UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/ x / Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______ to ________
Commission File No. 1-13245
PIONEER NATURAL RESOURCES COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 75-2702753
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1400 Williams Square West, 5205 N. O'Connor Blvd., Irving, Texas 75039
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (972) 444-9001
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes / x / No / /
Number of shares of Common Stock outstanding as of April 30, 1998....100,426,887
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997 ......................................... 3
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997................................. 5
Consolidated Statement of Stockholders' Equity for the three
months ended March 31, 1998................................... 6
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997................................. 7
Notes to Consolidated Financial Statements...................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 27
Item 6. Exhibits and Reports on Form 8-K................................ 27
Signatures...................................................... 29
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December 31,
1998 1997
---------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 74,152 $ 71,713
Restricted cash 1,195 1,695
Accounts receivable:
Trade, net 68,381 75,432
Oil and gas sales 117,000 116,500
Inventories 20,102 13,576
Deferred income taxes 15,300 16,900
Other current assets 10,114 12,372
--------- ---------
Total current assets 306,244 308,188
--------- ---------
Property, plant and equipment, at cost:
Oil and gas properties, using the successful
efforts method of accounting:
Proved properties 3,712,360 3,575,971
Unproved properties 491,033 545,074
Accumulated depletion, depreciation and
amortization (686,782) (605,203)
--------- ---------
3,516,611 3,515,842
--------- ---------
Deferred income taxes 47,100 -
Other property and equipment, net 47,153 44,017
Other assets, net 88,301 78,543
--------- ---------
$4,005,409 $3,946,590
========= =========
The financial information included as of March 31, 1998 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share data)
March 31, December 31,
1998 1997
---------- -----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 10,052 $ 5,791
Undistributed unit purchases 1,195 1,695
Accounts payable:
Trade 137,374 176,697
Affiliates 5,039 9,994
Other current liabilities 82,599 67,375
--------- ---------
Total current liabilities 236,259 261,552
--------- ---------
Long-term debt, less current maturities 2,099,155 1,943,718
Other noncurrent liabilities 165,017 180,275
Deferred income taxes - 12,200
Stockholders' equity:
Preferred stock, $.01 par value; 100,000,000
shares authorized; one share issued and
outstanding at March 31, 1998 and December
31, 1997 - -
Common stock, $.01 par value; 500,000,000 shares
authorized; 100,727,587 and 101,037,562 shares
issued at March 31, 1998 and December 31,
1997, respectively 1,007 1,010
Additional paid-in capital 2,350,909 2,359,992
Treasury stock, at cost; 250,700 and 591 shares
at March 31, 1998 and December 31, 1997,
respectively (5,593) (21)
Unearned compensation (14,445) (16,196)
Retained deficit (827,840) (795,940)
Accumulated other comprehensive income:
Cumulative translation adjustment 940 -
--------- ---------
Total stockholders' equity 1,504,978 1,548,845
Commitments and contingencies (Note D) --------- ---------
$4,005,409 $3,946,590
========= =========
The financial information included as of March 31, 1998 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part
of these consolidated financial statements.
4
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31,
--------------------------
1998 1997
---------- ----------
Revenues:
Oil and gas $ 197,369 $ 103,779
Interest and other 1,178 2,153
Gain on disposition of assets, net 10 775
--------- ---------
198,557 106,707
--------- ---------
Costs and expenses:
Oil and gas production 55,142 24,713
Depletion, depreciation and amortization 76,250 28,630
Exploration and abandonments 23,949 7,615
General and administrative 20,025 6,720
Reorganization 17,177 -
Interest 39,478 9,895
Other 6,780 421
--------- ---------
238,801 77,994
--------- ---------
Income (loss) before income taxes (40,244) 28,713
Income tax benefit (provision) 13,400 (10,100)
--------- ---------
Net income (loss) (26,844) 18,613
--------- ---------
Other comprehensive income:
Translation adjustment 940 -
--------- ---------
Comprehensive income (loss) $ (25,904) $ 18,613
========= =========
Net income (loss) per share:
Basic $ (.27) $ .53
========= =========
Diluted $ (.27) $ .50
========= =========
Dividends declared per share $ .05 $ .05
========= =========
Weighted average shares outstanding 100,545 35,048
========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Accumulated
Stock Additional Other Total
Shares Common Paid-in Treasury Unearned Retained Comprehensive Stockholders'
Outstanding Stock Capital Stock Compensation Deficit Income Equity
----------- -------- ---------- -------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 101,036,971 $ 1,010 $2,359,992 $ (21) $ (16,196) $(795,940) $ - $ 1,548,845
Common stock issued:
Adjustment to acquisition
of Chauvco Resources,
Ltd. (401,755) (4) (11,095) - - - - (11,099)
Tax provision related to
restricted stock - - (100) - - - - (100)
Purchase of treasury stock (250,109) - - (5,572) - - - (5,572)
Shares awarded 91,780 1 2,112 - (284) - - 1,829
Amortization of unearned
compensation - - - - 2,035 - - 2,035
Dividends ($.05 per share) - - - - - (5,056) - (5,056)
Net loss - - - - - (26,844) - (26,844)
Other comprehensive income:
Translation adjustment - - - - - - 940 940
----------- ------- --------- ------- -------- -------- ---------- ----------
Balance at March 31, 1998 100,476,887 $ 1,007 $2,350,909 $ (5,593) $ (14,445) $(827,840) $ 940 $ 1,504,978
=========== ======= ========= ======= ======== ======== ========== ==========
The financial information included herein has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
6
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three months ended
March 31,
------------------------
1998 1997
---------- ----------
Cash flows from operating activities:
Net income (loss) $ (26,844) $ 18,613
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depletion, depreciation and amortization 76,250 28,630
Exploration expenses, including dry holes 15,834 6,023
Deferred income taxes (12,700) 8,800
Gain on disposition of assets, net (10) (775)
Other noncash items 13,137 447
Change in operating assets and liabilities, net of
effects from acquisitions:
Accounts receivable 5,429 14,502
Inventory 825 (803)
Other current assets (8,791) 833
Accounts payable (7,832) (2,907)
Other current liabilities 13,753 100
--------- ---------
Net cash provided by operating activities 69,051 73,463
--------- ---------
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired (429) -
Proceeds from disposition of assets 12,884 5,706
Additions to oil and gas properties (195,309) (76,598)
Other property additions, net (3,870) 3,016
--------- ---------
Net cash used in investing activities (186,724) (67,876)
--------- ---------
Cash flows from financing activities:
Borrowings under long-term debt 773,183 -
Principal payments on long-term debt (615,719) (10,572)
Payment of noncurrent liabilities (21,434) (380)
Dividends (5,056) (1,754)
Purchase of treasury stock (5,572) (2,585)
Deferred loan fees/issuance costs (5,290) -
Exercise of long-term incentive plan stock options - 418
--------- ---------
Net cash provided by (used in) financing
activities 120,112 (14,873)
--------- ---------
Net increase (decrease) in cash and cash equivalents 2,439 (9,286)
Cash and cash equivalents, beginning of period 71,713 18,711
--------- ---------
Cash and cash equivalents, end of period $ 74,152 $ 9,425
========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part
of these consolidated financial statements.
7
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
NOTE A. Organization and Nature of Operations
Pioneer Natural Resources Company (the"Company") is a Delaware
corporation whose common stock is listed and traded on the New York Stock
Exchange and the Toronto Stock Exchange. The Company was formed by the merger of
Parker & Parsley Petroleum Company ("Parker & Parsley") and MESA Inc. ("Mesa")
on August 7, 1997. The Company was significantly expanded by the subsequent
acquisition of the Canadian and Argentine oil and gas business of Chauvco
Resources Ltd ("Chauvco"), a publicly traded independent oil and gas company
based in Calgary, Canada on December 18, 1997. The Company is an oil and gas
exploration and production company with ownership interests in oil and gas
properties located principally in the MidContinent, Southwestern and onshore and
offshore Gulf Coast regions of the United States, and in Canada and Argentina.
