EXHIBIT 99.1
NEWS RELEASE
Company Contacts:
Investors: Frank Hopkins
Media and Public Affairs: Susan Spratlen
(972) 444-9001
Pioneer Reports Second Quarter 2006 Results
Dallas, Texas, August 3, 2006 -- Pioneer Natural Resources Company (NYSE:PXD)
today announced financial and operating results for the quarter ended June 30,
2006.
o Pioneer reported net income of $88 million, or $.69 per diluted share.
o Second quarter oil and gas sales from continuing operations exceeded the
Company's guidance, averaging 98,893 barrels oil equivalent per day
(BOEPD).
o North American production for the first half of 2006 rose 16% from
equivalent volumetric production payment (VPP) adjusted 2005 first half
levels, reflecting the continuing success of Pioneer's accelerated
development drilling program. Worldwide production was up 9% for the same
period.
o Production growth is on track to meet or exceed the high end of Pioneer's
targeted 2006 worldwide exit rate of 95,000 to 100,000 BOEPD.
o Pioneer drilled three additional Edwards Trend discoveries, resulting in
100% success on the five prospects drilled to date.
o The Company purchased 4.3 million shares at $39.27 per share, completing
$170 million of the remaining $359 million share repurchase program
authorized by the Board of Directors.
o Pioneer closed the $675 million sale of its Argentine operations,
recognizing an after-tax gain on the disposition of these assets of $6
million, or $.05 per diluted share.
Net income for the second quarter of 2006 was comprised of (i) income from
continuing operations of $66 million, or $.52 per diluted share, as compared to
$22 million, or $.16 per diluted share, for the prior year quarter and (ii)
income from discontinued operations of $22 million, or $.17 per diluted share,
as compared to $163 million, or $1.12 per diluted share, for the prior year
quarter.
Income from continuing operations for the second quarter included the following
unusual after-tax items:
o deferred tax expense related to the newly enacted Texas margin tax of $13
million, or $.10 per diluted share,
o deferred tax benefit from the recent reduction in Canadian federal and
provincial tax rates of $10 million, or $.07 per diluted share, and
o a loss of $5 million, or $.04 per diluted share, associated with the early
extinguishment of $346 million of 6 1/2% 2008 senior notes with a scheduled
maturity of January 2008.
Income from discontinued operations for the second quarter was comprised of the
following after-tax items:
o a gain on the disposition of the Argentina assets of $6 million, or $.05
per diluted share, and operating income from the divested properties prior
to closing of $4 million, or $.03 per diluted share, and
o a gain related to deepwater Gulf of Mexico business interruption insurance
recoveries (Hurricane Katrina) of $12 million, or $.09 per diluted share.
Cash flow from operating activities for the second quarter of 2006 was $158
million.
Scott D. Sheffield, Pioneer's Chairman and CEO, stated, "Since shifting our
strategy to deliver strong, consistent production growth in North America, we
have accelerated development drilling, progressed several new resource play
opportunities and advanced our major development projects. We are on track to
meet or exceed our production targets for 2006 and remain confident that we can
deliver double-digit production growth and add significant shareholder value
over the next five years."
Operations Review
Pioneer currently has 32 rigs running, up from 27 rigs during the first quarter,
and expects to continue to increase its drilling activity level through the
remainder of 2006 and have approximately 44 rigs active by year end.
In the Permian Basin, Pioneer is on track to drill approximately 340 wells this
year, up from 190 wells in 2005. Production growth from the Spraberry field is
on target to meet or exceed the Company's exit rate forecast with production
during the first half of 2006 rising 26% from the same period in 2005, after
adjusting for the Company's VPPs for comparison purposes. These strong Spraberry
results are being driven by the success of Pioneer's deeper drilling campaign,
which increases reserves and production by including the deeper Wolfcamp
formation, and new opportunities from bolt-on acquisitions.
