EX-99 2 pnroct28er8k99.txt PIONEER 10/28/04 FORM 8-K EXHIBIT 99.1 EXHIBIT 99.1 NEWS RELEASE Investor Relations Contacts: Susan Spratlen or Chris Paulsen (972) 444-9001 Pioneer Reports Third Quarter 2004 Results Dallas, Texas, October 28, 2004 -- Pioneer Natural Resources Company ("Pioneer") (NYSE:PXD) today announced financial and operating results for the quarter ended September 30, 2004. Pioneer reported net income of $80.9 million, or $.67 per diluted share, for the third quarter of 2004 and $210.8 million, or $1.75 per diluted share, for the nine months ended September 30, 2004. Third quarter results included an $.08 per share after-tax impairment charge related to the Company's decision to not pursue development of the Olowi field in Gabon due to increases to development cost projections, primarily the result of higher steel costs. For the same periods last year, Pioneer reported net income of $191.8 million, or $1.62 per diluted share, and $353.2 million, or $2.99 per diluted share, respectively. The significant year-to-year change in net income is principally attributable to the Company's reversal of its deferred tax valuation allowance in the U.S. during the third quarter of 2003. The Company's balance sheet at September 30, 2004 reflects the merger with Evergreen Resources, Inc. that closed on September 28, 2004. Long-term debt at the end of the third quarter was $2.46 billion, reflecting a $280 million debt reduction year-to-date offset by a $1.2 billion addition for merger-related debt. After issuing approximately 25.4 million new shares of common stock to Evergreen holders, there were 145.2 million shares outstanding at the end of the period. Cash flow from operations for the third quarter was $239.1 million compared to $222.5 million for the same period in 2003. Third quarter oil and gas sales averaged 180,020 barrels oil equivalent per day (BOEPD). Third quarter oil sales averaged 45,924 barrels per day (BPD) and natural gas liquids sales averaged 21,459 BPD. Gas sales in the third quarter averaged 676 million cubic feet per day (MMcfpd). Realized prices for oil and natural gas liquids for the quarter were $33.10 and $26.99 per barrel, respectively. The realized price for gas was $4.18 per thousand cubic feet (Mcf), while North American gas prices averaged $5.09 per Mcf. Pioneer will begin including production from the assets acquired from Evergreen as of October 1, 2004. Evergreen's third quarter production averaged approximately 155 MMcfpd or approximately 25,900 BOEPD, net of field fuel usage. Pioneer burdens its lease operating expense with the value of fuel used for field operations and includes the field fuel in production. Based on Pioneer's method of accounting for field fuel, third quarter production from the assets acquired from Evergreen averaged approximately 27,200 BOEPD. Third quarter production costs averaged $5.63 per BOE. Exploration and abandonment costs of $33.0 million for the quarter include $6.9 million of dry hole and abandonments. Also included were $23.4 million of geologic and geophysical expenses including seismic costs in West Africa and the Gulf of Mexico and $2.7 million of delay rentals and unproved acreage abandonments. Income tax expense for the quarter resulted in a consolidated effective tax rate of approximately 23%. The effective tax rate is lower than the U.S. federal and state statutory rates (approximately 36.5%) primarily due to the aforementioned impairment of the Olowi field. Excluding the impairment, the consolidated effective tax rate would have been approximately 35%. For the same quarter last year, Pioneer reported oil sales of 33,560 BPD, natural gas liquids sales of 22,658 BPD and gas sales of 643 MMcfpd. Realized prices for the 2003 third quarter were $25.35 per barrel for oil, $18.71 per barrel for natural gas liquids and $3.71 per Mcf for gas, while North American