Pioneer Natural Resources Company (PXD)

[Timothy Smith]

Pioneer Natural Resources Reports Year-End 2012 Proved Reserves and Finding Costs

Feb 7, 2013 8:30:00 AM
Copyright Business Wire 2013
DALLAS--(BUSINESS WIRE)-- Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer” or “the Company”) today announced that the Company added proved reserves totaling 161 million barrels oil equivalent (MMBOE) during 2012 from discoveries, extensions, improved recovery and technical revisions of previous reserve estimates. These drillbit proved reserve additions equate to replacing 264% of Pioneer’s full-year 2012 production of 61 MMBOE (includes proved reserves used for field fuel of 3 MMBOE and production of 1 MMBOE from South Africa prior to its sale). The drillbit finding and development (F&D) cost related to proved reserve additions was $17.72 per barrel oil equivalent (BOE).

The NYMEX prices used for 2012 proved reserves reporting purposes were $94.84 per barrel for oil and $2.76 per million British thermal units (MMBtu) for gas. The oil price for 2012 was slightly below the oil price used to calculate proved reserves for 2011 ($96.13 per barrel), while the gas price for 2012 was significantly lower than the gas price used to calculate proved reserves for 2011 ($4.12 per MMBtu). The significant decline in gas prices resulted in moving proved undeveloped (PUD) gas reserves to probable reserves in the Raton field in southeastern Colorado, the Edwards Trend in South Texas and the Barnett Shale play in North Texas. As a result, the Company recognized negative price revisions of 82 MMBOE during 2012.

The Company’s successful horizontal Wolfcamp Shale drilling results in 2012 has led the Company to shift more of its future drilling activity in the Spraberry field from vertical drilling to horizontal drilling. As a result, Pioneer no longer expects to drill a significant number of its previously recorded vertical PUD locations within the next five years. Consequently, in compliance with Securities and Exchange Commission guidelines, 80 MMBOE of PUD reserves associated with vertical drilling locations in the Spraberry field have been moved to probable reserves. This reduction in proved reserves is reflected in technical revisions. Based on the horizontal drilling conducted by Pioneer to date in the Spraberry field, sufficient production data is not yet available to support the entire replacement of the vertical PUD reserves that were removed in 2012 with horizontal PUD reserve additions. Reserve additions during 2012 include 37 MMBOE of proved reserves added as a result of horizontal Wolfcamp Shale drilling in the Spraberry field. The Company expects to gain additional production data during 2013 from its expanding horizontal drilling program which is expected to support the addition of incremental horizontal proved developed (PD) and PUD reserves during 2013 and beyond.

Scott D. Sheffield, Chairman and CEO, stated, "In 2012, we again delivered drillbit reserve replacement well in excess of production and achieved our targeted drillbit F&D cost of $14 to $18 per BOE for the year, despite deferring the drilling of a substantial number of vertical Spraberry locations beyond five years. This strong performance is due to the continued successful execution of our drilling programs in the Spraberry field, the horizontal Wolfcamp Shale, the Eagle Ford Shale, the Barnett Shale Combo and Alaska.”

As mentioned above, technical revisions of previous reserve estimates for 2012 included the movement of 80 MMBOE of vertical PUD reserves to the probable category. This negative impact was partially offset by performance improvements totaling 53 MMBOE across Pioneer’s asset portfolio, resulting in net negative technical revisions of 27 MMBOE for the year. Technical revisions are included in the calculation of the drillbit F&D cost.

Pioneer’s proved reserve additions from the drillbit and acquisitions totaled 170 MMBOE for 2012. After taking into account the Company’s production for 2012 of 61 MMBOE, negative pricing revisions of 82 MMBOE and proved reserves of 4 MMBOE that were removed due to the divestitures of South Africa and certain Barnett Shale properties during 2012, proved oil and gas reserves totaled 1,086 MMBOE as of year-end 2012. Including negative pricing revisions, the Company replaced 144% of production at an all-in F&D cost of $34.46 per BOE.

As of December 31, 2012, all of Pioneer’s proved reserves are in the United States and 58% are classified as PD. Approximately 45% of the Company’s proved reserves are oil, 21% are NGLs and 34% are gas. Pioneer’s proved reserves are long-lived with a total reserves-to-production ratio of 18 years and a PD reserves-to-production ratio of 10 years.

The table below shows Pioneer’s year-end 2012 proved reserves by asset in MMBOE:

Spraberry 627
Raton 119
Eagle Ford Shale 116
Mid-Continent 101
Barnett Shale 55
Alaska 44
South Texas 23
Other 1
Total 1,086

Total costs incurred during 2012 were $3.0 billion, which included exploration and development spending, acquisitions, asset retirement obligations, capitalized interest and geological and geophysical G&A. Of this amount, $2.8 billion was attributable to development and exploration activities.

The commodity prices used for 2012 resulted in a pre-tax present value of future net cash flows discounted at 10% (PV-10) of $8.3 billion for Pioneer’s proved reserves.

Netherland, Sewell & Associates, Inc. and Ryder Scott Company, L.P., independent reserve engineering firms, audited the proved reserves of significant fields. These audits covered properties representing 95% of Pioneer’s total proved reserves at year-end 2012.

Year-end proved reserves, costs incurred and a reconciliation of PV-10 to Standardized Measure are detailed in the attached supplemental schedules.

Further information regarding 2012 reserves and finding costs will be discussed during Pioneer’s quarterly conference call scheduled for Thursday, February 14, 2013 at 9:00 a.m. Central Time, when Pioneer will also discuss its fourth quarter and full year 2012 financial and operating results and 2013 Capital Budget with an accompanying presentation. Instructions for listening to the call and viewing the presentation are shown below.

Internet: www.pxd.com

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