DALLAS–(Business Wire)–
Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer” or “the Company”) today
announced the Company signed a joint venture agreement with a wholly-owned U.S.
subsidiary of Reliance Industries Limited (“Reliance”). Under the agreement,
Pioneer will sell a 45% interest in approximately 212,000 net acres leased by
the Company in the highly prospective Eagle Ford Shale play for a total price of
$1.15 billion. Reliance will pay $266 million in cash to Pioneer at closing and
will pay an additional $879 million to carry Pioneer`s share of future drilling
costs (“drilling carry”). Reliance will also participate with Pioneer in the
development of midstream assets in the Eagle Ford Shale as a 49.9% partner.
Closing is expected within five business days. Reliance has also entered into a
joint venture agreement with Pioneer`s existing partner in the Eagle Ford Shale
play, Newpek LLC, for total consideration of approximately $210 million.
The joint venture agreement is effective June 1, 2010. Under the agreement,
Reliance acquires 95,300 net acres of leasehold held by Pioneer. Pioneer retains
an average 42% working interest in the acreage and Reliance receives an average
41% working interest, with other working interest owners continuing to hold the
remaining 17% working interest. Pioneer continues as operator. Reliance has the
right to perform certain drilling and completion operations beginning in 2011 -
one rig initially escalating up to four rigs under the current drilling ramp-up
schedule. In addition to funding its own drilling obligations, Reliance has
agreed to fund 75% of Pioneer`s portion of drilling costs until the $879 million
of drilling carry is fully utilized. Pioneer has six years to utilize the
drilling carry, subject to extension under certain circumstances.
Pioneer and Reliance have agreed to a joint venture development plan which
forecasts the drilling of 26 horizontal Eagle Ford Shale wells during June
through December 2010, increasing to 70 wells in 2011, 120 wells in 2012 and 140
wells in 2013. This plan is consistent with the accelerated development program
previously announced by Pioneer (7 rigs by year-end 2010, 10 rigs by year-end
2011 and 14 rigs by year-end 2012) and will allow the joint venture to retain
its acreage position.
Pioneer has successfully drilled and completed six horizontal wells in the Eagle
Ford Shale. Five of these are on production at a combined rate of 28 million
cubic feet equivalent per day (gross) and the sixth is expected to be brought
online late in the third quarter following the completion of a central gathering
facility. Pioneer recently increased its drilling activity in the play from two
rigs to five rigs. These rigs are currently drilling in Live Oak, Karnes and
DeWitt Counties. Three additional wells are awaiting completion. These three
wells are expected to be brought online during the fourth quarter after central
gathering facilities are completed. Pioneer is also purchasing a new fracture
stimulation fleet to support the joint venture`s drilling ramp-up. This new
fleet is expected to be operational by the second quarter of 2011.
The joint venture will benefit from Pioneer`s position as a technology leader in
the Eagle Ford Shale with greater than 2,000 square miles of 3-D seismic data,
logs from more than 150 operated wells, proprietary core samples and
micro-seismic results. Approximately 1,750 drilling locations have been
identified over the existing joint venture acreage position with a gross
resource potential of more than 11 trillion cubic feet equivalent.
Pioneer and Reliance expect to continue to grow the joint venture`s Eagle Ford
Shale leasehold position within an area of mutual interest (AMI), which includes
six counties in Texas (Atascosa, Bee, DeWitt, Karnes, Live Oak and McMullen).
Pioneer will act as the sole leasing agent for the joint venture in the AMI.
Reliance will have the option to acquire a 45% interest in Pioneer`s share of
such new acreage under comparable terms to those agreed to by Pioneer with the
leasehold owner. The joint venture will own approximately 9,500 net acres within
the AMI that have recently been acquired by Pioneer.
Pioneer and Reliance will also develop a midstream business which will initially
consist of central gathering facilities to separate condensate production from
produced gas and to treat the produced gas. Pioneer`s 50.1% capital requirement
associated with the construction of these facilities through 2013 is estimated
to total approximately $275 million, with much of this capital expected to be
spent by the end of 2011. Developing this midstream business as opposed to
contracting with a third-party will provide enhanced control and efficiencies
for the marketing of the joint venture`s upstream production and the potential
to attract third party business.
Based on the joint venture development plan, Pioneer`s net production in the
Eagle Ford Shale is expected to increase from an average of 2,000 barrels oil
equivalent per day (BOEPD) in 2010 to a range of 32,000 BOEPD to 41,000 BOEPD in
2013. This strong production growth, coupled with the up-front cash payment and
drilling carry from Reliance, is expected to generate positive cash flow for
Pioneer from its Eagle Ford Shale upstream and midstream activities in all years
going forward (assuming current NYMEX strip prices for oil and gas).