gas prices averaged $4.39 per Mcf. Financial Outlook The following statements are estimates based on current expectations. These forward-looking statements are subject to a number of risks and uncertainties which may cause the Company's actual results to differ materially from the following statements. The last paragraph of this release addresses certain of the risks and uncertainties to which the Company is subject. Fourth quarter 2004 production is expected to average 190,000 to 205,000 BOE per day, including the production from the Evergreen assets, current production expectations for Devils Tower and the Falcon Corridor and the variability of oil cargo shipments in Tunisia and South Africa. Fourth quarter lease operating expenses (including production and ad valorem taxes) are expected to average $6.40 to $7.00 per BOE based on current NYMEX strip prices for oil and gas. The increase is attributable to lower estimated production from low-cost Falcon Corridor properties and the impact of higher costs associated with the acquired Evergreen assets when accounting for field fuel in accordance with Pioneer's accounting practices. Depreciation, depletion and amortization expense is expected to average $8.50 to $9.25 per BOE. Total exploration and abandonment expense is expected to be $40 million to $60 million. General and administrative expense is expected to be $21 million to $23 million. Interest expense is expected to be $31 million to $34 million reflecting incremental acquisition financing, and accretion of discount on asset retirement obligations is expected to be approximately $2 million to $3 million. The Company's effective income tax rate is expected to range from 36% to 39% based on current capital spending plans, including cash income taxes of $5 million to $10 million that are principally related to Argentine and Tunisian income taxes and nominal alternative minimum tax in the U.S. Other than in Argentina and Tunisia, the Company continues to benefit from the carryforward of net operating losses and other positive tax attributes. The Company's financial results and oil and gas hedges are outlined on the attached schedules. Earnings Conference Call This morning at 10:00 a.m. Eastern, Pioneer will discuss its third quarter financial and operating results with an accompanying presentation. The call will be webcast on Pioneer's website, www.pioneernrc.com. At the website, select 'INVESTOR' at the top of the page. For those who cannot listen to the live broadcast, a replay will be available shortly after the call. Or you may choose to dial (800) 946-0741 (confirmation code: 954684) to listen to the call by telephone and view the accompanying visual presentation at the website above. A telephone replay will be available by dialing (888) 203-1112: confirmation code: 954684. Pioneer is a large independent oil and gas exploration and production company with operations in the United States, Argentina, Canada, Equatorial Guinea, South Africa and Tunisia. Pioneer's headquarters are in Dallas. For more information, visit Pioneer's website at www.pioneernrc.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 oil and gas prices, product supply and demand, competition, government regulation or action, international operations and associated international political and economic instability, litigation, the costs and results of drilling and operations, Pioneer's ability to replace reserves, implement its business plans, or complete its development projects as scheduled, access to and cost of capital, uncertainties about estimates of reserves, quality of technical data, environmental and weather risks, 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. PIONEER NATURAL RESOURCES COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 2004 2003 ------------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,949 $ 19,299 