Under the stated capital program of $550 million to $600 million, Pioneer plans to drill more than 400 wells during 2004. Approximately 65% of the capital is directed toward development activities and facilities with 35% allocated to exploration. A majority of the program will be invested in U.S. assets. Approximately 36% of the capital is directed to the Gulf of Mexico, primarily deepwater exploration and development, 32% is focused on onshore U.S. assets, and two percent is allocated to Alaska.
With the Argentine economy improving and several new prospects with potential for sizeable reserves, Pioneer plans to significantly increase its drilling activities investing approximately 19% of its capital program there. The Company is adding a new drilling campaign targeting natural gas and associated liquids to complement its oil drilling program. In Gabon, Pioneer plans to begin its drilling campaign early in the year and has allocated four percent of its stated capital program for additional investments there. The remainder of the capital program is directed to exploration and development opportunities in Canada, Tunisia, South Africa and other foreign areas.
Pioneer's fourth quarter production to date has exceeded expectations leading the Company to now expect that full quarter production will most likely be nearer the top end of its previously announced range of 150,000 to 165,000 barrels oil equivalent (BOE) per day.
Production for 2004 is expected to range from 65 million to 73 million BOE, or 178,000 to 200,000 BOE per day. The bottom end of the range incorporates only the projects currently identified and included in the stated capital program and the inherent variability in production results. Pioneer expects to generate cash flow significantly in excess of the stated capital program and has considered the potential to invest a portion of the excess cash for additional development drilling or core area acquisitions in arriving at the top end of the 2004 production range.
The outlook for continued growth in 2005 is strong considering that first production from several new projects is not expected until well into 2004. 2005 will mark the first full year of production from the Devils Tower, Tomahawk and Raptor deepwater fields, and the Company believes it has sufficient development inventory to support production growth in the U.S., Argentina, Canada and Tunisia. As a result, Pioneer currently expects production in 2005 to match 2004 at a minimum, with considerable upside given the potential investment of excess cash flow to develop new exploration successes and/or acquire additional assets in core areas during 2004 and 2005.
Longer term, with several discoveries to develop for 2006 and beyond, a pipeline of exploration opportunities, potential for continued core area acquisitions, strong commodity prices and significant excess cash flow, Pioneer has targeted five-year average compounded annual growth of ten percent.
Considering the expanding financial strength of the Company and expectations for significant cash flow in excess of the stated capital program, Pioneer's Board of Directors has approved a plan to begin a dividend program of $0.20 per common share, payable in two semi-annual installments of $0.10 per common share beginning in 2004.
Four years ago, Pioneer's management made a commitment to return the Company's financial position to investment grade standards, and significant strides have been made in that regard with year end debt to book capitalization expected to be 47% to 48%. During 2004, Pioneer expects to use a portion of its excess cash flow to further reduce debt by a minimum of $100 million and has established a targeted long-term range for debt to book capitalization of 37% to 43%. On December 16th, the Company plans to close a new $700 million five-year unsecured revolving senior credit facility, replacing its existing $575 million unsecured facility scheduled to mature in March of 2005. The new facility incorporates investment grade terms and will be utilized to refinance Pioneer's existing credit facility and for ongoing working capital and general corporate purposes.
During 2004 through 2006, Pioneer anticipates having significant excess cash flow that will provide the flexibility to consider other means of creating value, even after funding its typical annual capital programs and proposed dividends, and achieving its leverage targets. A high priority for the Company is to utilize a portion of the excess cash flow to fund the development of new exploration successes and to selectively acquire additional interests in its core areas. However, Pioneer will also consider share repurchases as a means to create value per share, and, to that end, the board has renewed and approved a $200 million common stock repurchase program.
In the deepwater Gulf of Mexico, the appraisal well to Pioneer's Triton discovery was successful and logged over 100 feet of net oil pay. The Triton field is expected to be the first subsea tie-back to the Devils Tower spar and various alternatives for development are being evaluated. Pioneer holds a 25% working interest in the field. Pioneer announced a discovery on its Hawa exploration well in Tunisia. The well was drilled on the Adam production concession and encountered 46 meters of aggregate net oil pay and nine meters of net gas pay in zones that are equivalent to the productive zones in the Company's nearby Adam field that was discovered in 2002 and began producing in May 2003. During preparation for extended testing, the well flowed at a rate of approximately 2,500 barrels of oil per day. More extensive production testing will be conducted during the second half of December and the well will then be suspended as a production well pending approval of the field development plan and connection to facilities approximately 13 kilometers away. Assuming that the state oil company elects to participate, Pioneer will have a 28% interest. Pioneer has exploration wells currently drilling in the Gulf of Mexico on the deepwater Juno and Goldfinger prospects and the Midway deep gas prospect on the shelf. The Company's deepwater team is also very active in the development of the Harrier, Raptor and Tomahawk fields in the Falcon corridor and the Devils Tower field. Scott Sheffield, Chairman and CEO, stated, "Having identified and initiated development of the projects that are expected to drive our production growth into 2005, we can focus our attention on building long-term value and growth through the last half of the decade. We expect to generate significant excess cash flow and will strive to invest in only the highest-return projects. We have the flexibility to choose among developing exploration successes, acquiring additional core area assets, repurchasing common shares and/or reducing debt to maximize value for our long-term shareholders."
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