In accordance with the provisions of Accounting Principles Board No. 16,
"Business Combinations", both the merger with Mesa and the acquisition of
Chauvco have been accounted for as purchases by the Company (formerly Parker &
Parsley). As a result, the historical financial statements for the Company are
those of Parker & Parsley, and the Company's financial statements present the
addition of Mesa's and Chauvco's assets and liabilities as an acquisition by the
Company in August and December 1997, respectively. Specifically, the
accompanying Consolidated Statements of Operations and Consolidated Statements
of Cash Flows include the financial results of Mesa and Chauvco for the three
months ended March 31, 1998 but only include the financial results of Parker &
Parsley for the three months ended March 31, 1997.
NOTE B. Basis of Presentation
In the opinion of management, the unaudited consolidated financial
statements of the Company as of March 31, 1998 and for the three months ended
March 31, 1998 and 1997 include all adjustments and accruals, consisting only of
normal recurring accrual adjustments, which are necessary for a fair
presentation of the results for the interim periods. These interim results are
not necessarily indicative of results for a full year. Certain amounts in the
prior period financial statements have been reclassified to conform to the
current period presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q pursuant to the
rules and regulations of the Securities and Exchange Commission. These
consolidated financial statements should be read in connection with the
consolidated financial statements and notes thereto included in the Company's
1997 Annual Report on Form 10-K.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") which
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income includes net income and other comprehensive income, which includes, but
is not limited to, unrealized gains for marketable securities and future
contracts, foreign currency translation adjustments and minimum pension
liability adjustments. The accompanying consolidated financial statements for
the Company reflect other comprehensive income consisting of foreign currency
translation adjustments.
NOTE C. Senior Note Issuances
During January 1998, the Company completed the issuance of the following
two series of senior notes for total net proceeds of $593 million. The proceeds
were used primarily to repay the Company's bank indebtedness.
6.5% senior notes due 2008. $350 million aggregate principal amount 6.5%
senior notes dated January 13, 1998, due January 15, 2008. Interest on the 6.5%
senior notes is payable semi-annually on January 15 and July 15 of each year,
commencing July 15, 1998.
8
<PAGE>
7.2% senior notes due 2028. $250 million aggregate principal amount 7.2%
senior notes dated January 13, 1998, due July 15, 2028. Interest on the 7.2%
senior notes is payable semi-annually on January 15 and July 15 of each year,
commencing July 15, 1998.
Both senior note issuances are governed by an Indenture between the
Company and The Bank of New York dated January 13, 1998. Both senior note
issuances are general unsecured obligations of the Company ranking equally in
right of payment with all other senior unsecured indebtedness of the Company and
are senior in right of payment to all existing and future subordinated
indebtedness of the Company. In addition, the Company is a holding company that
conducts all its operations through subsidiaries, and the senior notes are
structurally subordinated to all obligations of its subsidiaries. Pioneer
Natural Resources USA, Inc. ("Pioneer USA"), a wholly-owned subsidiary of the
Company, has fully and unconditionally guaranteed both senior note issuances.
NOTE D. Commitments and Contingencies
Legal Actions. The Company is party to various legal actions incidental
to its business, including, but not limited to, the proceedings described below.
The majority of these lawsuits primarily involve claims for damages arising from
oil and gas leases and ownership interest disputes. The Company believes that
the ultimate disposition of these legal actions will not have a material adverse
effect on the Company's consolidated financial position, liquidity, capital
resources or future results of operations. The Company will continue to evaluate
its litigation matters on a quarter-by-quarter basis and will adjust its
litigation reserve as appropriate to reflect the then current status of its
litigation.
The Company believes that the costs for compliance with environmental
laws and regulations have not and will not have a material effect on the
Company's financial position or results of operations.
Masterson
In February 1992, the current lessors of an oil and gas lease (the "Gas
Lease") dated April 30, 1955, between R.B. Masterson et al., as lessor, and
Colorado Interstate Gas Company ("CIG"), as lessee, sued CIG in Federal District
Court in Amarillo, Texas, claiming that CIG had underpaid royalties due under
the Gas Lease. Under the agreements with CIG, the Company, as successor to Mesa,
has an entitlement to gas produced from the Gas Lease. In August 1992, CIG filed
a third-party complaint against the Company for any such royalty underpayment
which may be allocable to the Company. Plaintiffs alleged that the underpayment
was the result of CIG's use of an improper gas sales price upon which to
calculate royalties and that the proper price should have been determined
pursuant to a "favored-nations" clause in a July 1, 1967, amendment to the Gas
Lease. The plaintiffs also sought a declaration by the court as to the proper
price to be used for calculating future royalties.
The plaintiffs alleged royalty underpayments of approximately $500
million (including interest at 10%) covering the period from July 1, 1967, to
the present. In March 1995, the court made certain pretrial rulings that
eliminated approximately $400 million of the plaintiff's claims (which related
to periods prior to October 1, 1989), but which also reduced a number of the
Company's defenses. The Company and CIG filed stipulations with the court
whereby the Company would have been liable for between 50% and 60%, depending on
the time period covered, of an adverse judgment against CIG or post-February
1988 underpayments of royalties.
On March 22, 1995, a jury trial began and on May 4, 1995, the jury
returned its verdict. Among its findings, the jury determined that CIG had
underpaid royalties for the period after September 30, 1989, in the amount of
approximately $140,000. Although the plaintiffs argued that the
"favored-nations" clause entitled them to be paid for all of their gas at the
highest price voluntarily paid by CIG to any other lessor, the jury determined
that the plaintiffs were estopped from claiming that the "favored-nations"
clause provides for other than a pricing-scheme to pricing-scheme comparison. In
light of this determination, and the plaintiff's stipulation that a
pricing-scheme to pricing-scheme comparison would not result in any "trigger
prices" or damages, defendants asked the court for a judgment that plaintiffs
take nothing. The court, on June 7, 1995, entered final judgment that plaintiffs
recover no monetary damages. The plaintiffs filed a motion for new trial on June
22, 1995. The court, on July 18, 1997, denied plaintiffs' motion. The plaintiffs
have appealed to the Fifth Circuit.
9
<PAGE>
On June 7, 1996, the plaintiffs filed a separate suit against CIG and
the Company in state court in Amarillo, Texas, similarly claiming underpayment
of royalties under the "favored-nations" clause, but based upon the
above-described pricing-scheme to pricing-scheme comparison on a well-by-well
monthly basis. The plaintiffs also claim underpayment of royalties since June 7,
1995, under the "favored-nations" clause based upon either the pricing-scheme to
pricing-scheme method or their previously alleged higher price method. The
Company believes it has several defenses to this action and intends to contest
it vigorously. The Company has not yet determined the amount of damages, if any,
that would be payable if such action was determined adversely to the Company.
The federal court in the above-referenced first suit issued an order on
July 29, 1996, which stayed the state suit pending the plaintiffs' resolution of
the first suit.
Based on the jury verdict and final judgment, the Company does not
currently expect the ultimate resolution of either of these lawsuits to have a
material adverse effect on its financial position or results of operations.