In South Texas, Pioneer is running four rigs in the Edwards Trend and expects to
add two rigs before year end. The Company has successfully drilled five
prospects in different areas of the Trend with a 100% success rate. Three of
these prospects were drilled in the second quarter - Bonita, Barracuda and
Wahoo. On the previously announced Sinor prospect, where four successful wells
have been drilled, the Company expects an aggressive development program to
begin in the second quarter of 2007 after a 3-D seismic program is completed
later this year. On the previously announced Stingray prospect, the first of
three appraisal wells is being drilled. Three wells from the Sinor and Stingray
prospects are now on production at approximately five million cubic feet per
day. As more wells come on stream from the five successful prospects and
development drilling in the existing Pawnee field continues, South Texas
production is expected to exceed prior estimates for 2006. In addition, the
Company continues to believe the Edwards Trend holds a gross resource potential
of one to three trillion cubic feet and will generate very attractive returns.
In the Rocky Mountains, year-to-date coal bed methane (CBM) production in the
Raton field was up 8% from the same period in 2005. Through July, Pioneer has
drilled 155 of the 330 Raton wells planned for 2006 and recently added the third
rig planned for this drilling program. The Company now expects full-year
production from the Raton field to exceed the 5% to 7% annual growth target
versus 2005 announced earlier this year.
In northeast Utah and northwest Colorado, Pioneer's programs to evaluate the CBM
resource potential in the Uinta, Piceance and Sand Wash basins are progressing,
and results from the initial pilot wells are expected to be evaluated in late
2006 / early 2007 to determine future development plans. In the Uinta Basin
pilot program, 25 Castlegate wells are expected to be producing by the end of
the third quarter, including four wells to be drilled during the third quarter.
In the Piceance Basin, 35 Columbine Springs pilot program wells are expected to
be on production during the third quarter. In the Sand Wash Basin, 22 Lay Creek
wells from the initial two pilots are expected to be producing by year end.
Drilling and testing continues on three additional pilots. Pioneer also plans to
drill four wells and shoot additional 3-D seismic to evaluate the Main Canyon
Entrada conventional gas play in the Uinta Basin during the second half of 2006.
In Canada, the Company has drilled 20 of the 200 Horseshoe Canyon CBM wells
planned for 2006, hindered by road bans from heavy spring rains which prevented
access. The road bans were recently lifted, and Pioneer has two rigs on location
and expects to add a third rig later in the third quarter. To test the potential
of Mannville CBM in the Bashaw area, Pioneer has drilled four horizontal wells
and plans to drill two additional horizontal wells during the third quarter.
On the North Slope of Alaska, Pioneer has completed the construction of the
gravel drill site for the Oooguruk development project. Additional work on the
project scheduled for 2006 includes contouring and armoring the drill site,
fabricating equipment and modifying the drilling rig for installation during
2007. The project is on schedule to achieve first oil production in 2008. In the
Cook Inlet, Pioneer has assumed operatorship of the Cosmopolitan oil discovery
project and increased its working interest to 50%.
Offshore South Africa, development drilling continues on the South Coast Gas
Project, a seven-well subsea tie-back to the existing F-A platform. Subsea
infrastructure is expected to be in place for project startup during the second
half of 2007.
In Tunisia, production from the Adam 4 well oil discovery has begun, and
drilling on the Adam 5 well began in July. Two wells are planned in the
Pioneer-operated Jenein Nord block by year end, and one well is anticipated
during the second half in the Borj El Khadra block.
Pioneer increased its 2006 capital budget by $100 million to $1.4 billion,
excluding discontinued operations, to accelerate successful Edwards Trend
activities and fund new shale gas acreage additions and core area bolt-on
acquisitions.
Financial Review
Second quarter oil sales averaged 24,571 barrels per day (BPD) and natural gas
liquids sales averaged 19,143 BPD. Gas sales in the second quarter averaged 331
million cubic feet per day. The reported price for oil was $69.71 per barrel and
included $13.00 per barrel related to deferred revenue from VPPs for which
production is not recorded. The price for natural gas liquids was $36.32 per
barrel. The reported price for gas was $6.25 per thousand cubic feet (Mcf) and
included $.62 per Mcf related to deferred revenue from VPPs for which production
is not recorded.
Second quarter production costs averaged $11.45 per barrel of oil equivalent
(BOE). Exploration and abandonment costs were $42 million for the quarter and
included $13 million of unsuccessful Alaskan drilling costs, primarily
associated with the Cronus and Antigua wells, $24 million of geologic and
geophysical expenses including seismic and personnel costs and $5 million of
other drilling and acreage costs.
