EARNINGS / Pioneer Reports Fourth Quarter and Full Year 1998 Results
And Announces Year-End Reserves
TSE, NYSE SYMBOL: PXD
FEBRUARY 2, 1999
DALLAS, TEXAS--Pioneer Natural Resources Company ("Pioneer") today
announced financial and operating results for the fourth quarter
and twelve months ended December 31, 1998.
Fourth Quarter and Full Year Results
Pioneer reported a fourth quarter net loss of $643 million or
$6.41 per share. These results include $592 million of previously
announced after-tax charges including non-cash property
impairments of $307 million, a non-cash deferred tax valuation
allowance of $271 million, both related to low commodity prices,
and reorganization and other expenses of $14 million. Cash flow
from operations for the fourth quarter was $48 million.
Fourth quarter liquids sales increased 6 percent to average 83,943
barrels per day (BPD) compared to the prior year quarter. Oil
sales averaged 54,839 BPD and natural gas liquids sales averaged
29,104 BPD. Fourth quarter natural gas sales increased 35 percent
to 492 million cubic feet per day (MMCFPD). Realized price for oil
in the fourth quarter declined 32 percent to $12.22 per barrel
compared to the prior year quarter, and realized price for natural
gas liquids declined 41 percent to $7.35 per barrel. Fourth
quarter realized price for natural gas declined 23 percent to
$1.67 per thousand cubic feet (mcf).
For the year-ended December 31, 1998, the net loss was $746
million or $7.46 per share, and cash flow from operations was $314
million. Oil sales for the year averaged 59,052 BPD and natural
gas liquids sales averaged 29,231 BPD. Natural gas sales for 1998
were 504 MMCFPD. Realized prices for oil and natural gas liquids
were $13.08 and $8.90 per barrel, respectively. Realized price for
natural gas was $1.82 per mcf. Hedging activities enhanced 1998
revenues by approximately $29 million.
Oil and Gas Reserves
As a result of low commodity pricing, proved reserve estimates
declined by over 85 million barrels oil equivalent (BOE) of oil
and gas reserves at year-end 1998. With a $6 decline in the oil
price used to determine reserves, Pioneer's long-lived oil
reserves were significantly impacted. Total proved reserves were
677 million barrels oil equivalent (MMBOE) calculated on the basis
prescribed by the Securities and Exchange Commission (SEC case).
The Company also calculated proved reserves utilizing supplemental
pricing representative of market consensus at year-end as defined
below (supplemental case). The supplemental case year-end proved
reserves were 764 MMBOE, essentially equivalent to proved reserves
at year-end 1997, indicating 108 percent reserve replacement
during 1998.
/T/
SEC Case/a Supplemental Case/b
-------- -----------------
Oil (MMBBL)
US 134 171
Canada 10 14
Argentina 18 31
Total 162 216
NGL (MMBBL)
US 136 151
Canada 3 3
Argentina 6 6
Total 145 160
Gas (BCF)
US 1,546 1,629
Canada 249 250
Argentina 428 450
Total 2,223 2,329
Oil Equivalent (MMBOE)
US 527 593
Canada 54 59
Argentina 96 112
Total 677 764
/a SEC case calculated on NYMEX equivalent flat pricing of $12
per barrel for oil and $2.00 per mcf for natural gas.
/b Supplemental case calculated on NYMEX equivalent pricing for
oil of $14, $16 and $18 per barrel for 1999, 2000 and 2001,
respectively, held flat thereafter, and for natural gas of $2.00
and $2.25 per mcf for 1999 and 2000, respectively, held flat
thereafter. The Company does not purport to predict or forecast
future oil prices; however, the Company has presented these
additional estimates for informational purposes only.
/T/
1998 Capital Program
Pioneer's 1998 capital costs incurred totaled $463 million
including development costs of $301 million, property acquisition
costs of $33 million, and exploration costs of $129 million.
Approximately $71 million or 55 percent of exploration costs was
invested in seismic data, personnel, and other geologic and
geophysical activities representing the cost of building an
exploration base for the next 3-5 years' activity. Exploratory
drilling capital totaled $58 million. Of this total, Pioneer
capitalized exploration costs of $25 million, primarily
representative of the successful South Africa and Argentina
exploration programs. Proved reserves have not yet been booked in
South Africa even though the project is expected to commence
production in 2001. Actual dry hole cost for 1998 was $33 million.