Kansas Ad Valorem Tax
The Natural Gas Policy Act of 1978 ("NGPA") allows a "severance,
production or similar" tax to be included as an add-on, over and above the
maximum lawful price for natural gas. Based on a Federal Energy Regulatory
Commission ("FERC") ruling that Kansas ad valorem tax was such a tax, Mesa
collected the Kansas ad valorem tax in addition to the otherwise maximum lawful
price. The FERC's ruling was appealed to the United States Court of Appeals for
the District of Columbia ("D.C. Circuit"), which held in June 1988 that the FERC
failed to provide a reasoned basis for its findings and remanded the case to the
FERC for further consideration.
On December 1, 1993, the FERC issued an order reversing its prior
ruling, but limiting the effect of its decision to Kansas ad valorem taxes for
sales made on or after June 28, 1988. The FERC clarified the effective date of
its decision by an order dated May 18, 1994. The order clarified that the
effective date applies to tax bills rendered after June 28, 1988, not sales made
on or after that date. Numerous parties filed appeals on the FERC's action in
the D.C. Circuit. Various natural gas producers challenged the FERC's orders on
two grounds: (1) that the Kansas ad valorem tax, properly understood, does
qualify for reimbursement under the NGPA; and (2) the FERC's ruling should, in
any event, have been applied prospectively. Other parties challenged the FERC's
orders on the grounds that the FERC's ruling should have been applied
retroactively to December 1, 1978, the date of the enactment of the NGPA and
producers should have been required to pay refunds accordingly.
The D.C. Circuit issued its decision on August 2, 1996, which holds that
producers must make refunds of all Kansas ad valorem tax collected with respect
to production since October 4, 1983 as opposed to June 28, 1988. Petitions for
rehearing were denied on November 6, 1996. Various natural gas producers
subsequently filed a petition for writ of certiori with the United States
Supreme Court seeking to limit the scope of the potential refunds to tax bills
rendered on or after June 28, 1988 (the effective date originally selected by
the FERC). Williams Natural Gas Company filed a cross-petition for certiori
seeking to impose refund liability back to December 1, 1978. Both petitions were
denied on May 12, 1997.
The Company and other producers filed petitions for adjustment with the
FERC on June 24, 1997. The Company is seeking waiver or set-off from FERC with
respect to that portion of the refund associated with (i) non-recoupable
royalties, (ii) non-recoupable Kansas property taxes based, in part, upon the
higher prices collected, and (iii) interest for all periods. On September 10,
1997, FERC denied this request, and on October 10, 1997, the Company and other
producers filed a request for rehearing. Pipelines were given until November 10,
1997 to file claims on refunds sought from producers and refunds totaling
approximately $30 million were made against the Company. Although the Company is
unable at this time to predict the final outcome of this matter or the amount,
if any, that will ultimately be refunded, the Company has set aside
approximately $30 million in an escrow account and has a $28.8 million provision
for such litigation recorded in the accompanying Consolidated Balance Sheet as
of March 31, 1998.
NOTE E. Commodity Hedge Derivatives
The Company utilizes various commodity swap and option contracts to (i)
reduce the effect of the volatility of price changes on the commodities the
10
<PAGE>
Company produces and sells, (ii) support the Company's annual capital budgeting
and expenditure plans and (iii) lock in prices to protect the economics related
to certain capital projects.
Crude oil. All material purchase contracts governing the Company's oil
production are tied directly or indirectly to NYMEX prices. The following table
sets forth the Company's outstanding oil hedge contracts as of March 31, 1998.
<TABLE>
First Second Third Fourth Yearly
Quarter Quarter Quarter Quarter Average
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Daily oil production:
1998 - Swap Contracts
Volume (Bbl) - 11,581 8,900 8,900 9,787
Price per Bbl $ - $ 19.36 $ 19.75 $ 19.74 $ 19.59
1998 - Collar Options
Volume (Bbl) - 2,000 2,000 2,000 2,000
Price per Bbl $ - $18.40-21.50 $18.40-21.50 $18.40-21.50 $18.40-21.50
1998 - Put Options
Volume (Bbl) - 2,000 2,000 2,000 2,000
Price per Bbl $ - $ 18.40 $ 18.40 $ 18.40 $ 18.40
1999 - Swap Contracts
Volume (Bbl) 1,000 1,000 1,000 1,000 1,000
Price per Bbl $ 17.95 $ 17.95 $ 17.95 $ 17.95 $ 17.95
</TABLE>
The Company reports average oil prices per Bbl including the effects of
oil quality, gathering and transportation costs and the net effect of the oil
hedges. The following table sets forth the Company's oil prices, both realized
and reported, and net effects of settlements of oil price hedges to revenue:
Three months ended
March 31,
--------------------
1998 1997
------- --------
Average price reported per Bbl $ 13.97 $ 19.99
Average price realized per Bbl $ 13.16 $ 21.86
Addition (reduction) to revenue (in millions) $ 4.6 $ (5.4)
Natural Gas. The Company employs a policy of hedging gas production based
on the index price upon which the gas is actually sold in order to mitigate the
basis risk between NYMEX prices and actual index prices. The following table
sets forth the Company's outstanding gas hedge contracts as of March 31, 1998.
Prices included herein represent the Company's weighted average index price per
MMBtu and, as an additional point of reference, the weighted average price for
the portion of the Company's gas which is hedged based on NYMEX.
<TABLE>
First Second Third Fourth Yearly
Quarter Quarter Quarter Quarter Average
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Daily gas production:
1998 - Swap Contracts
Volume (Mcf) - 97,643 85,000 51,848 78,093
Index price per MMBtu $ - $ 2.21 $ 2.19 $ 2.17 $ 2.20
NYMEX price per MMBtu $ - $ 2.29 $ 2.26 $ 2.30 $ 2.28
1998 - Put Options
Volume (Mcf) - 277,555 297,500 254,402 276,482
Index price per MMBtu $ - $ 1.91 $ 1.90 $ 1.91 $ 1.91
1999 - Swap Contracts
Volume (Mcf) 42,500 64,945 60,000 38,451 51,486
Index price per MMBtu $ 2.14 $ 2.15 $ 2.17 $ 2.23 $ 2.17
NYMEX price per MMBtu $ 2.28 $ 2.29 $ 2.29 $ 2.29 $ 2.29
1999 - Collar Contracts
Volume (Mcf) 52,500 52,500 52,500 52,500 52,500
Index price per MMBtu $1.83-2.72 $1.83-2.72 $1.83-2.72 $1.83-2.72 $1.83-2.72
</TABLE>
11
<PAGE>
The Company reports average gas prices per Mcf including the effects of
Btu content, gathering and transportation costs, gas processing and shrinkage
and the net effect of the gas hedges. The following table sets forth the
Company's gas prices, both realized and reported, and net effects of settlements
of gas price hedges to revenue:
Three months ended
March 31,
-------------------
1998 1997
------- -------
Average price reported per Mcf $ 2.07 $ 2.47
Average price realized per Mcf $ 1.94 $ 2.83
Addition/(reduction) to revenue (in millions) $ 5.5 $ (6.6)
NOTE F. BTU Swap Agreements
During 1996, Mesa entered into BTU swap agreements covering 13,036 MMBTU
per day from January 1, 1997 through December 31, 2004. Under the terms of these
agreements, the Company will receive a premium of $.52 per MMBTU over market
natural gas prices from January 1, 1997 through December 31, 1998. Following
this two-year period, the Company will receive 10% of the NYMEX oil price for
the volumes covered for a six-year period beginning January 1, 1999 and ending
December 31, 2004. As these derivative contracts do not qualify as hedges, other
expenses in the accompanying Consolidated Statement of Operations for the three
months ended March 31, 1998 include a $6.2 million noncash pre-tax
mark-to-market adjustment to the carrying value of the BTU swap agreements.
