EXHIBIT 99.1
NEWS RELEASE
Company Contacts:
Investors: Frank Hopkins or Scott Rice
Media and Public Affairs: Susan Spratlen
(972) 444-9001
Pioneer Provides Drilling and Financial Update
Dallas, Texas, January 25, 2007 - Pioneer Natural Resources Company (NYSE:PXD)
provided an update today on recent drilling activities in Tunisia, South Texas
and Mississippi, confirmed 2006 finding and development costs and updated
guidance on fourth quarter 2006 earnings.
Drilling Update
Pioneer has a sizeable acreage position in the Ghadames Basin of southern
Tunisia with an interest in 5 blocks, totaling 3.9 million acres. In the Adam
Concession, Pioneer has participated in 11 wells, with 10 successes, two of
these within the last few months. The Company holds a 20% interest in the
Concession in partnership with Eni (Operator), Talisman and ETAP. The recently
drilled Hawa development well began producing during the fourth quarter of 2006
bringing total Adam production to over 20,000 barrels per day (BPD), or
approximately 3,500 BPD net to Pioneer.
The Company also participated in a new exploratory discovery on the Adam
Concession. Data from the well logs and tests of the first of several zones are
encouraging, and testing is expected to be completed this month. First
production is expected during the first quarter.
Pioneer also announced three additional oil discoveries in Tunisia which extend
the Company's successful exploration program to two blocks bordering the Adam
Concession. Pioneer drilled two of the discoveries on its operated Jenein Nord
Block (50% interest assuming ETAP participation). Drilling continues on one of
the wells to also evaluate a deeper target before testing begins.
On the Borj El Khadra Block, where Pioneer has a 20% interest (assuming ETAP
participation), an exploratory well encountered a pay zone with excellent
porosity and has been put on an extended production test to further evaluate its
potential. The produced oil is being trucked for sales through facilities on the
Adam Concession.
As a result of this success, Pioneer continues to believe that Tunisia has the
potential to become a core area for the Company with attractive investment
returns and finding costs. Pioneer is currently running three drilling rigs in
Tunisia, including one rig operated by Pioneer. Near-term drilling plans include
an additional exploration well on the Pioneer-operated Jenein Nord Block and two
additional wells on the Adam Concession. After the performance of the discovery
wells has been monitored for several months, additional appraisal wells may also
be drilled.
In South Texas, Pioneer continues its expansion activities in the Edwards Trend
where its legacy Pawnee field is located. More than 300 billion cubic feet (Bcf)
of gas is ultimately expected to be produced from the Pawnee field, and Pioneer
is extending its success in the area with several additional discoveries along
the Trend. In 2006, the Company increased its Trend acreage position to over
270,000 gross acres and drilled 16 exploration and appraisal wells targeting new
field discoveries with 88% success, exceeding expectations and increasing proved
gas reserves. The six discoveries announced to date hold estimated gross
resource potential of 150 to 325 Bcf.
Since the end of the third quarter of 2006, three new wells have been added to
production in the Edwards expansion area, bringing the total to eight producing
wells. Gross production from these eight wells is more than 9 million cubic feet
per day (MMCFPD). Six wells are awaiting pipelines or testing.
Having 3-D seismic data has significantly enhanced field development in the
Pawnee field, allowing Pioneer to more accurately locate and orient the
horizontal wells for optimal results. To expand its 3-D data coverage to include
new discoveries and additional prospects, the Company plans to shoot and
interpret approximately 850 square miles of new data. Multiple surveys are
planned for 2007, with three already underway. While the new seismic work is
being completed, Pioneer will direct most of its investments in the Edwards
Trend to lower-risk, lower-cost development drilling on existing discoveries
where 3-D data is currently available.
The Company is particularly encouraged with recent results from its infill
program in the Pawnee field. A new horizontal well was recently drilled within a
developed section of the field and is initially producing more than 5 MMCFPD.
