The company's total 2007 capital spending is now budgeted at $1.3 billion excluding acquisitions, asset retirement obligations, capitalized interest and geological and geophysical G&A. As a result of this expanded drilling program and the recently announced $450 million increase in the company's share repurchase program to $750 million, Pioneer is increasing its compounded annual production per share growth target from 10+% to 12+% for 2007 through 2010.
Based on April strip pricing, Pioneer is also forecasting that cash flow from operations will approximately double between 2007 and 2010 due to production growth, expiration of legacy hedges (year-end 2008) and the effects of declines in volumetric production payments.
Since 2003, Pioneer has had a drilling success rate exceeding 90% in Tunisia. Recent successes include three discoveries on the PXD-operated Jenein Nord Block, a discovery and two successful appraisal wells on the Adam Concession and a discovery on the Borj El Khadra Block. The fourth well on the Jenein Nord Block is currently being logged. More than 30 prospects have been identified on these three blocks based on the 2006 3-D seismic program and existing 2-D seismic, some with individual resource potential as large as 25 million barrels of oil equivalent (MMBOE).
Based on this success, Pioneer is increasing its 2007 drilling and development budget for Tunisia by $70 million. The company plans to develop the three discoveries and complete the testing of the fourth well on the Jenein Nord Block and drill at least eight additional Tunisia wells this year. Pioneer's net oil and gas production is currently greater than 4,000 barrels oil equivalent per day (BOEPD) and 2007 and 2008 production rates are expected to rise at least 80% and 90%, respectively, compared to prior year levels, solidifying Tunisia's position as Pioneer's newest core area.
In the Edwards Trend in South Texas, Pioneer is increasing its capital spending by $60 million to expand its 2007 drilling program from 35 wells to 45 wells and increase its rig count from six to seven rigs. Pioneer had significant success in the trend during 2006 and drilled six new discoveries. More than 900 square miles of 3-D seismic is being shot and processed on these discoveries to more accurately locate future horizontal development wells. The company expects to have 3-D seismic coverage on all new discoveries and certain prospect areas by early 2008. In addition, the company is in the process of doubling its gas treating capacity and extending its pipeline along the trend to handle expected production increases from its 2006 discoveries.
The 2007 drilling program is focused on lower-risk development drilling in the Pawnee field and on new discoveries where 3-D seismic already exists. Five recent wells have individually tested at average initial gas rates of more than 4 million cubic feet per day (MMCFPD). On existing wells in the Pawnee field, Pioneer is restimulating gas production and increasing recoverable reserves by utilizing multiple isolation packer devices to refracture vertical and horizontal producing sections. Initial gas rates following restimulation of three wells have increased by factors of four to eleven times the pre-treatment rates, resulting in a payout of 12 months or less. Pioneer's production from the Edwards Trend currently stands at more than 45 MMCFPD and is now expected to rise 25% to 30% above prior year levels in both 2007 and 2008.
The Spraberry field in West Texas represents approximately 25% of Pioneer's current worldwide production and approximately 50% of total proved reserves. Pioneer's 440 MMBOE proved reserves in the Spraberry field are approximately 50% developed and 50% undeveloped and include approximately 4,000 future drilling locations. Pioneer continues to have success in drilling Spraberry wells to the deeper Wolfcamp zone, which typically contributes incremental reserves and production of 20% or more.
To take further advantage of excellent returns on Spraberry wells, Pioneer is increasing its drilling program by $60 million to accelerate development and plans to add four rigs to reach a total of 18 rigs by mid-year. Pioneer now plans to drill 350 wells during 2007, up from 300 wells previously planned, and expects to drill 450 wells in 2008. As a result, Spraberry production is now expected to grow by 18% to 23% in 2007 and by 20% to 25% in 2008.
"The continuing success of our low-risk growth strategy, including drilling programs in Tunisia, the Edwards Trend and the Spraberry field, has led to new opportunities that offer very compelling returns. With the financial flexibility afforded us by our strong balance sheet and the benefits we expect to achieve from the planned formation of two master limited partnerships, we can capture these opportunities and further accelerate our growth. Based on April strip pricing and with the ramp up of production from our onshore drilling programs and our two large development projects in South Africa and Alaska, we expect our cash flow from operations to equalize with capital spending in 2008 and to have positive free cash flow beginning in 2009," stated Scott Sheffield, Pioneer's Chairman and CEO.
Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations in the United States, Canada, South Africa and Tunisia.
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