EARNINGS / Pioneer Reports Results and Announces Fourth Quarter
Non-Cash Charge of $863 Million
NYSE SYMBOL: PXD
FEBRUARY 10, 1998
DALLAS, TEXAS--
Year-End Reserves of 762 Million Barrel Equivalents; A Divestiture
Program for Non-Strategic Assets; a Corporate Restructuring and an
Increase in Stock Repurchase Plan
Pioneer Natural Resources Company ("Pioneer") today announced
financial and operating results for the fourth quarter and twelve
months ended December 31, 1997. Pioneer also announced a series of
initiatives aimed at unlocking the value contained in its
long-lived reserve base and acreage position. About 95 percent of
the company's domestic fields generate only 15 percent of total
cash flow. These non-strategic fields will be sold with proceeds
expected to be $375 to $550 million. The current eight operating
divisions will be reduced to five. The reorganization and
divestiture program should reduce total lease operating and
administrative expenses by about 12 percent. "Over the last
several months, the pace of acquisitions and financial
transactions at Pioneer has been rapid. We are now in a position
to begin recognizing the many benefits associated with these
transactions," stated Scott Sheffield, President and CEO.
/T/
Fourth Quarter and Year-to-Date Results
---------------------------------------
Pioneer reported a fourth quarter net loss of $904 million or
$11.58 per share. These results include an $863 million non-cash
after tax charge related to the Statement of Financial Accounting
Standard No. 121, Impairment of Long-Lived Assets.
Fourth quarter oil sales averaged 45,570 barrels per day (BPD),
and fourth quarter natural gas liquid sales were 33,875 BPD.
Natural gas sales in the fourth quarter were 365 million cubic
feet per day (MMCFPD). Realized prices for oil and natural gas
liquids in the fourth quarter were $18.07 and $12.47 per barrel.
Fourth quarter realized price for natural gas was $2.18 per
thousand cubic feet. Compared to third quarter production
including production from Mesa's properties for the full quarter,
fourth quarter production increased 8 percent to 12.9 million
equivalent barrels (140,278 equivalent BPD) from 11.9 million
equivalent barrels (129,890 equivalent BPD). On a pro forma basis
including the Chauvco acquisition, fourth quarter volumes were
62,980 BPD for oil, 35,259 BPD for natural gas liquids and 458
MMCFPD for natural gas (174,572 equivalent BPD).
For the year-ended December 31, 1997, the net loss was $891
million or $17.14 per share. This compares to net income of $140
million or $3.47 per share in 1996.
Oil And Gas Reserves Doubled
----------------------------
During 1997, proved reserves more than doubled from 302 million
barrels oil equivalent (MMBOE) to 762 MMBOE, with the majority of
the increase relating to the acquisitions of Mesa and Chauvco.
Reserves added through development drilling were 53 MMBOE,
including revisions, at a cost of $5.44 per barrel equivalent,
producing a replacement ratio of 149 percent. Year-end 1997
reserves include 2.3 trillion cubic feet of natural gas and 384
million barrels of liquids. Proved developed reserves account for
86 percent of the company's total proved oil and gas reserves.
Non-Strategic Divestiture Program Accelerated
---------------------------------------------
Pioneer is accelerating its property portfolio management with a
major divestiture program focused on improving operating
efficiency and profitability. During 1998, the company intends to
pursue the sale of approximately 95 percent of its domestic
fields, representing 10 to 12 percent of its total reserve base.
The vast majority of these fields were acquired by Parker &
Parsley prior to 1995. Scott Sheffield stated, "Most of Pioneer's
domestic value is attributable to about 25 of the company's 450
fields. The purpose of this program is to shed non-strategic
properties, redeploying the proceeds into higher return assets.
Exact timing of the sales will depend on market conditions."
1998 Capital Program Reduced
----------------------------
Because of the unsettled pricing environment, Pioneer's 1998
capital program has been reduced to $500 million ($375 million
for development and $125 million for exploration) from $600
million. "Internally generated cash flow coupled with divestiture
proceeds will fully fund the 1998 capital program and acquisition
activity," said Scott Sheffield.