Accounts receivable, net 173,900 111,480 Inventories 35,576 17,509 Prepaid expenses 13,117 11,083 Deferred income taxes 18,143 40,514 Other current assets, net 18,725 5,230 ---------- ---------- Total current assets 262,410 205,115 ---------- ---------- Property, plant and equipment, at cost: Oil and gas properties, using the successful efforts method of accounting 7,964,212 5,163,383 Accumulated depletion, depreciation and amortization (2,083,735) (1,676,136) ---------- ---------- Total property, plant and equipment 5,880,477 3,487,247 ---------- ---------- Deferred income taxes 3,300 192,344 Goodwill 333,203 - Other assets, net 116,833 66,866 ---------- ---------- $ 6,596,223 $ 3,951,572 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 177,585 $ 186,418 Interest payable 25,152 37,034 Income taxes payable 13,101 5,928 Other current liabilities 421,022 200,372 ---------- ---------- Total current liabilities 636,860 429,752 ---------- ---------- Long-term debt 2,464,902 1,555,461 Deferred income taxes 438,236 12,121 Other liabilities 415,317 194,466 Stockholders' equity 2,640,908 1,759,772 ---------- ---------- $ 6,596,223 $ 3,951,572 ========== ==========
PIONEER NATURAL RESOURCES COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited)
Three months ended Nine months ended September 30, September 30, ---------------------- ----------------------- 2004 2003 2004 2003 --------- --------- ---------- --------- Revenues and other income: Oil and gas $ 452,839 $ 336,473 $1,346,358 $ 965,712 Interest and other 1,212 348 4,557 4,321 Gain (loss) on disposition of assets, net 215 46 (30) 1,576 -------- -------- --------- -------- 454,266 336,867 1,350,885 971,609 -------- -------- --------- -------- Costs and expenses: Oil and gas production 93,214 75,764 277,990 217,474 Depletion, depreciation and amortization 139,991 103,534 419,240 274,142 Impairment of oil and gas properties 34,825 - 34,825 - Exploration and abandonments 32,965 24,516 153,154 107,430 General and administrative 19,485 15,207 55,008 44,332 Accretion of discount on asset retirement obligations 2,030 1,327 6,012 3,656 Interest 24,827 23,212 67,805 69,526 Other 2,486 1,389 10,982 12,205 -------- -------- --------- -------- 349,823 244,949 1,025,016 728,765 -------- -------- --------- -------- Income before income taxes and cumulative effect of change in accounting principle 104,443 91,918 325,869 242,844 Income tax benefit (provision) (23,527) 99,895 (115,063) 94,961 -------- -------- --------- -------- Income before cumulative effect of change in accounting principle 80,916 191,813 210,806 337,805 Cumulative effect of change in accounting principle, net of tax - - - 15,413 -------- -------- --------- -------- Net income $ 80,916 $ 191,813 $ 210,806 $ 353,218 ======== ======== ========= ======== Net income per share: Basic: Income before cumulative effect of change in accounting principle $ .68 $ 1.64 $ 1.78 $ 2.89 Cumulative effect of change in accounting principle, net of tax - - - .13 -------- -------- --------- -------- Net income $ .68 $ 1.64 $ 1.78 $ 3.02 ======== ======== ========= ======== Diluted: Income before cumulative effect of change in accounting principle $ .67 $ 1.62 $ 1.75 $ 2.86 Cumulative effect of change in accounting principle, net of tax - - - .13 -------- -------- --------- -------- Net income $ .67 $ 1.62 $ 1.75 $ 2.99 ======== ======== ========= ======== Weighted average shares outstanding: Basic 118,663 117,216 118,745 116,990 ======== ======== ========= ======== Diluted 120,297 118,457 120,321 118,283 ======== ======== ========= ========
