1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 29, 1999
(FEBRUARY 15, 1999)
PIONEER NATURAL RESOURCES COMPANY
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 1-13245 75-2702753
- ------------------------------- ------------ ----------------------
(State or other jurisdiction of Registration (I.R.S. Employer
incorporation or organization) File Number Identification Number)
1400 WILLIAMS SQUARE WEST, 5205 N. O'CONNOR BLVD., IRVING, TEXAS 75039
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(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (972) 444-9001
Not applicable
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(Former name, former address and former fiscal year, if changed since
last report)
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PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS
Page
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Item 2. Acquisition or Disposition of Assets....................................................... 3
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Introductory Statement................................................................ 4
Unaudited Pro Forma Condensed Financial Statements:
Unaudited Pro Forma Condensed Balance Sheet for Pioneer Natural Resources
Company as of March 31, 1999....................................................... 5
Unaudited Pro Forma Condensed Statement of Operations for Pioneer Natural
Resources Company for the three months ended March 31, 1999........................ 6
Unaudited Pro Forma Condensed Statement of Operations for Pioneer Natural
Resources Company for the year ended December 31, 1998............................. 7
Notes to Unaudited Pro Forma Condensed Financial Statements.......................... 8
(c) Exhibits............................................................................... 12
Signatures ........................................................................................ 13
Exhibit Index....................................................................................... 14
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PIONEER NATURAL RESOURCES COMPANY
The information in this document includes forward-looking statements that are
based on assumptions that in the future may prove not to have been accurate.
Those statements, and Pioneer Natural Resources Company's business and prospects
are subject to a number of risks including the volatility of oil and gas prices,
environmental risks, operating hazards and risks, risks associated with natural
gas processing plants, risks related to exploration and development drilling,
uncertainties about estimates of reserves, competition, government regulation,
and the ability of Pioneer Natural Resources Company to implement its business
strategy. These and other risks are described in the 1998 Annual Report on Form
10-K for Pioneer Natural Resources Company which is available from the United
States Securities and Exchange Commission.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
PRIZE DISPOSITION.
On June 29, 1999, the Company completed a sale of certain United States
oil and gas producing properties, gas plants and other assets to Prize Energy
Corp. ("Prize"), a private company based in Grapevine, Texas. The oil and gas
producing assets sold to Prize include properties located in the Gulf Coast, Mid
Continent and Permian Basin areas of the Company's United States region.
At December 31, 1998, the Company's interest in these properties
contained 63 million BOE of proved reserves (consisting of 26 million Bbls of
oil and NGL's, and 224 Bcf of gas), representing $199 million of SEC 10 value.
During 1998, daily production from these properties averaged 7,390 Bbls of oil,
1,904 Bbls of NGL's and 68,884 Mcf of gas.
In accordance with the terms of the purchase and sale agreement, the
Company received gross sales proceeds of $245 million, comprised of $215 million
of cash and 2,307.693 shares of six percent convertible preferred stock having a
liquidation preference and fair value of $30 million ($13,000 per share). The
convertible preferred stock provides for a six percent annual dividend payment,
payable quarterly in additional equity shares of Prize through 2001. Subsequent
to 2001, Prize has the option of paying the quarterly dividends on the
convertible preferred stock in equity shares or cash. Each share of the six
percent convertible preferred stock may, at the option of the Company, be
converted into one share of Prize common stock, subject to certain anti-dilution
adjustments. The cash sales proceeds, after payment of certain costs and
expenses, were used to reduce the Company's outstanding bank indebtedness.
The directors of Prize include Mr. Philip P. Smith, the Chief Executive
Officer of Prize; Mr. Kenneth A. Hersh; and, two directors to be elected by
Pioneer under the terms of the convertible preferred stock received in this
transaction. Messers. Smith and Hersh were members of the Board of Directors of
the Company and have resigned their positions with the Company. Additionally,
Mr. Lon C. Kile resigned his position as Executive Vice President of the Company
to accept the position of President and Chief Operating Officer of Prize. The
sale of assets to Prize was the result of an auction process that, upon receipt
of Prize's initial offer, was placed under the supervision of a special
independent committee (comprised of outside directors unrelated to Prize) of the
Company's Board of Directors. The independent Committee reviewed and considered
all offers presented to the Company for the purchase of the assets acquired by
Prize.
OTHER DISPOSITIONS.
During the first quarter of 1999, the Company completed the sale of a
gas plant and certain oil and gas properties for gross cash proceeds of $5
million.
