Pioneer Natural Resources Reports Third Quarter 2009 Results
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DALLAS--(BUSINESS WIRE)-- Pioneer Natural Resources Company (NYSE: PXD) today announced financial and operating results for the quarter ended September 30, 2009.
Pioneer reported a third quarter net loss attributable to common stockholders of $7 million, or $.06 per diluted share. The loss included a noncash unrealized loss on commodity derivatives of $10 million after tax, or $.08 per diluted share. Without the effect of this item, adjusted income for the third quarter of 2009 would have been $3 million, or $.02 per diluted share.
Included in Pioneer's third quarter results were net gains of $5 million after tax, or $.05 per diluted share related to unusual items. These after-tax unusual items included:
-- gain on the sale of Pioneer's Gulf of Mexico Shelf properties of $12
million after tax ($.11 per diluted share),
-- hurricane-related charge of $2 million after tax ($.01 per diluted
share) that is expected to be covered by insurance and
-- stacked rig charges of $6 million after tax ($.05 per diluted share).
Recent highlights include:
-- Third quarter production averaged approximately 113 thousand barrels oil
equivalent per day (MBOEPD), up 2% compared to the third quarter of
2008, reflecting the strong performance of Pioneer's low-decline assets
during a period when drilling was severely curtailed.
-- Third quarter production costs per barrel oil equivalent (BOE) were
reduced by 24% from the third quarter of 2008 in response to the
Company's aggressive cost reduction initiatives.
-- An aggressive drilling campaign in the Spraberry field was initiated.
-- An Eagle Ford Shale well was successfully completed with an initial
production rate of 11.3 million cubic feet equivalent per day of gas
(MMCFEPD), consisting of 8.3 million cubic feet per day (MMCFPD) of
liquids-rich gas and 500 barrels per day (BPD) of condensate.
-- Long-term debt was reduced by $112 million during the third quarter as a
result of asset sales and free cash flow. (Excluding the debt of its
subsidiary, Pioneer Southwest Energy Partners L.P., attributable to its
acquisition of properties from Pioneer, Pioneer's debt reduction was
$247 million.)
-- Oil derivatives with price upside were added for 2010 and 2011, bringing
forecasted oil production coverage to approximately 85% in both years.
-- Gas derivatives with price upside were added for 2011, bringing
forecasted gas production coverage to approximately 50% in 2011.
Coverage for 2010 is 80%.
Scott Sheffield, Chairman and CEO, stated, "Despite a substantial reduction in drilling activity for 2009, our high-quality assets delivered production growth of 7% during the first nine months compared to last year, and we continue to expect full-year production growth of at least 5% per share. We remain committed to a free cash flow model, with excess cash flow being used to reduce debt this year."
"Improving oil prices and our strong derivative positions support operating cash flow forecasts of approximately $1 billion in 2010 and $1.4 billion in 2011. As a result, we are aggressively ramping up our drilling program in the Spraberry field and will continue our successful oil development program in Alaska. We have also expanded our Eagle Ford Shale drilling program where we hold 310,000 gross acres in one of the premier shale plays in the U.S. With this drilling program and the expiration of our 5 MBOEPD volumetric production payment obligation, we expect to once again generate quarterly production growth in 2010, while preserving our free cash flow model."
Operations Update
In the Spraberry field, Pioneer increased daily production for the first nine months of 2009 by 8% to 33 MBOEPD as compared to the same period in 2008. This production growth reflects the success of the 2008 drilling program, improved well performance and the Spraberry's low production decline rates. Nine month results also include inventoried natural gas liquids (NGLs) sold during the first half of 2009 that were produced but not sold in the fourth quarter of 2008 as a result of hurricane damage to third-party fractionation facilities.
Pioneer resumed Spraberry drilling activities in August and now has three rigs drilling in the field, which is the largest onshore oil field in the U.S. lower 48 states. Pioneer is the largest producer in the Spraberry field. With a substantial reduction in well costs, Pioneer's internal rate of return on Spraberry drilling has improved to approximately 50% before tax, at current strip prices for oil. As a result, the Company is aggressively ramping up Spraberry drilling and expects to have 14 rigs running by January 2010, increasing to 19 rigs by mid-year and 24 rigs by year end.