These contracts will continue to be marked-to-market at the end of each
reporting period during their respective lives and the effects on the Company's
results of operations in future periods could be significant.
NOTE G. Reorganization
In February 1998, the Company announced its plans to sell certain
nonstrategic fields for estimated proceeds of $375 to $550 million during the
latter part of 1998. The proceeds will be used to reduce the Company's
outstanding indebtedness and to fund the Company's capital expenditures program.
Coincidentally with the property divestiture program, the Company announced its
intentions to reorganize its operations by combining its six domestic operating
regions into three geographic regions: the Permian Basin region, the
MidContinent region and the onshore and offshore Gulf Coast region. In addition,
most of the Company's administrative services are being relocated from Midland,
Texas to Dallas, Texas. Shortly after the announcement, the Company formally
notified the employees affected by the reorganization whether they were to be
severed or relocated. During the three months ended March 31, 1998, the Company
has recorded severance, relocation, lease termination and other costs of
approximately $17.2 million relating to this reorganization. The Company
anticipates that it will incur total nonrecurring expenditures of approximately
$20 million during 1998 as a result of this reorganization.
The consummation of the Company's 1998 divestiture plans is entirely
dependent on finding one or more willing buyers who have the financial
wherewithal to complete such a purchase. Until such a buyer is found, the
Company may reevaluate its portfolio of properties and at any time may adjust
its plans concerning divestitures. As a result, there can be no assurance that
the divestiture of any or all of these properties will be completed or that the
estimated proceeds will be realized.
NOTE H. Pioneer USA
Pioneer USA is a wholly-owned subsidiary of the Company that has fully and
unconditionally guaranteed certain debt securities of the Company (see Note C
above). The Company has not prepared financial statements and related
disclosures for Pioneer USA under separate cover because management of the
Company has determined that such information is not material to investors. In
accordance with practices accepted by the U.S. Securities and Exchange
Commission ("SEC"), the Company has prepared Consolidating Financial Statements
in order to quantify the assets of Pioneer USA as a subsidiary guarantor. The
following Consolidating Balance Sheet, Consolidating Statement of Operations and
Consolidating Statement of Cash Flows present financial information for Pioneer
Natural Resources Company as the Parent on a stand-alone basis (carrying any
investments in subsidiaries under the equity method), financial information for
Pioneer USA on a stand-alone basis (carrying any investment in non-guarantor
subsidiaries under the equity method), financial information for the
12
<PAGE>
non-guarantor subsidiaries of the Company on a consolidated basis, the
consolidation and elimination entries necessary to arrive at the information for
the Company on a consolidated basis, and the financial information for the
Company on a consolidated basis. Pioneer USA is not restricted from making
distributions to the Company.
Pioneer USA's guarantees of the Company's debt securities were executed as
a result of the merger with Mesa in August 1997. Consequently, the Consolidating
Statements of Operations and Consolidating Statement of Cash Flows for the three
months ended March 31, 1997 have not been presented.
13
<PAGE>
CONSOLIDATING BALANCE SHEET
As of March 31, 1998
(in thousands)
(Unaudited)
ASSETS
<TABLE>
Pioneer
Natural
Resources Non-
Company Pioneer Guarantor The
(Parent) USA Subsidiaries Eliminations Company
---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 35 $ 60,434 $ 13,683 $ $ 74,152
Restricted cash - 1,195 - 1,195
Accounts receivable:
Trade, net 5 53,877 14,502 (3) 68,381
Affiliates - 5,165 (5,165) -
Oil and gas sales - 83,674 33,326 117,000
Intercompany notes receivable 2,197,874 (1,788,970) (408,904) -
Inventories - 9,947 10,155 20,102
Deferred income taxes 14,300 - 1,000 15,300
Other current assets 126 7,366 2,622 10,114
--------- --------- --------- ---------
Total current assets 2,212,340 (1,567,312) (338,781) 306,244
--------- --------- --------- ---------
Property, plant and equipment, at cost:
Oil and gas properties, using the
successful efforts method of
accounting:
Proved properties - 2,519,412 1,192,948 3,712,360
Unproved properties - 109,476 381,557 491,033
Accumulated depletion, depreciation
and amortization - (556,533) (130,249) (686,782)
--------- --------- --------- ---------
- 2,072,355 1,444,256 3,516,611
--------- --------- --------- ---------
Deferred income taxes 227,215 - (180,115) 47,100
Other property and equipment, net - 29,447 17,706 47,153
Other assets, net 9,600 70,647 31,029 (22,975) 88,301
Investment in subsidiaries 603,598 284,378 691 (888,667) -
--------- --------- --------- ----------
$3,052,753 $ 889,515 $ 974,786 $ 4,005,409
========= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ - $ 530 $ 32,497 $ (22,975) $ 10,052
Undistributed unit purchases - 1,195 - 1,195
Accounts payable:
Trade 473 86,499 50,402 137,374
Affiliates 78 4,961 - 5,039
Other current liabilities 15,173 65,538 1,888 82,599
--------- --------- --------- ---------
Total current liabilities 15,724 158,723 84,787 236,259
--------- --------- --------- ---------
Long-term debt, less current maturities 1,819,712 326 279,117 2,099,155
Other noncurrent liabilities - 126,241 38,776 165,017
Stockholders' equity:
LP Capital - - 4 (4) -
Common stock 898 1 110 (2) 1,007
Additional paid-in capital 2,049,852 2,047,347 738,907 (2,485,197) 2,350,909
Treasury stock, at cost (5,593) - - (5,593)
Unearned compensation - (14,445) - (14,445)
Retained deficit (827,840) (1,428,678) (167,855) 1,596,533 (827,840)
Accumulated other comprehensive income:
Cumulative translation adjustment - - 940 940
--------- --------- --------- ---------
Total stockholders' equity 1,217,317 604,225 572,106 1,504,978
Commitments and contingencies --------- ---------- --------- ----------
$3,052,753 $ 889,515 $ 974,786 $ 4,005,409
========= ========== ========= ==========
</TABLE>
14
<PAGE>
CONSOLIDATING BALANCE SHEET
As of December 31, 1997
(in thousands)
ASSETS
<TABLE>
Pioneer
Natural
Resources Non-
Company Pioneer Guarantor The
(Parent) USA Subsidiaries Eliminations Company
---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 41 $ 49,033 $ 22,639 $ $ 71,713
Restricted cash - 1,695 - 1,695
Accounts receivable:
Trade, net 5 56,424 19,003 75,432
Oil and gas sales - 82,145 34,355 116,500
Intercompany notes receivable 2,088,082 (1,673,443) (414,639) -
Inventories - 11,677 1,899 13,576
Deferred income taxes 16,700 - 200 16,900
Other current assets - 9,293 3,079 12,372
--------- ---------- --------- ---------
Total current assets 2,104,828 (1,463,176) (333,464) 308,188
--------- ---------- --------- ---------
Property, plant and equipment, at cost:
Oil and gas properties, using the
successful efforts method of
accounting:
Proved properties - 2,453,750 1,122,221 3,575,971
Unproved properties - 98,664 446,410 545,074
Accumulated depletion, depreciation
and amortization - (504,628) (100,575) (605,203)
--------- ---------- --------- ---------
- 2,047,786 1,468,056 3,515,842
--------- ---------- --------- ---------
Other property and equipment, net - 26,096 17,921 44,017
Other assets, net 4,705 68,715 28,098 (22,975) 78,543
Investment in subsidiaries 645,113 284,046 - (929,159) -
--------- ---------- --------- ---------
$2,754,646 $ 963,467 $ 1,180,611 $3,946,590
========= ========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ - $ 538 $ 28,228 $ (22,975) $ 5,791
