Pioneer Reports Strong Third Quarter 2005 Results
Pioneer Natural Resources Company reports financial and operating results for the quarter ended September 30, 2005.
Pioneer reported net income for the quarter of $124 million, or $.88 per diluted share, an increase of 53% over net income for the same period last year of $81 million, or $.67 per diluted share. Income from continuing operations was $105 million, or $.74 per diluted share, compared to income from continuing operations of $77 million, or $.64 per diluted share, for the same period in 2004.
Pioneer's net income for the quarter included discontinued operations of $30 million ($19 million after-tax) related to the divestiture of its interest in non-core assets on the Gulf of Mexico shelf. Net income also included a $33 million pre-tax charge ($21 million after-tax) related to the incremental abandonment obligation for the East Cameron 322 field which was lost during Hurricane Rita. Insurance is expected to cover this cost as well as the value of the platform and lost revenues. Insurance recoveries will be recognized as income in future quarters as the amount of the recoveries becomes known.
Cash flow from operations for the third quarter was $318 million, an increase of 33% compared to $239 million for the same period in 2004. The increase in operating cash flow is attributable to higher prices for oil, gas and natural gas liquids partially offset by cost increases.
Scott D. Sheffield, Chairman and CEO, stated, "We had a strong quarter and have made significant progress in executing the strategic initiatives we announced in September. We completed most of the first phase of our share repurchase program, repurchased $217 million of bonds and increased our semiannual dividend by 20%. In October, we opened data rooms covering the assets we have targeted for divestiture in the deepwater Gulf of Mexico and Tierra del Fuego in southern Argentina. Our increased 2005 drilling programs are on track, and we've made significant progress towards sanctioning a project to commercialize our gas reserves offshore South Africa."
During 2005, Pioneer has repurchased 19.8 million shares for $941 million, including $641 million of the $650 million share repurchase program announced on September 1 for execution during 2005. A $300 million repurchase program concluded earlier in the year.
Third quarter oil and gas sales averaged 169,255 barrels oil equivalent per day (BOEPD), excluding 1,831 BOEPD associated with fields sold during the quarter that are reflected in discontinued operations. Third quarter oil sales averaged 41,938 barrels per day (BPD) and natural gas liquids sales averaged 20,595 BPD. Gas sales in the third quarter averaged 640 million cubic feet per day (MMcfpd). Third quarter prices for oil and natural gas liquids were $40.66 and $34.53 per barrel, respectively. The worldwide price for gas was $5.70 per thousand cubic feet (Mcf) and includes $.37 per Mcf associated with the VPP transactions. North American gas prices averaged $7.10 per Mcf, including $.48 per Mcf associated with the VPP transactions.
Third quarter production costs averaged $7.61 per barrel of oil equivalent (BOE). The increase in third quarter lease operating costs is attributable to increases in commodity prices resulting in higher production taxes, decreases in deepwater Gulf of Mexico production which has lower per BOE operating costs and price increases in services and supplies related to field operations. Exploration and abandonment costs were $64 million for the quarter and included $11 million of dry hole and abandonments associated primarily with unsuccessful wells in Argentina and Tunisia, $33 million of incremental abandonment charges associated with the aforementioned East Cameron 322 field which was lost during Hurricane Rita, $17 million of geologic and geophysical expenses including seismic costs and $3 million of delay rentals and unproved acreage abandonments. General and administrative costs for the quarter were $33 million.
For the same quarter last year, adjusted to exclude discontinued operations from asset sales, Pioneer reported oil and gas sales of 170,298 BOEPD, including oil sales of 44,004 BPD, natural gas liquids sales of 20,933 BPD and gas sales of 632 MMcfpd. Prices for third quarter 2004 were $33.29 per barrel for oil, $26.89 per barrel for natural gas liquids and $4.11 per Mcf for gas. North American gas prices averaged $5.08 per Mcf.
During the third quarter, Pioneer continued the aggressive pace of development set earlier in the year. Currently, the Company has 18 onshore rigs running in the U.S., five in Argentina, five in Canada and one in Tunisia.
As discussed above, Pioneer's East Cameron 322 platform was destroyed by Hurricane Rita. Pioneer plans to abandon the East Cameron 322 field because the pre-hurricane production of approximately 600 BOEPD and future production profile do not justify the cost of replacing the platform. Devils Tower production is in the process of being restarted, and production is expected to return to pre-hurricane levels of approximately 5,000 net BOEPD shortly after start up. The subsea wells at the Triton and Goldfinger satellite fields have been tied back to the Devils Tower platform and are ready to flow. Further increases in production from these subsea wells and Devils Tower well recompletions will occur over the next few months as additional repairs are completed on Chevron's Empire Terminal. Pioneer's remaining operations in the Gulf of Mexico experienced limited disruptions from Hurricanes Katrina and Rita. Deepwater facilities at Falcon, Canyon Express and Devils Tower had little to no damage. By October 1, 2005, Falcon and Canyon Express were fully operational and producing at pre-hurricane levels.
In the Raton Basin, production is increasing as a result of a pipeline expansion that was completed in October. Pioneer drilled 36 Raton wells during October, 234 wells year-to-date, and expects production growth from the field of 5% to 7% during 2005.
In Canada, Pioneer has drilled 90 wells of a 180 well program in the Horseshoe Canyon coal bed methane play and expects to complete the balance of the program by the end of the year. An additional 180 well program is planned for 2006.
In South Africa, Pioneer and PetroSA have signed a Memorandum of Understanding finalizing the terms for jointly developing South Coast gas fields to provide feedstock for PetroSA's onshore gas-to-liquids plant at Mossel Bay. Pioneer holds a 45% interest in the gas development project and expects to initiate production from the project during the first half of 2007.
In October, the Company announced a discovery on its Clipper
prospect in the deepwater Gulf of Mexico. This discovery will be
included in Pioneer's deepwater Gulf of Mexico divestment program.
Data rooms related to this divestment and the Tierra del Fuego
properties in Argentina have been opened. Randall & Dewey is advising
Pioneer on the Gulf of Mexico sale, and Scotia Waterous/Toronto
Dominion is supporting the Argentine sale. The bids related to both
divestiture packages are due in December.
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