Pioneer Reports Record First Quarter 2004 Results

Pioneer Natural Resources Company (NYSE:PXD) reported net income of $60.2 million, or $0.50 per diluted share, for the first quarter of 2004. For the same period last year, Pioneer reported net income of $84.2 million, or $0.71 per diluted share, which included a $15.4 million, or $0.13 per share, benefit from the cumulative effect of change in accounting principle related to the adoption of Statement of Financial Accounting Standards No. 143.

Cash flow from operations for the first quarter was $253.6 million compared to $136.8 million for the same period in 2003. The Company reduced long-term debt by $98.8 million during the first quarter of 2004 to $1.46 billion.

First quarter oil and gas sales averaged 185,858 barrels per day (BPD) on a barrel oil equivalent (BOE) basis and represented a new record for Pioneer. First quarter oil sales averaged 47,733 BPD, an increase of 54% as compared to the same period last year, and natural gas liquids sales averaged 23,406 BPD. Gas sales in the first quarter averaged 688 million cubic feet per day (MMcfpd), a 54% increase over the same period last year. Realized prices for oil and natural gas liquids for the quarter were $28.31 and $22.21 per barrel, respectively. The realized price for gas was $4.41 per thousand cubic feet (Mcf), while North American gas prices averaged $5.04 per Mcf.

First quarter production costs averaged $5.27 per BOE. Exploration and abandonment costs of $80.5 million for the quarter included $21.8 million of geologic and geophysical expenses including seismic costs and $4.2 million of noncash leasehold abandonments.

For the same quarter last year, Pioneer reported oil sales of 31,894 BPD, natural gas liquids sales of 22,033 BPD and gas sales of 447 MMcfpd. Realized prices for the 2003 first quarter were $25.82 per barrel for oil, $22.00 per barrel for natural gas liquids and $4.16 per Mcf for gas.

Operations Update

In January, Pioneer achieved first production from the Harrier gas field in the deepwater Gulf of Mexico and from the Hawa oil field onshore Tunisia. The deepwater Gulf of Mexico Devils Tower field achieved first oil production in early May and the Company recently drilled a discovery well on its Goldfinger prospect, the second satellite discovery to the field. Goldfinger and Triton, the first satellite discovery, are expected to be jointly developed via subsea tieback to the Devils Tower spar for first production in 2005. Two deepwater development projects in the Falcon corridor, Tomahawk and Raptor, are proceeding on schedule with first production anticipated during the second quarter.

Onshore development continues with ten onshore rigs running in the U.S. and five rigs running in Argentina. During the first quarter, Pioneer drilled 61 wells in the U.S., 44 wells in Canada and 12 wells in Argentina. In early April, Pioneer also acquired additional interests in the Spraberry field in West Texas, expanding its inventory of drilling locations.

In Argentina, Pioneer's drilling activities continue to confirm the presence of significant deep gas reserves. First quarter gas production from Argentina was the highest summer production in the Company's history, and Pioneer expects to complete the expansion of its Loma Negra gas plant over the next few months, increasing plant capacity by 25% as demand peaks during the winter months in Argentina. The Company is also acquiring additional 3-D seismic in support of future drilling plans.

Commercialization plans are progressing for existing discoveries in Gabon, Alaska, South Africa and the deepwater Gulf of Mexico.

Financial Outlook

The following statements are estimates based on current expectations. These forward-looking statements are subject to a number of risks and uncertainties which may cause the Company's actual results to differ materially from the following statements. The last paragraph of this release addresses certain of the risks and uncertainties to which the Company is subject.

Second quarter 2004 production is expected to average 180,000 to 195,000 BOEs per day, reflecting the incremental production expected from Devils Tower, Tomahawk and Raptor, the variability of oil cargo shipments in Tunisia and South Africa, and the seasonal increase in gas demand during Argentina's winter season. Second quarter lease operating expenses (including production and ad valorem taxes) are expected to average $5.20 to $5.70 per BOE based on current NYMEX strip prices for oil and gas. Depreciation, depletion and amortization expense is expected to average $8.00 to $8.50 per BOE as a greater proportion of the Company's production is being produced from higher-cost basis deepwater Gulf of Mexico and South Africa properties. Total exploration and abandonment expense is expected to be $25 million to $50 million. General and administrative expense is expected to be $16 million to $18 million. Interest expense is expected to be $20 million to $23 million and accretion of discount on asset retirement obligations is expected to be approximately $2 million. Cash income taxes are expected to be $3 million to $6 million, principally related to Argentine and Tunisian income taxes and nominal alternative minimum tax in the U.S. Other than in Argentina and Tunisia, the Company continues to benefit from the carryforward of net operating losses and other positive tax attributes.