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Pioneer Natural Resources Reports Fourth Quarter 2013 Financial And Operating Results And Announces 2014 Capital Budget

Stocks in this article: PXD

Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer” or “the Company”) today announced financial and operating results for the quarter ended December 31, 2013.

Pioneer reported a fourth quarter net loss attributable to common stockholders of $1.4 billion, or $9.82 per diluted share (see attached schedule for a description of the net loss per diluted share calculation). Without the effect of noncash derivative mark-to-market losses and other unusual noncash items, adjusted income for the fourth quarter was $140 million after tax, or $1.00 per diluted share.

Fourth quarter and other recent highlights included:

  • producing 164 thousand barrels oil equivalent per day (MBOEPD) from continuing operations in the fourth quarter (excludes the previously announced sale of Alaska assets and the plan to sell the Company’s Barnett Shale assets that is being announced today); fourth quarter production was curtailed by approximately 6 MBOEPD due to severe winter weather in Texas, primarily in the Spraberry/Wolfcamp play; fourth quarter production was 173 MBOEPD including Barnett Shale production, which is consistent with Pioneer’s news release on January 20, 2014;
  • producing 161 MBOEPD for full-year 2013 from continuing operations (excludes production from Alaska and Barnett Shale assets that is reflected in discontinued operations), an increase of 12% from a comparable full-year 2012; this strong production growth was primarily related to the Company’s successful Spraberry/Wolfcamp (+19%) and Eagle Ford Shale (+35%) drilling programs; Eagle Ford Shale achieved record production in the fourth quarter;
  • growing oil production from continuing operations by 22% in 2013 as compared to 2012;
  • delivering 211% drillbit reserve replacement by adding proved reserves of 141 million barrels oil equivalent (MMBOE) (excludes proved undeveloped reserves removed totaling 319 MMBOE and positive pricing revisions of 30 MMBOE) at a drillbit finding and development cost of $19.70 per barrel oil equivalent (BOE);
  • forecasting annual production growth from continuing operations of 14% to 19% from 2013 to 2014 based on planned drilling capital expenditures of $3.0 billion; production growth in 2014 will be second-half weighted as Pioneer ramps up its drilling program in the northern Spraberry/Wolfcamp from five rigs at year-end 2013 to 16 rigs by the end of the first quarter;
  • targeting compound annual production growth from continuing operations of 16% to 21% for 2014 to 2016 and expecting to more than double production by 2018 compared to 2013;
  • having derivative coverage for approximately 90% of forecasted 2014 oil production at $93 per barrel or higher;
  • completing the merger of Pioneer and Pioneer Southwest Energy Partners L.P.;
  • progressing asset divestitures that will allow Pioneer to reallocate capital to the Company’s higher-return Spraberry/Wolfcamp horizontal drilling program; these divestitures include (i) the previously-announced sale of Pioneer’s Alaska assets for reduced proceeds of $350 million (remains subject to receiving governmental and other third-party approvals), (ii) the plan to sell Pioneer’s Barnett Shale assets that is being announced today and (iii) the expected divestiture of other assets for anticipated proceeds of approximately $100 million;
  • maintaining a strong balance sheet with approximately $400 million of cash on hand at year-end 2013, a net debt-to-operating cash flow of 1.1 and a net debt-to-book capitalization of 25%;
  • concluding that production data from Pioneer’s first 10 Wolfcamp A, B and D interval wells on its northern Spraberry/Wolfcamp acreage supports estimated ultimate recoveries (EURs) for wells with 7,000-foot lateral lengths of:
    • 1 MMBOE for Wolfcamp B interval wells in Midland County with before tax returns of 100+%,
    • 800 thousand barrels oil equivalent (MBOE) for Wolfcamp A interval wells in Midland County and Wolfcamp B interval wells in Martin County with before tax returns of 100+% and
    • 650 MBOE to 800 MBOE for Wolfcamp D interval wells in Midland, Martin and Andrews counties with before tax returns ranging from 45% to 95%;
  • placing four additional Wolfcamp B interval wells on production in the fourth quarter (two were in Midland County with 24-hour peak initial production (IP) rates of 2,673 barrels oil equivalent per day (BOEPD) and 2,347 BOEPD and two were in Martin County with 24-hour peak IP rates of 1,606 BOEPD and 756 BOEPD); early production data from these wells also supports EURs for Wolfcamp B interval wells with 7,000-foot lateral lengths of 1 MMBOE in Midland County and 800 MBOE in Martin County;
  • placing first Wolfcamp B interval well in Glasscock County on production in early February with 24-hour peak IP rate of 1,460 BOEPD;
  • placing the Company’s first five Lower Spraberry Shale interval wells on production in the fourth quarter and early January in Andrews, Glasscock, Martin and Midland counties, with 24-hour peak IP rates ranging from 537 BOEPD to 1,660 BOEPD and an average oil content of 84%; early production data from these wells suggests that Lower Spraberry Shale EURs will range from 575 MBOE to 800 MBOE with before tax returns ranging from 45% to 100%;
  • continuing to test horizontal downspacing in the southern Wolfcamp joint venture area; six wells downspaced to 480 feet between wells continue to display similar production performance to six offset wells placed at 720 feet between wells;
  • testing of 300-foot downspaced and staggered horizontal wells in the liquids-rich areas of the Eagle Ford Shale continues; initial 300-foot and staggered test in the Lower Eagle Ford Shale indicates performance is consistent with offset 500-foot spaced wells;
  • announcing that Pioneer’s first successful Upper Eagle Ford Shale well continues to perform in line with offset Lower Eagle Ford Shale wells; 45 Upper Eagle Ford Shale wells are planned in 2014 as part of the downspacing program in this play;
  • optimizing completions in the Eagle Ford Shale, which is increasing EURs by 20% to 30% with a minimal increase in drilling and completion capital and generating before tax returns of 100% on the incremental capital spent; and
  • increasing Pioneer’s net recoverable resource potential from more than 8 billion barrels oil equivalent (BBOE) to more than 10 BBOE, primarily as a result of drilling and downspacing success in the Spraberry/Wolfcamp and Eagle Ford Shale plays; Pioneer’s total proved reserves and net recoverable resource potential exceeds 11 BBOE.

Scott D. Sheffield, Chairman and CEO, stated, “I consider 2013 to be the best year in Pioneer’s 17-year history. Our successful horizontal drilling programs in the Spraberry/Wolfcamp and Eagle Ford Shale plays contributed to another year of strong production growth and drillbit reserve additions. The successful closing of our joint venture with Sinochem in the southern Wolfcamp and our successful equity offering in February allowed us to accelerate horizontal development drilling in the southern Wolfcamp and to commence appraising six horizontal shale intervals across our extensive northern Spraberry/Wolfcamp acreage position. By demonstrating the horizontal prospectivity of Pioneer’s northern acreage and progressing successful downspacing programs in the Eagle Ford Shale and the Spraberry/Wolfcamp, we added substantial resource potential and net asset value to the Company. We are in the process of reallocating capital to higher-return Spraberry/Wolfcamp horizontal drilling by reducing our vertical drilling activity and divesting our Alaska and Barnett Shale assets. We accomplished all of this while maintaining a strong balance sheet and building one of the best oil and gas derivative positions in the industry. Pioneer’s stock price increased by 73% during 2013, and we were once again the top performing energy stock in the S&P 500.”

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