Reorganization Announced
------------------------
Pioneer will reorganize and reduce its operating divisions from
eight to five. This reorganization will have significant impact
on the company's cost structure by the end of 1998, with lease
operating costs expected to fall by 8 percent and administrative
expenses expected to fall by 24 percent. The company has
estimated that on a preliminary basis it will incur approximately
$20 million of costs related to the reorganization over the
course of business in 1998. "For an energy company, value resides
in its per unit margin and its volume growth per share. The
actions taken today should substantially improve the long-term
profitability of Pioneer," said Scott Sheffield. Based on fourth
quarter pro forma production and year-end reserves before the
impact of divestitures, the new organization breaks down as
follows:
Year-end 4th Qtr.
Reserves Pro forma Volumes
-------- -----------------
Mid-Continent 37 percent 30 percent
Permian Basin 34 percent 31 percent
Gulf Coast 9 percent 19 percent
Argentina 12 percent 10 percent
Canada 8 percent 10 percent
Stock Repurchase Plan Authorization Increased
---------------------------------------------
Pioneer's Board of Directors has approved an increase to the
company's recently announced stock repurchase plan from $100
million to $200 million. This increase will give Pioneer further
options for the divestiture proceeds, in addition to reinvestment
in higher growth assets and debt reduction.
Current Operating Activity
--------------------------
Drilling activity continued at an aggressive pace in the fourth
quarter with 40 rigs in worldwide operation. Recent results have
been particularly promising in Argentina and the Gulf of Mexico.
During January, oil production increased by 1,800 BPD in
Argentina from four new wells being placed on production. Half of
the increase was from one well in the Puesto Lopez field in the
Neuquen Basin. In the Gulf of Mexico, the Eugene Island Block 208
K-4 well, which logged 90 feet of pay in four zones, has been
completed and placed on production at a rate of 3,200 BPD and 7
MMCFPD. This is the first well completed in the program on this
offshore block acquired from Greenhill in 1997, with three
additional wells to be drilled.
Chairman's Comment
------------------
"The effect of today's action adds value to Pioneer by increasing
pre-tax margins by about $3.75 per barrel, and by honing the
organization into one that can prosper and grow in a volatile
price environment. We will be quick, flexible, efficient, and
focused. The concentration of our large reserve base in only 25
fields will produce operating and administrative efficiencies
unmatched within the industry. Pioneer's goal is to be the
company of choice to investors, merger candidates, employees, and
strategic partners. With these strategic initiatives in place,
buying back our shares is a no-brainer," stated Jon Brumley.
Pioneer
-------
Pioneer was created on August 7, 1997, to effect the merger of
MESA, Inc. ("Mesa") and Parker & Parsley Petroleum Company
("Parker & Parsley"). The financial history reflects the results
of Parker & Parsley through July 31, 1997, and reflects the
results of the combined companies beginning in August 1997. On
December 18, 1997, Pioneer acquired Chauvco Resources, Ltd.
("Chauvco").
This announcement includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such forward-looking statements include, without
limitation, estimates with respect to production levels, cash
flows, capital expenditures and revenue potential. Among other
things, such forward-looking statements assume limited changes in
oil and gas prices and the accuracy of engineering studies on
reserves. Although Pioneer believes that the expectations and
assumptions reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations and
assumptions will prove to have been correct. Such forward-looking
statements and assumptions are qualified as may be provided in
Pioneer's annual, quarterly, and current reports, and
registration statements filed with the Securities and Exchange
Commission.