Scott Sheffield, Chairman and CEO, stated, “We are very excited to partner with
Reliance, a global energy industry leader, and pleased that they share our
confidence in the development potential of Pioneer`s large, liquids-rich acreage
position in the Eagle Ford Shale. Our joint development plan will add
significant production and reserves for Pioneer while enhancing shareholder
value.”
“We had originally forecasted total Company production growth at 10+% per year
over the 2011 through 2013 period, while continuing our commitment to spend
within cash flow. This strong growth was primarily attributable to our
significant drilling ramp up in the Spraberry field. With the addition of the
ramp up in Eagle Ford Shale drilling, we now expect production growth over this
same period to be 15+% per year, while still spending within cash flow. Cash
flow is forecasted to substantially increase from $1.2 billion in 2010 to $2.0
billion in 2013 assuming current NYMEX strip prices and taking into account the
Company`s attractive oil and gas derivatives for 2010 through 2013.”
Pioneer Natural Resources Company is a large independent oil and gas exploration
and production company, headquartered in Dallas, Texas, with operations
primarily in the United States. For more information, visit Pioneer`s website at
www.pxd.com.
Reliance Industries Limited is an India-based industrial enterprise with a
market capitalization of over $78 billion. It is one of the largest refiners and
petrochemical producers in the world and currently produces approximately 3
billion cubic feet equivalent per day of oil and gas production from its E&P
operations. For more information, visit Reliance`s website at www.ril.com.
On Thursday, June 24, 2010, at 9:00 a.m. Central Time, Pioneer will hold a
conference call and webcast to discuss the Eagle Ford Shale joint venture
transaction, with an accompanying presentation. Instructions for listening to
the call and viewing the presentation are shown below.
Internet: www.pxd.com
Select “Investors,” then “Investor Presentations,” to listen to the discussion
and view the presentation.
Telephone: Dial (877) 440-5807, confirmation code: 4015000 five minutes before
the call. View the presentation via Pioneer`s internet address above.
A replay of the webcast will be archived on Pioneer`s website. A telephone
replay will be available through July 16 by dialing (888) 203-1112, confirmation
code: 4015000.
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 that 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 commodity prices, product supply and demand, competition, the
ability to obtain environmental and other permits and the timing thereof, other
government regulation or action, the ability to obtain approvals from third
parties and negotiate agreements with third parties on mutually acceptable
terms, international operations and associated international political and
economic instability, litigation, the costs and results of drilling and
operations, access to and availability of drilling equipment and transportation,
processing and refining facilities, Pioneer’s ability to replace reserves,
implement its business plans or complete its development activities as
scheduled, access to and cost of capital, the financial strength of
counterparties to Pioneer`s credit facility and derivative contracts and the
purchasers of Pioneer`s oil, NGL and gas production, uncertainties about
estimates of reserves and resource potential and the ability to add proved
reserves in the future, the assumptions underlying production forecasts, quality
of technical data, environmental and weather risks, including the possible
impacts of climate change, and 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. In addition, Pioneer may be subject to
currently unforeseen risks that may have a materially adverse impact on it.
Pioneer undertakes no duty to publicly update these statements except as
required by law.
Cautionary Note to U.S. Investors –The U.S. Securities and Exchange Commission
(the “SEC”) prohibits oil and gas companies, in their filings with the SEC, from
disclosing estimates of oil or gas resources other than “reserves,” as that term
is defined by the SEC. In this presentation, Pioneer includes estimates of
quantities of oil and gas using certain terms, such as “resource potential,” or
other descriptions of volumes of reserves, which terms include quantities of oil
and gas that may not meet the SEC`s definitions of proved, probable and possible
reserves, and which the SEC’s guidelines strictly prohibit Pioneer from
including in filings with the SEC. These estimates are by their nature more
speculative than estimates of proved reserves and accordingly are subject to
substantially greater risk of being recovered by Pioneer. U.S. investors are
urged to consider closely the disclosures in the Company`s periodic filings with
the SEC.Such filings are available from the Company at 5205 N. O’Connor Blvd.,
Suite 200, Irving, Texas 75039, Attention: Investor Relations, and the Company`s
website at www.pxd.com. These filings also can be obtained from the SEC by
calling 1-800-SEC-0330.
Pioneer Natural Resources
Investors
Frank Hopkins, 972-969-4065
or
Nolan Badders, 972-969-3955
or
Media and Public Affairs
Susan Spratlen, 972-969-4018
or
Suzanne Hicks, 972-969-4020
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