Approximately 425 Spraberry wells are expected to be drilled during 2010, with a continual ramp up in quarterly production anticipated. Fourth quarter production is expected to average approximately 29 MBOEPD during 2009 and increase to approximately 34 MBOEPD in the fourth quarter of 2010. The majority of these wells will include completions in additional zones, including the Wolfcamp and shale/silt intervals. Pioneer will also implement a 7,000-acre waterflood project in 2010.
The Company plans to continue to add rigs beyond 2010, and by 2012, Pioneer plans to be operating 40 rigs and drilling 1,000 wells per year. From 2009 through 2013, Spraberry production is expected to double with compounded annual production growth averaging approximately 20%.
In South Texas, Pioneer's daily production for the first nine months of 2009 rose 4% to 76 MMCFPD versus the prior-year period benefiting from its strong 2008 Edwards Trend drilling program. The Company also recently announced a significant discovery in the Eagle Ford Shale play where it holds 310,000 gross acres overlaying the Edwards Trend. The Sinor #5 well flowed at an initial rate of approximately 11.3 MMCFEPD of gas (approximately 8.3 MMCFPD of liquids-rich gas and 500 BPD of higher-valued condensate). The liquids-rich gas contains 1,200 British thermal units per cubic foot. Pioneer now plans to continuously operate one rig in the play through 2010 and test the benefits of longer laterals and additional frac stages. The Company is drilling its next well and will evaluate a further rig expansion as additional drilling results are known. Pioneer is also exploring a joint venture strategy to accelerate development of its extensive Eagle Ford acreage position.
On the North Slope of Alaska, production from Pioneer's Oooguruk field averaged 4 thousand barrels of oil per day (MBOPD) during the first nine months of 2009. Third quarter production averaged 6 MBOPD. Pioneer successfully drilled a total of five horizontal Nuiqsut laterals during the second and third quarters, three fracture-stimulated production wells and two unstimulated water injection wells. During the upcoming winter drilling season, the Company will resume drilling to the Kuparuk zone where the Company has previously drilled two high-rate producing wells.
In the Raton and Mid-Continent areas, no wells have been drilled during 2009, but due to the low production decline characteristics of these areas, nine-month production was down only 5% to 188 MMCFPD and 7% to 109 MMCFEPD, respectively, compared to last year. The reduction in Mid-Continent production included the curtailment of approximately 6 MMCFEPD during the second quarter of 2009 due to an unscheduled third-party pipeline repair. Pioneer's Mid-Continent production will increase by approximately 28 MMCFPD on January 1, 2010 with the expiration of the volumetric production payment (VPP) obligation in the Hugoton field.
Daily production in Tunisia increased 13% to 7 MBOEPD in the first nine months of 2009 as compared to the same period in 2008. Fourth quarter production is forecasted to average 6 MBOEPD reflecting planned gas pipeline repairs and the planned lifting schedule. Pioneer-operated drilling will recommence in early 2010 with three new prospects identified from new 3-D seismic. The Company is also participating in two non-operated wells being drilled in the Adam Concession during the fourth quarter of 2009.
In South Africa, daily production for the first nine months of 2009 increased 51% to 6 MBOEPD compared to the same period in 2008 reflecting the commencement of production from the most prolific well in Pioneer's South Coast Gas project during the fourth quarter of 2008. A major maintenance shutdown commenced in late September and is expected to return to full capacity in early November at the Mossel Bay gas-to-liquids plant where the gas production is sold. As a result, fourth quarter forecasted production is expected to be curtailed by approximately 2 MBOEPD and average 4 MBOEPD.
Cost Reduction Initiatives
Pioneer's asset teams have aggressively implemented initiatives to reduce 2009 lease operating expenses (LOE). Third quarter production costs were 24% lower on a per BOE basis than the same period in 2008. The Company has achieved significant reductions in electricity, water disposal, well servicing, facilities and compression costs. Compared to the second quarter of 2009, production costs were up 11% on a per BOE basis, primarily due to higher production taxes, increased workover and preventive maintenance activity and lower production volumes. The Company did not experience inflation in service costs and other base operating expenses during the quarter.