During June 1999, the Company also completed the sales of certain oil
and gas properties for gross cash proceeds of $40 million, subject to normal
purchase price adjustments. Such proceeds include $31 million received under
seven separate purchase and sale agreements that divest non-strategic Canadian
oil and gas properties. The Company received the remaining $9 million of
proceeds from the sale of its interest in a West Texas oil and gas field. The
net cash proceeds from these dispositions were used to reduce the Company's
outstanding bank indebtedness.
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PIONEER NATURAL RESOURCES COMPANY
Additionally, during June, the Company executed definitive agreements
for the sale of certain natural gas properties in South Texas to CNG Producing
Company for $62 million of gross proceeds and certain other non-strategic
Canadian oil and gas properties for estimated proceeds of approximately $34
million. While these pending dispositions are expected to be completed during
the third quarter of 1999, there can be no assurances that the buyers will have
the financial wherewithal to complete the transactions.
At December 31, 1998, the Company's interest in these properties
contained 21 million BOE of proved reserves (consisting of 10 million Bbls of
oil and NGL's, and 65 Bcf of gas), representing $76 million of SEC 10 value.
During 1998, daily production from these properties averaged 8,110 Bbls of oil,
211 Bbls of NGL's and 28,732 Mcf of gas. The Canadian oil and gas properties
being divested by the Company represent approximately 57 percent of the
Company's Canadian production during 1998 and 26 percent of the Company's
Canadian proved oil and gas reserves as of December 31, 1998. The dispositions
of the Canadian and United States oil and gas properties were executed through
competitive bid processes with unrelated third party purchasers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
INTRODUCTORY STATEMENT.
The unaudited pro forma condensed financial statements of the Company
have been prepared to give effect to (i) the sale of certain non-strategic oil
and gas properties, gas plants, and other assets to Prize Energy Corp. in June
1999 and (ii) the aggregate effect of both completed and pending sales
(evidenced by signed purchase and sale agreements) of certain non-strategic
Canadian and United States oil and gas properties, gas plants and related assets
during the period from February 15, 1999 to June 30, 1999 (items (i) and (ii)
collectively the "1999 Dispositions").
The unaudited pro forma condensed balance sheet and statements of
operations have been prepared to give effect to the 1999 Dispositions, as
described below:
o The unaudited pro forma condensed balance sheet of Pioneer as of March
31, 1999 has been prepared to give effect to the 1999 Dispositions as if
they were completed on March 31, 1999.
o The unaudited pro forma condensed statements of operations of Pioneer for
the three months ended March 31, 1999 and for the year ended December 31,
1998 have been prepared to give effect to the 1999 Dispositions as if
they had occurred on January 1, 1998.
The unaudited pro forma condensed financial statements included herein
are not necessarily indicative of the results that might have occurred had the
transactions taken place on the dates that are assumed for the pro forma
presentations and are not intended to be a projection of future results. Future
results may vary significantly from the results reflected in the accompanying
unaudited pro forma condensed financial statements because of normal production
declines, changes in product prices, future acquisitions and divestitures,
future development and exploration activities, and other factors.
The following unaudited pro forma condensed financial statements should
be read in conjunction with the Consolidated Financial Statements (and the
related notes) of Pioneer included in the Annual Report on Form 10-K for the
year ended December 31, 1998 and the Quarterly Report on Form 10-Q for the three
months ended March 31, 1999.
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PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
(IN THOUSANDS)
ASSETS
THE PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS PIONEER
------------- ------------ -------------
Current assets:
Cash and cash equivalents......................... $ 33,563 $ $ 33,563
Accounts receivable............................... 109,021 109,021
Other current assets.............................. 28,696 28,696
------------- -------------
Total current assets.......................... 171,280 171,280
------------- -------------
Property, plant and equipment at cost:
Oil and gas properties, using the successful
efforts method of accounting.................... 4,002,844 (775,046)(a) 3,227,798
Accumulated depletion, depreciation and
amortization.................................... (998,541) 365,113 (a) (633,428)
------------- -------------
3,004,303 2,594,370
------------- -------------
Deferred income taxes............................... 98,200 98,200
Other assets, net................................... 143,346 22,625 (a) 165,971
------------- ------------
$ 3,417,129 $ 3,029,821
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............. $ 339,282 $(339,282)(a) $ --
Other current liabilities......................... 167,329 167,329
------------- ------------
Total current liabilities..................... 506,611 167,329
------------- ------------
Long-term debt, less current maturities............. 1,869,134 (12,006)(a) 1,857,128
Other noncurrent liabilities........................ 189,838 (1,678)(a) 188,160
Deferred income taxes............................... 64,800 64,800
Stockholders' equity:
Preferred stock................................... -- --
Common stock...................................... 1,008 1,008
Additional paid-in capital........................ 2,348,071 2,348,071
Treasury stock, at cost........................... (10,388) (10,388)
Retained deficit.................................. (1,554,943) (34,342)(a) (1,589,285)
Cumulative translation adjustment................. 2,998 2,998
------------- ------------
Total stockholders' equity.................... 786,746 752,404
Commitments and contingencies.......................
