.
The Partnership has a large inventory of oil drilling locations in the Spraberry field, with approximately 140 40-acre locations and 1,200 20-acre locations. It continues to operate two drilling rigs. Twenty-one wells have been drilled and placed on production through the end of the third quarter. All wells are being completed in the deeper Wolfcamp formation and organic rich shale/silt intervals. Production rates from the new wells have exceeded expectations and drilling costs have been on target, averaging $1.15 million per well (gross).
The Partnership has credit facility availability of $180 million, which is expected to be adequate to fund future growth through drilling and acquisitions.
Pioneer Southwest previously announced a cash distribution of $.50 per outstanding common unit for the quarter ended September 30, 2010, or $2.00 per outstanding common unit on an annual basis. The distribution is payable November 12, 2010, to unitholders of record at the close of business on November 4, 2010. Distribution sustainability is supported by the Partnership’s low-decline rate Spraberry properties, its large drilling inventory of 40-acre and 20-acre locations and its strong derivative position through 2013. Of the Partnership’s forecasted production, derivative contracts cover approximately 80% for the remainder of 2010, 70% in 2011, 80% in 2012 and 60% in 2013.
Fourth Quarter 2010 Financial Outlook
The following paragraphs provide the Partnership’s fourth quarter of 2010 outlook for certain operating and financial items.
Production is forecasted to average 6,400 BOEPD to 6,800 BOEPD. Production costs (including production and ad valorem taxes) are expected to average $20.00 to $23.00 per barrel oil equivalent (BOE) based on current NYMEX strip prices for oil, NGLs and gas. Depreciation, depletion and amortization expense is expected to average $5.00 to $6.00 per BOE.
General and administrative expense is expected to be $1 million to $2 million. Interest expense is expected to be $400 thousand to $600 thousand. Accretion of discount on asset retirement obligations is forecasted to be nominal.
Pioneer Southwest’s cash taxes and effective income tax rate are expected to be approximately 1% of earnings before income taxes as a result of Pioneer Southwest being subject to the Texas Margin tax.
Earnings Conference Call
On Wednesday, October 27, 2010, at 11:00 a.m. Central Time, Pioneer Southwest will discuss its financial and operating results with an accompanying presentation. Instructions for listening to the call and viewing the accompanying presentation are shown below.
Internet: www.pioneersouthwest.com
Select “Investors,” then “Earnings Calls & Webcasts” to listen to the discussion and view the presentation.
Telephone: Dial (888) 298-3490 confirmation code: 4128149 five minutes before the call to listen to the discussion. View the presentation via Pioneer Southwest’s internet address above.
A replay of the webcast will be archived on Pioneer Southwest’s website. A telephone replay will be available through November 17 by dialing (888) 203-1112 confirmation code: 4128149.
Pioneer Southwest is a Delaware limited partnership, headquartered in Dallas, Texas, with current production and drilling operations in the Spraberry field in West Texas. For more information, visit www.pioneersouthwest.com.
Except for historical information contained herein, the statements in this News Release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and the business prospects of Pioneer Southwest are subject to a number of risks and uncertainties that may cause Pioneer Southwest’s actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, volatility of commodity prices, the effectiveness of Pioneer Southwest’s commodity price derivative strategy, reliance on Pioneer Natural Resources Company and its subsidiaries to manage Pioneer Southwest’s business and identify and evaluate drilling opportunities and acquisitions, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services and personnel required to complete Pioneer Southwest’s operating activities, access to and availability of transportation, processing and refining facilities, Pioneer Southwest’s ability to replace reserves, including through acquisitions, and implement its business plans or complete its development activities as scheduled, uncertainties associated with acquisitions, access to and cost of capital, the financial strength of counterparties to Pioneer Southwest’s credit facility and deriva tive contracts and the purchasers of Pioneer Southwest’s oil, NGL and gas production, uncertainties about estimates of reserves and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data and environmental and weather risks, including the possible impacts of climate change. These and other risks are described in Pioneer Southwest’s 10-K and 10-Q Reports and other filings with the Securities and Exchange Commission. In addition, Pioneer Southwest may be subject to currently unforeseen risks that may have a materially adverse impact on it. Pioneer Southwest undertakes no duty to publicly update these statements except as required by law.
Pioneer Southwest Energy Partners L.P. Contacts:
Investors
Frank Hopkins – 972-969-4065
Nolan Badders – 972-969-3955
Brian Hansen – 972-969-4017
Media and Public Affairs
Susan Spratlen – 972-969-4018
Suzanne Hicks – 972-969-4020