The Company has also worked with service providers to reduce drilling and completion costs. Since the third quarter of 2008 when these costs peaked, Pioneer has reduced drilling and completion costs by more than 30% per well for the majority of its domestic drilling inventory.
Financial Review
Third quarter sales from continuing operations averaged 112,623 barrels oil equivalent per day (BOEPD), consisting of oil sales averaging 31,663 barrels per day (BPD), NGL sales averaging 18,602 BPD and gas sales averaging 374 MMCFPD.
The reported third quarter average price for oil was $78.20 per barrel and included $8.24 per barrel related to deferred revenue from VPPs for which production was not recorded. The reported price for NGLs was $33.13 per barrel. The reported price for gas was $3.64 per thousand cubic feet (MCF) and included $.35 per MCF related to deferred revenue from VPPs for which production was not recorded.
Third quarter production costs averaged $11.43 per BOE.
Depreciation, depletion and amortization (DD&A) expense averaged $15.69 per BOE for the third quarter. Exploration and abandonment costs were $25 million for the quarter and included $13 million of acreage and unsuccessful drilling costs and $12 million of geologic and geophysical expenses and personnel costs.
Cash flow from operating activities for the third quarter was $162 million.
Financial Outlook
Fourth quarter production is forecasted to average 105,000 BOEPD to 110,000 BOEPD, reflecting reduced 2009 drilling activity, downtime associated with the gas plant maintenance shutdown in South Africa and gas pipeline repairs and planned lifting schedule in Tunisia.
Fourth quarter production costs are expected to average $11.50 to $13.50 per BOE, based on current NYMEX strip prices for oil and gas, including higher production taxes and transportation costs, lower production volumes and increased workover activity. DD&A expense is expected to average $15.50 to $17.00 per BOE based on the new SEC reserve pricing methodology that is expected to be implemented during the fourth quarter of 2009.
Total exploration and abandonment expense during the fourth quarter is expected to be $20 million to $30 million, primarily related to exploration wells, including related acreage costs, and seismic and personnel costs.
General and administrative expense is expected to be $35 million to $39 million. Interest expense is expected to be $42 million to $45 million. Accretion of discount on asset retirement obligations is expected to be $2 million to $4 million.
Noncontrolling interest in consolidated subsidiaries' net income is expected to be $8 million to $10 million, primarily reflecting the public ownership in Pioneer Southwest.
The Company also expects to recognize $5 million to $10 million of charges in other expense associated with certain drilling rigs stacked as a result of the low price environment.
The Company's fourth quarter effective income tax rate is expected to range from 40% to 50% based on current capital spending plans, higher tax rates in Tunisia and no significant mark-to-market changes in the Company's derivative position. Cash taxes are expected to be $10 million to $15 million and are primarily attributable to Tunisia.
Pioneer has increased its 2010 and 2011 oil and gas derivative positions to support the Company's free cash flow model and the resumption of oil drilling. In particular, the Company recently added 2,000 BPD of three-way oil collar derivatives in 2010 and 9,000 BPD in 2011, with upside to approximately $87 per barrel and $107 per barrel, respectively. The Company also added 75,000 million British thermal units per day of three-way gas collar derivatives in 2011, with upside to $8.70 per million British thermal units.
The Company's financial and mark-to-market results, derivatives for oil, NGL and gas, amortization of net deferred gains on discontinued/terminated commodity hedges and future VPP amortization are outlined on the attached schedules.
Earnings Conference Call
On Wednesday, November 4 at 9:00 a.m. Central Time, Pioneer will discuss its financial and operating results with an accompanying presentation. The call will be webcast on Pioneer's website, www.pxd.com. The presentation will be available on the website for preview in advance of the call. At the website, select 'INVESTORS' at the top of the page. For those who cannot listen to the live webcast, a replay will be available shortly thereafter. Or you may choose to dial (888) 395-3230 (confirmation code: 9764784) to listen by telephone and view the accompanying presentation at the website above. A telephone replay will be available by dialing (888) 203-1112 (confirmation code: 9764784).
Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations primarily in the United States. For more information, visit Pioneer's website at www.pxd.com.