Financial Outlook
The following statements are estimates based on current expectations. These
forward-looking statements are subject to a number of risks and uncertainties
that 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.
Third quarter 2006 production is expected to average 95,000 to 100,000 BOEPD.
Third quarter production costs (including production and ad valorem taxes and
transportation costs) are expected to average $11.00 to $12.00 per BOE based on
current NYMEX strip prices for oil and gas. Depreciation, depletion and
amortization expense is expected to average $9.50 to $10.50 per BOE.
Total exploration and abandonment expense during the third quarter is expected
to be $20 million to $65 million and could include up to $15 million of costs
associated with the high-impact drilling of a new prospect adjacent to the
Company's Clipper discovery (deepwater Gulf of Mexico) and an onshore Norphlet
prospect (Mississippi). It could also include $25 million associated with
lower-risk resource plays in the Edwards Trend in South Texas, Uinta / Piceance
in the Rockies, Canada and Tunisia. In addition, exploration expense includes
$20 million to $25 million for seismic investments and personnel, primarily
related to the onshore resource plays Pioneer is currently pursuing. General and
administrative expense is expected to be $29 million to $32 million. Interest
expense is expected to be $22 million to $25 million, offset by interest income
of $3 million to $5 million. Accretion of discount on asset retirement
obligations is expected to be $1 million to $2 million.
The Company's third quarter effective income tax rate is expected to range from
35% to 45% based on current capital spending plans. Cash income taxes are
expected to range from $5 million to $15 million, principally related to
Tunisian income taxes and nominal alternative minimum tax in the U.S.
The Company's financial results and oil and gas hedges are outlined on the
attached schedules.
Earnings Conference Call
This morning at 10:00 a.m. Eastern, Pioneer will discuss its quarterly financial
and operating results with an accompanying presentation. The call will be
webcast on Pioneer's website, www.pxd.com. At the website, select `INVESTOR' at
the top of the page. For those who cannot listen to the live broadcast, a replay
will be available shortly after the call. Or you may choose to dial (800)
474-8920 (confirmation code: 1564263) to listen to the call by telephone and
view the accompanying visual presentation at the website above. A telephone
replay will be available by dialing (888) 203-1112 (confirmation code: 1564263).
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 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, 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 plan 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 "SEC").
Cautionary Note to U.S. Investors -- 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 release, such as "resource
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.
PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2006 2005
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 457,042 $ 18,802
Accounts receivable, net 166,982 337,658
Inventories 115,917 79,659
Prepaid expenses 8,563 18,091
Deferred income taxes 115,963 158,878
Other current assets, net 30,604 10,716
---------- ----------
Total current assets 895,071 623,804
---------- ----------
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts
method of accounting 7,389,043 8,813,134
Accumulated depletion, depreciation and amortization (1,728,466) (2,577,946)
----------- -----------
Total property, plant and equipment 5,660,577 6,235,188
---------- ----------
Goodwill 311,346 311,651
Other assets, net 200,434 158,591
---------- ----------
$ 7,067,428 $ 7,329,234
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 238,410 $ 345,204
Interest payable 30,500 40,314