1999 Strategy and Capital Program
Scott Sheffield, President and CEO, stated, "In spite of the low
commodity-price environment, we are moving forward with our
financial strategy to reduce debt, further reduce overhead and
operating costs, and hedge to protect future cash flow. Our 1999
operating strategy is focused on enhancing our existing core
assets through natural gas development drilling combined with
selective core-area acquisitions. Our exploration plans include a
comprehensive prospect evaluation and the drilling of three or
four exploratory wells."
Pioneer plans a capital budget of approximately $100 million in
1999. With this limited capital program, Pioneer expects to
produce 56-60 million barrels oil equivalent (MMBOE) in 1999,
assuming a full year's production from properties under agreement
to be sold.
Pioneer's long-lived reserves require less capital for reserve
replacement and preserve value through periods of low commodity
prices. Over an assumed two-year period of low prices, Pioneer has
a strategic advantage over a company with shorter-lived reserves
in that fewer reserves will be produced and sold at low prices,
preserving value upon price recovery.
Pioneer plans to invest approximately $75 million in exploitation
projects during 1999. These projects will focus on gas development
in the Gulf Coast area and West Panhandle field in the U.S., in
the Chinchaga field in Canada, and in the Neuquen Basin in
Argentina.
The 1999 exploration program will absorb considerably less
capital, estimated at $25 million. The exploration base has now
been established, providing Pioneer opportunity to focus on
analysis, ranking and timing of prospects. South Africa, Gabon,
and the Gulf Coast transition zone have been targeted for
comprehensive studies. Exploratory drilling will be concentrated
in the Gulf of Mexico and the onshore Gulf Coast area. Pioneer
will participate in one or two wells in the Gulf of Mexico
deep-water Mississippi Canyon Block 305. The first well was
spudded in early January and will take 45 to 60 days to drill. Two
additional wells are planned onshore in the Gulf Coast area or in
East Texas where several shallow exploration prospects defined by
our large 3-D database offer opportunity.
Cost Reductions and Natural Gas Hedges Enhance Cash Flow
Cash operating costs including lease operating expense and general
and administrative expense are expected to be reduced
approximately $1.15 in aggregate, to less than $3.50 and $.75 per
BOE, respectively, or over 20 percent from 1997 year-end levels.
Pioneer will continue to focus on improving margins by reducing
costs and anticipates additional lease operating expense
reductions in 1999.
By aggressively hedging 1999 gas production, the Company has
protected a significant portion of its cash flow. Approximately 87
percent of Pioneer's 1999 North American gas volumes are under
hedge contracts that provide protection against NYMEX equivalent
pricing below $2.32 per mcf while retaining upside. For 2000, the
Company has approximately 50 percent of its North American gas
volumes under contracts with price protection on a NYMEX
equivalent basis below $2.33 per mcf while retaining upside.
Hedging activities provided $29 million of revenues for 1998, and
Pioneer's 1999 hedges have a value of approximately $43 million at
current market commodity prices.
Debt Reduction / Credit Facilities
Over the next 18 months, Pioneer plans to reduce debt through
prudent capital allocation and the divestiture of non-core,
non-strategic properties. Property divestitures totaling $500-600
million are anticipated in 1999 and 2000. Cash flow from 1999
operations in excess of the $100 million capital budget has also
been earmarked to pay down debt.
With the special charges taken in the fourth quarter and the
effects of lower prices on cash flow, Pioneer will not be in
compliance with the prescribed financial ratios contained in its
revolving credit agreements and has agreed in principle with its
largest lenders on the preliminary terms of a proposed amendment.
Pioneer will be seeking the required majority approval of other
participants in these facilities and expects to complete these
amendments before filing its year-end financial statements with
the SEC.
Dividend Eliminated
Due to the low price environment, the board of directors has
elected to eliminate the $.05 stock dividend paid semi-annually.
"Pioneer has a large registered shareholder base, and the
administrative cost of paying this nominal dividend exceeded
$200,000 per year. Shareholders are better served by the Company
retaining the dividend for investment in development projects and
acquisitions in our core areas," stated Scott Sheffield.
President's Comment
"Pioneer's long-lived reserves in the Hugoton and West Panhandle
gas fields and the Spraberry oil field represent about 60 percent
of the Company's total reserves. The long-life of these properties
will allow us to weather this period of low commodity prices and
will preserve value upon commodity price recovery. Despite low
commodity prices, we will stay the course of reducing debt,
streamlining operations, and allocating available capital to the
highest-return projects to build net asset value for our
shareholders."
Headquartered in Dallas, Pioneer is one of the largest independent
exploration and production oil and gas companies in North America,
with major operations in the United States, Canada and Argentina.
