Pioneer Natural Resources

Pioneer LogoPioneer’s Eagle Ford Shale position was built through the company’s existing Edwards Trend assets. The company has been operating in this part of South Texas since discovering the Pawnee Field in 1961. The company quickly expanded operations in the Eagle Ford after the first two successful wells in late 2009 and early 2010 produced 11.3 mmcfed and 17 mmcfed, respectively.

Pioneer kicked off full development of the Eagle Ford after signing a joint venture agreement with Reliance Industries in June 2010. Pioneer and Reliance Industries reached a JV agreement where Pioneer sold a 45% interest in approximately 212,000 net acres for a total prices of $1.15 billion. Reliance paid $266 million initially and will carry future drilling costs of $879 million. The JV will utilize horizontal drilling to produce gas and condensate in the liquids-rich portion of the formation. Reliance and Pioneer will also partner in the development of midstream assets where Reliance will be a 49.9% partner.

Pioneer Natural Resources is a large independent oil and gas exploration and production company, with a foundation of assets in the onshore US. Pioneer’s headquarters is in Irving, TX, and the company has field offices serving the Eagle Ford in both Pawnee and Victoria, Texas. Pioneer stock trades on the NYSE under the symbol PXD.

Pioneer produces oil and gas in multiple operating areas including: the West Texas Spraberry, the South Texas Edwards Trend and Eagle Ford Shale play, the Barnett shale of North Texas, Alaska, as well as international locations. Pioneer is also pursuing several emerging resource plays in the Lower 48.

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Pioneer Natural Resources Eagle Ford Shale Quarterly Commentary

February 13, 2013
In the Eagle Ford Shale, the Pioneer drilled 30 wells and placed 37 wells on production in the fourth quarter of 2012. Production increased from 29 mboe/d to 35 mboe/d from quarter to quarter. Full-year 2012 production averaged 28 mboe/d. The Company expects 2013 production to range from 38 mboe/d to 42 mboe/d, an increase of 36% to 50% compared to 2012.

Pioneer expects to drill approximately 130 Eagle Ford Shale wells in 2013 at a cost of $7 million to $8 million per well. Minimal dry gas drilling expected during the year. The number of wells drilled from pads, as opposed to single-well locations, is expected to increase from 45% of the wells drilled in 2012 to 80% of the wells drilled in 2013, reflecting that most of Pioneer’s acreage is now held by production. Pad drilling saves $600 thousand to $700 thousand per well and will result in Pioneer being able to drill 130 wells with 10 rigs in 2013 compared to drilling essentially the same number of wells in 2012 with 12 rigs.

Pioneer has been using lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. The Company is now expanding the use of white sand proppant to deeper areas of the field to further define its performance limits. The Company tested 97 wells with white sand proppant in 2011 and 2012, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer is continuing to monitor the performance of these wells and expects that greater than 50% of its 2013 drilling program will use the lower-cost white sand proppant. The Company also expects to improve well performance, EURs and well economics by increasing the average lateral length of its wells from 5,700 feet in 2012 to 6,200 feet in 2013, which will add approximately $500 thousand to the cost of drilling and completing a well.

Eleven central gathering plants (CGPs) are now operational as part of the joint venture’s Eagle Ford Shale midstream business. One additional CGP is scheduled to be on line by the end of 2013.

October 31, 2012

Pioneer expects to drill approximately 125 wells in 2012. The 2012 drilling program continues to focus on liquids-rich drilling, with only 10% of the wells designated to hold strategic dry gas acreage in response to the current low gas price environment. The Company drilled 38 wells in the third quarter and placed 35 wells on production.

Pioneer’s drilling operations in the Eagle Ford Shale continue to become more efficient. The Company’s average drilling cost per foot has decreased by 18% and drilling feet per day has increased by 28% since the second quarter of 2011. The number of wells drilled from pads, as opposed to single-well locations, is expected to increase from 30% of the wells drilled in the first nine months of 2012 to 80% of the wells drilled in 2013.

Pioneer has been testing the use of lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. The Company is now expanding the use of white sand proppant to deeper areas of the field to further define its performance limits. The Company has tested 74 wells with white sand proppant through the third quarter, three of which were deeper dry gas wells, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer is continuing to monitor the performance of these wells and expects that 50% of its 2012 drilling program will have used the lower-cost white sand proppant. During 2013, the Company expects that greater than 50% of the wells drilled will use white sand proppant.

Pioneer increased its Eagle Ford Shale production from 24 mboe/d in the second quarter of 2012 to 29 mboe/d in the third quarter, achieving another record production level. Strong well performance continues to drive this growth. Fifty percent of Pioneer’s wells across the entire play are in the top quartile of industry EURs, while 80% of the Company’s wells are above the industry mean EUR. The choke management program being utilized by Pioneer on its wells is contributing to the strong well performance. The Company expects fourth quarter production to range from 32 mboe/d to 35 mboe/d. On a full-year basis, this will result in average production of 27 mboe/d to 28 mboe/d, up from 12 mboe/d in 2011. The updated production forecast for 2012 reflects a narrowing from the previous guidance range of 25 mboe/d to 29 mboe/d.