Except for historical information contained herein, the statements in this News Release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and the business prospects of Pioneer are subject to a number of risks and uncertainties that may cause Pioneer's actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, international operations and associated international political and economic instability, litigation, the costs and results of drilling and operations, access to and availability of drilling equipment and transportation, processing and refining facilities, Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer's credit facility and derivative contracts and the purchasers of Pioneer's oil, NGL and gas production, uncertainties about estimates of reserves and resource potential and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, and acts of war or terrorism. These and other risks are described in Pioneer's 10-K and 10-Q Reports and other filings with the Securities and Exchange Commission. In addition, Pioneer may be subject to currently unforeseen risks that may have a materially adverse impact on it. Pioneer undertakes no duty to publicly update these statements except as required by law.
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2009 2008
ASSETS
Current assets:
Cash and cash equivalents $ 55,615 $ 48,337
Accounts receivable, net 137,517 207,553
Income taxes receivable 16,290 60,573
Inventories 145,976 76,901
Prepaid expenses 12,553 12,464
Deferred income taxes 3,417 6,510
Derivatives 41,280 59,622
Other current assets, net 10,314 14,951
Total current assets 422,962 486,911
Property, plant and equipment, at cost:
Oil and gas properties, using the successful 10,383,159 10,371,403
efforts method of accounting
Accumulated depletion, depreciation and (2,819,643 ) (2,511,401 )
amortization
Total property, plant and equipment 7,563,516 7,860,002
Deferred income taxes 2,572 553
Goodwill 309,371 310,563
Derivatives 35,772 72,594
Other assets, net 346,875 431,162
$ 8,681,068 $ 9,161,785
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 220,330 $ 356,972
Interest payable 28,481 43,247
Income taxes payable 12,745 3,618
Deferred income taxes 307 -
Deferred revenue 104,743 147,905
Discontinued operations held for sale 1,802 -
Derivatives 91,967 49,561
Other current liabilities 57,445 93,694
Total current liabilities 517,820 694,997
Long-term debt 2,867,298 2,899,241
Deferred income taxes 1,408,481 1,501,459
Deferred revenue 109,497 177,236
Derivatives 65,664 20,584
Other liabilities 178,076 187,409
Stockholders' equity 3,534,232 3,680,859
$ 8,681,068 $ 9,161,785
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues and other
income:
Oil and gas $ 409,969 $ 600,413 $ 1,148,512 $ 1,777,579
Interest and other 503 2,285 99,761 33,697
Gain (loss) on
disposition of assets, (385 ) 190 (447 ) 4,768
net
410,087 602,888 1,247,826 1,816,044
Costs and expenses:
Oil and gas production 90,394 107,159 285,617 297,299
Production and ad 28,089 46,124 79,503 129,670
valorem taxes
Depletion,
depreciation and 162,605 121,265 509,422 338,153
amortization
Impairment of oil and - 89,753 21,091 89,753
gas properties
Exploration and 25,073 109,420 77,861 172,714
abandonments
General and 34,799 31,622 102,728 103,739
administrative
Accretion of discount
on asset retirement 2,754 1,981 8,259 5,885
obligations
Interest 43,438 41,176 128,051 123,124
Hurricane activity, 1,830 541 18,280 2,400
net
Derivative losses, net 15,222 3,858 85,583 1,451
Other 21,363 33,964 89,467 54,153
425,567 586,863 1,405,862 1,318,341
Income (loss) from
continuing operations (15,480 ) 16,025 (158,036 ) 497,703
before income taxes
Income tax benefit 5,206 (13,165 ) 47,671 (217,615 )
(provision)
Income (loss) from (10,274 ) 2,860 (110,365 ) 280,088
continuing operations
Income from