Undistributed unit purchases - 1,695 - 1,695
Accounts payable:
Trade 663 113,432 62,602 176,697
Affiliates 90 9,904 - 9,994
Other current liabilities 5,771 59,953 1,651 67,375
--------- ---------- ---------- ---------
Total current liabilities 6,524 185,522 92,481 261,552
--------- ---------- ---------- ---------
Long-term debt, less current maturities 1,700,500 565 242,653 1,943,718
Other noncurrent liabilities - 140,668 39,607 180,275
Deferred income taxes (216,253) - 228,453 12,200
Stockholders' equity:
GP Capital - - 4 (4) -
LP Capital - - 397 (397) -
Common stock 901 1 110 (2) 1,010
Additional paid-in capital 2,058,935 2,049,072 739,518 (2,487,533) 2,359,992
Treasury stock, at cost (21) - - (21)
Unearned compensation - (16,196) - (16,196)
Retained deficit (795,940) (1,396,165) (162,612) 1,558,777 (795,940)
--------- ---------- ---------- ---------
Total stockholders' equity 1,263,875 636,712 577,417 1,548,845
Commitments and contingencies --------- ---------- ---------- ---------
$2,754,646 $ 963,467 $ 1,180,611 $3,946,590
========= ========== ========== =========
</TABLE>
15
<PAGE>
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
For the Three Months Ended March 31, 1998
(in thousands)
(Unaudited)
<TABLE>
Pioneer
Natural
Resources Non- Consolidated
Company Pioneer Guarantor Income The
(Parent) USA Subsidiaries Tax Benefit Eliminations Company
--------- -------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas $ - $140,412 $ 56,957 $ - $ $ 197,369
Interest and other 38 863 765 - (488) 1,178
Gain on disposition of assets,
net - 10 - - 10
-------- ------- --------- --------- ---------
38 41,285 57,722 - 198,557
-------- ------- --------- --------- ---------
Costs and expenses:
Oil and gas production - 38,036 17,106 - 55,142
Depletion, depreciation and
amortization - 46,378 29,872 - 76,250
Exploration and abandonments - 11,597 12,352 - 23,949
General and administrative 495 16,064 3,466 - 20,025
Reorganization - 17,177 - - 17,177
Interest (4,041) 38,907 5,100 - (488) 39,478
Equity (income) loss from
subsidiary 39,791 (2,774) - - (37,017) -
Other - 5,879 901 - 6,780
-------- ------- --------- --------- ---------
36,245 171,264 68,797 - 238,801
-------- ------- --------- --------- ---------
Loss before income taxes (36,207) (29,979) (11,075) (40,244)
Income tax benefit - - - 13,400 13,400
-------- ------- --------- --------- ---------
Net loss (36,207) (29,979) (11,075) 13,400 (26,844)
Other comprehensive income:
Translation adjustment - - 940 - 940
-------- ------- --------- --------- ---------
Comprehensive loss $ (36,207) $(29,979) $ (10,135) $ 13,400 $ (25,904)
======== ======= ========= ========= ==========
</TABLE>
16
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months ended March 31, 1998
(in thousands)
(Unaudited)
<TABLE>
Pioneer
Natural
Resources Non- Consolidated
Company Pioneer Guarantor Income Tax The
(Parent) USA Subsidiaries Benefit Eliminations Company
----------- --------- ------------ ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (36,208) $ (29,979) $ (11,074) $ 13,400 $ 37,017 $ (26,844)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depletion, depreciation and
amortization - 46,378 29,872 - 76,250
Exploration and abandonments - 5,075 10,759 - 15,834
Deferred income taxes - - - (12,700) (12,700)
Gain on disposition of assets, net - (10) - - (10)
Other noncash items 49,730 400 24 - (37,017) 13,137
Change in working capital (114,761) 119,487 (642) (700) 3,384
--------- -------- --------- --------- ---------
Net cash provided by (used
in) operating activities (101,239) 141,351 28,939 - 69,051
--------- -------- --------- --------- ---------
Cash flows from investing activities:
Payment for acquisitions, net of
cash acquired - (429) - - (429)
Proceeds from disposition of assets - 12,426 458 - 12,884
Additions to oil and gas properties - (113,746) (81,563) - (195,309)
Other property additions, net - (5,532) 1,662 - (3,870)
--------- -------- --------- --------- ---------
Net cash used in
investing activities - (107,281) (79,443) - (186,724)
--------- -------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under long-term debt 732,142 - 41,041 - 773,183
Principal payments on long-term debt (614,991) (250) (478) - (615,719)
Borrowings (payment) of noncurrent
liabilities - (22,419) 985 - (21,434)
Dividends (5,056) - - - (5,056)
Purchase of treasury stock (5,572) - - - (5,572)
Deferred loan fees/issuance costs (5,290) - - - (5,290)
--------- -------- --------- --------- ---------
Net cash provided by
(used in) financing
activities 101,233 (22,669) 41,548 - 120,112
--------- -------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (6) 11,401 (8,956) - 2,439
Cash and cash equivalents,
beginning of period 41 49,033 22,639 - 71,713
--------- -------- --------- --------- ---------
Cash and cash equivalents, end
of period $ 35 $ 60,434 $ 13,683 $ - $ 74,152
========= ======== ========= ========= ========
</TABLE>
17
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations(1)
The Formation of Pioneer
Pioneer Natural Resources Company (the"Company") is a Delaware
corporation whose common stock is listed and traded on the New York Stock
Exchange and the Toronto Stock Exchange. The Company was formed by the merger of
Parker & Parsley Petroleum Company ("Parker & Parsley") and MESA Inc. ("Mesa")
on August 7, 1997. The Company was significantly expanded by the subsequent
acquisition of the Canadian and Argentine oil and gas business of Chauvco
Resources Ltd ("Chauvco"), a publicly traded independent oil and gas company
based in Calgary, Canada on December 18, 1997. The Company is an oil and gas
exploration and production company with ownership interests in oil and gas
properties located principally in the MidContinent, Southwestern and onshore and
offshore Gulf Coast regions of the United States, and in Canada and Argentina.
In accordance with the provisions of Accounting Principles Board No. 16,
"Business Combinations", both the merger with Mesa and the acquisition of
Chauvco have been accounted for as purchases by the Company (formerly Parker &
Parsley). As a result, the historical financial statements for the Company are
those of Parker & Parsley, and the Company's financial statements present the
addition of Mesa's and Chauvco's assets and liabilities as an acquisition by the
Company in August and December 1997, respectively. Specifically, the
accompanying Consolidated Statements of Operations and Consolidated Statements
of Cash Flows include the financial results of Mesa and Chauvco for the three
months ended March 31, 1998 but only include the financial results of Parker &
Parsley for the three months ended March 31, 1997.
Financial Performance
The Company reported a net loss of $26.8 million ($.27 per share) for the
three months ended March 31, 1998, as compared to net income of $18.6 million
($.53 per share) for the same period in 1997. The three month period ended March
31, 1998 was negatively impacted by a decline in the average price received for
oil and gas (see "Results of Operations" below) and reorganization costs
totaling $17.2 million (see "1998 Outlook" below). The Company's financial
performance during 1998 was positively affected by increases in oil and gas
production and decreases in production costs per BOE due to ongoing cost
reduction efforts.
Net cash provided by operating activities decreased to $69.1 million
during the three months ended March 31, 1998, as compared to the net cash
provided by operating activities of $73.5 million for the same period in 1997.
These decreases are primarily attributable to decreased commodity prices and
increases in interest expense, general and administrative expenses and
reorganization costs, offset, to some extent, by cash flows generated by the
acquired oil and gas properties from Mesa and Chauvco.
