Pioneer Reports Third Quarter 2004 Results

Pioneer Natural Resources Company (NYSE:PXD) announced financial and operating results for the quarter ended September 30, 2004.

Pioneer reported net income of $80.9 million, or $.67 per diluted share, for the third quarter of 2004 and $210.8 million, or $1.75 per diluted share, for the nine months ended September 30, 2004. Third quarter results included an $.08 per share after-tax impairment charge related to the Company's decision to not pursue development of the Olowi field in Gabon due to increases to development cost projections, primarily the result of higher steel costs. For the same periods last year, Pioneer reported net income of $191.8 million, or $1.62 per diluted share, and $353.2 million, or $2.99 per diluted share, respectively. The significant year-to-year change in net income is principally attributable to the Company's reversal of its deferred tax valuation allowance in the U.S. during the third quarter of 2003.

The Company's balance sheet at September 30, 2004 reflects the merger with Evergreen Resources, Inc. that closed on September 28, 2004. Long-term debt at the end of the third quarter was $2.46 billion, reflecting a $280 million debt reduction year-to-date offset by a $1.2 billion addition for merger-related debt. After issuing approximately 25.4 million new shares of common stock to Evergreen holders, there were 145.2 million shares outstanding at the end of the period. Cash flow from operations for the third quarter was $239.1 million compared to $222.5 million for the same period in 2003.

Third quarter oil and gas sales averaged 180,020 barrels oil equivalent per day (BOEPD). Third quarter oil sales averaged 45,924 barrels per day (BPD) and natural gas liquids sales averaged 21,459 BPD. Gas sales in the third quarter averaged 676 million cubic feet per day (MMcfpd). Realized prices for oil and natural gas liquids for the quarter were $33.10 and $26.99 per barrel, respectively. The realized price for gas was $4.18 per thousand cubic feet (Mcf), while North American gas prices averaged $5.09 per Mcf.

Pioneer will begin including production from the assets acquired from Evergreen as of October 1, 2004. Evergreen's third quarter production averaged approximately 155 MMcfpd or approximately 25,900 BOEPD, net of field fuel usage. Pioneer burdens its lease operating expense with the value of fuel used for field operations and includes the field fuel in production. Based on Pioneer's method of accounting for field fuel, third quarter production from the assets acquired from Evergreen averaged approximately 27,200 BOEPD.

Third quarter production costs averaged $5.63 per BOE. Exploration and abandonment costs of $33.0 million for the quarter include $6.9 million of dry hole and abandonments. Also included were $23.4 million of geologic and geophysical expenses including seismic costs in West Africa and the Gulf of Mexico and $2.7 million of delay rentals and unproved acreage abandonments.

Income tax expense for the quarter resulted in a consolidated effective tax rate of approximately 23%. The effective tax rate is lower than the U.S. federal and state statutory rates (approximately 36.5%) primarily due to the aforementioned impairment of the Olowi field. Excluding the impairment, the consolidated effective tax rate would have been approximately 35%.

For the same quarter last year, Pioneer reported oil sales of 33,560 BPD, natural gas liquids sales of 22,658 BPD and gas sales of 643 MMcfpd. Realized prices for the 2003 third quarter were $25.35 per barrel for oil, $18.71 per barrel for natural gas liquids and $3.71 per Mcf for gas, while North American gas prices averaged $4.39 per Mcf.

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.

Fourth quarter 2004 production is expected to average 190,000 to 205,000 BOE per day, including the production from the Evergreen assets, current production expectations for Devils Tower and the Falcon Corridor and the variability of oil cargo shipments in Tunisia and South Africa. Fourth quarter lease operating expenses (including production and ad valorem taxes) are expected to average $6.40 to $7.00 per BOE based on current NYMEX strip prices for oil and gas. The increase is attributable to lower estimated production from low-cost Falcon Corridor properties and the impact of higher costs associated with the acquired Evergreen assets when accounting for field fuel in accordance with Pioneer's accounting practices. Depreciation, depletion and amortization expense is expected to average $8.50 to $9.25 per BOE. Total exploration and abandonment expense is expected to be $40 million to $60 million. General and administrative expense is expected to be $21 million to $23 million. Interest expense is expected to be $31 million to $34 million reflecting incremental acquisition financing, and accretion of discount on asset retirement obligations is expected to be approximately $2 million to $3 million. The Company's effective income tax rate is expected to range from 36% to 39% based on current capital spending plans, including cash income taxes of $5 million to $10 million that are 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.