Income taxes payable 78,283 22,470
Deferred revenue 184,848 190,327
Other current liabilities 349,047 435,040
---------- ----------
Total current liabilities 881,088 1,033,355
---------- ----------
Long-term debt 1,263,994 2,058,412
Deferred income taxes 1,050,236 767,329
Deferred revenue 574,155 664,511
Other liabilities and minority interests 383,028 588,525
Stockholders' equity 2,914,927 2,217,102
---------- ----------
$ 7,067,428 $ 7,329,234
========== ==========
PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenues and other income:
Oil and gas $ 407,570 $ 320,337 $ 787,038 $ 644,163
Interest and other 9,741 12,031 26,852 14,051
Gain (loss) on disposition of assets, net (3,403) 109 (3,476) 2,250
-------- -------- -------- --------
413,908 332,477 810,414 660,464
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 103,066 79,640 197,749 160,584
Depletion, depreciation and amortization 87,984 65,999 170,390 139,307
Impairment of long-lived assets - 471 - 623
Exploration and abandonments 41,618 37,498 166,260 91,327
General and administrative 29,468 26,596 61,715 54,084
Accretion of discount on asset retirement
obligations 1,154 1,043 2,302 2,089
Interest 22,766 29,403 59,342 62,149
Other 11,759 15,713 16,813 24,554
-------- -------- -------- --------
297,815 256,363 674,571 534,717
-------- -------- -------- --------
Income from continuing operations before
income taxes 116,093 76,114 135,843 125,747
Income tax provision (50,207) (53,885) (70,924) (75,796)
-------- -------- -------- --------
Income from continuing operations 65,886 22,229 64,919 49,951
Income from discontinued operations,
net of tax 22,153 163,330 566,327 220,265
-------- -------- -------- --------
Net income $ 88,039 $ 185,559 $ 631,246 $ 270,216
======== ======== ======== ========
Basic earnings per share:
Income from continuing operations $ .52 $ .16 $ .52 $ .35
Income from discontinued operations,
net of tax .18 1.16 4.48 1.55
-------- -------- -------- --------
Net income $ .70 $ 1.32 $ 5.00 $ 1.90
======== ======== ======== ========
Diluted earnings per share:
Income from continuing operations $ .52 $ .16 $ .52 $ .35
Income from discontinued operations,
net of tax .17 1.12 4.34 1.51
-------- -------- -------- --------
Net income $ .69 $ 1.28 $ 4.86 $ 1.86
======== ======== ======== ========
Weighted average shares outstanding:
Basic 125,629 140,812 126,282 141,849
======== ======== ======== ========
Diluted 129,624 145,246 130,346 146,286
======== ======== ======== ========
PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------ -------------------------
2006 2005 2006 2005
---------- ---------- ---------- -----------
Cash flows from operating activities:
Net income $ 88,039 $ 185,559 $ 631,246 $ 270,216
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion, depreciation and amortization 87,984 65,999 170,390 139,307
Impairment of long-lived assets - 471 - 623
Exploration expenses, including dry holes 17,354 12,286 111,936 28,962
Deferred income taxes 50,223 41,030 67,184 56,376
Loss (gain) on disposition of assets, net 3,403 (109) 3,476 (2,250)
Loss on extinguishment of debt 8,076 7,342 8,076 7,342
Accretion of discount on asset retirement
obligations 1,154 1,043 2,302 2,089
Discontinued operations (1,002) 61,019 (540,655) 184,072
Interest expense 2,118 865 5,165 1,062
Commodity hedge related activity (6,061) (7,666) (5,553) (10,727)
Stock-based compensation 10,824 8,018 18,310 13,170
Amortization of deferred revenue (47,886) (20,449) (95,835) (32,074)
Other noncash items 5,810 1,553 9,524 5,699
Changes in operating assets and liabilities,
net of effects from acquisition:
Accounts receivable, net 37,050 (42,269) 163,165 (54,302)
Inventories (18,994) (11,388) (39,125) (12,703)
Prepaid expenses 14,228 3,359 1,964 5,808
Other current assets, net (237) (331) 9,192 (529)
Accounts payable (19,993) (8,029) (113,641) 9,564
Interest payable 8,826 11,895 (10,274) (4,364)
