Pioneer Natural Resources Reports Year-End 2011 Proved Reserves and Finding Costs

Published on Thursday, 02 February 2012 08:41 Written by TradersHuddle Staff

DALLAS-( Business Wire )-

Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer” or “the Company”) today announced that the Company added proved reserves totaling 148 million barrels oil equivalent (MMBOE) during 2011 from discoveries, extensions, improved recovery and technical revisions of previous estimates. These drillbit proved reserve additions equate to replacing 313% of Pioneer’s full-year 2011 production of 49 MMBOE (including production of 230 thousand barrels oil equivalent from Tunisia prior to its sale and proved reserves used for field fuel of 3 MMBOE). The drillbit finding and development (F&D) cost related to proved reserve additions was $13.83 per barrel oil equivalent (BOE).

Scott D. Sheffield, Chairman and CEO, stated, “In 2011, we again delivered reserve replacement well in excess of production and achieved our targeted drillbit F&D cost of $10 to $15 per BOE for the year. This strong performance is mostly due to the successful execution of our drilling programs in the Spraberry field, the Eagle Ford Shale and the Barnett Shale Combo play.”

The NYMEX prices used for 2011 proved reserves reporting purposes were $96.13 per barrel for oil and $4.12 per million British thermal units (MMBtu) for gas, compared to $79.28 per barrel of oil and $4.37 per MMBtu of gas used to calculate proved reserves for 2010. The increase in oil prices resulted in positive oil and natural gas liquids (NGL) price revisions due to the higher prices extending the economic life of certain producing wells in the Spraberry field. However, the decline in gas prices combined with management’s current outlook for future gas prices resulted in the Company reallocating the planned capital spending from certain gas areas to liquids-rich areas with higher rates of return. The negative gas price revisions associated with this reallocation were primarily related to moving proved undeveloped gas reserves in the Company’s Raton field in southeastern Colorado that are not expected to be drilled in the next five years to probable reserves. As a result, the Company recognized net negative price revisions of 28 MMBOE during 2011.

Pioneer’s proved reserve additions from the drillbit, acquisitions and price revisions totaled 124 MMBOE for 2011. This equates to replacing 256% of full-year 2011 production and results in an all-in F&D cost for the proved reserve additions of $17.51 per BOE.

After taking into account the Company’s production for 2011 of 49 MMBOE and proved reserves of 23 MMBOE that were removed due to the divestiture of Tunisia during 2011, proved oil and gas reserves totaled 1,063 MMBOE as of year-end 2011, an increase of 52 MMBOE, or 5%, from year-end 2010.

Essentially all of Pioneer’s proved reserves are in the United States and 58% are proved developed (PD). Approximately 60% of proved reserves are oil and NGLs, and 40% are gas. Pioneer’s proved reserves are long-lived with a total reserves-to-production ratio of approximately 22 years and a PD reserves-to-production ratio of 13 years.

The table below shows Pioneer’s year-end 2011 proved reserves by asset in MMBOE:

Spraberry				609
Raton				170
Mid-Continent				107
Eagle Ford Shale				70
South Texas				36
Barnett Shale				33
Alaska				30
Other				8
Total				1,063

Total costs incurred during 2011 were $2.2 billion, which included exploration and development spending, acquisitions, asset retirement obligations, capitalized interest and geological and geophysical G&A. Of this amount, $2.0 billion was attributable to development and exploration activities.

The commodity prices used for 2011 resulted in a pre-tax present value of future net cash flows discounted at 10% (PV-10) of $11.1 billion for Pioneer’s proved reserves.

Netherland, Sewell & Associates, Inc. (NSAI), an independent reserve engineering firm, audited the proved reserves of significant fields. NSAI’s audit covered properties representing approximately 90% of Pioneer’s total proved reserves at year-end 2011.

Year-end proved reserves, costs incurred and a reconciliation of PV-10 to Standardized Measure are detailed in the attached supplemental schedules.

Information regarding 2011 reserves and finding costs will be discussed during Pioneer’s quarterly conference call scheduled for Tuesday, February 7, 2012 at 9:00 a.m. Central Time, when Pioneer will also discuss its fourth quarter and full year 2011 financial and operating results and 2012 Capital Budget with an accompanying presentation. The discussion 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, then “Earnings Calls and Webcasts.” For those who cannot listen to the live webcast, a replay will be available on Pioneer’s website shortly thereafter. Or you may choose to dial (877) 856-1965 (confirmation code: 7754248) to listen to the call by telephone and view the accompanying presentation at the website. A telephone replay will be available through February 28 by dialing (888) 203-1112 (confirmation code: 7754248).

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, litigation, the costs and results of drilling and operations, availability of equipment, services and personnel required to complete the Company's operating activities, access to and availability of 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, derivative contracts and joint ventures 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, including the possible impacts of climate change, international operations 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.

An audit of proved reserves follows the general principles set forth in the standards pertaining to the estimating and auditing of oil and gas reserve information promulgated by the Society of Petroleum Engineers ("SPE"). A reserve audit as defined by the SPE is not the same as a financial audit. Please see the Company's Annual Report on Form 10-K for a general description of the concepts included in the SPE's definition of a reserve audit.

"Finding and development cost per BOE," or “all-in F&D cost per BOE,” means total costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place, discoveries and extensions and improved recovery. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.

"Drillbit finding and development cost per BOE," or “drillbit F&D cost per BOE,” means the summation of exploration and development costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to technical revisions of previous estimates, discoveries and extensions and improved recovery. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.

