The Company has also assigned a 40% working interest in the Tuvaaq exploration well on Alaska's North Slope to Kerr-McGee.
New Drilling Rig
The new drilling rig, which will be built in Canada this summer and begin operations later this year, will be lightweight and highly mobile and is designed to maximize the number of wells drilled during the relatively short winter drilling season on the Alaska North Slope. This fit-for-purpose rig will significantly reduce drilling costs and increase productivity by reducing ice road and mobilization costs. It will also allow the Company to optimize its drilling program over Pioneer's extensive undeveloped acreage position on the North Slope.
Ken Sheffield, President of Pioneer's Alaska subsidiary commented, "We are very pleased to be working with two of the most experienced and efficient drilling contractors in the Arctic, Doyon and Akita. The new rig is an example of the entrepreneurial approach Pioneer brings to the North Slope and underscores Pioneer's strategy of providing strong returns and production growth through high-impact exploration in Alaska."
2005 Alaska Exploration Program
Earlier this year, Pioneer announced a $50 million exploration program for 2005 in Alaska with activities centered on the following areas:
-- National Petroleum Reserve - Alaska (20% to 30% working interest) 1.4 million acres in an under-explored area with various leads and prospects -- Storms Lead Area (50% working interest and operator) 130,000-acre position adjacent to the giant Prudhoe Bay and Kuparuk River Units -- Tuvaaq Offshore Lease (40% working interest) A 14,000-acre block northeast of Pioneer's Oooguruk Unit with a primary objective in the Ivishak sands and a secondary objective in the Schrader Bluff sands encountered in the adjacent Nikaitchuq Unit
Drilling operations have concluded on the Tuvaaq exploration well. The well encountered wet sands in the primary Ivishak objective and hydrocarbon-bearing sands in the Schrader Bluff interval. Pioneer elected to assign its interest to Kerr-McGee rather than participate with a small working interest in the eventual development of the Schrader Bluff resource, most of which is found in the adjacent Nikaitchuq Unit operated by Kerr-McGee. As a result, Pioneer will not incur any capital expense related to the well.
Pioneer and partner ConocoPhillips concluded a 3-D seismic survey in the Storms area and may drill the first exploratory well on the acreage as early as 2006. The Company is also participating with ConocoPhillips and Anadarko Petroleum Corporation in two to three wells in the National Petroleum Reserve - Alaska.
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