PIONEER NATURAL RESOURCES COMPANY
NYSE : PXD

PIONEER NATURAL RESOURCES COMPANY

November 03, 2005 08:30 ET

Pioneer Reports Third Quarter 2005 Results

DALLAS--(CCNMatthews - Nov 3, 2005) -

Pioneer Natural Resources Company (NYSE:PXD) today announced financial and operating results for the quarter ended September 30, 2005.

Pioneer reported net income for the quarter of $124 million, or $.88 per diluted share, an increase of 53% over net income for the same period last year of $81 million, or $.67 per diluted share. Income from continuing operations was $105 million, or $.74 per diluted share, compared to income from continuing operations of $77 million, or $.64 per diluted share, for the same period in 2004.

Pioneer's net income for the quarter included discontinued operations of $30 million ($19 million after-tax) related to the divestiture of its interest in non-core assets on the Gulf of Mexico shelf. Net income also included a $33 million pre-tax charge ($21 million after-tax) related to the incremental abandonment obligation for the East Cameron 322 field which was lost during Hurricane Rita. Insurance is expected to cover this cost as well as the value of the platform and lost revenues. Insurance recoveries will be recognized as income in future quarters as the amount of the recoveries becomes known.

Cash flow from operations for the third quarter was $318 million, an increase of 33% compared to $239 million for the same period in 2004. The increase in operating cash flow is attributable to higher prices for oil, gas and natural gas liquids partially offset by cost increases.

Scott D. Sheffield, Chairman and CEO, stated, "We had a strong quarter and have made significant progress in executing the strategic initiatives we announced in September. We completed most of the first phase of our share repurchase program, repurchased $217 million of bonds and increased our semiannual dividend by 20%. In October, we opened data rooms covering the assets we have targeted for divestiture in the deepwater Gulf of Mexico and Tierra del Fuego in southern Argentina. Our increased 2005 drilling programs are on track, and we've made significant progress towards sanctioning a project to commercialize our gas reserves offshore South Africa."

During 2005, Pioneer has repurchased 19.8 million shares for $941 million, including $641 million of the $650 million share repurchase program announced on September 1 for execution during 2005. A $300 million repurchase program concluded earlier in the year.

Third quarter oil and gas sales averaged 169,255 barrels oil equivalent per day (BOEPD), excluding 1,831 BOEPD associated with fields sold during the quarter that are reflected in discontinued operations. Third quarter oil sales averaged 41,938 barrels per day (BPD) and natural gas liquids sales averaged 20,595 BPD. Gas sales in the third quarter averaged 640 million cubic feet per day (MMcfpd). Third quarter prices for oil and natural gas liquids were $40.66 and $34.53 per barrel, respectively. The worldwide price for gas was $5.70 per thousand cubic feet (Mcf) and includes $.37 per Mcf associated with the VPP transactions. North American gas prices averaged $7.10 per Mcf, including $.48 per Mcf associated with the VPP transactions.

Third quarter production costs averaged $7.61 per barrel of oil equivalent (BOE). The increase in third quarter lease operating costs is attributable to increases in commodity prices resulting in higher production taxes, decreases in deepwater Gulf of Mexico production which has lower per BOE operating costs and price increases in services and supplies related to field operations. Exploration and abandonment costs were $64 million for the quarter and included $11 million of dry hole and abandonments associated primarily with unsuccessful wells in Argentina and Tunisia, $33 million of incremental abandonment charges associated with the aforementioned East Cameron 322 field which was lost during Hurricane Rita, $17 million of geologic and geophysical expenses including seismic costs and $3 million of delay rentals and unproved acreage abandonments. General and administrative costs for the quarter were $33 million.

For the same quarter last year, adjusted to exclude discontinued operations from asset sales, Pioneer reported oil and gas sales of 170,298 BOEPD, including oil sales of 44,004 BPD, natural gas liquids sales of 20,933 BPD and gas sales of 632 MMcfpd. Prices for third quarter 2004 were $33.29 per barrel for oil, $26.89 per barrel for natural gas liquids and $4.11 per Mcf for gas. North American gas prices averaged $5.08 per Mcf.

Operations Update

During the third quarter, Pioneer continued the aggressive pace of development set earlier in the year. Currently, the Company has 18 onshore rigs running in the U.S., five in Argentina, five in Canada and one in Tunisia.

