2012 Capital Budget
Pioneer’s capital program for 2012 of $3.0 billion (excludes acquisitions, asset retirement obligations, capitalized interest and geological and geophysical G&A) includes drilling capital of $2.5 billion and capital for vertical integration of $0.5 billion.
The Company is increasing its 2012 drilling budget from $2.4 billion to $2.5 billion. The increase of $100 million primarily supports the acceleration of appraisal activity in the horizontal Wolfcamp Shale. The overall program continues to be focused on liquids-rich drilling, with approximately 75% of the spending earmarked for Spraberry vertical and horizontal Wolfcamp Shale drilling and 10% for Eagle Ford Shale drilling.
The capital for vertical integration of $500 million includes $300 million for the U.S. industrial sands business acquired by Pioneer in early April, $100 million for pressure pumping and well service equipment and $100 million for the accelerated construction of field offices and facilities from 2013 into 2012.
The 2012 capital budget is expected to be funded from forecasted operating cash flow of $1.8 billion, assuming commodity prices of $85 per barrel for oil and $3 per thousand cubic feet (MCF) for gas for the fourth quarter of 2012; proceeds of $500 million from Pioneer’s equity offering during the fourth quarter of 2011; net proceeds of $200 million from the liquidation of certain 2014 and 2015 gas derivatives, liquidating expiring interest rate swaps and the utilization of existing pipe and equipment inventory; proceeds from the divestiture of South African and certain South Texas assets of $100 million and borrowings of $400 million under Pioneer’s credit facility.
Third Quarter 2012 Financial Review
The following financial results for the third quarter of 2012 reflect continuing operations and exclude the results of operations attributable to South Africa and the Barnett Shale that are included in discontinued operations.