EXHIBIT 99.1
NEWS RELEASE
Company Contacts:
Investors: Frank Hopkins or Chris Paulsen
Media and Public Affairs: Susan Spratlen
(972) 444-9001
Pioneer Announces 2006 Capital Budget and Production Growth
Program and Provides Financial Outlook
Dallas, Texas, March 8, 2006 -- Pioneer Natural Resources Company (NYSE:PXD)
announced today that its Board of Directors has approved a 2006 capital budget
of $1.3 billion, an increase of approximately $200 million from comparable 2005
capital spending excluding acquisitions.
The 2006 capital budget reflects Pioneer's strategic initiatives announced
during 2005 to increase its focus on North American onshore development
activities and lower-risk resource plays. The capital budget is allocated as
follows:
o 70% for development activities
- 53% for low-risk development drilling in onshore North American
core assets
- 17% to develop new projects discovered or sanctioned in 2005
o 20% to test attractive resource plays onshore North America and Tunisia
o 10% for high-impact exploration in the U.S. and West Africa
Over 80% of the capital budget is directed toward onshore low-risk North
American activities ranging from development drilling in core areas to wells
testing new coalbed methane (CBM) resource projects. The reduction in
higher-risk exploration capital, from 30% in 2005 to 10% this year, reflects
Pioneer's commitment to significantly decrease its spending on higher-risk
exploration.
Pioneer is accelerating low-risk development drilling in its core areas in the
U.S. and Canada and expects to drill approximately 950 development wells
primarily in the Spraberry, Raton, Pawnee and Horseshoe Canyon fields. The
Company will be active in the development of two larger-scale projects, the
Oooguruk field on the North Slope of Alaska and a gas development project off
the coast of South Africa. The capital budget also includes investments to
initiate development of the Clipper discovery in the deepwater Gulf of Mexico.
To expand and potentially establish new onshore North American resource plays,
Pioneer also plans to drill approximately 110 lower-risk exploration and
appraisal wells. In the U.S., the Company will continue to evaluate the
potential to expand its South Texas portfolio testing prospects that are
analogous to its Pawnee field in the Edwards Reef trend. CBM pilots are planned
in three Rocky Mountain basins and in southern Canada. Pioneer also plans to
expand its Silurian resource drilling program onshore Tunisia.
The 2006 high-impact exploration budget includes plans to drill 3 wells in
Alaska, 2 wells in West Africa, 1 to 2 wells in Mississippi and 2 wells to test
amplitudes related to the Clipper discovery.
Pioneer intends to fund its 2006 capital program with cash flow from operations
and a portion of the proceeds related to the divestiture of assets in the
deepwater Gulf of Mexico and Argentina. By closing these divestitures, Pioneer
is delivering the initiatives launched last year and establishing a strong
platform for growth that will improve performance and enhance shareholder value.
By focusing on the lower-risk, predictable oil and gas basins in North America
that will represent 98% of Pioneer's proved reserve base and continuing the
development of approved projects, Pioneer expects 5-year compound annual
production growth in excess of 10%. Success with emerging resource plays,
bolt-on acquisitions or high-impact exploration offers additional production
growth upside. All of these projects offer excellent returns, and the emerging
resource plays expose Pioneer to more than 1 billion barrels of oil equivalent
gross resources.
Pioneer expects to exit 2006 with average daily production of 95,000 to 100,000
barrels oil equivalent per day (BOEPD), a 10% increase from the 2005 average
daily production from comparable assets which excludes the assets being divested
as discussed above and the incremental year-on-year production sold as part of
the VPPs completed in 2005. Production growth in 2007 and 2008 is expected to
reflect continued core asset drilling and the start up of production from
development projects in South Africa and Alaska.
"I believe that this capital program and our 2006 activities will provide the
initial momentum we need to achieve our 5-year goal of delivering top-quartile
production and reserve per share growth in order to achieve top-quartile stock
price growth for our shareholders," stated Scott Sheffield, Pioneer's Chairman
and CEO.
Operations Update
Pioneer's 2006 development drilling program is well underway. Currently, Pioneer
has 18 onshore rigs running in the U.S. and 3 in Canada.
Pioneer has initiated its onshore program in South Texas and has recently
drilled two successful wells in the Edwards Reef trend testing prospects that
are analogous to Pioneer's Pawnee field. Both wells had initial production tests
in excess of 2.5 million cubic feet per day before stimulation. During 2006,
Pioneer plans to drill 10 to 15 development wells in the Pawnee field. An
additional 8 to 13 low-risk exploration wells are planned along the Edwards Reef
trend, 6 of which are expected to be completed by July.