As discussed above, Pioneer's East Cameron 322 platform was destroyed by Hurricane Rita. Pioneer plans to abandon the East Cameron 322 field because the pre-hurricane production of approximately 600 BOEPD and future production profile do not justify the cost of replacing the platform. Devils Tower production is in the process of being restarted, and production is expected to return to pre-hurricane levels of approximately 5,000 net BOEPD shortly after start up. The subsea wells at the Triton and Goldfinger satellite fields have been tied back to the Devils Tower platform and are ready to flow. Further increases in production from these subsea wells and Devils Tower well recompletions will occur over the next few months as additional repairs are completed on Chevron's Empire Terminal. Pioneer's remaining operations in the Gulf of Mexico experienced limited disruptions from Hurricanes Katrina and Rita. Deepwater facilities at Falcon, Canyon Express and Devils Tower had little to no damage. By October 1, 2005, Falcon and Canyon Express were fully operational and producing at pre-hurricane levels.

In the Raton Basin, production is increasing as a result of a pipeline expansion that was completed in October. Pioneer drilled 36 Raton wells during October, 234 wells year-to-date, and expects production growth from the field of 5% to 7% during 2005.

In Canada, Pioneer has drilled 90 wells of a 180 well program in the Horseshoe Canyon coal bed methane play and expects to complete the balance of the program by the end of the year. An additional 180 well program is planned for 2006.

In South Africa, Pioneer and PetroSA have signed a Memorandum of Understanding finalizing the terms for jointly developing South Coast gas fields to provide feedstock for PetroSA's onshore gas-to-liquids plant at Mossel Bay. Pioneer holds a 45% interest in the gas development project and expects to initiate production from the project during the first half of 2007.

In October, the Company announced a discovery on its Clipper prospect in the deepwater Gulf of Mexico. This discovery will be included in Pioneer's deepwater Gulf of Mexico divestment program. Data rooms related to this divestment and the Tierra del Fuego properties in Argentina have been opened. Randall & Dewey is advising Pioneer on the Gulf of Mexico sale, and Scotia Waterous/Toronto Dominion is supporting the Argentine sale. The bids related to both divestiture packages are due in December.

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.

Fourth quarter 2005 production is expected to average 160,000 to 175,000 BOEPD. Fourth quarter production costs (including production and ad valorem taxes) are expected to average $7.25 to $7.75 per BOE based on current NYMEX strip prices for oil and gas. 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 $30 million to $70 million and includes plans to drill wells in Alaska, the Gulf of Mexico shelf, Argentina, Nigeria and Tunisia as well as the acquisition of additional 3-D seismic. General and administrative expense is expected to be $31 million to $33 million. Interest expense is expected to be $31 million to $34 million, and accretion of discount on asset retirement obligations is expected to be $2 million to $3 million.

The Company's fourth quarter effective income tax rate is expected to range from 34% to 37% based on current capital spending plans. Cash income taxes are expected to range from $10 million to $20 million, principally related to Argentine, Canadian and Tunisian income taxes and nominal alternative minimum tax in the U.S. The Company continues to benefit from the carryforward of net operating losses and other positive tax attributes 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 third quarter financial and operating results with an accompanying presentation. The call will be webcast on Pioneer's website, www.pioneernrc.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) 967-7134 (confirmation code: 1274638) 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: 1274638).

Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, with operations in the United States, Argentina, Canada and Africa. 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 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, 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, 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.



PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


September 30, December 31,
2005 2004
------------- ------------
(Unaudited)

ASSETS

Current assets:
Cash and cash equivalents $64,508 $7,257
Accounts receivable, net 257,957 209,936
Inventories 65,094 40,332
Prepaid expenses 18,504 10,822
Deferred income taxes 233,562 115,206
Other current assets, net 10,011 9,872
------------- ------------

Total current assets 649,636 393,425
------------- ------------

Property, plant and equipment, at cost:
Oil and gas properties, using the
successful efforts method of accounting 8,599,553 8,124,616
Accumulated depletion, depreciation and
amortization (2,478,043) (2,243,549)
------------- ------------

Total property, plant and equipment 6,121,510 5,881,067
------------- ------------

