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Providing coverage of Alaska and northern Canada's oil and gas industry
November 2008

Vol. 13, No. 46 Week of November 16, 2008

Pioneer may postpone Cosmopolitan well

Faced with oil prices hovering around $60 a barrel and natural gas prices close to $6 per thousand cubic feet, Pioneer Natural Resources is planning substantial cuts in its 2009 drilling program. And a planned appraisal well in the Cosmopolitan prospect near Anchor Point, offshore the southern Kenai Peninsula in Alaska, could prove to be one of the casualties.

“In the light of the current uncertainties in oil prices we most likely will defer the drilling of the (Cosmopolitan) well that we had planned for 2009 into the following year,” Tim Dove, Pioneer president and chief operating officer, told an earnings conference call Nov. 5.

Pioneer’s Alaska spokesman Tadd Owens told Petroleum News Nov. 11 that the company had not yet made a decision on whether to defer the Cosmopolitan drilling into 2010. The ultimate decision will depend on what happens to commodity prices in the coming months — it’s a question of taking a prudent approach to budgeting and avoiding an overspend on the company’s cash flow, Owens said.

Budget not set

“We haven’t set our budget yet,” Owens said. “Our management is looking at maybe prices turning around in six to eight months. In that case we may have some additional flexibility before the year ends.”

Meantime the company is continuing with its Cosmopolitan work program, including the analysis of results from its last appraisal well and the preparation of permits.

During the earnings conference Scott Sheffield, Pioneer chairman and chief executive officer, said that Pioneer is planning to reduce 60 percent of its drilling activity and to cut its rig count substantially, to reduce the company’s costs to 2006 levels. The company wants oil prices back around $80 per barrel and gas prices around $8 before it restarts its business growth activities, Sheffield said.

Sheffield said that no one knows how long it will take for prices to recover — it might take anywhere from six months to two years. However, he expressed confidence that at some point the company will be able to throttle up its operations again.

“We’ll be back there and the company will be growing again, strong,” he said.

—Alan Bailey






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