Pioneer Announces $1 Billion Share Repurchase & Other Strategic Initiatives
Pioneer Natural Resources' board of director has approved a series of strategic initiatives to enhance shareholder value and returns.
- Initiating $1 billion share repurchase program
- Pursuing divestment of properties in the deepwater Gulf of Mexico and Tierra del Fuego in southern Argentina
- Implementing plan to exit exploration in deepwater Gulf of Mexico
- Reducing exploration budget to 15% - 20% of total capital from 30%
- Reallocating capital to North America onshore development and extension drilling
- Hedging eligible oil and gas production for 2006 and 2007 using costless collars
- Increasing dividend on common shares by 20% to $0.12 per share
"The current commodity pricing environment offers a unique opportunity to deliver near-term value to our shareholders by repurchasing shares at attractive prices and increasing the dividend," said Scott Sheffield, Pioneer's Chairman and CEO. "We also reduce our risk profile with an increased focus on onshore North America and the planned divestiture of short-lived and non-strategic assets. At the same time, by hedging our eligible oil and gas production using costless collars for 2006 and 2007, we maintain our financial flexibility."
Share Repurchase Program
The new $1 billion share repurchase authorization represents approximately 15% of Pioneer's total equity market value as of August 31, 2005 and will be funded by the Company's credit facility and asset sale proceeds. Pioneer will immediately commence a program to purchase up to $650 million of shares through open market transactions by the end of the year. Upon completion of this phase of the repurchase program but before considering asset divestitures, the Company expects that debt-to-book capitalization would be less than 50% at the end of 2005 and would drop below 35% by the end of 2006.
The Company intends to adopt a repurchase plan, which will permit it to purchase shares during the period from October 3, 2005 until two trading days following its third quarter 2005 earnings announcement, a period during which it ordinarily would not be in the market because of a self-imposed trading blackout.
The Company also plans to repurchase approximately $223 million of its outstanding bonds which are subject to high-yield covenants. Pioneer expects to initiate up to an additional $350 million of share repurchases upon completion of the bond repurchases and certain asset divestitures.
In August, the Company completed a $300 million share repurchase program which was authorized by the board of directors in January 2005. Pursuant to that repurchase program and a prior program, Pioneer has repurchased 9 million shares or approximately 6% of shares outstanding since October 2004.
Pioneer has essentially completed its hedging program, and a table outlining the Company's current hedge position is included as a supplement to this release.
High commodity prices and an active asset market have prompted Pioneer to pursue the potential divestiture of its properties in the deepwater Gulf of Mexico and southern Argentina.
Since entering the deepwater Gulf of Mexico in 1998, Pioneer has had significant success targeting mid-sized prospects supported by direct hydrocarbon indicators interpreted on 3-D seismic. To date, the Company has drilled 33 successful exploration and development wells, has working interests in three producing deepwater projects, owns interests in several discoveries that are being considered for commercialization and has interests in 90 deepwater blocks with attractive but higher-risk exploration opportunities.
Pioneer has also expanded and balanced its exploration portfolio in onshore North America, Alaska and Africa and believes these opportunities are now better aligned with the Company's current exploration objectives. As a result, Pioneer plans to pursue the divestment of its deepwater Gulf of Mexico properties to reduce the exploration risk and production volatility that have been associated with these properties.
Pioneer will also seek to sell its non-operated position in Tierra del Fuego, southern Argentina and has received attractive expressions of interest from several potential purchasers.
"Divesting these assets, if successful, would concentrate our portfolio and reestablish a more predictable foundation capable of more consistent, sustainable production growth while enhancing our net asset value," stated Tim Dove, Pioneer's President and COO.
"Onshore North America, we are aggressively developing our multi-year inventory of low-risk opportunities. We are significantly expanding our development drilling programs in our Spraberry and South Texas fields in the U.S. and the Chinchaga and Horseshoe Canyon fields in Canada, and coming into this year, expanded our Raton domestic drilling program," added Dove.
"We are also pursuing the commercialization of two discoveries in Alaska and have an active exploration program focused on prospects with nearer-term production impact planned for this winter season," said Dove. "By the end of this year, we will have initiated drilling activities in several of our Piceance and Uinta fields in the Rockies and will be testing our Mannville coal bed methane potential in Canada, and we will work to continue to expand our unconventional and tight gas positions in these areas and the onshore Gulf Coast."
Pioneer has initiated the process for divesting these assets and hiring advisors to assist in its efforts. The Company also announced that it has completed the previously announced divestiture of two of its inland bay properties for total proceeds of $77 million, before normal closing adjustments, bringing year-to-date sales proceeds to approximately $300 million.
Pioneer's board of directors declared a semiannual cash dividend
on Pioneer's outstanding common stock of $0.12 per share, an increase
of 20%. The dividend is payable October 14, 2005 to stockholders of
record at the close of business on September 30, 2005.
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