------------- ------------
$ 3,417,129 $ 3,029,821
============= ============
See accompanying notes to unaudited pro forma condensed financial statements.
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PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THE 1999 PRO FORMA PRO FORMA
COMPANY DISPOSITIONS ADJUSTMENTS PIONEER
----------- ------------ ----------- ---------
Revenues:
Oil and gas........................... $ 147,151 $ (28,696) $ 118,455
Interest and other.................... 45,973 - 45,973
Gain on disposition of
assets, net....................... 67 - 67
----------- --------- ----------
193,191 (28,696) 164,495
----------- --------- ----------
Cost and expenses:
Oil and gas production................ 47,194 (10,286) 36,908
Depletion, depreciation and
amortization........................ 69,372 (13,953) 55,419
Exploration and abandonments.......... 11,776 (298) 11,478
General and administrative............ 10,249 - 10,249
Reorganization........................ 5,529 - 5,529
Interest.............................. 42,521 - (5,589)(b) 36,932
Other................................. 8,651 - 8,651
----------- --------- ----------
195,292 (24,537) 165,166
----------- --------- ----------
Loss from continuing operations before
income taxes.......................... (2,101) (4,159) (671)
Income tax provision.................... (400) - (100)(c) (500)
----------- --------- ----------
Loss from continuing operations......... $ (2,501) $ (4,159) $ (1,171)
=========== ========= ==========
Loss from continuing operations per
common share:
Basic................................. $ (.02) $ (.01)
=========== ==========
Diluted............................... $ (.02) $ (.01)
=========== ==========
Weighted average shares outstanding.... 100,300 100,300
=========== ==========
See accompanying notes to unaudited pro forma condensed financial statements.
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PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THE 1999 PRO FORMA PRO FORMA
COMPANY DISPOSITIONS ADJUSTMENTS PIONEER
----------- ------------ ----------- ---------
Revenues:
Oil and gas.......................... $ 711,492 $ (151,134) $ 560,358
Interest and other................... 10,452 - 10,452
Loss on disposition of assets, net... (445) - (445)
----------- ---------- ----------
721,499 (151,134) 570,365
----------- ---------- ----------
Cost and expenses:
Oil and gas production............... 223,551 (51,656) 171,895
Depletion, depreciation and
amortization....................... 337,308 (72,163) 265,145
Impairment of long-lived assets...... 459,519 (33,738) 425,781
Exploration and abandonments......... 121,858 (5,824) 116,034
General and administrative........... 73,000 - 73,000
Reorganization....................... 33,199 - 33,199
Interest............................. 164,285 - (21,286)(b) 142,999
Other................................ 39,605 - 39,605
----------- ---------- ----------
1,452,325 (161,007) 1,267,658
----------- ---------- ----------
Loss from continuing operations before
income taxes....................... (730,826) 9,873 (697,293)
Income tax provision................... (15,600) - (18,700)(c) (34,300)
----------- ---------- ----------
Loss from continuing operations ....... $ (746,426) 9,873 $ (731,593)
=========== ========== ==========
Loss from continuing operations per
common share:
Basic.............................. $ (7.46) $ (7.31)
=========== ==========
Diluted............................ $ (7.46) $ (7.31)
=========== ==========
Weighted average shares outstanding.... 100,055 100,055
=========== ==========
See accompanying notes to unaudited pro forma condensed financial statements.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
MARCH 31, 1999 AND DECEMBER 31, 1998
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed financial information of Pioneer
Natural Resources Company (the "Company") has been prepared to give effect to
(i) the sale of certain non-strategic oil and gas properties, gas plants and
other assets to Prize Energy Corp. ("Prize") in June 1999 and (ii) the aggregate
effect of both completed and pending sales (evidenced by signed purchase and
sale agreements) of certain non-strategic Canadian and United States oil and gas
properties, gas plants and related assets during the period from February 15,
1999 to June 30, 1999 (items (i) and (ii) collectively, the "1999
Dispositions"). The unaudited pro forma condensed balance sheet is presented as
if the 1999 Dispositions occurred on March 31, 1999 and the unaudited pro forma
condensed statements of operations are presented as if the 1999 Dispositions
occurred on January 1, 1998.