Additional infill drilling locations are currently being evaluated.
To revitalize existing horizontal wells in the field, Pioneer has initiated a
pilot using more extensive fracture stimulation techniques and is excited with
initial results. Horizontal wells in the field are completed open-hole and have
traditionally been lightly stimulated with acid. By performing a sand-propped
fracture stimulation on one of its existing horizontal wells, the Company
increased production from the well from approximately 100 thousand cubic feet
per day (MCFPD) to an initial rate of approximately 1,000 MCFPD. Pioneer plans
to fracture stimulate additional horizontal wells, including newer producing
wells, as the year progresses to further evaluate the potential for a more
extensive program. Plans are also in progress to expand the gas gathering
infrastructure in the area to accommodate expected production growth and to
maximize efficiency at Pioneer's Pawnee Plant.
Pioneer is also building an acreage position covering multiple plays in the
Mississippi Salt Basin and now holds leases and option interests covering over
300,000 acres. Over the next two to three years, the Company expects to test a
number of opportunities and to continue technical work that is currently
underway.
One of the lower risk opportunities in the portfolio is the redevelopment of the
Bolton Gas Field in Hinds County, Mississippi. The first well of the project was
drilled to 17,600 feet and penetrated multiple gas-bearing Cotton Valley sands.
Currently the well is being logged, and completion design work is progressing.
The location for the next well has been built, and drilling will commence
immediately after operations are completed on the current well. Pioneer plans to
drill at least one more well in 2007 during this initial phase of the project.
Facility construction is underway, and first production is anticipated in
mid-2007.
Pioneer has also concluded drilling operations on its first well testing the
Norphlet formation in Mississippi. The well was drilled in Wayne County and,
after extensive evaluation, has been plugged and abandoned resulting in a fourth
quarter 2006 charge of approximately $16 million. Information from the well is
being kept confidential at this time as Pioneer and its partners incorporate
information gained from this well into the technical analysis of the play.
Future drilling plans will be determined after the technical analysis is
completed.
Financial Outlook
Pioneer continues to expect full-year finding and development costs for 2006 to
be in the range of $15 to $20 per barrel oil equivalent (BOE), consistent with
the Company's guidance in March 2006.
Earnings from continuing operations for the fourth quarter of 2006 are expected
to range from $.17 to $.22 per diluted share. Pioneer's production and cost
performance were strong while exploration and abandonment expense was higher
than normal as a result of charges not directly related to the quarter's
drilling activities. Details are provided below.
Fourth quarter 2006 production is expected to average approximately 101 thousand
barrels per day on an oil equivalent basis (MBOEPD) and exceed the 2006 year-end
exit rate of 95 MBOEPD to 100 MBOEPD that was forecasted in March 2006. Total
production for 2006 is expected to be approximately 35.9 million barrels oil
equivalent (MMBOE), which is at the high end of the full-year production
guidance range provided by the Company in March 2006 of 33 to 37 MMBOE.
The Company's fourth quarter realized price for oil, including the effects of
hedges, is expected to average approximately $61.45 to $61.95 per barrel,
including approximately $12.58 per barrel related to deferred revenue from
volumetric production payments (VPPs) for which production is not recorded.
Pioneer's fourth quarter realized price for natural gas liquids is expected to
range from $32.50 to $33.00 per barrel. The Company's fourth quarter realized
price for gas, including the effects of hedges, is expected to average
approximately $5.50 to $5.80 per thousand cubic feet (Mcf), including
approximately $.58 per Mcf related to deferred revenue from VPPs for which
production is not recorded.
Total exploration and abandonment expense during the fourth quarter of 2006 is
expected to be $128 million to $133 million. The fourth quarter exploration and
abandonment expense includes a $33 million increase in the estimated cost to
abandon East Cameron 322, which was destroyed by Hurricane Rita, offset by
insurance coverage that is reflected in other income (see detailed discussion
below). Excluding the additional abandonment accrual for East Cameron 322, which
was not forecasted in the Company's November 2006 guidance, exploration and
abandonment expense was at the top end of the guidance range.
