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Pioneer to use Evergreen as platform to double North American asset base Company has record production, strong earnings in first quarter; begins production from Gulf deepwater gas field, and from Hawa field onshore Tunisia Ray Tyson Petroleum News Houston Correspondent
Pioneer Natural Resources, weighing in with record production and strong earnings in the 2004 first quarter, plans to use acquired Evergreen Resources as a platform to “reload” its North American position with a projected doubling of the company’s asset base over the next four years.
The Dallas-based independent said May 7 it also used excess cash from its Gulf of Mexico operations to back the $2.1 billion merger with coalbed methane producer Evergreen, whose main strength lies in Colorado’s Raton basin.
“I think the most important thing is reloading North America by adding a brilliant key core area in the Rockies,” said Scott Sheffield, Pioneer’s chief executive officer.
He said Pioneer would accelerate drilling and “continue to add positions” in the Raton and other Evergreen strongholds, including Canada and the U.S. Piceance and Uintah basins.
“We’re reloading our North America onshore base with a tremendous, low-risk growing asset base that we feel very comfortable about doubling over the next four years,” Sheffield said. Oil and gas sales a new quarterly record Overall, Pioneer’s 2004 first quarter oil and gas sales averaged 185,858 barrels per day of oil equivalent, a new quarterly record for the company.
Sales of oil alone averaged 47,733 barrels per day, a 54 percent increase compared to the same period last year, and natural gas liquids sales averaged 23,406 barrels per day. Gas sales during the first quarter averaged 688 million cubic feet per day, also a 54 percent increase over the same period last year.
The company said it expected production in the 2004 second quarter to average 180,000 to 195,000 barrels of oil equivalent per day, reflecting incremental production expected from Devils Tower, Tomahawk and Raptor in the Gulf of Mexico, variability of oil cargo shipments in Tunisia and South Africa, and the seasonal increase in gas demand during Argentina’s winter season.
Pioneer’s realized prices for oil and natural gas liquids for the 2004 first quarter were $28.31 and $22.21 per barrel, respectively. Its realized price for natural gas was $4.41 per thousand cubic feet, while North American gas prices averaged $5.04 per thousand cubic feet.
On the earnings front, Pioneer reported 2004 first-quarter net income of $60.2 million or 50 cents per share, a decrease compared to year-ago net income of $84.2 million or 71 cents per share, which included a $15.4 million or 13 cents per share benefit from a change in accounting.
Cash flow from operations for the 2004 first quarter soared to $253.6 million from $136.8 million a year earlier, due largely to strong production from the Gulf of Mexico, Pioneer said. The company also reduced long-term debt by $98.8 million during the first quarter of 2004 to $1.46 billion. First production from Harrier, Hawa In January, Pioneer achieved first production from the Harrier gas field in the deepwater Gulf, which the company said was the main contributor to record production in the first quarter, and from the Hawa oil field onshore Tunisia.
Also, Devils Tower in the deepwater Gulf achieved first oil production in early May, and Pioneer recently drilled a discovery well on its Gulf Goldfinger prospect, the second satellite discovery in the field. Goldfinger and Triton, the first satellite discovery, are expected to be jointly developed via subsea tieback to the Devils Tower spar for first production in 2005, the company said.
Two deepwater Gulf development projects in the company’s so-called Falcon corridor, Tomahawk and Raptor, are proceeding on schedule with first production anticipated during the second quarter, Pioneer said.
Onshore, Pioneer said it is currently running 10 drilling rigs in the United States and five in Argentina. During the first quarter, the company drilled 61 wells in the United States, 44 wells in Canada and 12 wells in Argentina. In early April, Pioneer also acquired additional interests in the Spraberry field in West Texas, expanding its inventory of drilling locations.
In Argentina, Pioneer’s drilling activities “continue to confirm the presence of significant deep gas reserves,” the company said, adding that 2004 first-quarter gas production from Argentina was the highest summer production in its history.
Pioneer said it expects to complete the expansion of its Loma Negra gas plant over the next few months, increasing plant capacity by 25 percent as demand peaks during the winter months in Argentina. The company said it is also acquiring additional 3-D seismic to support future drilling plans.
On Alaska’s North Slope, Pioneer said it would decide by year-end whether to sanction its Northwest Milne project for development. “We are completing our evaluation which should be completed sometime this summer,” Sheffield said.
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