Pioneer Natural Resources Reports Year-End 2014 Proved Reserves and Finding Costs

DALLAS--()--Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer” or “the Company”) today announced that the Company added proved reserves totaling 177 million barrels oil equivalent (MMBOE) during 2014 from discoveries, extensions and technical revisions of previous estimates (excludes revisions of previous estimates of 39 MMBOE of proved undeveloped (PUD) reserves related to vertical drilling locations in the Spraberry/Wolfcamp area that are no longer expected to be drilled, acquisitions of 2 MMBOE and 12 MMBOE of positive pricing revisions). These drillbit proved reserve additions equate to a drillbit reserve replacement of 239% of Pioneer’s full-year 2014 production of 74 MMBOE, which includes 5 MMBOE of production associated with assets that were divested during 2014 (Alaska, Barnett Shale and Hugoton) and production used for field fuel of 3 MMBOE. The Company’s substantial reserve additions in 2014 are primarily due to the continued successful execution of Pioneer’s horizontal drilling programs in the Spraberry/Wolfcamp and Eagle Ford Shale plays. The Company’s drillbit finding and development (F&D) cost for horizontal additions in the Spraberry/Wolfcamp and Eagle Ford Shale, which totaled 157 MMBOE, was $15.51 per barrel oil equivalent (BOE), while the Company’s overall drillbit F&D cost was $19.65 per BOE.

In 2013, Pioneer removed 231 MMBOE of PUD reserves associated with vertical drilling locations in the Spraberry/Wolfcamp area as the Company shifted its vertical drilling to more capital-efficient horizontal drilling. At the end of 2013, the Company did not remove those vertical drilling PUD locations that were expected to be drilled over the next few years with the 11 vertical rigs the Company was operating at that time. These vertical drilling locations were primarily related to continuous drilling obligations associated with certain leases. However, as 2014 progressed, the Company began phasing out the drilling of vertical wells and substituting them with higher-rate-of-return horizontal wells or extending the leases that had continuous drilling obligations so they could be developed at a later date with horizontal wells. During the fourth quarter of 2014, the Company determined that it would no longer drill its remaining vertical PUD locations and, consequently, removed the remaining 39 MMBOE of vertical PUD reserve locations in the Spraberry/Wolfcamp area. This reduction in proved reserves is reflected in the revisions of previous estimates category.

During 2014, Pioneer removed proved reserves totaling 40 MMBOE due to technical revisions (also included in the revisions of previous estimates category). Most of this reduction is related to (i) horizontal PUD reserves in the Spraberry/Wolfcamp and the Eagle Ford Shale that are no longer expected to be drilled within the next five years due to the reallocation of drilling capital to horizontal wells with higher rates of return and (ii) updated horizontal and vertical well performance and cost data.

Pioneer added 2 MMBOE of proved reserves in the Spraberry/Wolfcamp related to property acquisitions and removed 124 MMBOE of proved reserves that were associated with the divestitures of Alaska, Barnett Shale, Hugoton and other non-core Permian properties during 2014.

The NYMEX prices used for 2014 proved reserves reporting purposes were $94.98 per barrel for oil and $4.35 per million British thermal units (MMBTU) for gas. The oil price for 2014 was $1.84 per barrel below the oil price used to calculate proved reserves for 2013 ($96.82 per barrel). The gas price for 2014 was $0.68 per MMBTU above the gas price used to calculate proved reserves for 2013 ($3.67 per MMBTU). The increase in the 2014 gas price, as compared to 2013, led to the positive price revisions of 12 MMBOE, principally in the Company’s Raton gas assets.

As of December 31, 2014, all of Pioneer’s proved reserves were in the United States, and 81% were proved developed (PD) reserves. Approximately 44% of the Company’s proved reserves are oil, 21% are NGLs and 35% are gas. Pioneer’s proved reserves are long-lived with a total reserves-to-production ratio of 11 years and a PD reserves-to-production ratio of 9 years.

The table below shows Pioneer’s year-end 2014 proved reserves by asset in MMBOE:

Spraberry/Wolfcamp           476
Eagle Ford Shale 142
Raton 121
Other 60
Total 799
 

Total costs incurred during 2014 were $3.6 billion, which included $3.4 billion for exploration and development spending, $0.1 billion for property acquisitions (principally in the Spraberry/Wolfcamp area) and $72 million for asset retirement obligations, capitalized interest and geological and geophysical G&A. Of total costs incurred during 2014, $214 million was related to capital spending activity in assets that were divested during the year (Alaska, Barnett Shale and Hugoton).

The commodity prices used for 2014 resulted in a pre-tax present value of future net cash flows discounted at 10% (PV-10) of $9.7 billion for Pioneer’s proved reserves.

Netherland, Sewell & Associates, Inc., an independent reserve engineering firm, audited the proved reserves of significant fields. The audit covered properties representing 80% of Pioneer’s total proved reserves at year-end 2014.

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

On Wednesday, February 11, 2015, at 9:00 a.m. Central Time, Pioneer will discuss its financial and operating results for the quarter ended December 31, 2014 and 2015 capital program, with an accompanying presentation. Instructions for listening to the call and viewing the accompanying presentation are shown below.

Internet: www.pxd.com
Select “Investors,” then “Earnings & Webcasts” to listen to the discussion, view the presentation and see other related material.

Telephone: Dial (888) 855-5838 and confirmation code: 1285607 five minutes before the call. View the presentation via Pioneer’s internet address above.

A replay of the webcast will be archived on Pioneer’s website. A telephone replay will be available through March 8, 2015, by dialing (888) 203-1112 and confirmation code: 1285607.

Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations 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, resources and personnel required to perform the Company’s drilling and operating activities, access to and availability of transportation, processing, fractionation 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, 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, and environmental and weather risks, including the possible impacts of climate change, 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 U.S. Securities and Exchange Commission (SEC). 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.

“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 discoveries and extensions (excludes purchases of minerals-in-place) and revisions of previous estimates. Revisions of previous estimates excludes vertical Spraberry/Wolfcamp PUDs removed and price revisions. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.

“Drillbit reserve replacement” is the summation of annual proved reserves, on a BOE basis, attributable to discoveries and extensions (excludes purchases of minerals-in-place) and revisions of previous estimates divided by annual production of oil, NGLs and gas, on a BOE basis. Revisions of previous estimates excludes vertical Spraberry/Wolfcamp PUDs removed and price revisions.

   
 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION
Year Ended December 31, 2014
 
Proved reserves:
Oil (MBbls):
Balance, January 1, 2014 342,105
Revisions of previous estimates (46,354 )
Purchases of minerals-in-place 1,139
Discoveries and extensions 114,864
Production (32,718 )
Sales of minerals-in-place   (26,952 )
Balance, December 31, 2014 352,084
Natural Gas Liquids (MBbls):
Balance, January 1, 2014 185,422
Revisions of previous estimates

(20,125

)
Purchases of minerals-in-place 647
Discoveries and extensions 55,987
Production

(15,761

)
Sales of minerals-in-place   (36,926 )
Balance, December 31, 2014 169,244
Natural Gas (MMcf):
Balance, January 1, 2014

 1,906,341

Revisions of previous estimates (2,574 )
Purchases of minerals-in-place 3,252
Discoveries and extensions 275,825
Production (154,424 )
Sales of minerals-in-place   (359,548 )
Balance, December 31, 2014

 1,668,872

Equivalent Barrels (MBOE):
Balance, January 1, 2014 845,250
Revisions of previous estimates (a)

(66,907

)
Purchases of minerals-in-place 2,328
Discoveries and extensions 216,822
Production (b)

(74,217

)
Sales of minerals-in-place   (123,803 )
Balance, December 31, 2014   799,473  
 
Costs incurred for oil and gas producing activities ($000):
Property acquisition costs:
Proved $ 19,129
Unproved   84,410  
103,539
Exploration costs

1,939,952

Development costs  

1,538,702

 
Total costs incurred (c)

$

3,582,193

 
 
 
Reserve replacement percentage (d)   205 %
 
Reserve replacement percentage (excludes PUDs removed and price revisions) (e)   242 %
 
Drillbit reserve replacement percentage (excludes PUDs removed, pricing revisions and purchases of minerals-in-place) (f)   239 %
 
F&D costs per BOE of proved reserves added (g) $ 23.53  
 
F&D costs per BOE of proved reserves added (excludes PUDs removed and price revisions) (h) $ 19.97  
 
Drillbit F&D costs per BOE of proved reserves added (excludes PUDs removed, pricing revisions and purchases of minerals-in-place) (i) $ 19.65  

_____________

(a)     Revisions of previous estimates includes 11.6 MMBOEs of positive price revisions and 78.5 MMBOEs of negative technical revisions, including 38.8 MMBOE of vertical Spraberry/Wolfcamp area PUDs removed from proved reserves since they are no longer expected to be drilled.
(b) Production includes 2.8 MMBOE related to field fuel and 4.9 MMBOE of production associated with discontinued operations in Alaska and the Barnett Shale and Hugoton fields.
(c) Costs incurred includes $2.6 million of capitalized interest, $6.5 million of asset retirement obligation increases and $62.7 million 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 and discoveries and extensions, if any, divided by annual production of oil, NGLs and gas, on a BOE basis.
(e) The summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates, purchases of minerals-in-place and discoveries and extensions, if any, divided by annual production of oil, NGLs and gas, on a BOE basis. Revisions of previous estimates excludes vertical Spraberry/Wolfcamp PUDs removed and price revisions.
(f) The summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates and discoveries and extensions, if any, (excludes purchases of minerals-in-place) divided by annual production of oil, NGLs and gas, on a BOE basis. Revisions of previous estimates excludes vertical Spraberry/Wolfcamp PUDs removed and price revisions.
(g) 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 and discoveries and extensions, if any. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.
(h) 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 and discoveries and extensions, if any. Revisions of previous estimates excludes vertical Spraberry/Wolfcamp PUDs removed and price revisions. Consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred.
(i) The summation of exploration and development costs incurred divided by the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates and discoveries and extensions, if any (excludes purchases of minerals-in-place). Revisions of previous estimates excludes vertical Spraberry/Wolfcamp PUDs removed and price revisions. 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, 2014
 
 
 
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 using SEC oil and gas NYMEX pricing (in billions):
   

$94.98/$4.35

SEC Pricing
PV-10 at December 31, 2014 $ 9.7
 
Discounted Effect of Income Taxes (1.9 )
 
Standardized Measure at December 31, 2014 $ 7.8  

Contacts

Pioneer Natural Resources
Investors
Frank Hopkins, 972-969-4065
or
Michael Bandy, 972-969-4513
or
Steven Cobb, 972-969-5679
or
Media and Public Affairs
Tadd Owens, 972-969-5760
or
Suzanne Hicks, 972-969-4020

Release Summary

Pioneer Natural Resources Reports Year-End 2014 Proved Reserves and Finding Costs

Contacts

Pioneer Natural Resources
Investors
Frank Hopkins, 972-969-4065
or
Michael Bandy, 972-969-4513
or
Steven Cobb, 972-969-5679
or
Media and Public Affairs
Tadd Owens, 972-969-5760
or
Suzanne Hicks, 972-969-4020