The Company strives to maintain its outstanding indebtedness at a
moderate level in order to provide sufficient financial flexibility to fund
future opportunities. The Company's total book capitalization at March 31, 1998
was $3.6 billion, consisting of total long-term debt of $2.1 billion and
stockholders' equity of $1.5 billion. Debt as a percentage of total book
capitalization was 58% at March 31, 1998, as compared to 56% at December 31,
1997.
Drilling Results
During the first quarter of 1998, the Company participated in the
completion of 236 gross exploration and development wells, including 144 in the
Permian Basin region, 23 in the Gulf Coast region, 12 in the MidContinent
region, 27 in Argentina and 30 in Canada. Of these wells, 116 were in progress
at December 31, 1997. Of the total wells completed during the three months ended
March 31, 1998, 227 were completed successfully which resulted in a 96% success
rate. In addition to the wells completed in the first quarter of 1998, the
Company had 131 wells in progress at March 31, 1998.
18
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
In the Dorsal area of the Neuquen Basin in Argentina where the Company's
working interest approximates 100%, the Company has drilled 30 wells to date
during 1998. Of these, 22 of the 25 successful wells are on production at a
combined daily rate of 3,300 BOEs, and the Company anticipates that gas sales
will increase by 7 MMcf per day in early June when new gathering facilities are
completed. An additional 30 wells are planned for the remainder of 1998.
The Company has concluded its winter-access program in the Chinchaga gas
field in Northeast British Columbia, Canada with the drilling of 19 development
wells and six delineation wells and installation of 50 MMcf per day gas
processing facility and gathering system. The gas processing facility began
production on April 15, 1998, with a total of 30 wells tied into the production
system. Production is anticipated to increase by 18 MMcf per day and 451 barrels
of oil per day (condensate and NGL barrels per day) to 25 MMcf per day and 632
barrels of oil per day, net to the Company's interest.
In the 100% owned Timbalier Bay field in South Louisiana, four new wells
and one recompletion resulted in new production of 1,400 barrels of oil per day
and 1.2 MMcf of gas per day. The Company continues to evaluate this large oil
field with 3-D seismic data to unlock additional development and large-scale
exploration opportunities. In the Lopeno field in South Texas, the Company
completed six new wells increasing production more than 30 MMcf of gas per day.
Up to ten additional development wells are planned in this field during the
remainder of 1998.
The Company also completed two infill development wells in the Bear Creek
field, a water flood unit in Dunn County, North Dakota. The two new wells are
producing at a combined rate of over 1,480 barrels of oil per day and 740 Mcf of
gas per day, net to the Company's interest. The field was discovered in 1982 and
water flooding commenced in 1992.
1998 Outlook
In February 1998, the Company announced plans to accelerate its portfolio
management initiatives through a divestiture program focused on improving
operating efficiency and profitability. The Company plans to sell certain
nonstrategic fields for estimated proceeds of $375 to $550 million during the
latter part of 1998. The proceeds will be used to reduce the Company's
outstanding indebtedness and to fund the Company's capital expenditures program.
This will leave the Company with approximately 25 domestic fields, which
represent its core producing assets and complementary development and
exploration opportunities.
The consummation of the Company's 1998 divestiture plans is entirely
dependent on finding one or more willing buyers who have the financial
wherewithal to complete such a purchase. Until such a buyer is found, the
Company may reevaluate its portfolio of properties and at any time may adjust
its plans concerning divestitures. As a result, there can be no assurance that
the divestiture of any or all of these properties will be completed or that the
estimated proceeds will be realized.
Coincidentally with the property divestiture program, the Company has
announced its intentions to reorganize its operations to take advantage of the
economies of scale provided by the concentration of reserves in a small number
of fields. The Company has combined its six domestic regions into three
geographic regions: the Permian Basin region, the MidContinent region and the
onshore and offshore Gulf Coast region. In addition, most of the Company's
administrative services are being relocated from Midland, Texas to Dallas, Texas
Texas. Shortly after the announcement, the Company formally notified the
employees affected by the reorganization whether they were to be severed or
relocated. During the three months ended March 31, 1998, the Company has
recorded severance, relocation, lease termination and other costs of
approximately $17.2 million relating to this reorganization. The Company
anticipates that it will incur total nonrecurring expenditures of approximately
$20 million during 1998 as a result of this reorganization.
During 1998, the Company will continue its emphasis on core development,
exploration and production activities, with a primary focus on the exploitation
of its current portfolio of drilling locations. This portfolio was significantly
19
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
enhanced and expanded by the major acquisitions completed in 1997. In addition,
the 1996 and 1997 drilling programs have added a large number of new locations
to which proved reserves have been assigned. The Company believes that its
current portfolio of undeveloped prospects provides attractive development and
exploration opportunities for at least the next three to five years. The
Company's 1998 capital expenditure budget has been decreased to $440 million
from its previous budget of $500 million. The Company budgets its capital
expenditures based on projected internally-generated cash flows and routinely
adjusts the level of its capital expenditures in response to anticipated changes
in cash flows. The decrease in the Company's 1998 capital expenditure budget is
a direct result of the decrease in operating cash flows due to declines in
commodity prices. Of the total capital expenditure budget of $440 million, the
Company has allocated $265 million to exploitation activities, $115 million to
exploration activities and $60 million to oil and gas property acquisitions. The
Company anticipates that the $440 million budget will be spent geographically as
follows: $85 million in the Permian Basin, $145 million in the onshore and
offshore Gulf Coast, $40 million in the MidContinent, $70 million in Canada, $75
million in Argentina and $25 million in Africa and other international areas.
During most of 1996 and 1997, the Company benefitted from higher oil
prices as compared to previous years. However, during the fourth quarter of
1997, oil prices began a downward trend that has continued into May 1998. A
continuation of the oil price environment experienced thus far in 1998 will have
an adverse effect on the Company's revenues and operating cash flow, and may
result in further downward adjustments to the Company's current 1998 capital
budget of $440 million. Also, a continuing decline in oil prices could result in
additional decreases in the carrying value of the Company's oil and gas
properties.
The forward looking statements in these projections, including statements
relating to capital budget, production, cash flows and drilling activities, are
based upon a number of assumptions, including among others, limited changes in
oil and gas prices and the accuracy of reserve engineering studies. These
assumptions may prove not to have been accurate.
Information Systems for the Year 2000. The Company will be required to
modify its information systems in order to accurately process data referencing
the year 2000. Because of the importance of occurrence dates in the oil and gas
industry, the consequences of not pursuing these modifications could be very
significant to the Company's ability to manage and report operating activities.
The Company has contracted with a third party to perform the software
programming changes necessary to correct any existing deficiencies. The Company
currently believes the total cost to make the necessary software program
modifications will be approximately $3 million. Such programming changes are
anticipated to be completed and tested by March 1, 1999.
On a daily basis, the Company exchanges date-specific information with a
multitude of suppliers and purchasers. If these other parties do not properly
address the year 2000 in their data exchange processes, the effect to the
Company could be significant. At this time, the extent of the potential impact
to the Company cannot be determined.
20
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
Results of Operations
Oil and Gas Production.