Deferred income taxes -- 2,963
Goodwill 306,666 315,880
Other assets, net 149,801 135,132
------------- ------------

$7,227,613 $6,728,467
============= ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $273,541 $216,051
Interest payable 21,493 45,735
Income taxes payable 19,125 13,520
Deferred revenue 165,063 --
Other current liabilities 652,954 269,153
------------- ------------

Total current liabilities 1,132,176 544,459
------------- ------------

Long-term debt 1,939,296 2,385,950
Deferred income taxes 618,343 607,415
Deferred revenue 711,669 --
Other liabilities and minority interests 701,879 358,863
Stockholders' equity 2,124,250 2,831,780
------------- ------------

$7,227,613 $6,728,467
============= ============



PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(Unaudited)

Three months ended Nine months ended
September 30, September 30,
------------------- -----------------------
2005 2004 2005 2004
--------- --------- ----------- -----------
Revenues and other income:
Oil and gas $558,382 $425,575 $1,593,470 $1,265,744
Interest and other 9,460 1,212 85,689 4,557
Gain (loss) on
disposition of assets,
net 394 215 2,763 (30)
--------- --------- ----------- -----------

568,236 427,002 1,681,922 1,270,271
--------- --------- ----------- -----------
Costs and expenses:
Oil and gas production 118,422 75,095 330,871 222,707
Depletion, depreciation
and amortization 136,367 135,459 431,760 405,758
Impairment of long-
lived assets 21 34,825 644 34,825
Exploration and
abandonments 64,198 32,882 183,671 152,233
General and
administrative 32,749 19,431 91,551 54,846
Accretion of discount
on asset retirement
obligations 1,968 2,030 6,210 6,012
Interest 29,268 24,827 92,731 67,805
Other 38,173 2,486 67,475 10,982
--------- --------- ----------- -----------

421,166 327,035 1,204,913 955,168
--------- --------- ----------- -----------
Income from continuing
operations before income
taxes 147,070 99,967 477,009 315,103
Income tax provision (42,483) (22,893) (193,722) (113,688)
--------- --------- ----------- -----------

Income from continuing
operations 104,587 77,074 283,287 201,415
Income from discontinued
operations, net of tax 18,986 3,842 110,502 9,391
--------- --------- ----------- -----------
Net income $123,573 $80,916 $393,789 $210,806
========= ========= =========== ===========

Basic earnings per share:
Income from continuing
operations $.76 $.65 $2.02 $1.70
Income from
discontinued
operations, net of tax .14 .03 .78 .08
--------- --------- ----------- -----------
Net income $.90 $.68 $2.80 $1.78
========= ========= =========== ===========

Diluted earnings per
share:
Income from continuing
operations $.74 $.64 $1.97 $1.67
Income from
discontinued
operations, net of tax .14 .03 .77 .08
--------- --------- ----------- -----------
Net income $.88 $.67 $2.74 $1.75
========= ========= =========== ===========

Weighted average shares
outstanding:
Basic 137,655 118,663 140,436 118,745
========= ========= =========== ===========
Diluted 141,786 120,297 144,770 120,321
========= ========= =========== ===========


PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)


Three months ended Nine months ended
September 30, September 30,
------------------- -----------------------
2005 2004 2005 2004
--------- --------- ----------- -----------

Cash flows from operating
activities:
Net income $123,573 $80,916 $393,789 $210,806
Depletion, depreciation
and amortization 136,367 135,459 431,760 405,758
Impairment of long-lived
assets 21 34,825 644 34,825
Exploration expenses,
including dry holes 52,817 13,975 157,604 125,415
Deferred income taxes 30,485 15,377 157,283 94,500
Loss (gain) on
disposition of assets,
net (394) (215) (2,763) 30
Loss on debt
extinguishment 18,633 -- 25,975 --
Accretion of discount on
asset retirement
obligations 1,968 2,030 6,210 6,012
Discontinued operations (15,256) 5,249 (84,118) 15,778
Interest expense 1,898 (1,094) 4,270 (12,457)
Commodity hedge related
activity 1,658 (11,311) (9,069) (33,844)
Amortization of stock-
based compensation 6,449 2,928 19,619 7,794
Amortization of deferred
revenue (21,882) -- (53,956) --
Other noncash items 3,950 788 10,777 6,492
Changes in operating
assets and liabilities,
net of effects from
acquisition:
Accounts receivable,
net 9,044 13,450 (45,255) (45,090)
Inventories (8,964) (5,572) (21,667) (9,752)
Prepaid expenses (13,513) (6,881) (7,705) (2,034)
Other current assets,
net 405 380 (124) 1,137
Accounts payable 27,730 (23,019) 37,294 (27,773)
Interest payable (21,593) (14,526) (25,957) (14,440)
Income taxes payable (6,314) (1,460) 5,605 2,995
Other current
liabilities (9,350) (2,160) (15,039) (8,679)
--------- --------- ----------- -----------

