The plaintiffs in this lawsuit are royalty owners in oil and gas properties located in the Hugoton field, which are owned by Pioneer's subsidiary, Pioneer Natural Resources USA, Inc. ("Pioneer USA"). The plaintiffs sued a predecessor company to Pioneer USA asserting various claims relating to alleged improper deductions in the calculation of royalties.
Under the terms of the agreement, Pioneer USA will make cash payments to settle the plaintiffs' claims with respect to production occurring on and before December 31, 2005. Pioneer USA also agreed to adjust the manner in which royalty payments to the class members will be calculated for production occurring on and after January 1, 2006.
Pioneer's portion of the cash payment is expected to be approximately $32 million. The cash portion will be paid in two installments. Pioneer does not expect the settlement to impact net income for its quarter ended September 30, 2006 because Pioneer has previously accrued sufficient contingency reserves associated with this case. In addition, the change in the calculation of future royalty payments is not expected to have a material effect on Pioneer's liquidity, financial condition or future results of operations.
The settlement agreement is subject to customary conditions, including preliminary and final court approval.
Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas with operations in the United States, Canada and Africa.
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