Pioneer Forecasts 2010 Operating Cash Flow of $1B
Pioneer reported fourth quarter net income attributable to common stockholders of $57 million, or $.48 per diluted share. Net income included a noncash unrealized loss on commodity derivatives of $38 million after tax, or $.32 per diluted share. Without the effect of this item, adjusted income for the fourth quarter of 2009 would have been $95 million, or $.80 per diluted share.
Also included in Pioneer's fourth quarter results was income of $73 million after tax, or $.62 per diluted share, related to unusual items. These unusual items included:
- the recognition of a $119 million ($75 million after tax) royalty refund receivable from the Minerals Management Service (MMS) related to the overpayment of royalties on production from deepwater Gulf of Mexico properties prior to the January 1, 2006 effective date of their sale ($.64 per diluted share),
- a net hurricane-related insurance recovery of $1 million after tax ($.01 per diluted share) and
- stacked rig charges of $3 million after tax ($.03 per diluted share).
2009, fourth quarter and recent highlights included:
- 2009 production of 115 thousand barrels oil equivalent per day (MBOEPD), a 3% increase from 2008 and a 5% increase from 2008 on a per-share basis, reflecting the strong performance of Pioneer’s low-decline assets during a period when drilling was severely curtailed,
- reducing long-term debt by $205 million during 2009 (excludes $67 million of long-term debt of Pioneer Southwest Energy Partners L.P.),
- issuing $450 million of 7.5% Senior Notes due 2020, with the net proceeds being used to reduce credit facility indebtedness,
- adding 52 million barrels oil equivalent of proved reserves in 2009, or 114% of full-year production, from discoveries, extensions and technical revisions, despite a severely curtailed drilling program,
- delivering a drillbit finding and development (F&D) cost of $7.42 per barrel oil equivalent (BOE) (excluding price revisions), a continuing downward trend in the Company's drillbit F&D cost, and an all-in F&D cost of $9.15 per BOE (excluding price revisions),
- fourth quarter production of 106 MBOEPD, which reflects an incremental production curtailment of 2.5 MBOEPD due to the longer-than-anticipated maintenance shutdown at the gas-to-liquids plant in South Africa where the Company's gas production is sold (full production resumed in early January),
- adding oil derivatives with price upside in 2011 and 2012, bringing forecasted oil production coverage to approximately 90% and 35%, respectively,
- adding gas derivatives in 2010, 2011 and 2012 (combination of swaps, collars and three-way collars), bringing forecasted gas production coverage to approximately 85%, 70% and 25%, respectively,
- ramping up Spraberry drilling activity as planned, and
- successfully completing a second Eagle Ford Shale well with an initial production rate of 17 million cubic feet per day of gas (MMCFPD), the highest gas rate well drilled in the play to date.
Scott Sheffield, Chairman and CEO, stated, "Despite a substantial reduction in drilling activity for 2009, our high-quality assets delivered year-over-year production growth. We also delivered free cash flow and improved financial flexibility. We remain committed to a free cash flow model going forward.
"Improved oil prices and our strong derivative positions support operating cash flow forecasts of approximately $1.0 billion in 2010 and $1.3 billion in 2011. As a result, we have aggressively ramped up our drilling program in the Spraberry field and will continue our successful development program in Alaska. We also have 2 rigs operating in the burgeoning Eagle Ford Shale play. With this drilling program and the expiration of our 5 MBOEPD volumetric production payment obligation, we expect to generate quarterly production growth in 2010 and thereby increase production by at least 10% between the fourth quarter of 2009 and the fourth quarter of 2010. This growth rate could be higher when we significantly ramp up drilling activity in the Eagle Ford Shale later in 2010. Beyond 2010, we expect a further increase in our Spraberry and Eagle Ford Shale drilling programs and expect to resume double-digit annual production growth in 2011 and beyond."
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