Pioneer Reports Year-End Eagle Ford Shale Reserves of 70 mmboe

Pioneer Natural Resource's Eagle Ford Shale reserves grew to 70 million barrels at the end of 2011. Pioneer's core assets cut through the condensate rich window of the Eagle Ford in DeWitt, Karnes, and Live Oak counties. For the entire company, Pioneer added 149 mmboe of proved reserves, which replaced 313% of the company's 49 mmboe of production in 2011. Management attributed the strong performance to the Sprayberry field (West Texas), the Barnett Combo (North of Fort Worth), and the South Texas Eagle Ford. 

The Eagle Ford accounts for less than 10% of Pioneer's proved reserves, but that will change dramatically in the next few years as the company is able to prove reserves from land not yet drilled.

Pioneer Natural Resources Adds Frack Crew - White Sand Completions - Q311 Ops

Pioneer Natural Resources (PXD) reported strong growth from its Eagle Ford Shale assets when the company operates in partnership with Reliance Industries. The company is currently running 12 rigs in the play and has assembled 2 frack crews solely dedicated to the Eagle Ford. The second crew will be active in Q4 2011. Both crews compliment the company's two-year third party completion agreement. Wells are producing a 65% liquids cut that includes oil, condensate, and NGLs. Average wells laterals extend 5,500 ft and completions involve 13 frack stages. Wells are being brought on at restricted rates (16/64ths) to protect against reservoir damage at high flow rates. To date, company is seeing improved declines.

The company's midstream partnership will continue to build out gathering facilities in 2012 and will begin financing construction through outside sources in the next year. Well costs across the play average $7-8 million, but the company is saving as much as $700,000 per well by utilizing white sand in the more shallow portions of the play.

Production grew quarter over quarter from 8,000 boe/d to 14,000 boe/d and is expected to reach as high as 60,000 boe/d in 2014. 

PXD Q311 Eagle Ford Well Results
PXD Q311 Eagle Ford Well Results

"Based on our drilling plans for the Spraberry field, the Eagle Ford Shale and the Barnett Shale Combo play, we expect the Company to deliver production growth of 20+% in 2012 compared to 2011 and U.S. production growth of 22+%.

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. Beginning in June 2011, funding for ongoing midstream infrastructure build-out costs that are in excess of operating cash flow are expected to be 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 of $1.4 billion to $1.5 billion in 2011.

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.

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