July 31, 2012
Pioneer is currently running 12 rigs and plans to drill approximately 125 wells in 2012. The 2012 drilling program will continue to focus on liquids-rich drilling, with only 10% of the wells designated to hold strategic dry gas acreage in response to the current low gas price environment. The company drilled 34 wells in the second quarter and placed 37 wells on production.

Pioneer increased its Eagle Ford Shale production from 23,000 boe/d in the first quarter of 2012 to 24,000 boe/d in the second quarter and expects production to increase from an average of 12,000 boe/d in 2011 to 25,000-29,000 boe/d in 2012.

Well cost in the Eagle Ford Shale ranges from $7 million to $8 million per well. Pioneer has been testing the use of lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. The Company is now expanding the use of white sand proppant to deeper areas of the field to further define its performance limits. The Company has tested 53 wells through the second quarter, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer is continuing to monitor the performance of these wells and plans to use white sand in 50% of its 2012 drilling program. The first dry gas well using white sand as proppant was fracture stimulated in July. Four additional dry gas wells using white sand as proppant are planned over the remainder of the year.

Three central gathering plants (CGPs) were added during the second quarter as part of the joint venture’s Eagle Ford Shale midstream business. 11 CGPs are now operational. Funding for ongoing midstream infrastructure build-out costs that are in excess of operating cash flow is provided from external debt sources.

May 3, 2012

Pioneer is running 12 rigs and drilled 28 wells (26 brought to production) in the first quarter.  The company is also operating two fracture stimulation fleets totaling 100,000 horsepower. A dedicated third-party fracture stimulation fleet commenced operating in April 2011 and is under a two-year contract.

Pioneer plans to drill approximately 125 wells focusing on liquids-rich drilling, with only 15% of the wells designated to hold strategic dry gas acreage in response to the current low gas price environment. Future plans call for the rig count to increase to 14 in 2013, 16 in 2014 and 19 in 2015.

Pioneer’s Eagle Ford Shale production grew from 20,000 boe/d in the fourth quarter of 2011 to 23,000 boe/d in the first quarter. The company expects production to increase from an average of 12 mboe/d in 2011 to 25 mboe/d to 29 mboe/d in 2012, 37 mboe/d to 41 mboe/d in 2013 and 47 mboe/d to 53 mboe/d in 2014.

Pioneer’s gross well cost in the Eagle Ford Shale ranges from $7 million to $8 million per well. Using this well cost, estimated EURs, assumed flat commodity prices of $100 per barrel for oil and $4 per MCF for gas and excluding the benefit of the joint-venture drilling carry, the before-tax internal rate of return for 2012 is estimated to be 70%.

Pioneer has also tested the use of lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. Forty-five wells have been tested to date, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer plans to continue to monitor the performance of these wells and plans to use white sand in 50% of its 2012 drilling program.

The ninth central gathering plant (CGP) was added in the quarter and two additional CGPs are planned to start up by mid-year.

February 6, 2012

Pioneer and its joint venture partners are currently running 12 rigs. The Company drilled 111 wells in 2011 and placed 92 wells on production. Pioneer also operates two Company-owned fracture stimulation fleets totaling 100,000 horsepower. The Company is also utilizing a dedicated third-party fracture stimulation fleet, which commenced operating in April 2011 under a two-year contract.

Pioneer plans to continue running 12 rigs in 2012 and drill approximately 125 wells. The 2012 drilling program will continue to focus on liquids-rich drilling, with only 15% of the wells designated to hold strategic dry gas acreage. The original plan for 2012 called for an increase to 14 rigs on the assumption that 25% of the program would target dry gas drilling. However, in response to the current low gas price environment, the increase to 14 rigs has been delayed until 2013. It is now planned that the rig count will increase to 16 rigs in 2014 and 19 rigs in 2015.

Pioneer increased its Eagle Ford Shale production from 14 MBOEPD in the third quarter to 20 MBOEPD in the fourth quarter. The Company expects production to increase from an average of 12 MBOEPD in 2011 to 25 MBOEPD to 29 MBOEPD in 2012, 37 MBOEPD to 41 MBOEPD in 2013 and 47 MBOEPD to 53 MBOEPD in 2014.

Pioneer’s gross well cost in the Eagle Ford Shale ranges from $7 million to $8 million per well. Using this well cost, estimated EURs, assumed flat commodity prices of $100 per barrel for oil and $4 per MCF for gas and excluding the benefit of the joint-venture drilling carry, the before-tax internal rate of return for the 2012 drilling program is estimated to be 70%.

Pioneer has been testing the use of lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. Twenty-five wells have been tested to date, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer plans to continue to monitor the performance of these wells and plans to use white sand in 50% of its 2012 drilling program.

