Pioneer Natural Resource Q1 2010 Earnings Call Transcript

Pioneer Natural Resource Q1 2010 Earnings Call Transcript
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Pioneer Natural Resource (PXD)

Q1 2010 Earnings Call

May 05, 2010 10:00 am ET

Executives

Timothy Dove - President and Chief Operating Officer

Frank Hopkins - Vice President of Investor Relations

Richard Dealy - Chief Financial Officer and Executive Vice President

Scott Sheffield - Chairman and Chief Executive Officer

Analysts

Michael Hall

Amir Arif - Stifel, Nicolaus & Co., Inc.

Gil Yang - BofA Merrill Lynch

Brian Corales - Coker & Palmer

Leo Mariani - RBC Capital Markets Corporation

Scott Wilmoth - Simmons

Michael Jacobs - Private Investor

Sven Del Pozzo - C. K. Cooper & Company, Inc.

Presentation

Operator

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Welcome to Pioneer Natural Resources First Quarter Conference Call. [Operator Instructions] Joining us today will be Scott Sheffield, Chairman and Chief Executive Officer; Tim Dove, President and Chief Operating Officer; Rich Dealy, Executive Vice President and Chief Financial Officer; and Frank Hopkins, Vice President of Investor Relations.

Pioneer has prepared PowerPoint slides to supplement their comments today. These slides can be accessed over the Internet at www.pxd.com. At the website, select Investors, then select Investor Presentations.

The company's comments today will include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements and the business prospects of Pioneer are subject to a number of risks and uncertainties that may cause actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties are described in Pioneer's new release on Page 2 of the slide presentation and in Pioneer's public filings made with the Securities and Exchange Commission.

At this time, for opening remarks and introductions, I would like to turn the call over to Pioneer's Vice President of Investor Relations, Frank Hopkins. Please go ahead, sir.

Frank Hopkins

Good day, everyone, and thank you for joining us. I'll briefly run through the agenda for today's call. Scott's going to be up first. He'll review the financial and operating highlights for the first quarter of 2010. He'll then comment on the company's plans for the remainder of this year and talk a little bit about 2011 and beyond. After Scott's finished with his remarks, Tim's going to provide an update on our recent drilling results and plans for this Spraberry/Eagle Ford Shale and Alaska. Rich will then cover the first quarter financials in more detail and provide earnings guidance for the second quarter. After that, we'll open up the call for your questions. With that, I'll turn the call over to Scott.

Scott Sheffield

Thanks, Frank. Good morning. We appreciate everyone taking the time to listen to us for this quarter. I'll start on Slide #3, our highlights.

First quarter 2010 adjusted income of $58 million or $0.48 per share above consensus, excludes income from unusual items totaling about $23 million or $0.20 per share. And also a non-cash mark-to-market hedging gain of $164 million after tax or about $1.40 per share.

First quarter production, mid-point of guidance, around 114.3. And first quarter was about 7% above fourth quarter, primarily due to excellent drilling results in the Spraberry and Eagle Ford and Alaska. Obviously, resumption of our operations at our GTL plant that was shut in the fourth quarter and then the expiration of a gas VPP.

Obviously, the Spraberry drilling ramp-up is ahead of schedule, current running 19 rigs and on track to be close to 30 rigs by the end of this year. Another successful well with an IP of about 15.6 million equivalent, still with industry-leading results in the Eagle Ford play, 45% liquids. And our JV process is on track as Tim will talk more about later about the Eagle Ford and its results.

We also drilled three key wells, highly productive at both the Kuparuk and the Moraine at Oooguruk project, which will help production significantly going forward. In addition, we started up our rig to drill three operated wells in Tunisia.

We added significant derivative positions, both oil and gas at very attractive prices. Obviously, we did it before the markets adjusted over the last 3, 4 days. In addition, we reduced debt by $113 million, a combination of free cash flow and partial MMS refund, received about $95 million of our expected $150 million so far from the MMS. In addition, our debt to book down to 40%. So we're very, very close to achieving our target of between 35% and 40%.

Slide #4, return to quarterly production growth in first quarter 2010. Obviously by this first quarter, we're already up 7% on our 10% plus target. Obviously, that excludes the Eagle Ford ramp up. Well obviously, we benefit from 5,000 barrels a day of VPP that expired into 2009. We're still one of the few companies with no significant gas drilling, or really no gas drilling on dry gas drilling going on, on our key properties.

CapEx, approximately $900 million. Obviously, we're continuing to forecast strong double-digit annual production growth from 2011 through 2015. And we think it's important to re-emphasize the fact that we are spending within cash flow.

Slide #5, our CapEx. Obviously, based on the current matrix chart, we're currently -- based on the current strip as of yesterday, now it's obviously, it's off today. But we're about $1.1 billion cash flow based on that and where our store is. CapEx, about $900 million. That includes 440 Spraberry wells and a 2-rig Eagle Ford program. Obviously, we'll be ramping that up somewhere within six and seven rigs by the end of the year. And again, obviously, as I've mentioned, it does not include ramping up Eagle Ford over the next two or three quarters.

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