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Pioneer Natural Resources Reports Third Quarter 2013 Financial And Operating Results

In the liquids-rich Eagle Ford Shale play in South Texas, Pioneer has added approximately 300 drilling locations in the liquids-rich area of the play as a result of downspacing from 1,000 feet between wells (120-acre spacing) to 500 feet (60-acre spacing) between wells. The Company also utilized zipper fracture stimulation on three-well and four-well pads in the same liquids-rich areas where downspacing has been implemented. Using this fracture stimulation technique on the pad wells improves the fracture network and has resulted in EURs for the zipper fracture-stimulated wells increasing by 20% as compared to offset single wells, or from 1.0 million barrels oil equivalent (MMBOE) to 1.2 MMBOE.

Further testing of downspacing to 300 feet between wells is underway in the liquids-rich areas where 500-foot spacing was successful. Early results are encouraging, and the potential exists to add 300 to 400 drilling locations. This testing will include staggered laterals in the Upper Eagle Ford Shale interval and the Lower Eagle Ford Shale interval. Pioneer’s first Upper Eagle Ford Shale well was recently successfully completed with a 24-hour peak initial production rate of 1,620 BOEPD, comparable to Lower Eagle Ford Shale interval wells. Approximately 25% of Pioneer’s acreage is expected to be prospective for this interval.

Pioneer expects to drill approximately 130 Eagle Ford Shale wells in 2013 at a cost of $7 million to $8 million per well for lateral lengths of approximately 5,500 feet. Essentially all of these wells will be in Pioneer’s liquids-rich acreage. Pioneer’s drilling operations in the Eagle Ford Shale continue to become more efficient. The number of wells drilled from pads, as opposed to single-well locations, is expected to increase from 45% of the wells drilled in 2012 to more than 80% of the wells drilled in 2013, reflecting that most of Pioneer’s acreage is now held by production. Pad sizes range from two wells to six wells per pad. None of the wells are fracture stimulated until all of the wells on a pad are drilled. Therefore, the timing between when the first well on a pad is spud and when the pad is placed on production is dependent on how many wells are drilled from the pad and is significantly extended compared to single- well drilling. For perspective, it is taking 100 days to 125 days from the time the first well on a three-well pad is spud until all three wells on the pad are placed on production. Consequently, the Company’s pad drilling is resulting in “lumpy” quarter-to-quarter production growth. The Company placed 26 wells on production during the third quarter of 2013, of which 11 were in September, and expects to place approximately 45 wells on production during the fourth quarter. Pad drilling saves $600 thousand to $700 thousand per well and will result in Pioneer being able to drill 130 wells with 10 rigs in 2013 compared to drilling a similar number of wells in 2012 with 12 rigs.

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