discontinued 12,107 327 13,868 14,718
operations, net of tax
Net income (loss) 1,833 3,187 (96,497 ) 294,806
Net income
attributable to (8,998 ) (8,422 ) (12,269 ) (15,388 )
noncontrolling
interests
Net income (loss)
attributable to common $ (7,165 ) $ (5,235 ) $ (108,766 ) $ 279,418
stockholders
Basic earnings per
share:
Income (loss) from
continuing operations $ (0.17 ) $ (0.04 ) $ (1.07 ) $ 2.22
attributable to common
stockholders
Income from
discontinued
operations 0.11 - 0.12 0.12
attributable to common
stockholders
Net income (loss)
attributable to common $ (0.06 ) $ (0.04 ) $ (0.95 ) $ 2.34
stockholders
Diluted earnings per
share:
Income (loss) from
continuing operations $ (0.17 ) $ (0.04 ) $ (1.07 ) $ 2.20
attributable to common
stockholders
Income from
discontinued
operations 0.11 - 0.12 0.12
attributable to common
stockholders
Net income (loss)
attributable to common $ (0.06 ) $ (0.04 ) $ (0.95 ) $ 2.32
stockholders
Weighted average shares
outstanding:
Basic 114,123 118,110 114,118 118,136
Diluted 114,123 118,110 114,118 118,765
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Cash flows from operating
activities:
Net income (loss) $ 1,833 $ 3,187 $ (96,497 ) $ 294,806
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depletion,
depreciation and 162,605 121,265 509,422 338,153
amortization
Impairment of oil and - 89,753 21,091 89,753
gas properties
Exploration expenses, 12,745 89,414 40,699 93,996
including dry holes
Hurricane activity 1,200 - 16,200 -
Deferred income taxes (17,456 ) (10,964 ) (67,397 ) 160,346
(Gain) loss on
disposition of 385 (190 ) 447 (4,768 )
assets, net
Accretion of discount
on asset retirement 2,754 1,981 8,259 5,885
obligations
Discontinued (10,581 ) 10,145 (5,373 ) 24,609
operations
Interest expense 7,165 7,158 20,694 21,252
Derivative related 70 15,602 48,305 31,118
activity
Amortization of
stock-based 10,096 8,323 29,319 25,571
compensation
Amortization of (37,207 ) (39,708 ) (110,902 ) (118,644 )
deferred revenue
Other noncash items 5,825 26,708 30,665 30,495
Changes in operating
assets and
liabilities:
Accounts receivable, 17,133 59,496 71,074 (39,039 )
net
Income taxes 12,966 (120 ) 44,762 (9,522 )
receivable
Inventories 5,620 (14,347 ) (52,069 ) (54,990 )
Prepaid expenses 7,287 (8,255 ) (6,900 ) (7,152 )
Other current assets, 31,612 (9,747 ) 98,532 (2,561 )
net
Accounts payable 13,150 16,533 (94,238 ) 15,364
Interest payable (14,867 ) (15,878 ) (14,766 ) (12,724 )
Income taxes payable (4,790 ) (16,584 ) 9,127 11,528
Other current (45,048 ) (28,000 ) (89,629 ) (76,972 )
liabilities
Net cash provided by 162,497 305,772 410,825 816,504
operating activities
Net cash used in (53,184 ) (393,238 ) (312,991 ) (884,719 )
investing activities
Net cash provided by
(used in) financing (118,021 ) 111,001 (90,556 ) 122,861
activities
Net increase (decrease)
in cash and cash (8,708 ) 23,535 7,278 54,646
equivalents
Cash and cash
equivalents, beginning of 64,323 43,282 48,337 12,171
period
Cash and cash
equivalents, end of $ 55,615 $ 66,817 $ 55,615 $ 66,817
period
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUMMARY PRODUCTION AND PRICE DATA
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Average Daily Sales Volumes
from Continuing Operations:
Oil (Bbls) - U.S. 24,754 19,824 24,989 19,919
South Africa 575 2,995 401 2,879
Tunisia 6,334 6,831 6,612 5,705
Worldwide 31,663 29,650 32,002 28,503
Natural gas liquids (Bbls) - U.S. 18,602 18,884 20,044 19,568
Gas (Mcf) - U.S. 341,874 364,357 360,896 365,438
South Africa 31,372 4,956 31,637 5,199
Tunisia 904 2,709 1,662 2,303
Worldwide 374,150 372,022 394,195 372,940
Total (BOE) - U.S. 100,335 99,434 105,182 100,394
South Africa 5,803 3,821 5,674 3,746
Tunisia 6,485 7,283 6,890 6,089
Worldwide 112,623 110,538 117,746 110,229
Average Daily Sales Volumes
from Discontinued Operations:
