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Pioneer Implements New Commodity Price Derivatives and Monetizes Certain Derivatives
DALLAS--(BUSINESS WIRE)--Pioneer Natural Resources Company (NYSE:PXD) today announced that it recently implemented new oil, natural gas liquids (NGL) and gas commodity price derivatives for 2009 and liquidated certain 2009 and 2010 oil and gas derivatives.
During December 2008 and January 2009, the Company entered into the following new oil, NGL and gas derivatives for 2009:
In addition, the Company also entered into 2009 basis swaps for 117,397 MMBTUPD of Mid-Continent gas production and 10,000 MMBTUPD of Spraberry gas production at $1.20 per MMBTU and $0.99 per MMBTU, respectively.
The Company has historically designated the majority of its derivative instruments as cash flow hedges for financial accounting purposes. However, in response to the Company’s desire to enhance the certainty of future revenues by using derivatives from time to time to protect the price risk associated with its Alaskan and international production (which would require mark-to-market accounting), the Company has elected to account for all of the new and any future derivative instruments using the mark-to-market accounting method. Therefore, the Company will recognize all future changes in the fair values of its commodity derivative contracts as gains and losses in the earnings of the period in which they occur.
In December 2008, Pioneer liquidated swap and collar derivatives for 4,000 BPD of 2009 oil production, 30,000 MMBTUPD of first quarter 2009 gas production and 6,000 BPD of 2010 oil production. As a result of these liquidations, the Company realized approximately $143 million of proceeds which it used to reduce its outstanding debt and fund stock repurchases completed during the fourth quarter of 2008. Further details on year-end debt and share repurchases will be provided on February 4, 2009, when the Company holds a conference call to discuss its earnings for the fourth quarter of 2008.
"The monetization of the commodity derivatives, coupled with debt repayment and share repurchases, highlight our commitment to maintaining financial flexibility and adding shareholder value in these uncertain times," stated Scott D. Sheffield, Chairman and CEO. “With the implementation of the new commodity derivatives, Pioneer now has approximately 80% of our forecasted oil production hedged for 2009 and approximately 25% of our forecasted North American gas production hedged for the same time frame. We have locked in a substantial amount of cash flow to protect against the risk of continuing low commodity prices while ensuring the ability to deliver a free cash flow model and grow production per share.”
Below is a detailed schedule of Pioneer’s new oil, NGL and gas derivatives. A summary of the Company’s total derivative portfolio is also included at the end of this release and includes derivatives for Pioneer Southwest Energy Partners L.P. which did not change during the fourth quarter of 2008.
Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations in the United States, South Africa and Tunisia. For more information, visit Pioneer’s website at www.pxd.com.
Except for historical information contained herein, the statements in this News 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 are subject to a number of risks and uncertainties that may cause Pioneer’s actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, international operations and associated international political and economic instability, litigation, the costs and results of drilling and operations, access to and availability of drilling equipment and transportation, processing and refining facilities, Pioneer's ability to implement its business plans (including its plan to repurchase stock) or complete its development projects as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer’s credit facility and derivative contracts and the purchasers of Pioneer’s oil, NGL and gas production, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, and acts of war or terrorism. These and other risks are described in Pioneer’s 10-K and 10-Q Reports and other filings with the Securities and Exchange Commission. In addition, Pioneer may be subject to currently unforeseen risks that may have a materially adverse impact on it. Pioneer undertakes no duty to publicly update these statements except as required by law.
Pioneer Natural Resources
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