The following tables reflect the activities for the Company's oil and gas
properties for the three months ended March 31, 1998 and 1997:
<TABLE>
Three Months Ended March 31, 1998
-----------------------------------------------------------------
United Other
States Canada Argentina Foreign Total
---------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas $ 164,703 $ 16,442 $ 16,224 $ - $ 197,369
Costs and expenses:
Oil and gas production (44,345) (5,675) (5,122) - (55,142)
Depletion (54,774) (8,941) (9,440) - (73,155)
Exploration and abandonments (3,976) (3,255) (2,208) (1,687) (11,126)
Geological and geophysical (6,451) (4,588) (991) (793) (12,823)
-------- ------- -------- ------- --------
(109,546) (22,459) (17,761) (2,480) (152,246)
-------- ------- -------- ------- --------
Operating profit (loss) (excluding
general and administrative
expenses and income taxes) $ 55,157 $ (6,017) $ (1,537) $ (2,480) $ 45,123
======== ======= ======== ======== =========
Production:
Oil (MBbls) 3,866 885 842 - 5,593
NGLs (MBbls) 2,413 62 54 - 2,529
Gas (MMcf) 35,000 3,573 5,457 - 44,030
Total (MBOE) 12,112 1,543 1,806 - 15,461
Average daily production:
Oil (Bbls) 42,952 9,835 9,359 - 62,146
NGLs (Bbls) 26,814 693 599 - 28,106
Gas (Mcf) 388,890 39,703 60,632 - 489,225
Average oil price (per Bbl) $ 15.08 $ 11.82 $ 11.16 $ - $ 13.97
Average NGL price (per Bbl) $ 11.03 $ 12.01 $ 14.09 $ - $ 11.12
Average gas price (per Mcf) $ 2.28 $ 1.46 $ 1.11 $ - $ 2.07
Costs (per BOE):
Lease operating expense $ 2.94 $ 3.65 $ 2.68 $ - $ 2.98
Production taxes $ .55 $ - $ .15 $ - $ .45
Workover costs $ .17 $ .03 $ - $ - $ .13
--------- ------- -------- -------- ---------
Total production costs $ 3.66 $ 3.68 $ 2.83 $ - $ 3.56
========= ======= ======== ======== =========
Depletion $ 4.52 $ 5.79 $ 5.23 $ - $ 4.73
Three Months Ended March 31, 1997
-----------------------------------------------------------------
United Other
States Canada Argentina Foreign Total
---------- -------- --------- --------- ----------
Revenues:
Oil and gas $ 102,970 $ - $ 809 $ - $ 103,779
Loss on disposition of oil and gas
properties, net (51) - - - (51)
-------- ------ -------- ------- --------
102,919 - 809 - 103,728
-------- ------ -------- ------- --------
Costs and expenses:
Oil and gas production (24,414) - (299) - (24,713)
Depletion (26,587) - (419) - (27,006)
Exploration and abandonments (5,008) - (394) - (5,402)
Geological and geophysical (1,791) - (422) - (2,213)
-------- ------ -------- ------- --------
(57,800) - (1,534) - (59,334)
-------- ------ -------- ------- --------
Operating profit (loss) (excluding
general and administrative
expenses and income taxes) 45,119 $ - $ (725) $ - $ 44,394
======== ======= ======== ======== =========
Production:
Oil (MBbls) 2,838 - 34 - 2,872
Gas (MMcf) 18,736 - - - 18,736
Total (MBOE) 5,961 - 34 - 5,995
Average daily production:
Oil (Bbls) 31,536 - 376 - 31,912
Gas (Mcf) 208,173 - - - 208,173
Average oil price (per Bbl) $ 19.94 $ - $ 23.86 $ - $ 19.99
Average gas price (per Mcf) $ 2.47 $ - $ - $ - $ 2.47
Costs (per BOE):
Lease operating expense $ 2.64 $ - $ 8.82 $ - $ 2.68
Production taxes $ 1.05 $ - $ - $ - $ 1.05
Workover costs $ .40 $ - $ - $ - $ .40
--------- ------- -------- -------- ---------
Total production costs $ 4.09 $ - $ 8.82 $ - $ 4.13
========= ======= ======== ======== =========
Depletion $ 4.46 $ - $ 12.36 $ - $ 4.51
</TABLE>
21
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
Oil and Gas Revenues. Revenues from oil and gas operations totaled $197.4
million in the first quarter of 1998 compared to $103.8 million in the first
quarter of 1997, representing an increase of 90%. The increase is primarily
attributable to increases in oil and gas production, offset by declines in
commodity prices. The majority of the increased production is a direct result of
the oil and gas properties acquired from Mesa and Chauvco.
Parker & Parsley historically accounted for processed natural gas
production as wellhead production on a wet gas basis while Mesa accounted for
processed natural gas production in two components: natural gas liquids and dry
residue gas. The combined entities own three major gas processing facilities,
and the majority of the gas processed by these facilities is owned by the
Company and produced by Company-operated properties. Consequently, the Company
now accounts for natural gas production as processed natural gas liquids and dry
residue gas, and separate product volumes will not be comparable for periods
prior to September 30, 1997. Also, prices for gas products will not be
comparable as the price per mcf for natural gas for the three months ended March
31, 1998 is the price received for dry residue gas and the price per mcf for
natural gas for the three months ended March 31, 1997 is a price for natural gas
liquids combined with dry residue gas.
On a BOE basis, production increased by 158% for the three months ended
March 31, 1998, as compared to the same period in 1997. The additional
production volumes from the Mesa properties contributed 90% of production
growth, and the Chauvco properties contributed 55%. The remainder of the
increases are a direct result of the successes of the Company's exploration and
exploitation efforts. Such production growth becomes particularly evident in
light of the fact that a portion of the average daily oil and gas production for
1997 related to properties included in the 1997 sale of certain nonstrategic
domestic assets. Excluding production associated with assets sold during 1997
and the Mesa and Chauvco properties acquired in 1997, on a BOE basis, production
increased 21% for the three months ended March 31, 1998 as compared to the same
period in 1997.
The average oil price for the three months ended March 31, 1998 decreased
30% (from $19.99 to $13.97 for the three months ended March 31, 1997 and 1998,
respectively) and the average gas price decreased 16% (from $2.47 to $2.07 for
the three months ended March 31, 1997 and 1998, respectively). During the three
months ended March 31, 1998, the Company received an average of $11.12 per Bbl
for NGLs.
Hedging Activities
The oil and gas prices that the Company reports are based on the market
price received for the commodities adjusted by the results of the Company's
hedging activities. The Company periodically enters into commodity derivative
contracts (swaps, futures and options) in order to (i) reduce the effect of the
volatility of price changes on the commodities the Company produces and sells,
(ii) support the Company's annual capital budgeting and expenditure plans and
(iii) lock in prices to protect the economics related to certain capital
projects. During the first quarter of 1998, the Company's hedging activities
increased the average price received for oil and gas sales 6% and 7%,
respectively, as discussed below.
Crude Oil. All material purchase contracts governing the Company's oil
production are tied directly or indirectly to NYMEX prices. The average oil
price per Bbl that the Company reports includes the effects of oil quality,
gathering and transportation costs and the net effect of the oil hedges. The
Company's average realized price for physical oil sales (excluding hedge
results) for the three months ended March 31, 1998 was $13.16 per Bbl. The
comparable average NYMEX prompt month closing for the same period was $15.92 per
Bbl.
Natural Gas. The Company employs a policy of hedging gas production based
on the index price upon which the gas is actually sold in order to mitigate the
basis risk between NYMEX prices and actual index prices. The average gas price
per Mcf that the Company reports includes the effects of Btu content, gathering
and transportation costs, gas processing and shrinkage and the net effect of the
gas hedges. The Company's average realized price for physical gas sales
(excluding hedge results) for the three months ended March 31, 1998 was $1.94
per Mcf. The comparable average NYMEX prompt month closing for the same period
was $2.21 per Mcf.
22
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
See Note E of Notes to Consolidated Financial Statements included in "Item
1. Financial Statements" for information concerning the Company's open hedge
positions at March 31, 1998 and the related prices to be realized.