Exploration and abandonment expense will include approximately $13 million of
costs associated with an unsuccessful test of the Flying Cloud prospect adjacent
to Pioneer's Clipper discovery in the deepwater Gulf of Mexico, as previously
disclosed, and approximately $16 million associated with the unsuccessful
Norphlet well in Mississippi. It will also include approximately $11 million
associated with drilling activities in lower-risk resource plays in the Edwards
Trend in South Texas, the Uinta and Piceance basins in the Rockies and in
Canada.
Pioneer will also expense exploration costs of approximately $18 million related
to previously drilled discoveries that were suspended pending additional
commercialization, appraisal and/or technical work which was completed during
the fourth quarter of 2006. Approximately $7 million of that total is associated
with two discoveries previously drilled on the Gulf of Mexico shelf during 2005
which are no longer expected to be developed considering the rise in development
costs and Pioneer's onshore focus. Approximately $7 million relates to prior
period exploration costs for Pioneer's Boomslang discovery drilled offshore
South Africa during 2001. The Boomslang field is not part of the South Coast Gas
Project currently being developed. While the field could potentially be tied in
to the project's infrastructure at a future date, commercialization plans have
not progressed sufficiently to allow the Company to continue to capitalize the
exploration costs related to the discovery. Approximately $4 million relates to
an appraisal well drilled in 2005 on the Company's Anaguid Block in Tunisia. The
appraisal well encountered gas and condensate in the similar horizon as the
initial exploration well, but after further technical analysis, it has been
determined that the well is not commercial.
In addition, exploration expense will include $32 million to $34 million for
personnel and seismic investments, primarily related to the Edwards Trend and
Uinta and Piceance basin areas and other onshore resource plays Pioneer is
currently pursuing, and $5 million to $8 million for delay rentals, acreage
abandonments and other expenditures.
During the fourth quarter of 2006, the Company received notification denying its
application to "reef in place" a substantial portion of the East Cameron 322
debris. As a result, the Company increased its estimate for debris removal by
$33 million, bringing the total estimated cost to reclaim and abandon the
facility to $119 million. Pioneer expects that substantially all of the cost for
debris removal will be covered by insurance, and recorded estimated insurance
recoveries of $43 million in other income during the fourth quarter. The Company
believes that a substantial portion of the total estimated cost to reclaim and
abandon the facility is covered by insurance, and additional insurance
recoveries will be recorded to other income in future periods. Operations to
reclaim and abandon the East Cameron 322 facilities began in January 2007, and
the Company expects to incur a substantial portion of its accrued costs in 2007.
Fourth quarter production costs (including production and ad valorem taxes and
transportation costs) are expected to average $10.40 to $10.65 per BOE. These
costs are expected to be less than prior guidance primarily due to lower than
anticipated 2006 ad valorem taxes.
Depreciation, depletion and amortization expense is expected to average $10.10
to $10.50 per BOE. General and administrative expense is expected to be $29
million to $31 million. Interest expense is expected to be $24 million to $25
million, offset by interest income of approximately $3 million. Accretion of
discount on asset retirement obligations is expected to be approximately $1
million. Each of these financial measures was within the ranges provided by the
Company in its November 2006 guidance.
The Company's fourth quarter effective income tax rate is expected to range from
47% to 52%, principally due to a higher proportion of the Company's fourth
quarter income coming from Tunisia which has a higher income tax rate. Cash
income taxes are expected to be less than $5 million and principally related to
Tunisian income taxes.
Pioneer is a large independent oil and gas exploration and production company,
headquartered in Dallas, Texas, with operations in the United States, Canada,
South Africa and Tunisia. 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 which 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
or complete its development projects as scheduled, access to and cost of
capital, the assumptions underlying production forecasts, 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.
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," "expected" 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.