“Reserve replacement” is the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place, discoveries and extensions and improved recovery divided by annual production of oil, NGLs and gas, on a BOE basis.

“Drillbit reserve replacement” is the summation of annual proved reserves, on a BOE basis, attributable to technical revisions of previous estimates, discoveries and extensions and improved recovery divided by annual production of oil, NGLs and gas, on a BOE basis.

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL INFORMATION
Year Ended December 31, 2011
		United
		States					Africa					Total
Proved reserves:
Oil (MBbls):
Balance, January 1, 2011			360,716					20,093					380,809
Revisions of previous estimates			8,816					122					8,938
Purchases of minerals-in-place			2,810					-					2,810
Discoveries and extensions			70,864					28					70,892
Improved recovery			1,394					-					1,394
Production			(14,826	)				(393	)				(15,219	)
Sales of minerals-in-place			-					(19,619	)				(19,619	)
Balance, December 31, 2011			429,774					231					430,005
Natural Gas Liquids (MBbls):
Balance, January 1, 2011			184,218					-					184,218
Revisions of previous estimates			(5,750	)				-					(5,750	)
Purchases of minerals-in-place			863					-					863
Discoveries and extensions			39,912					-					39,912
Improved recovery			-					-					-
Production			(8,208	)				-					(8,208	)
Sales of minerals-in-place			-					-					-
Balance, December 31, 2011			211,035					-					211,035
Natural Gas (MMcf):
Balance, January 1, 2011			2,635,702					38,820					2,674,522
Revisions of previous estimates			(248,365	)				1,159					(247,206	)
Purchases of minerals-in-place			4,569					-					4,569
Discoveries and extensions			269,709					3,344					273,053
Improved recovery			-					-					-
Production			(143,243	)				(7,689	)				(150,932	)
Sales of minerals-in-place			-					(22,968	)				(22,968	)
Balance, December 31, 2011			2,518,372					12,666					2,531,038
Equivalent Barrels (MBOE):
Balance, January 1, 2011			984,217					26,564					1,010,781
Revisions of previous estimates (a)			(38,328	)				315					(38,013	)
Purchases of minerals-in-place			4,435					-					4,435
Discoveries and extensions			155,728					585					156,313
Improved recovery			1,394					-					1,394
Production (b)			(46,907	)				(1,675	)				(48,582	)
Sales of minerals-in-place			-					(23,447	)				(23,447	)
Balance, December 31, 2011			1,060,539					2,342					1,062,881
Costs incurred for oil and gas producing activities ($000):
Property acquisition costs:
Proved		$	7,571				$	-				$	7,571
Unproved			124,326					-					124,326
			131,897					-					131,897
Exploration costs			560,036					7,160					567,196
Development costs			1,470,362					4,031					1,474,393
Total costs incurred (c)		$	2,162,295				$	11,191				$	2,173,486
Reserve replacement percentage (d)			263	%				54	%				256	%
Reserve replacement percentage, excluding price revisions (d)			322	%				54	%				313	%
F&D costs per BOE of proved reserves added (e)		$	17.55				$	12.43				$	17.51
F&D costs per BOE of proved reserves added, excluding price revisions (e)		$	14.30				$	12.43				$	14.29
Drillbit F&D costs per BOE of proved reserves added (f)		$	13.84				$	12.43				$	13.83

_____________
	(a)		Revisions of previous estimates includes 27.9 MMBOEs of negative price revisions and 10.1 MMBOEs of negative technical revisions.
	(b)		Production includes 2,954 MBOE related to field fuel and 230 MBOE of production associated with Tunisia prior to its sale.
	(c)		Costs incurred includes $13.4 MM of capitalized interest, $19.5 MM of asset retirement obligation increases and $43.1 MM of G&G/G&A.
	(d)		The summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place, improved recovery and discoveries and extensions, if any, divided by annual production of oil, NGLs and gas, on a BOE basis.
	(e)		Total costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place, improved recovery and discoveries and extensions, if any.
			Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.
	(f)		The summation of exploration and development costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to technical revisions of previous estimates, improved recovery and discoveries and extensions, if any.
			Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED RECONCILIATION OF PV-10 TO STANDARDIZED MEASURE

December 31, 2011

PV-10 is the estimated future net cash flows from proved reserves discounted at an annual rate of 10 percent before giving effect to income taxes. Standardized Measure is the after-tax estimated future cash flows from proved reserves discounted at an annual rate of 10 percent, determined in accordance with GAAP. Pioneer uses PV-10 as one measure of the value of the Company's proved reserves and to compare relative values of proved reserves among exploration and production companies without regard to income taxes. Pioneer believes that securities analysts and rating agencies use PV-10 in similar ways. Pioneer’s management believes PV-10 is a useful measure for comparison of proved reserve values among companies because, unlike Standardized Measure, it excludes future income taxes that often depend principally on the characteristics of the owner of the reserves rather than on the nature, location and quality of the reserves themselves. Below is a reconciliation of PV-10 to Standardized Measure for SEC oil and gas NYMEX pricing (in billions):

		$96.13/$4.12
		SEC Pricing
PV-10 at December 31, 2011		$	11.1
Discounted Effect of Income Taxes			(3.3	)
Standardized Measure at December 31, 2011		$	7.8

Pioneer Natural ResourcesInvestorsFrank Hopkins, 972-969-4065orEric Pregler, 972-969-5756orMedia and Public AffairsSusan Spratlen, 972-969-4018orSuzanne Hicks, 972-969-4020