The following is a description of the individual columns included in
these unaudited pro forma condensed financial statements:
The Company - Represents the consolidated condensed balance sheet of
Pioneer Natural Resources Company as of March 31, 1999 and the consolidated
condensed statements of operations of Pioneer Natural Resources Company for
the three months ended March 31, 1999 and the year ended December 31, 1998.
1999 Dispositions - Reflects the results of operations (before income
taxes) for the three months ended March 31, 1999 and the year ended
December 31, 1998 from the oil and gas properties, gas plants and related
assets prior to their sale in 1999.
NOTE 2. PRO FORMA ADJUSTMENTS
Following are descriptions of the pro forma adjustments used in the
preparation of the accompanying unaudited pro forma condensed financial
statements:
(a) Pro forma adjustment to recognize the 1999 Dispositions and
the use of the cash proceeds, as if the transactions had
occurred on March 31, 1999. Included in this adjustment are
post-March 31, 1999 total proceeds of $381 million, comprised
of $351 million of cash and a $30 million investment in Prize.
(b) Respective pro forma adjustments to reduce interest expense
for the quarter ended March 31, 1999 and for the year ended
December 31, 1998 to reflect the use of $356 million of
cash proceeds from divestments to reduce outstanding bank
indebtedness. The adjustments for the quarter ended March 31,
1999 and the year ended December 31, 1998 are based on
historic average annual interest rates of 6.27 percent and
5.97 percent, respectively, incurred on bank indebtedness.
(c) Pro forma adjustments to the Company's Canadian income tax
provisions for the three months ended March 31, 1999 and the
year ended December 31, 1998. These adjustments are based on
an effective Canadian income tax rate of 43.7 percent. Due to
uncertainties regarding the recoverability of the Company's
United States net operating loss and tax credit carryovers,
neither income tax provisions nor benefits have been
recognized in the pro forma adjustments associated with pro
forma adjustments to pre-tax United States earnings.
NOTE 3. OIL AND GAS RESERVE DATA
The following unaudited pro forma supplemental information regarding
the oil and gas activities of the Company is presented pursuant to the
disclosure requirements promulgated by the Securities and Exchange Commission
and Statement of Financial Accounting Standards No. 69, "Disclosures About Oil
and Gas Producing Activities". The pro forma combined reserve information is
presented as if the 1999 Dispositions had occurred on January 1, 1998.
Information for oil and NGL's are presented in barrels (Bbls) and for gas in
thousands of cubic feet (Mcf).
The Company emphasizes that reserve estimates are inherently imprecise
and subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available; such changes could
be significant.
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Quantities of oil and gas reserves
Set forth below is a pro forma summary of the changes in the net
quantities of oil, NGL and natural gas reserves for the year ended December 31,
1998.