Net cash provided by
operating activities 317,732 239,139 985,177 757,473
Net cash provided by (used
in) investing activities (364,909) (975,756) 240,445 (1,340,290)
Net cash provided by (used
in) financing activities 52,616 723,739 (1,171,751) 566,205
--------- --------- ----------- -----------

Net increase (decrease) in
cash and cash equivalents 5,439 (12,878) 53,871 (16,612)
Effect of exchange rate
changes on cash and cash
equivalents 618 615 3,380 262
Cash and cash equivalents,
beginning of period 58,451 15,212 7,257 19,299
--------- --------- ----------- -----------

Cash and cash equivalents,
end of period $64,508 $2,949 $64,508 $2,949
========= ========= =========== ===========


PIONEER NATURAL RESOURCES COMPANY
SUMMARY PRODUCTION AND PRICE DATA
(Unaudited)

Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2005 2004 2005 2004
--------- -------- -------- --------
Average Daily Sales
Volumes from
Continuing Operations:
Oil (Bbls) -- U.S. 24,133 25,930 25,059 23,681
Argentina 7,930 9,316 7,972 8,827
Canada 209 25 194 27
Africa 9,666 8,733 10,686 10,986
--------- -------- -------- --------
Worldwide 41,938 44,004 43,911 43,521
========= ======== ======== ========

Natural gas liquids
(Bbls) -- U.S. 18,176 18,825 16,835 19,790
Argentina 1,917 1,727 1,814 1,549
Canada 502 381 510 415
--------- -------- -------- --------
Worldwide 20,595 20,933 19,159 21,754
========= ======== ======== ========

Gas (Mcf) -- U.S. 460,372 472,133 512,834 506,166
Argentina 142,399 137,971 136,023 119,440
Canada 37,562 22,058 36,160 23,627
--------- -------- -------- --------
Worldwide 640,333 632,162 685,017 649,233
========= ======== ======== ========

Average Daily Sales
Volumes from
Discontinued
Operations:
Oil (Bbls) U.S. 1,066 1,850 1,709 2,587
Canada -- 70 38 70
--------- -------- -------- --------
Worldwide 1,066 1,920 1,747 2,657
========= ======== ======== ========

Natural gas liquids
(Bbls) U.S. 131 49 87 80
Canada 2 478 149 525
--------- -------- -------- --------
Worldwide 133 527 236 605
========= ======== ======== ========

Gas (Mcf) U.S. 3,447 5,245 5,529 7,407
Canada 347 16,779 8,676 16,418
--------- -------- -------- --------
Worldwide 3,794 22,024 14,205 23,825
========= ======== ======== ========

Average Reported Prices
(a):
Oil (per Bbl) -- U.S. $32.87 $30.67 $30.41 $29.45
Argentina $40.59 $32.25 $35.62 $26.96
Canada $68.77 $36.57 $51.73 $42.76
Africa $59.57 $42.17 $51.40 $35.43
Worldwide $40.66 $33.29 $36.56 $30.46

Natural gas liquids
(per Bbl) -- U.S. $34.40 $26.50 $29.78 $23.37
Argentina $31.73 $29.62 $31.02 $28.71
Canada $49.93 $33.68 $43.22 $29.42
Worldwide $34.53 $26.89 $30.26 $23.87

Gas (per Mcf) -- U.S. $7.07 $5.12 $6.43 $5.13
Argentina $.83 $.63 $.86 $.62
Canada $7.51 $4.39 $6.57 $4.33
Worldwide $5.70 $4.11 $5.33 $4.27

(a) Average prices are attributable to continuing operations and
include the results of hedging activities.