Oil (Bbls) - U.S. 266 756 741 1,093
Natural gas liquids (Bbls) - U.S. 42 37 38 42
Gas (Mcf) - U.S. 1,085 3,041 2,534 4,063
Total (BOE) - U.S. 489 1,300 1,202 1,812
Average Reported Prices (a):
Oil (per Bbl) - U.S. $ 81.57 $ 69.10 $ 70.13 $ 69.32
South Africa $ 70.30 $ 107.89 $ 63.08 $ 113.39
Tunisia $ 65.76 $ 101.01 $ 56.83 $ 109.38
Worldwide $ 78.20 $ 80.37 $ 67.29 $ 81.79
Natural gas liquids (per Bbl) U.S. $ 33.13 $ 62.23 $ 27.33 $ 57.41
-
Gas (per Mcf) - U.S. $ 3.42 $ 7.92 $ 3.69 $ 8.09
South Africa $ 5.93 $ 8.10 $ 5.08 $ 8.09
Tunisia $ 9.35 $ 15.67 $ 7.22 $ 14.29
Worldwide $ 3.64 $ 7.98 $ 3.82 $ 8.13
Total (BOE) - U.S. $ 37.92 $ 54.61 $ 34.54 $ 54.41
South Africa $ 39.03 $ 95.07 $ 32.80 $ 98.39
Tunisia $ 65.54 $ 100.58 $ 56.28 $ 107.89
Worldwide $ 39.57 $ 59.04 $ 35.73 $ 58.86
____________
(a) Average prices are attributable to continuing operations and include the
results of hedging activities and amortization of VPP deferred revenue.
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(in thousands)
EBITDAX and discretionary cash flow ("DCF") (as defined below) are presented
herein, and reconciled to the generally accepted accounting principle ("GAAP")
measures of net income (loss) and net cash provided by operating activities
because of their wide acceptance by the investment community as financial
indicators of a company's ability to internally fund exploration and development
activities and to service or incur debt. The Company also views the non-GAAP
measures of EBITDAX and DCF as useful tools for comparisons of the Company's
financial indicators with those of peer companies that follow the full cost
method of accounting. EBITDAX and DCF should not be considered as alternatives
to net income (loss) or net cash provided by operating activities, as defined by
GAAP.
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net income (loss) $ 1,833 $ 3,187 $ (96,497 ) $ 294,806
Depletion, depreciation 162,605 121,265 509,422 338,153
and amortization
Impairment of oil and gas - 89,753 21,091 89,753
properties
Exploration and 25,073 109,420 77,861 172,714
abandonments
Hurricane activity 1,200 - 16,200 -
Accretion of discount on
asset retirement 2,754 1,981 8,259 5,885
obligations
Interest expense 43,438 41,176 128,051 123,124
Income tax (benefit) (5,206 ) 13,165 (47,671 ) 217,615
provision
(Gain) loss on disposition 385 (190 ) 447 (4,768 )
of assets, net
Discontinued operations (10,581 ) 10,145 (5,373 ) 24,609
Current income tax
provision on discontinued - 135 - 306
operations
Cash exploration and
abandonment expense on 7 1,655 30 7,127
discontinued operations
Derivative related 70 15,602 48,305 31,118
activity
Amortization of 10,096 8,323 29,319 25,571
stock-based compensation
Amortization of deferred (37,207 ) (39,708 ) (110,902 ) (118,644 )
revenue
Other noncash items 5,825 26,708 30,665 30,495
EBITDAX (a) 200,292 402,617 609,207 1,237,864
Cash interest expense (36,273 ) (34,018 ) (107,357 ) (101,872 )
Current income taxes (12,250 ) (24,264 ) (19,726 ) (57,575 )
Discretionary cash flow 151,769 344,335 482,124 1,078,417
(b)
Cash exploration expense (12,335 ) (21,661 ) (37,192 ) (85,845 )
Changes in operating 23,063 (16,902 ) (34,107 ) (176,068 )
assets and liabilities
Net cash provided by $ 162,497 $ 305,772 $ 410,825 $ 816,504
operating activities
____________
(a)"EBITDAX" represents earnings before depletion, depreciation and amortization
expense; impairment of oil and gas properties; exploration and abandonments;
noncash hurricane activity; noncash derivative activity; accretion of discount
on asset retirement obligations; interest expense; income taxes; (gain) loss on
the disposition of assets, net; noncash effects from discontinued operations;
amortization of stock-based compensation; amortization of deferred revenue; and
other noncash items.
