Pioneer Natural Resources Sees Production Soar in Third-Quarter 2011 from Texas Drilling

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Researched by Industrial Info Resources (Sugar Land, Texas)--In the third quarter of 2011, Pioneer Natural Resources (NYSE:PXD) (Dallas, Texas), a leading independent oil and gas exploration and production company, tripled its net income and nearly doubled its revenues when compared to the same quarter last year, as its three major liquids-rich assets in Texas--in the Eagle Ford Shale, the Spraberry oil field and the Barnett Shale Combo--played a leading role in boosting the company's production to about 128,000 barrels of oil equivalent per day. Net income for the quarter was reported to be $351.46 million, compared with $112.04 million in the third quarter of 2010.

Total revenues stood at $1.03 billion, compared with only $585.8 million in the same period last year. Pioneer executives attributed part of the success to cash savings created by the company's ownership of drilling rigs, fracture stimulation fleets and other service equipment, which they say also has improved drilling overall. They estimate that these investments will save the company about $450 million for all of 2011. Pioneer also benefited from $191 million in after-tax unrealized mark-to-market gains on derivatives.

In Eagle Ford Shale in South Texas, where the company is running or co-running 12 rigs, production nearly doubled from 8,000 to 14,000 barrels of oil equivalent per day from the second quarter of 2011. In the Spraberry oil field in West Texas, Pioneer increased its average number of rigs to 38, boosting production by 6,000 barrels of oil equivalent per day to an average of 47,000. In the Barnett Shale Combo play, where Pioneer has more than 700 drilling locations in 76,000 acres, production stood at 4,000 barrels of oil equivalent per day, up from 3,000 in the previous quarter.

Industrial Info is tracking more than $538 million in active U.S. projects from Pioneer, including a $100 million development project at the Oooguruk oil production field near Anchorage, Alaska, where the company is working with contractor Nabors Alaska Drilling Incorporated (Anchorage). The project, which is set to conclude in January 2013, involves the drilling of 10 new shallow extended-reach horizontal wells in the 7,000 barrel-per-day field, where recoverable reserves are estimated to be between120 million and 150 million barrels.

"We've got three tremendous growth areas, over 20,000 drilling locations, with over 200,000 acres minimum and growing," said Scott Sheffield, the chairman and chief executive officer of Pioneer, in a conference call. "In the horizontal Wolfcamp [Shale] play, we'll have well over 1,000 locations--that's not in the 20,000 at this point in time. That play will allow us to continue to grow significantly." The Wolfcamp Shale is in the Permian Basin of Texas and New Mexico.

Pioneer's South African Gas segment was the only major segment to report a decline in production for the quarter:

• The U.S. Oil segment reported average daily sales volumes of 42,245 barrels, compared with 28,880 barrels in third-quarter 2010.
• The South African Oil segment reported average daily sales volumes of 527 barrels, compared with 445 barrels in the same period last year.
• The U.S. Natural Gas Liquids segment reported average daily sales volumes of 23,212 barrels, compared with 20,525 barrels in third-quarter 2010.
• The U.S. Gas segment reported average daily sales volumes of 350.69 million cubic feet, compared with 327.92 million cubic feet in the same period last year.
• The South African Gas segment reported average daily sales volumes of 19.47 million cubic feet, compared with 31.07 million cubic feet in third-quarter 2010.

Pioneer executives expect fourth-quarter 2011 production to grow by about 10,000 barrels per day, with production for the full year averaging 125,000 barrels per day. They expect the company to show production growth of more than 20% in 2012, when compared to this year, including more than 22% growth in the U.S. Liquids are expected to reach 60% of global production in 2014, compared with 44% today.

"We're going to continue, going into next year, to focus on U.S. production growth as our last international asset, South Africa, next year will be down below 2% of our production, and in 2013 down below 1% of our production," Sheffield said in the conference call. "All of our liquids rich plays are demonstrating very strong well performance."

For more information, visit Industrial Info's North American Oil and Gas Production Project Database.

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