Income taxes payable (78,236) 9,144 55,815 11,919
Other current liabilities (4,438) (9,425) 8,927 (5,689)
--------- --------- --------- ----------
Net cash provided by operating activities 158,242 309,917 461,589 613,571
Net cash provided by investing activities 343,536 266,099 965,291 659,228
Net cash used in financing activities (89,857) (536,165) (990,440) (1,224,367)
--------- --------- --------- ----------
Net increase in cash and cash equivalents 411,921 39,851 436,440 48,432
Effect of exchange rate changes on cash
and cash equivalents 2,139 2,561 1,800 2,762
Cash and cash equivalents, beginning
of period 42,982 16,039 18,802 7,257
--------- --------- --------- ----------
Cash and cash equivalents, end of period $ 457,042 $ 58,451 $ 457,042 $ 58,451
========= ========= ========= ==========
PIONEER NATURAL RESOURCES COMPANY
SUMMARY PRODUCTION AND PRICE DATA
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- -----------------------
2006 2005 2006 2005
--------- --------- --------- ----------
Average Daily Sales Volumes
from Continuing Operations:
Oil (Bbls) - U.S. 17,671 19,875 17,320 21,191
Canada 307 210 292 186
Africa 6,593 10,452 7,121 11,205
--------- --------- --------- ---------
Worldwide 24,571 30,537 24,733 32,582
========= ========= ========= =========
Natural gas liquids (Bbls) - U.S. 18,731 14,834 18,455 16,154
Canada 412 610 415 514
--------- --------- --------- ---------
Worldwide 19,143 15,444 18,870 16,668
========= ========= ========= =========
Gas (Mcf) - U.S. 286,270 252,047 280,553 267,477
Canada 44,801 36,710 40,317 35,448
--------- --------- --------- ---------
Worldwide 331,071 288,757 320,870 302,925
========= ========= ========= =========
Average Daily Sales Volumes
from Discontinued Operations:
Oil (Bbls) - U.S. - 6,549 4,839 6,376
Argentina 2,982 7,796 5,071 7,992
Canada - 45 - 57
--------- --------- --------- ---------
Worldwide 2,982 14,390 9,910 14,425
========= ========= ========= =========
Natural gas liquids (Bbls) - U.S. - 74 - 65
Argentina 406 1,948 849 1,761
Canada - 264 - 224
--------- --------- --------- ---------
Worldwide 406 2,286 849 2,050
========= ========= ========= =========
Gas (Mcf) - U.S. 1,317 301,756 72,763 278,609
Argentina 42,538 135,188 88,537 132,783
Canada 173 10,472 87 12,910
--------- --------- --------- ---------
Worldwide 44,028 447,416 161,387 424,302
========= ========= ========= =========
Average Reported Prices (a):
Oil (per Bbl) - U.S. $ 69.43 $ 30.13 $ 64.82 $ 29.71
Canada $ 72.37 $ 35.22 $ 69.89 $ 41.97
Africa $ 70.34 $ 51.84 $ 64.73 $ 47.82
Worldwide $ 69.71 $ 37.60 $ 64.86 $ 36.01
Natural gas liquids (per Bbl) - U.S. $ 35.84 $ 28.34 $ 34.81 $ 27.14
Canada $ 57.97 $ 41.18 $ 56.10 $ 39.89
Worldwide $ 36.32 $ 28.85 $ 35.28 $ 27.54
Gas (per Mcf) - U.S. $ 6.08 $ 6.75 $ 6.33 $ 6.40
Canada $ 7.35 $ 6.17 $ 7.48 $ 6.07
Worldwide $ 6.25 $ 6.67 $ 6.48 $ 6.36
<FN>
- ---------------
(a) Average prices are attributable to continuing operations and include the
results of hedging activities and amortization of VPP deferred revenue.
</FN>
PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(in thousands)
(Unaudited)
EBITDAX and discretionary cash flow ("DCF") (as defined below) are
presented herein, and reconciled to the generally accepted accounting principle
("GAAP") measures of net income and net cash provided by operating activities
because of their wide acceptance by the investment community as financial
indicators of a company's ability to internally fund exploration and development
activities and to service or incur debt. The Company also views the non-GAAP
measures of EBITDAX and DCF as useful tools for comparisons of the Company's
financial indicators with those of peer companies that follow the full cost
method of accounting. EBITDAX and DCF should not be considered as alternatives
to net income or net cash provided by operating activities, as defined by GAAP.