Except for historical information contained herein, the statements
in this Press 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 Natural Resources Company, are
subject to a number of risks and uncertainties which may cause the
Company'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, litigation, the costs and results of drilling and
operations, the Company's ability to replace reserves or implement
its business plans, access to and cost of capital, uncertainties
about estimates of reserves, quality of technical data, and
environmental risks. These and other risks are described in the
Company's 10-K and 10-Q Reports and other filings with the
Securities and Exchange Commission.
/T/
PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
1998 1997
------ ------
ASSETS
Oil and gas properties $3,964,219 $4,121,045
Accumulated depletion, depreciation
and amortization (930,111) (605,203)
Deferred income taxes 103,900 223,300
Other assets 343,306 413,848
---------- ----------
$3,481,314 $4,152,990
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt $2,175,265 $1,949,509
Other liabilities 452,772 436,036
Deferred income taxes 64,200 218,600
Stockholders' equity 789,077 1,548,845
---------- ----------
$3,481,314 $4,152,990
---------- ----------
---------- ----------
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
Three months ended
December 31,
1998 1997
----------- -----------
Revenues:
Oil and gas $ 157,014 $ 187,802
Interest and other 2,261 629
Gain (loss) on disposition of
assets, net (309) 2,224
----------- -----------
158,966 190,655
Costs and expenses:
Oil and gas production 54,043 52,496
Depletion, depreciation and
amortization - oil and gas 85,231 83,148
Depletion, depreciation and
amortization - other 4,869 2,390
Impairment of oil and gas
properties 459,519 1,356,390
Exploration and abandonments 35,709 42,850
General and administrative 16,352 16,994
Reorganization 12,041 --
Interest 41,968 33,286
Other 21,105 4,142
----------- -----------
730,837 1,591,696
----------- -----------
Loss before income taxes and
extraordinary item (571,871) (1,401,041)
Income tax benefit (provision) (71,000) 508,800
----------- -----------
Loss before extraordinary item (642,871) (892,241)
Extraordinary item - loss on
early extinguishment of debt,
net of tax -- (11,890)
----------- -----------
Net loss $ (642,871) $ (904,131)
----------- -----------
----------- -----------
Net loss per share:
Basic:
Loss before extraordinary item $ (6.41) $ (11.43)
Extraordinary item -- (.15)
----------- -----------
Net loss $ (6.41) $ (11.58)
----------- -----------
----------- -----------
Diluted:
Loss before extraordinary item $ (6.41) $ (11.43)
Extraordinary item -- (.15)
----------- -----------
Net loss $ (6.41) $ (11.58)
----------- -----------
----------- -----------
Dividends declared per share $ -- $ --
----------- -----------
----------- -----------
Weighted average shares
outstanding 100,291 78,063
----------- -----------
----------- -----------
Year ended
December 31,
1998 1997
----------- -----------
Revenues:
Oil and gas $ 711,492 $ 536,782
Interest and other 10,452 4,278
Gain (loss) on disposition of
assets, net (445) 4,969
----------- -----------
721,499 546,029
Costs and expenses:
Oil and gas production 223,551 144,170
Depletion, depreciation and
amortization - oil and gas 322,294 204,450
Depletion, depreciation and
amortization - other 15,014 7,985
Impairment of oil and gas
properties 459,519 1,356,390
Exploration and abandonments 121,858 77,160
General and administrative 73,000 48,763
Reorganization 33,199 --
Interest 164,285 77,550
Other 39,605 7,124
----------- -----------
1,452,325 1,923,592
----------- -----------
Loss before income taxes and
extraordinary item (730,826) (1,377,563)
Income tax benefit (provision) (15,600) 500,300
----------- -----------
Loss before extraordinary item (746,426) (877,263)
Extraordinary item - loss on
early extinguishment of debt,
net of tax -- (13,408)
----------- -----------
Net loss $ (746,426) $ (890,671)
----------- -----------
----------- -----------
Net loss per share:
Basic:
