Pioneer Receives Proceeds from 3rd Volumetric Production Payment

Pioneer Natural Resources Company (NYSE: PXD) has closed a third volumetric production payment (VPP) transaction under which it sold 7.3 million barrels oil equivalent (BOE) of proved reserves, or less than one percent of the Company's total proved reserves, for proceeds of $300 million. The Company received over $41 per BOE at a discount rate of 5.2%, or approximately $34 per BOE after adjustment for the operating costs for which Pioneer maintains responsibility.

Through the VPP, Pioneer sold a limited term overriding royalty interest in a portion of its Spraberry oil and gas field. The oil sold through the VPP is for a 5-year term beginning January 1, 2006, while the gas sold is for a 32-month term beginning May 1, 2005. The production sold represents less than 20% of Pioneer's daily production from the field during the term of the VPP and approximately 2% of the Company's proved Spraberry reserves. The schedule of production volumes sold and related deferred revenue amortization by year is as follows:

                                            Total     Deferred Revenue
         Oil Production  Gas Production    Production   Amortization
 Year      (million      (billion cubic    (million      (millions)
            barrels)          feet)           BOE)
-------- -------------- ----------------- ----------- ----------------
 2005         --              1.6            0.3            $10
 2006         1.4             2.3            1.8            $73
 2007         1.3             2.1            1.7            $68
 2008         1.2              --            1.2            $52
 2009         1.2              --            1.2            $50
 2010         1.1              --            1.1            $47
         -------------- ----------------- ----------- ----------------
 Total        6.2             6.0            7.3           $300

Scott D. Sheffield, Chairman and CEO, stated, "The VPP allows us to unlock the value of our long-lived assets at today's high oil and gas prices. The VPP proceeds, coupled with the strong free cash flow we expect to generate this year, will enhance our financial flexibility to develop future exploration successes, secure accretive, bolt-on acquisitions, support share repurchases and potentially increase future dividends."

Barclays Capital, the investment banking division of Barclays Bank PLC, has arranged or provided the capital to the purchaser of the VPP.

The VPP is a particularly effective monetization strategy for Pioneer's longer-lived asset base due to the predictability of the production stream and related operating costs. The VPP transaction allows the Company to accelerate this revenue stream at a low discount rate, while eliminating commodity price and interest rate risk. Pioneer also keeps the oil and gas reserves and production stream beyond the limited term of the VPP and retains the upside of future development drilling.

For reporting purposes, Pioneer's production and reserves will be reduced by the oil and gas volumes sold via the VPP, and the proceeds will be reported as Deferred Revenue on the balance sheet. Over the term of the VPP, the Deferred Revenue balance will be amortized and reported as noncash oil and gas revenues, thereby causing oil and gas revenues per BOE to rise as a result of the VPP volumes not being reflected in production. Because Pioneer retains all operating costs and the depreciation, depletion and amortization costs related to the oil and gas production sold, these costs, when calculated on a per BOE basis, will also increase, recognizing that the VPP volumes are not included in production or proved reserves. Interest expense will decrease as a result of the proceeds being applied to outstanding debt.

The VPP proceeds are not immediately taxable and will be included in taxable income over the term of the VPP.

In January of this year, Pioneer announced the closing of its first two VPPs with proceeds totaling $593 million. These VPPs included oil reserves from the Spraberry field and gas reserves from the Hugoton field.