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net income $ 88,039 $ 185,559 $ 631,246 $ 270,216
Depletion, depreciation and amortization 87,984 65,999 170,390 139,307
Impairment of long-lived assets - 471 - 623
Exploration and abandonments 41,618 37,498 166,260 91,327
Accretion of discount on asset retirement
obligations 1,154 1,043 2,302 2,089
Interest expense 22,766 29,403 59,342 62,149
Income tax provision 50,207 53,885 70,924 75,796
Loss (gain) on disposition of assets, net 3,403 (109) 3,476 (2,250)
Loss on extinguishment of debt 8,076 7,342 8,076 7,342
Discontinued operations (1,002) 61,019 (540,655) 184,072
Current income taxes on discontinued operations 8,545 5,563 152,575 7,889
Cash exploration expense on discontinued
operations 634 3,213 2,145 6,230
Commodity hedge related activity (6,061) (7,666) (5,553) (10,727)
Stock-based compensation 10,824 8,018 18,310 13,170
Amortization of deferred revenue (47,886) (20,449) (95,835) (32,074)
Other noncash items 5,810 1,553 9,524 5,699
--------- --------- --------- ---------
EBITDAX (a) 274,111 432,342 652,527 820,858
Less: Cash interest expense (20,648) (28,538) (54,177) (61,087)
Current income taxes (8,529) (18,418) (156,315) (27,309)
--------- --------- --------- ---------
Discretionary cash flow (b) 244,934 385,386 442,035 732,462
Less: Cash exploration expense (24,898) (28,425) (56,469) (68,595)
Changes in operating assets and liabilities (61,794) (47,044) 76,023 (50,296)
--------- --------- --------- ----------
Net cash provided by operating activities $ 158,242 $ 309,917 $ 461,589 $ 613,571
========= ========= ========= =========
<FN>
- -------------
(a) "EBITDAX" represents earnings before depletion, depreciation and
amortization expense; impairment of long-lived assets; exploration and
abandonments; accretion of discount on asset retirement obligations;
interest expense; income taxes; gain or loss on the disposition of assets;
loss on extinguishment of debt; noncash effects from discontinued
operations; commodity hedge related activity; stock-based compensation;
amortization of deferred revenue; and other noncash items.
(b) Discretionary cash flow equals cash flows from operating activities before
changes in operating assets and liabilities and before cash exploration
expense.
</FN>
PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL INFORMATION
As of August 1, 2006
Open Commodity Hedge Positions
2006
------------------------------
Third Fourth
Quarter Quarter Year 2007 2008
-------- -------- -------- -------- --------
Average Daily Oil Production Hedged:
Swap Contracts:
Volume (Bbl) 5,000 5,000 5,000 10,000 10,000
NYMEX price (Bbl) $ 37.20 $ 37.20 $ 37.20 $ 30.96 $ 30.62
Collar Contracts:
Volume (Bbl) 6,500 6,500 6,500 2,000 -
NYMEX price (Bbl):
Ceiling $ 66.41 $ 66.41 $ 66.41 $ 89.50 $ -
Floor $ 41.92 $ 41.92 $ 41.92 $ 50.00 $ -
Average Daily Gas Production Hedged:
Swap Contracts:
Volume (MMBtu) 73,880 73,984 73,932 59,195 15,000
NYMEX price (MMBtu) (a) $ 4.30 $ 4.30 $ 4.30 $ 7.75 $ 9.10
Collar Contracts:
Volume (MMBtu) 85,000 95,000 90,000 - -
NYMEX price (MMBtu) (a):
Ceiling $ 15.00 $ 15.25 $ 15.15 $ - $ -
Floor $ 6.95 $ 6.95 $ 6.95 $ - $ -
<FN>
- ---------------
(a) Approximate, based on historical differentials to index prices.
</FN>
Amortization of Volumetric Production Payment Proceeds and Net Derivative Losses
(in thousands)
2006
-----------------------------------
Third Fourth
Quarter Quarter Year 2007 Thereafter Total
--------- --------- --------- --------- ---------- ---------
VPP proceeds, net of
transaction costs $ 45,838 $ 45,527 $ 91,365 $ 175,216 $ 460,322 $ 726,903
Net hedge obligations assigned 1,558 1,569 3,127 6,016 22,957 32,100
-------- -------- -------- -------- -------- --------
Total deferred revenue (a) 47,396 47,096 94,492 181,232 483,279 759,003
Less net derivative losses to be
recognized in pretax earnings (b) 274 (396) (122) (3,540) (17,117) (20,779)
-------- -------- -------- -------- -------- --------
Total VPP impact to pretax
earnings $ 47,670 $ 46,700 $ 94,370 $ 177,692 $ 466,162 $ 738,224
======== ======== ======== ======== ======== ========
<FN>
- --------------
(a) Deferred revenue will be amortized as increases to oil and gas revenues
during the indicated future periods.
(b) Represents the remaining pretax earnings impact of the derivatives assigned
in the VPPs.
</FN>