(b)Discretionary cash flow equals cash flows from operating activities before
changes in operating assets and liabilities and before cash exploration expense.
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)
(in thousands, except per share data)
Income adjusted for unrealized mark-to-market derivative losses, net, as
presented in this press release are presented and reconciled to Pioneer's net
loss attributable to common stockholders that is determined in accordance
with GAAP because Pioneer believes that these non-GAAP financial measures
reflect an additional way of viewing aspects of Pioneer's business that, when
viewed together with its financial results computed in accordance with GAAP,
provide a more complete understanding of factors and trends affecting its
historical financial performance and future operating results, greater
transparency of underlying trends and greater comparability of results across
periods. In addition, management believes that these non-GAAP measures may
enhance investors' ability to assess Pioneer's historical and future
financial performance. These non-GAAP financial measures are not intended to
be substitutes for the comparable GAAP measure and should be read only in
conjunction with Pioneer's consolidated financial statements prepared in
accordance with GAAP. Unrealized mark-to-market derivative gains and losses
will recur in future periods; however, the amount and frequency of each item
can vary significantly from period to period. The table below reconciles
Pioneer's net loss attributable to common stockholders for the three months
ended September 30, 2009, as determined in accordance with GAAP, to the
income adjusted for unrealized mark-to-market derivative losses, net, for
that quarter.
After-tax Per
Amounts Share
Net loss attributable to common stockholders $ (7,165 ) $ (0.06 )
Plus: Unrealized derivative mark-to-market losses, net 9,817 0.08
Income adjusted for unrealized mark-to-market 2,652 0.02
derivative losses, net
PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL INFORMATION
Open Commodity Derivative Positions as of October 16, 2009 (a)
2009
Fourth
Quarter 2010 2011 2012 2013
Average Daily Oil
Production
Associated with
Derivatives (a):
Swap Contracts:
Volume (Bbl) 11,250 2,500 750 3,000 3,000
NYMEX price $ 63.41 $ 93.34 $ 77.25 $ 79.32 $ 81.02
(Bbl) (b)
Collar
Contracts:
Volume (Bbl) 2,000 - 2,000 - -
NYMEX price
(Bbl):
Ceiling $ 70.38 $ - $ 170.00 $ - $ -
Floor $ 52.00 $ - $ 115.00 $ - $ -
Collar Contracts
with Short Puts:
Volume (Bbl) 15,000 27,000 34,000 5,000 1,250
NYMEX price
(Bbl):
Ceiling $ 69.72 $ 83.84 $ 97.98 $ 106.70 $ 111.50
Floor $ 51.47 $ 66.89 $ 73.38 $ 80.00 $ 83.00
Short Put $ 41.47 $ 53.96 $ 58.91 $ 65.00 $ 68.00
Percent of total
oil production ~90% ~85% ~85% ~15% ~5%
(c):
Average Daily
Natural Gas
Liquid Production
Associated with
Derivatives (a):
Swap Contracts:
Volume (Bbl) 3,750 1,250 750 750 -
Blended index $ 34.28 $ 47.38 $ 34.65 $ 35.03 $ -
price (Bbl) (d)
Percent of total
NGL production ~20% ~5% <5% <5% N/A
(c):
Average Daily Gas
Production
Associated with
Derivatives (a):
Swap Contracts:
Volume (MMBtu) 137,500 152,295 2,500 2,500 2,500
NYMEX price $ 6.13 $ 6.42 $ 6.65 $ 6.77 $ 6.89
(MMBtu) (e)
Collar
Contracts:
Volume (MMBtu) 20,000 30,000 - - -
NYMEX price
(MMBtu): (e)
Ceiling $ 5.90 $ 7.52 $ - $ - $ -
Floor $ 4.00 $ 6.00 $ - $ - $ -
Collar Contracts
with Short Puts:
Volume (MMBtu) 150,000 95,000 175,000 50,000 -
NYMEX price
(MMBtu): (e)
Ceiling $ 5.35 $ 7.94 $ 8.69 $ 8.81 $ -
Floor $ 4.18 $ 6.00 $ 6.36 $ 6.25 $ -
Short Put $ 3.18 $ 5.00 $ 4.93 $ 4.50 $ -
Percent of U.S.