Pioneer Natural Resources Company
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
1997 1996
ASSETS
Current assets $ 308,188 $ 117,039
Oil and gas properties 4,121,045 1,426,382
Gas processing facilities -- 59,276
Accumulated depletion, depreciation
and amortization (605,203) (445,238)
Other assets, net 122,560 42,406
----------- -----------
$ 3,946,590 $ 1,199,865
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 261,552 $ 90,970
Long-term debt 1,943,718 320,908
Other noncurrent liabilities 180,275 8,071
Deferred income taxes 12,200 60,800
Preferred stock of subsidiary -- 188,820
Stockholders' equity 1,548,845 530,296
----------- -----------
$ 3,946,590 $ 1,199,865
Pioneer Natural Resources Company
Consolidated Statements of Operations
(in thousands, except for per share data)
Three months ended Year ended
December 31, December 31,
1997 1996 1997 1996
Revenues:
Oil and gas $ 187,802 $ 113,604 $ 536,782 $ 396,931
Natural gas
processing -- 7,004 -- 23,814
Interest & other 629 2,462 4,278 17,458
Gain on disposition
of assets, net 2,224 253 4,969 97,140
---------- ----------- ----------- -----------
190,655 123,323 546,029 535,343
Costs and expenses:
Oil and gas
production 52,496 28,101 144,170 110,334
Natural gas
processing -- 3,405 -- 12,528
Depletion,
depreciation
and amortization
(oil and gas) 83,148 24,347 204,450 105,259
Depletion,
depreciation and
amortization
(other) 2,390 1,559 7,985 6,875
Impairment of oil
and gas
properties 1,356,390 -- 1,356,390 --
Exploration and
abandonments 42,850 8,068 77,160 23,030
General and
administrative 16,994 8,943 48,763 28,363
Interest 33,286 10,050 77,550 46,155
Other 4,142 1,533 7,124 2,451
---------- ----------- ----------- -----------
1,591,696 86,006 1,923,592 334,995
Income (loss) before
income taxes and
extraordinary
item (1,401,041) 37,317 (1,377,563) 200,348
Income tax benefit
(provision) 508,800 (12,900) 500,300 (60,100)
Income (loss) before
extraordinary
item (892,241) 24,417 (877,263) 140,248
Extraordinary loss on
early extinguishment
of debt,
net of tax (11,890) -- (13,408) --
Net income
(loss) $ (904,131) $ 24,417 $ (890,671) $ 140,248
Net income (loss)
per share:
Basic:
Income (loss) before
extraordinary
item $ (11.43) $ .69 $ (16.88) $ 3.95
Extraordinary
item (.15) -- (.26) --
Net income
(loss) $ (11.58) $ .69 $ (17.14) $ 3.95
Diluted:
Income (loss) before
extraordinary
item $ (11.43) $ .62 $ (16.88) $ 3.47
Extraordinary
item (.15) -- (.26) --
Net income
(loss) $ (11.58) $ .62 $ (17.14) $ 3.47
Dividends declared
per share $ .05 $ .05 $ .10 $ .10
Weighted average
shares
outstanding 78,063 35,522 51,973 35,475
Pioneer Natural Resources Company
Condensed Consolidated Statements of Cash Flows
(in thousands)
Three months ended Year ended
December 31, December 31,
1997 1996 1997 1996
Cash flows
from operations:
Net income
(loss) $ (904,131) $ 24,417 $ (890,671) $ 140,248
Depletion, depreciation
and
amortization 85,538 25,906 212,435 112,134
Impairment of oil
and gas
properties 1,356,390 -- 1,356,390 --
Exploration expenses,
including
dry holes 37,707 6,876 63,288 17,262
Deferred
income taxes (508,700) 10,500 (501,300) 57,400
Gain on disposition
of assets,
net (2,224) (253) (4,969) (97,140)
Loss on early
extinguishment
of debt 11,890 -- 13,408 --
Other noncash
items 8,304 956 18,886 (1,360)
Net changes in
operating assets
and liabilities,
net of effects from
acquisitions and
dispositions (35,633) (27,710) (39,258) 1,562
Net cash provided by
operations 49,141 40,692 228,209 230,106
Net cash provided by
(used in)
investing (97,045) (76,496) (341,178) 13,729
Net cash provided by
(used in)
financing 78,986 (13,124) 165,971 (245,354)
Effect of exchange rate
changes on cash
and cash
equivalents -- -- -- 290
Net increase (decrease)
in cash and
cash equivalents 31,082 (48,928) 53,002 (1,519)
Cash and cash
equivalents,
beginning
of period 40,631 67,639 18,711 19,940
Cash and cash
equivalents,
end of period $ 71,713 $ 18,711 $ 71,713 $ 18,711
/T/ |