Loss before extraordinary item $ (7.46) $ (16.88)
Extraordinary item -- (.26)
---------- -----------
Net loss $ (7.46) $ (17.14)
---------- -----------
---------- -----------
Diluted:
Loss before extraordinary item $ (7.46) $ (16.88)
Extraordinary item -- (.26)
----------- -----------
Net loss $ (7.46) $ (17.14)
----------- -----------
----------- -----------
Dividends declared per share $ .10 $ .10
----------- -----------
----------- -----------
Weighted average shares
outstanding 100,055 51,973
----------- -----------
----------- -----------
PIONEER NATURAL RESOURCES COMPANY
CASH FLOW SUPPLEMENT
(in thousands)
Three months ended
December 31,
1998 1997
------- -------
Cash flows from operations:
Net loss $ (642,871) $ (904,131)
Depletion, depreciation and amortization 90,101 85,538
Impairment of oil and gas properties 459,519 1,356,390
Exploration and abandonments 35,709 42,850
Deferred income taxes 71,600 (507,900)
(Gain) loss on disposition of assets, net 309 (2,224)
Loss on early extinguishment of debt -- 11,890
Other noncash items 28,355 7,504
----------- -----------
Discretionary cash flow 42,722 89,917
Working capital and other changes 4,846 (40,776)
----------- -----------
Net cash provided by operations 47,568 49,141
Net cash used in investing (84,937) (97,045)
Net cash provided by financing 26,694 78,986
----------- -----------
Net increase (decrease) in cash and
cash equivalents (10,675) 31,082
Effect of exchange rate changes on cash
and cash equivalents (389) --
Cash and cash equivalents, beginning
of period 70,285 40,631
----------- -----------
Cash and cash equivalents,
end of period $ 59,221 $ 71,713
----------- -----------
----------- -----------
Year Ended
December 31,
1998 1997
--------- ---------
Cash flows from operations:
Net loss $ (746,426) $ (890,671)
Depletion, depreciation
and amortization 337,309 212,435
Impairment of oil and gas properties 459,519 1,356,390
Exploration and abandonments 121,858 77,160
Deferred income taxes 18,600 (501,300)
(Gain) loss on disposition of assets, net 445 (4,969)
Loss on early extinguishment of debt -- 13,408
Other noncash items 66,400 18,886
----------- -----------
Discretionary cash flow 257,705 281,339
Working capital and
other changes 56,371 (53,130)
----------- -----------
Net cash provided by operations 314,076 228,209
Net cash used in investing (517,007) (341,178)
Net cash provided by financing 190,933 165,971
----------- -----------
Net increase (decrease) in cash and
cash equivalents (11,998) 53,002
Effect of exchange rate changes on cash
and cash equivalents (494) --
Cash and cash equivalents, beginning
of period 71,713 18,711
----------- -----------
Cash and cash equivalents, end of period $ 59,221 $ 71,713
----------- -----------
----------- -----------
PIONEER NATURAL RESOURCES COMPANY
SUMMARY PRODUCTION AND PRICE DATA
Three months ended Year ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
Average Daily Production:
Oil (Bbls) - U.S. 39,121 45,170 41,555 36,903
Canada 8,178 -- 9,082 --
Argentina 7,540 400 8,415 406
----- ------ ----- ------
Total 54,839 45,570 59,052 37,309
Natural gas liquids
(Bbls) - U.S. 27,646 33,875 27,835 11,691
Canada 810 -- 770 --
Argentina 648 -- 626 --
------ ------- ------ -------
Total 29,104 33,875 29,231 11,691
Gas (Mcf) - U.S 350,648 365,043 377,373 287,309
Canada 61,216 -- 53,072 --
Argentina 80,103 -- 73,427 --
------- ------- ------- -------
Total 491,967 365,043 503,872 287,309
Total Production:
Oil (Mbbls) 5,045 4,192 21,554 13,618
Natural gas
liquids (Mbbls) 2,678 3,117 10,669 4,267
Gas (Mmcf) 45,261 33,584 183,913 104,868
Equivalent
barrels (MBOE) 15,266 12,906 62,875 35,363
Average Price:
Oil - U.S. $ 13.20 $ 18.06 $ 13.96 $ 18.50
Canada $ 9.81 $ -- $ 10.96 $ --
Argentina $9.73 $ 18.83 $ 11.00 $ 19.68
Average $12.22 $ 18.07 $ 13.08 $ 18.51
Natural gas
liquids - U.S. $ 7.33 $ 12.47 $ 8.86 $ 12.59
Canada $ 8.69 $ -- $ 9.54 $ --
Argentina $6.91 $ -- $ 9.83 $ --
Average $ 7.35 $ 12.47 $ 8.90 $ 12.59
Gas - U.S. $ 1.82 $ 2.18 $ 2.01 $ 2.20
Canada $ 1.64 $ -- $ 1.45 $ --
Argentina $1.05 $ -- $ 1.09 $ --
Average $ 1.67 $ 2.18 $ 1.82 $ 2.20
/T/ |