gas production ~90% ~80% ~50% ~15% <1%
(c):
Basis Swap
Contracts:
Spraberry Index
Swaps - (MMBtu) 35,000 5,000 - - -
(f)
Price
differential $ (0.76 ) $ (0.81 ) - - -
($/MMBtu)
Mid-Continent
Index Swaps - 220,000 180,000 100,000 20,000 10,000
(MMBtu) (f)
Price
differential $ (1.07 ) $ (0.85 ) $ (0.71 ) $ (0.78 ) $ (0.71 )
($/MMBtu)
Gulf Coast Index
Swaps - (MMBtu) 30,000 30,000 - - -
(f)
Price
differential $ (0.37 ) $ (0.29 ) $ - $ - $ -
($/MMBtu)
____________
(a) On February 1, 2009, Pioneer Natural Resources Company (the "Company")
ceased accounting for commodity derivatives as hedges on a prospective basis.
Changes in derivative values since February 1, 2009 are recorded as derivative
gains or losses.
(b) Represents NYMEX and Dated Brent average prices on U.S. and foreign
production.
(c) Represents percent of forecasted production, which may differ from
percentage of actual production.
(d) Represents the blended Mont Belvieu index price per Bbl.
(e) Approximate NYMEX Henry Hub index price, based on historical differentials
to the index price on the derivative trade date.
(f) Represent swaps that fix the basis differentials between Spraberry,
Mid-Continent and Gulf Coast indices at which the Company sells its gas and
NYMEX Henry Hub prices.
PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL INFORMATION
Amortization of Deferred Revenue Associated with Volumetric Production
Payments and Net Derivative Losses as of September 30, 2009
(in thousands)
2009
Fourth
Quarter 2010 Thereafter Total
Total deferred revenues (a) $ 37,003 $ 90,215 $ 87,022 $ 214,240
Less derivative losses to be
recognized
in pretax earnings (b) (822 ) (2,403 ) (6,729 ) (9,954 )
Total VPP impact to pretax $ 36,181 $ 87,812 $ 80,293 $ 204,286
earnings
____________
(a) Deferred revenue will be amortized as increases to oil and gas revenues
during the indicated future periods.
(b) Represents the remaining pretax earnings impact of the derivatives
assigned in the VPPs.
Deferred Gains on Discontinued and Terminated Commodity Hedges
as of September 30, 2009 (a)
(in thousands)
2009
Fourth
Quarter 2010 2011 2012
Commodity hedge gains (b):
Oil $ 20,674 $ 77,511 $ 32,241 $ (3,157 )
NGL 1,588 3,691 - -
Gas 2,360 7,297 - -
$ 24,622 $ 88,499 $ 32,241 $ (3,157 )
____________
(a) Excludes deferred hedge gains and losses on terminated derivatives
related to the VPPs.
(b) Deferred commodity hedge gains will be amortized as increases to oil and
gas revenues during the indicated future periods.
PIONEER NATURAL RESOURCES COMPANY
SUPPLEMENTAL INFORMATION
Derivative Losses, Net
(in thousands)
Three Months Nine Months
Ended Ended
September 30, September 30,
2009 2009
Noncash mark-to-market changes:
Oil derivative loss (gain) $ (47,991 ) $ 66,794
Gas derivative loss 61,309 44,312
NGL derivative loss 1,695 8,260
Interest rate derivative loss (gain) (1,581 ) 1,521
Total noncash derivative loss, net (a) 13,432 120,887
Cash settlements:
Oil derivative loss 27,841 25,239
Gas derivative gain (29,924 ) (64,936 )
NGL derivative loss 2,423 2,794
Interest rate derivative loss 1,450 1,599
Total cash derivative loss (gain), net 1,790 (35,304 )
Total derivative loss, net $ 15,222 $ 85,583
____________
(a) Total noncash derivative loss, net include $2.2 million of gain and $8.0
million of loss attributable to noncontrolling interests in consolidated
subsidiaries during the three and nine month periods ended September 30,
2009, respectively.
Source: Pioneer Natural Resources Company
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