EXHIBIT 99.1
NEWS RELEASE
Company Contacts:
Investors: Frank Hopkins or Chris Paulsen
Media and Public Affairs: Susan Spratlen
(972) 444-9001
Pioneer Receives Proceeds of $300 Million from
Third Volumetric Production Payment Transaction
Dallas, Texas, April 18, 2005 -- Pioneer Natural Resources Company (NYSE:PXD)
today announced that it has closed a third volumetric production payment (VPP)
transaction under which it sold 7.3 million barrels oil equivalent (BOE) of
proved reserves, or less than one percent of the Company's total proved
reserves, for proceeds of $300 million. The Company received over $41 per BOE at
a discount rate of 5.2%, or approximately $34 per BOE after adjustment for the
operating costs for which Pioneer maintains responsibility.
Through the VPP, Pioneer sold a limited term overriding royalty interest in a
portion of its Spraberry oil and gas field. The oil sold through the VPP is for
a 5-year term beginning January 1, 2006, while the gas sold is for a 32-month
term beginning May 1, 2005. The production sold represents less than 20% of
Pioneer's daily production from the field during the term of the VPP and
approximately 2% of the Company's proved Spraberry reserves. The schedule of
production volumes sold and related deferred revenue amortization by year is as
follows:
Deferred Revenue
Oil Production Gas Production Total Production Amortization
Year (million barrels) (billion cubic feet) (million BOE) (millions)
---- ----------------- -------------------- ---------------- ----------------
2005 - 1.6 0.3 $ 10
2006 1.4 2.3 1.8 $ 73
2007 1.3 2.1 1.7 $ 68
2008 1.2 - 1.2 $ 52
2009 1.2 - 1.2 $ 50
2010 1.1 - 1.1 $ 47
--- --- --- ----
Total 6.2 6.0 7.3 $ 300
Scott D. Sheffield, Chairman and CEO, stated, "The VPP allows us to unlock the
value of our long-lived assets at today's high oil and gas prices. The VPP
proceeds, coupled with the strong free cash flow we expect to generate this
year, will enhance our financial flexibility to develop future exploration
successes, secure accretive, bolt-on acquisitions, support share repurchases and
potentially increase future dividends."
Barclays Capital, the investment banking division of Barclays Bank PLC, has
arranged or provided the capital to the purchaser of the VPP.
The VPP is a particularly effective monetization strategy for Pioneer's
longer-lived asset base due to the predictability of the production stream and
related operating costs. The VPP transaction allows the Company to accelerate
this revenue stream at a low discount rate, while eliminating commodity price
and interest rate risk. Pioneer also keeps the oil and gas reserves and
production stream beyond the limited term of the VPP and retains the upside of
future development drilling.
For reporting purposes, Pioneer's production and reserves will be reduced by the
oil and gas volumes sold via the VPP, and the proceeds will be reported as
Deferred Revenue on the balance sheet. Over the term of the VPP, the Deferred
Revenue balance will be amortized and reported as noncash oil and gas revenues,
thereby causing oil and gas revenues per BOE to rise as a result of the VPP
volumes not being reflected in production. Because Pioneer retains all operating
costs and the depreciation, depletion and amortization costs related to the oil
and gas production sold, these costs, when calculated on a per BOE basis, will
also increase, recognizing that the VPP volumes are not included in production
or proved reserves. Interest expense will decrease as a result of the proceeds
being applied to outstanding debt.
The VPP proceeds are not immediately taxable and will be included in taxable
income over the term of the VPP.
In January of this year, Pioneer announced the closing of its first two VPPs
with proceeds totaling $593 million. These VPPs included oil reserves from the
Spraberry field and gas reserves from the Hugoton field.
Pioneer is a large independent oil and gas exploration and production company
with operations in the United States, Argentina, Canada, Equatorial Guinea,
Nigeria, South Africa and Tunisia. Pioneer's headquarters are in Dallas. For
more information, visit Pioneer's website at www.pioneernrc.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 are subject to a number
of risks and uncertainties that may cause Pioneer's actual results in future
periods to differ materially from the forward-looking statements. These risks
and uncertainties include, among other things, volatility of oil and gas prices,
product supply and demand, competition, government regulation or action,
international operations and associated international political and economic
instability, litigation, the costs and results of drilling and operations,
Pioneer's ability to replace reserves, implement its business plans, or complete
its development projects as scheduled, access to and cost of capital,
uncertainties about estimates of reserves, quality of technical data,
environmental and weather risks, acts of war or terrorism. These and other risks
are described in Pioneer's 10-K and 10-Q Reports and other filings with the
Securities and Exchange Commission.