Pioneer Nets Gain of Approximately $50 Million from Unusual Items
Pioneer Natural Resources expects fourth quarter net income to include an after-tax gain of approximately $50 million related to the net effect of several unusual items. These items principally include the previously announced gain on the sale of the Company's Canadian operations, partially offset by a charge related to the Company's withdrawal from the Clipper project in the deepwater Gulf of Mexico.
Pioneer recently announced that the Company expected to record an after-tax gain on the sale of its Canadian subsidiary in excess of $85 million during the fourth quarter of 2007. As a result of a favorable translation adjustment associated with the weakening U.S. dollar, this fourth quarter gain is now expected to be approximately $100 million, which will be reported in discontinued operations.
During 2005, the Company announced a discovery on its Clipper prospect in the deepwater Gulf of Mexico (Green Canyon Blocks 299 and 300). During 2006, the Company drilled two appraisal wells and began evaluating plans for potential development of the discovery. Projected capital costs for the project have doubled since the evaluation began. As a result, Pioneer no longer plans to pursue the development of the project and will recognize a noncash after-tax charge of approximately $48 million in the fourth quarter of 2007 to write off the project's carrying value.
This completes the Company's exit from the deepwater Gulf of Mexico, with the majority of assets having been divested in 2006.
For the fourth quarter of 2007, Pioneer also expects to record a noncash after-tax charge of approximately $11 million to eliminate the remaining carrying value of its Equatorial Guinea assets and to recognize a tax benefit of approximately $9 million associated with the relinquishment of Pioneer's other remaining interests in West Africa.
With the divestiture of Canadian assets and the write-off of the remaining carrying value of interests in deepwater Gulf of Mexico and West Africa, Pioneer is focusing on growth in its core operating areas to achieve its goal of delivering 12+% compounded average annual production per share growth for 2007 through 2010, pro forma for the divestiture of Canada.
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