Oil
& NGLs Gas
(MBbls) (MMcf) MBOE
-------- --------- -------
TOTAL PROVED RESERVES:
UNITED STATES
Balance, January 1.................... 288,146 1,446,523 529,234
Revisions of previous estimates....... (23,641) (54,849) (32,784)
Purchases of minerals in place........ -- -- --
New discoveries and extensions........ 183 3,438 756
Production............................ (21,823) (102,111) (38,842)
Sales of minerals-in-place............ (323) (7,070) (1,501)
-------- --------- -------
Balance, December 31.................. 242,542 1,285,931 456,863
CANADA
Balance, January 1.................... 3,783 167,558 31,709
Revisions of previous estimates....... 249 65,662 11,193
Purchases of minerals in place........ 2 -- 2
New discoveries and extensions........ 261 5,951 1,253
Production............................ (670) (13,542) (2,927)
Sales of minerals-in-place............ (111) (5,465) (1,022)
-------- --------- -------
Balance, December 31.................. 3,514 220,164 40,208
ARGENTINA
Balance, January 1.................... 31,612 340,392 88,344
Revisions of previous estimates....... (7,615) 76,843 5,192
Purchases of minerals in place........ -- -- --
New discoveries and extensions........ 3,522 37,900 9,839
Production............................ (3,300) (26,801) (7,767)
Sales of minerals-in-place............ -- -- --
-------- --------- -------
Balance, December 31.................. 24,219 428,334 95,608
TOTAL
Balance, January 1.................... 323,541 1,954,473 649,287
Revisions of previous estimates....... (31,007) 87,656 (16,399)
Purchases of minerals in place........ 2 -- 2
New discoveries and extensions........ 3,966 47,289 11,848
Production............................ (25,793) (142,454) (49,536)
Sales of minerals-in-place............ (434) (12,535) (2,523)
-------- --------- -------
Balance, December 31.................. 270,275 1,934,429 592,679
======== ========= =======
PROVED DEVELOPED RESERVES:
January 1........................ 288,147 1,521,925 541,801
======== ========= =======
December 31...................... 216,409 1,200,300 416,459
======== ========= =======
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Standardized measure of discounted future net cash flows
The standardized measure of discounted future net cash flow is computed
by applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of oil and gas reserves less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves
discounted using a rate of 10 percent per year to reflect the estimated timing
of the future cash flows. Future income taxes are calculated by comparing
discounted future cash flows to the tax basis of oil and gas properties plus
available carryforwards and credits and applying the current tax rate to the
difference.
UNITED STATES (in thousands)
Oil and gas producing activities:
Future cash inflows........................................ $ 4,352,050
Future production costs.................................... (2,011,439)
Future development costs................................... (192,273)
Future income tax expense.................................. --
-----------
2,148,338
10% annual discount factor................................. (1,148,881)
-----------
Standardized measure of discounted future net cash flows... $ 999,457
===========
ARGENTINA
Oil and gas producing activities:
Future cash inflows........................................ $ 686,911
Future production costs.................................... (196,446)
Future development costs................................... (45,710)
Future income tax expense.................................. --
-----------
444,755
10% annual discount factor................................. (211,956)
-----------
Standardized measure of discounted future net cash flows... $ 232,799
===========
CANADA
Oil and gas producing activities:
Future cash inflows........................................ $ 383,118
Future production costs.................................... (87,734)
Future development costs................................... (46,860)
Future income tax expense.................................. (30,566)
-----------
217,958
10% annual discount factor................................. (75,947)
-----------
Standardized measure of discounted future net cash flows... $ 142,011
===========
TOTAL
Oil and gas producing activities:
Future cash inflows........................................ $ 5,422,079
Future production costs.................................... (2,295,619)
Future development costs................................... (284,843)
Future income tax expense.................................. (30,566)
-----------
2,811,051
10% annual discount factor................................. (1,436,784)
-----------
Standardized measure of discounted future net cash flows... $ 1,374,267
===========
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Changes relating to the standardized measure of discounted future net cash flows
The principal sources of the change in the pro forma combined
standardized measure of discounted future net cash flows for the year ended
December 31, 1998 are as follows (in thousands):
Oil, NGL and gas sales, net of production costs $ (389,382)
Net changes in prices and production costs (1,093,101)
Extension and discoveries 44,018
Sales of minerals-in-place (12,748)
Purchases of minerals-in-place 3
Revisions of estimated future development costs (14,780)
Revisions of previous quantity estimates (17,426)
Accretion of discount 251,217
Changes in production rates, timing and other 94,296
-----------
Change in present value of future net revenues (1,137,903)
Net change in present value of future income taxes 23,908
-----------
(1,113,995)
Balance, beginning of year 2,488,262
-----------
Balance, end of year $ 1,374,267
===========
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PIONEER NATURAL RESOURCES COMPANY
(d) EXHIBITS
10.1 Purchase and Sale Agreement, dated May 16, 1999, by and between
Pioneer Natural Resources USA, Inc. and Pioneer Resources
Producing, L.P. as Seller and Prize Energy Corp. as Purchaser
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PIONEER NATURAL RESOURCES COMPANY
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duty caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER NATURAL RESOURCES COMPANY
Date: July 13, 1999 By: /s/ RICH DEALY
------------------------------------
Rich Dealy
Vice President and Chief Accounting
Officer
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PIONEER NATURAL RESOURCES COMPANY
INDEX TO EXHIBITS
Page Number
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10.1 Purchase and Sale Agreement, dated May 16, 1999, by and between
Pioneer Natural Resources USA, Inc. and Pioneer Resources
Producing, L.P. as Seller and Prize Energy Corp. as Purchaser 15
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