PIONEER NATURAL RESOURCES COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three months ended Nine months ended September 30, September 30, ------------------------ ------------------------- 2004 2003 2004 2003 ---------- ---------- ----------- ---------- Cash flows from operating activities: Net income $ 80,916 $ 191,813 $ 210,806 $ 353,218 Depletion, depreciation and amortization 139,991 103,534 419,240 274,142 Impairment of oil and gas properties 34,825 - 34,825 - Exploration expenses, including dry holes 14,058 15,677 126,336 83,204 Deferred income taxes 16,011 (103,691) 95,875 (103,938) Loss (gain) on disposition of assets, net (215) (46) 30 (1,576) Accretion of discount on asset retirement obligations 2,030 1,327 6,012 3,656 Interest related amortization (1,094) (4,781) (12,457) (13,960) Commodity hedge related amortization (11,311) (18,132) (33,844) (54,119) Cumulative effect of change in accounting principle, net of tax - - - (15,413) Amortization of stock-based compensation 2,928 1,609 7,794 4,321 Other noncash items 788 (11) 6,492 4,259 Changes in operating assets and liabilities: Accounts receivable, net 13,450 17,932 (45,090) 3,287 Inventories (5,572) (4,678) (9,752) (8,895) Prepaid expenses (6,881) 1,102 (2,034) (8,404) Other current assets, net 380 (2,712) 1,137 (3,276) Accounts payable (23,019) 23,281 (27,773) 28,951 Interest payable (12,563) 850 (12,477) 581 Income taxes payable (1,460) 1,740 2,995 3,916 Other current liabilities (4,123) (2,349) (10,642) (3,278) --------- --------- ---------- --------- Net cash provided by operating activities 239,139 222,465 757,473 546,676 Net cash used in investing activities (975,756) (127,409) (1,340,290) (495,149) Net cash provided by (used in) financing activities 723,739 (94,388) 566,205 (48,641) --------- --------- ---------- --------- Net increase (decrease) in cash and cash equivalents (12,878) 668 (16,612) 2,886 Effect of exchange rate changes on cash and cash equivalents 615 (173) 262 1,275 Cash and cash equivalents, beginning of period 15,212 12,156 19,299 8,490 --------- --------- ---------- --------- Cash and cash equivalents, end of period $ 2,949 $ 12,651 $ 2,949 $ 12,651 ========= ========= ========== =========
PIONEER NATURAL RESOURCES COMPANY SUMMARY PRODUCTION AND PRICE DATA (Unaudited)
Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 2004 2003 2004 2003 --------- --------- --------- ---------- Average Daily Production: Oil (Bbls) - U.S. 27,780 24,130 26,268 24,128 Argentina 9,316 9,126 8,827 8,200 Canada 95 93 97 118 Africa 8,733 211 10,986 71 --------- --------- --------- --------- Total 45,924 33,560 46,178 32,517 Natural gas liquids (Bbls) - U.S. 18,873 20,254 19,869 20,157 Argentina 1,727 1,584 1,549 1,387 Canada 859 820 940 907 --------- --------- --------- --------- Total 21,459 22,658 22,358 22,451 Gas (Mcf) - U.S. 499,012 487,000 535,740 435,275 Argentina 137,971 114,326 119,440 94,916 Canada 38,837 41,253 40,045 42,468 --------- --------- --------- --------- Total 675,820 642,579 695,225 572,659 Total Production: Oil (MBbls) 4,225 3,088 12,653 8,877 Natural gas liquids (MBbls) 1,974 2,085 6,126 6,129 Gas (MMcf) 62,175 59,117 190,492 156,336 Total equivalent barrels (MBOE) 16,562 15,025 50,528 41,062 Average Reported Prices (a): Oil (per Bbl) - U.S. $ 30.51 $ 25.04 $ 28.35 $ 25.06 Argentina $ 32.25 $ 26.10 $ 26.96 $ 25.31 Canada $ 38.70 $ 28.97 $ 37.69 $ 28.67 Africa $ 42.17 $ 26.94 $ 35.43 $ 26.94 Worldwide $ 33.10 $ 25.35 $ 29.79 $ 25.14 Natural gas liquids (per Bbl) - U.S. $ 26.51 $ 18.29 $ 23.37 $ 18.98 Argentina $ 29.62 $ 21.63 $ 28.71 $ 22.86 Canada $ 32.24 $ 23.62 $ 29.18 $ 26.10 Worldwide $ 26.99 $ 18.71 $ 23.98 $ 19.51 Gas (per Mcf) - U.S. $ 5.15 $ 4.38 $ 5.14 $ 4.64 Argentina $ .63 $ .54 $ .62 $ .55 Canada $ 4.34 $ 4.62 $ 4.37 $ 5.04 Worldwide $ 4.18 $ 3.71 $ 4.32 $ 3.98 ----------- (a) Average prices include the results of hedging activities.
PIONEER NATURAL RESOURCES COMPANY SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (in thousands) (Unaudited) 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 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 or net cash provided by operating activities, as defined by GAAP.
Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Net income $ 80,916 $ 191,813 $ 210,806 $ 353,218 Depletion, depreciation and amortization 139,991 103,534 419,240 274,142 Impairment of oil and gas properties 34,825 - 34,825 - Exploration and abandonments 32,965 24,516 153,154 107,430 Accretion of discount on asset retirement obligations 2,030 1,327 6,012 3,656 Interest expense 24,827 23,212 67,805 69,526 Income tax provision (benefit) 23,527 (99,895) 115,063 (94,961) Loss (gain) on disposition of assets, net (215) (46) 30 (1,576) Commodity hedge related amortization (11,311) (18,132) (33,844) (54,119) Cumulative effect of change in accounting principle, net of tax - - - (15,413) Amortization of stock-based compensation 2,928 1,609 7,794 4,321 Other noncash items 788 (11) 6,492 4,259 -------- -------- -------- -------- EBITDAX (a) 331,271 227,927 987,377 650,483 Less: Cash interest expense (25,921) (27,993) (80,262) (83,486) Current income taxes (7,516) (3,796) (19,188) (8,977) -------- -------- -------- -------- Discretionary cash flow (b) 297,834 196,138 887,927 558,020 Less: Cash exploration expense (18,907) (8,839) (26,818) (24,226) Changes in operating assets and liabilities (39,788) 35,166 (103,636) 12,882 --------- -------- -------- -------- Net cash provided by operating activities $ 239,139 $ 222,465 $ 757,473 $ 546,676 ======== ======== ======== ======== ------------- (a) "EBITDAX" represents earnings before depletion, depreciation and amortization expense; impairment of oil and gas properties; exploration and abandonments; accretion of discount on asset retirement obligations; interest expense; income taxes; gain or loss on the disposition of assets; commodity hedge related amortization; cumulative effect of change in accounting principle, net of tax; amortization of stock-based compensation; 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 SUPPLEMENTAL HEDGE INFORMATION As of October 27, 2004 Open Commodity Hedge Positions
2004 --------- Fourth Quarter 2005 2006 2007 2008 --------- --------- --------- --------- --------- Average Daily Oil Production Hedged: Swap Contracts: Volume (Bbl) 24,000 28,000 11,500 13,000 17,000 NYMEX price (Bbl) $ 29.65 $ 28.47 $ 32.52 $ 30.89 $ 29.21 Collar Contracts: Volume (Bbl) - 1,000 4,500 - - NYMEX price (Bbl): Ceiling $ - $ 51.10 $ 41.93 $ - $ - Floor $ - $ 35.00 $ 35.00 $ - $ - Average Daily Gas Production Hedged: Swap Contracts: Volume (Mcf) 426,163 274,904 70,000 25,000 5,000 NYMEX price (MMBtu) (a) $ 4.60 $ 5.20 $ 4.25 $ 4.15 $ 5.40 Collar Contracts: Volume (Mcf) - - 5,000 - - NYMEX price (MMBtu): Ceiling $ - $ - $ 7.15 $ - $ - Floor $ - $ - $ 5.25 $ - $ - --------------- (a) Approximate, based on historical differentials to index prices.
Net Deferred Gains (Losses) on Terminated Hedges (in thousands)
2004 --------- Fourth Quarter 2005 Thereafter Total --------- --------- ---------- --------- Net commodity hedge gains (a) $ 10,954 $ 1,249 $ - $ 12,203 Net debt hedge gains (losses) (b) 2,460 4,962 (11,799) (4,377) -------- ------ -------- -------- Total net deferred gains (losses) $ 13,414 $ 6,211 $ (11,799) $ 7,826 ======== ====== ======== ======== --------------- (a) Includes the following net deferred commodity hedge gains and losses for which cash settlements have been deferred until the indicated future periods: (i) $317 thousand of net deferred commodity hedge losses due during the fourth quarter of 2004 and (ii) $209 thousand of net deferred commodity hedge gains to be received during 2005. Deferred commodity hedge gains will be amortized as increases to oil and gas revenues and deferred commodity hedge losses will be amortized as decreases to oil and gas revenues during the indicated future periods. (b) Deferred debt hedge gains will be amortized as decreases to interest expense and deferred debt hedge losses will be amortized as increases to interest expense during the indicated future periods.