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 Nine months ended
September 30, September 30,
------------------- --------------------
2005 2004 2005 2004
--------- --------- ---------- ---------

Net income $123,573 $80,916 $393,789 $210,806
Depletion, depreciation and
amortization 136,367 135,459 431,760 405,758
Impairment of long-lived
assets 21 34,825 644 34,825
Exploration and abandonments 64,198 32,882 183,671 152,233
Loss on debt extinguishment 18,633 -- 25,975 --
Accretion of discount on
asset retirement
obligations 1,968 2,030 6,210 6,012
Interest expense 29,268 24,827 92,731 67,805
Income tax provision 42,483 22,893 193,722 113,688
Loss (gain) on disposition
of assets, net (394) (215) (2,763) 30
Discontinued operations (15,256) 5,249 (84,118) 15,778
Current income taxes on
discontinued operations -- -- 2,869 --
Commodity hedge related
activity 1,658 (11,311) (9,069) (33,844)
Amortization of stock-based
compensation 6,449 2,928 19,619 7,794
Amortization of deferred
revenue (21,882) -- (53,956) --
Other noncash items 3,950 788 10,777 6,492
--------- --------- ---------- ---------

EBITDAX (a) 391,036 331,271 1,211,861 987,377

Less: Cash interest
expense (27,370) (25,921) (88,461) (80,262)
Current income taxes (11,998) (7,516) (39,308) (19,188)
--------- --------- ---------- ---------

Discretionary cash
flow (b) 351,668 297,834 1,084,092 887,927

Less: Cash exploration
expense (11,381) (18,907) (26,067) (26,818)
Changes in operating
assets and
liabilities (22,555) (39,788) (72,848) (103,636)
--------- --------- ---------- ---------

Net cash provided by
operating activities $317,732 $239,139 $985,177 $757,473
========= ========= ========== =========


(a) "EBITDAX" represents earnings before depletion, depreciation and
amortization expense; impairment of long-lived assets; exploration
and abandonments; loss on debt extinguishment; accretion of
discount on asset retirement obligations; interest expense; income
taxes; gain or loss on the disposition of assets; noncash effects
from discontinued operations; commodity hedge related activity;
amortization of 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.


PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL INFORMATION
As of November 2, 2005

Open Commodity Hedge Positions

2005
---------
Fourth
Quarter 2006 2007 2008
--------- --------- --------- --------

Average Daily Oil Production
Hedged:
Swap Contracts:
Volume (Bbl) 27,000 10,000 13,000 17,000
NYMEX price (Bbl) $27.97 $31.69 $30.89 $29.21
Collar Contracts:
Volume (Bbl) -- 9,129 4,500 --
NYMEX price (Bbl)
Ceiling $-- $74.92 $90.43 $--
Floor $-- $44.25 $50.00 $--

Average Daily Gas Production
Hedged:
Swap Contracts:
Volume (MMBtu) 253,535 73,842 29,195 5,000
NYMEX price (MMBtu) (a) $5.20 $4.30 $4.30 $5.40
Collar Contracts:
Volume (MMBtu) -- 183,685 215,000 --
NYMEX price (MMBtu)
Ceiling $-- $14.55 $11.95 $--
Floor $-- $7.00 $6.70 $--


(a) Approximate, based on historical differentials to index prices.


Amortization of Volumetric Production Payment Proceeds and Net
Derivative Losses (in thousands)

2005
--------
Fourth
Quarter 2006 Thereafter Total
-------- --------- ---------- ---------


VPP proceeds, net of
transaction costs $21,061 $184,099 $635,594 $840,754
Net hedge obligations assigned 757 6,248 28,973 35,978
-------- --------- ---------- ---------

Total deferred revenue (a) 21,818 190,347 664,567 876,732
Less net derivative losses to
be recognized in pretax
earnings (b) (2,307) (4,860) (20,657) (27,824)
-------- --------- ---------- ---------

Total VPP impact to pretax
earnings $19,511 $185,487 $643,910 $848,908
======== ========= ========== =========

(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.



Contact Information

  • Pioneer Natural Resources Company, Dallas
    Investors:
    Frank Hopkins or Chris Paulsen, 972-444-9001
    or
    Media and Public Affairs:
    Susan Spratlen, 972-444-9001