Eight central gathering plants (CGPs) have been completed as part of the joint venture’s Eagle Ford Shale midstream business. Three additional CGPs are planned for 2012. Pioneer’s share of its Eagle Ford Shale joint-venture midstream activities is conducted through a partially-owned, unconsolidated entity. Funding for ongoing midstream infrastructure build-out costs that are in excess of operating cash flow is provided from external debt sources. Cash flow from the services provided by the midstream operations is not included in Pioneer’s forecasted operating cash flow.

November 1, 2011

In the liquids-rich Eagle Ford Shale in South Texas, Pioneer and its joint venture partners are currently running 12 rigs. To improve the execution of its drilling and completions program and reduce costs, Pioneer purchased two fracture stimulation fleets for its Eagle Ford Shale completions. One fleet was placed in service in April and the other fleet is expected to be operational later in the fourth quarter. The Company also entered into a two-year contract for a dedicated third-party fracture stimulation fleet, which commenced operating in April. With the start-up of these two fleets, Pioneer has been able to significantly increase the number of wells put on production, with a further increase expected when the second Company-owned fleet commences operations later this quarter.

Wells drilled during the third quarter continued to yield approximately 65% liquids, consisting of oil, condensate and NGLs. The lateral length of each well continues to average approximately 5,500 feet and is being completed with a 13-stage fracture stimulation.

Pioneer’s gross well cost in the Eagle Ford Shale ranges from $7 million to $8 million per well. Using this cost, flat commodity prices of $90 per barrel for oil and $5 per MCF for gas, estimated future production costs, and excluding the benefit of the joint-venture drilling carry, before tax internal rates of return are estimated to be 80% for high condensate yield wells (200 barrels per million cubic feet) and 60% for lean condensate yield wells (60 barrels per million cubic feet).

Pioneer has been testing the use of lower-cost white sand instead of ceramic proppant to fracture stimulate wells drilled in shallower areas of the field. Twenty wells have been tested to date, with a savings of approximately $700 thousand per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer plans to continue to monitor the performance of these wells and plans to use white sand in approximately 30% of its 2012 drilling program.

As a result, annual production for 2011 is forecasted to average 12 MBOEPD to 15 MBOEPD and grow to 26 MBOEPD to 30 MBOEPD in 2012, 40 MBOEPD to 45 MBOEPD in 2013 and 54 MBOEPD to 60 MBOEPD in 2014.

August 3, 2011

“In the highly prospective Eagle Ford Shale in South Texas, Pioneer and its joint venture partners have increased the rig count from 9 rigs in the second quarter to 12 rigs currently, with expected further increases to 14 rigs in early 2012, 16 rigs in early 2013 and 19 rigs in 2014. To improve the execution of its drilling and completions program and reduce costs, Pioneer purchased two fracture stimulation fleets for its Eagle Ford Shale completions. One fleet was placed in service in April and the other fleet is expected to be operational during the fourth quarter of 2011. The Company also entered into a two-year contract for a dedicated third-party fracture stimulation fleet, which commenced operating in April. With the start-up of these two fleets and some spot market fracture stimulation capacity that became available for a short period in the second quarter, Pioneer was able to increase the number of wells placed on production from 5 wells in the first quarter to 18 wells in the second quarter. Further increases in the number of wells placed on production are expected during the second half of the year.

Six central gathering plants (CGPs) have been completed as part of the joint venture’s Eagle Ford Shale midstream business. The seventh CGP is scheduled to commence operation during the third quarter, with the eighth CGP expected to commence operation in the fourth quarter.”

May 3, 2011

“…In the highly prospective Eagle Ford Shale in South Texas, Pioneer and its joint venture partners have successfully drilled 50 horizontal wells through the end of the first quarter of 2011. Twenty-four of the wells are on production and performing as forecasted. Of the remaining 26 wells, 5 are completed and awaiting hookup. Completion of the remaining 21 wells has been slower than anticipated due to limited third-party fracture stimulation fleet availability.

Pioneer has 9 rigs currently running in the play and plans to increase to 12 rigs by mid-year, 14 rigs in early 2012 and 16 rigs in early 2013.

Pioneer’s gross well cost in the Eagle Ford Shale ranges from $7 million to $8 million per well. Using this cost and current NYMEX strip commodity prices, and excluding the benefit of the joint-venture drilling carry, before tax internal rates of return are estimated at 110% for high condensate yield wells (200 barrels per million cubic feet) and 70% for low condensate yield wells (60 barrels per million cubic feet).

Based on the increasing rig count and fracture stimulation capacity in the Eagle Ford Shale, Pioneer expects to significantly increase the number of wells put on production during 2011, especially during the second half of the year. Average annual production in 2011 is expected to grow to 12 MBOEPD to 15 MBOEPD, with a further expected increase to 26 MBOEPD to 30 MBOEPD in 2012 and 40 MBOEPD to 45 MBOEPD in 2013….”

Source: pxd.com

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