On the North Slope of Alaska, the Company is drilling the second of a three-well
exploration campaign. The first well in the Storms prospect area was
unsuccessful. After sanctioning the Oooguruk field development in January,
Pioneer is actively progressing construction of the gravel island from which the
field will be developed in 2007 for initial production in 2008. This project is
expected to deliver gross oil reserve potential ranging from 50 to 90 million
barrels. Pioneer is the operator of the project with a 70% working interest.
In Tunisia, Pioneer has acquired the remaining equity interest and assumed
operatorship of the Jenein Nord block west of and adjacent to the Adam
Concession. In the Adam Concession, the Company has drilled 8 successful wells
with current gross production of approximately 17,000 barrels of oil per day.
Pioneer is currently acquiring additional 3-D seismic data covering acreage on
both Adam and Jenein Nord. Offshore South Africa, development drilling has begun
on the South Coast Gas project in anticipation of first gas sales during the
second half of 2007.
Financial Outlook
The following statements are estimates based on current expectations. These
forward-looking statements are subject to a number of risks and uncertainties
which may cause the Company's actual results to differ materially from the
following statements. The last paragraph of this release addresses certain of
the risks and uncertainties to which the Company is subject.
First quarter 2006 production from continuing operations is expected to average
90,000 to 95,000 BOEPD. Full year production for 2006 is expected to range from
33 to 37 million barrels oil equivalent. First quarter production costs are
expected to average $11.00 to $12.00 per barrel of oil equivalent (BOE) based on
current NYMEX strip prices for oil and gas. Production cost estimates include
lease operating expenses of $5.15 to $5.55 per BOE, ad valorem and severance
taxes of $2.90 to $3.00 per BOE, transportation and workover costs of $1.35 to
$1.65 per BOE and incremental per unit costs related to the VPPs of $1.60 to
$1.80 per BOE. Depreciation, depletion and amortization expense is expected to
average $8.75 to $9.25 per BOE.
Total exploration and abandonment expense is expected to be $50 million to $100
million and includes $25 million to $65 million for exploration wells in Alaska
and Nigeria, $10 million to $15 million to test onshore resource plays and $15
million to $20 million of related seismic and personnel costs. Approximately 45%
of the annual budget for high-impact exploration is being invested during the
first quarter. General and administrative expense is expected to be $32 million
to $35 million. Interest expense is expected to be $32 million to $35 million,
and accretion of discount on asset retirement obligations is expected to be $2
million to $3 million.
The Company's first quarter effective income tax rate is expected to range from
40% to 50% based on current capital spending plans but could increase to as high
as 80% if the Nigeria well is unsuccessful. Cash income taxes are expected to
range from $5 million to $15 million, principally related to Canadian and
Tunisian income taxes and nominal alternative minimum tax in the U.S.
The Company's oil and gas hedges are outlined on the attached schedules.
Analyst Meeting Webcast and Conference Call
Pioneer will provide a live webcast and conference call of its Analyst Meeting
on Thursday, March 9, 2006 from 7:30 a.m. until approximately 3:00 p.m. Central
time.
The meeting will include presentations by the Company's senior management team
covering the Company's financial and operating outlook for 2006 and a detailed
look at the Company's portfolio of development activities, emerging resource
plays and exploration opportunities.
The webcast may be accessed through Pioneer's website at http://www.pxd.com.
Select "Investor", then "Webcasts/Earnings Calls". To listen, dial (800)
291-9234 (confirmation code: 97603120) five minutes before the meeting.
A replay of the webcast will be archived on Pioneer's website. A telephone
replay will be available through April 9 by dialing (888) 286-8010, confirmation
code: 71500712.
Pioneer is a large independent oil and gas exploration and production company,
headquartered in Dallas, with operations in the United States, Canada and
Africa. For more information, visit Pioneer's website at www.pxd.com.
Except for historical information contained herein, the statements in this
presentation 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, the ability to obtain
environmental and other permits and the timing thereof, other government
regulation or action, third party approvals, international operations and
associated international political and economic instability, litigation, the
costs and results of drilling and operations, availability of drilling
equipment, Pioneer's ability to replace reserves, implement its business plans
(including its plans to complete certain asset divestments and to repurchase
stock), or complete its development projects as scheduled, access to and cost of
capital, uncertainties about estimates of reserves, the assumptions underlying
production forecasts, 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.
The U.S. Securities and Exchange Commission (the "SEC") permits oil and gas
companies, in their filings with the SEC, to disclose only proved reserves that
a company has demonstrated by actual production or conclusive formation tests to
be economically and legally producible under existing economic and operating
conditions. Pioneer uses certain terms in this presentation, such as "resource,"
"reserve potential" or other descriptions of volumes of reserves potentially
recoverable through additional drilling or recovery techniques that the SEC's
guidelines prohibit Pioneer from including in filings with the SEC. These
estimates are by their nature more speculative than estimates of proved reserves
and accordingly are subject to substantially greater risk of being recovered by
Pioneer.