Production Costs. Total production costs per BOE decreased to $3.56 during
the three months ended March 31, 1998 as compared to production costs per BOE of
$4.13 during the same period in 1997. The decrease is due to decreases in
domestic production taxes caused by lower commodity prices, the lower production
costs of the Mesa and Chauvco properties, the sale of certain high operating
cost properties in 1997 and ongoing cost reduction efforts.
Depletion Expense. Depletion expense per BOE increased to $4.73 during the
first quarter of 1998 from $4.40 per BOE during the first quarter of 1997. The
increase in depletion expense per BOE during 1997 is primarily associated with
the value allocated to Chauvco's reserves and decreases in oil and gas reserves
due to declines in oil and gas prices from March 31, 1997 to March 31, 1998.
Exploration and Abandonments/Geological and Geophysical Costs. Exploration
and abandonments/geological and geophysical costs increased to $23.9 million
during the first quarter of 1998 from $7.6 million during the same period in
1997. The increase is largely the result of increased geological and geophysical
activity, both in domestic and international activity, resulting from the
Company's increased focus on exploration activities.
Three months
ended March 31,
--------------------
1998 1997
-------- --------
(in thousands)
Exploratory dry holes:
United States $ 1,746 $ 4,517
Foreign 3,582 394
Geological and geophysical costs:
United States 6,451 1,655
Foreign 6,372 558
Leasehold abandonments and other 5,798 491
------- -------
$ 23,949 $ 7,615
======= =======
Approximately 26% of the Company's 1998 capital budget will be spent on
exploratory projects (compared to 25% in 1997 and 16.7% in 1996). The Company
currently anticipates that its 1998 exploration efforts will be concentrated in
the Gulf Coast region and its interests in Canada and Argentina. The Company
continues to review opportunities involving exploration joint ventures in
domestic or international areas outside the Company's existing core operating
areas.
General and Administrative Expense
General and administrative expense was $20.0 million for the quarter
ended March 31, 1998 as compared to $6.7 million for the quarter ended March 31,
1997, representing an increase of $13.3 million. The increase is primarily due
to the acquisitions of Mesa and Chauvco.
Reorganization costs for the three months ended March 31, 1998 totaled
$17.2 million. As announced in February 1998, the Company has consolidated its
six domestic operating divisions into three geographic regions and is relocating
most of its administrative services to Dallas, Texas. During the three months
ended March 31, 1998, the Company has recorded severance, relocation, lease
termination and other costs of approximately $17.2 million relating to this
reorganization. The Company anticipates that it will incur total nonrecurring
expenditures of approximately $20 million during 1998 as a result of this
reorganization. As a result of this reorganization and ongoing cost reduction
efforts, the Company expects general and administrative expenses on a BOE basis
to be $1.00 per BOE by the end of 1998.
23
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
Interest Expense
Interest expense for the quarter ended March 31, 1998 increased to $39.5
million as compared to $9.9 million for the comparable period in 1997. The
increase is due to an increase of $1.7 billion in the weighted average
outstanding balance of the Company's indebtedness for the three months ended
March 31, 1998 as compared to the three months ended March 31, 1997. The
increase in the weighted average outstanding balance of the Company's
indebtedness was primarily the result of the additional debt assumed from Mesa,
and to a lesser extent, from Chauvco. This increase is slightly offset by a
decrease in the weighted average interest rate on the Company's indebtedness
from 7.88% during the first quarter of 1997 to 7.36% during the first quarter of
1998.
During the three months ended March 31, 1998 and 1997, the Company was a
party to various interest rate swap agreements that resulted in a reduction in
interest expense of $5 thousand and $390 thousand for the three months ended
March 31, 1998 and 1997, respectively.
Income Taxes
The Company's income tax benefit and provision of $13.4 million and
$10.1 million for the quarters ended March 31, 1998 and March 31, 1997,
respectively, reflect the net benefit and provision resulting from the separate
tax calculation prepared for each tax jurisdiction in which the Company is
subject to income taxes. At March 31, 1998, the Company has a current deferred
tax asset of $15.3 million and a noncurrent deferred tax asset of $47.1 million.
Management believes that it is more likely than not that the net deferred tax
asset is realizable; however, realization is contingent upon future profitable
operations and is not assured.
Capital Commitments, Capital Resources and Liquidity
Capital Commitments. The Company's primary needs for cash are for
exploration, development and acquisitions of oil and gas properties, repayment
of principal and interest on outstanding indebtedness and working capital
obligations.
The Company's cash expenditures during the first quarter of 1998 for
additions to oil and gas properties totaled $195.3 million. This amount includes
$13.1 million for the acquisition of properties and $182.2 million for
development and exploratory drilling. Significant drilling expenditures in the
first quarter of 1998 included $62.4 million in the Permian Basin region, $56.9
million in the onshore Gulf Coast region, $11.1 million in the MidContinent
region, $33.6 million in Canada, $16.4 in Argentina and $1.8 million in other
international areas.
The Company's 1998 capital expenditure budget has been set at $440
million, reflecting planned expenditures of $265 million for exploitation
activities, $115 million for exploration activities and $60 million for oil and
gas property acquisitions in the Company's core areas. The Company budgets its
capital expenditures based on projected internally-generated cash flows and
routinely adjusts the level of its capital expenditures in response to
anticipated changes in cash flows.
Funding for the Company's working capital obligations is provided by
internally-generated cash flows. Funding for the repayment of principal and
interest on outstanding debt may be provided by any combination of
internally-generated cash flows, proceeds from the disposition of nonstrategic
assets or alternative financing sources as discussed in "Capital Resources"
below.
Capital Resources. The Company's primary capital resources are net cash
provided by operating activities, proceeds from financing activities and
proceeds from sales of nonstrategic assets. The Company expects that these
resources will be sufficient to fund its capital commitments in 1998.
24
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
Net cash provided by operating activities decreased to $69.1 million
during the three months ended March 31, 1998, as compared to the net cash
provided by operating activities of $73.5 million for the same period in 1997.
These decreases are primarily attributable to increases in interest expense,
general and administrative expenses and reorganization costs, offset, to some
extent, by cash flows generated by the acquired oil and gas properties from Mesa
and Chauvco.
Financing Activities. The Company had an outstanding balance under its
domestic bank facility at March 31, 1998 of $941 million (including outstanding,
undrawn letters of credit of $31 million), leaving approximately $434 million of
unused borrowing base immediately available. At March 31, 1998, the Company also
had $276 million outstanding under its Canadian credit facility leaving a
borrowing capacity of $14 million. At March 31, 1998, the Company had four other
outstanding significant debt issuances. Such debt issuances consist of (i) $150
million aggregate principal amount of 8-7/8% senior notes issued by Parker &
Parsley in 1995 and due in 2005 (carrying value of $150.0 million), (ii) $150
million aggregate principal amount of 8-1/4% senior notes issued by Parker &
Parsley in 1995 and due in 2007 (carrying value of $149.3 million), (iii) $350
million aggregate principal amount 6.5% senior notes issued in January 1998 and
due in 2008 (carrying value of $348.3 million) and (iv) $250 million aggregate
principal amount 7.2% senior notes issued in January 1998 and due in 2028
(carrying value of $249.9 million). The weighted average interest rate for the
three months ended March 31, 1998 on the Company's indebtedness was 7.36% as
compared to 7.88% for the three months ended March 31, 1997 (taking into account
the effect of interest rate swaps).
During January 1998, the Company completed the issuance of the 6.5%
senior notes due 2008 and the 7.2% senior notes due 2028 for total net proceeds
of $593 million. The proceeds were used primarily to repay the Company's bank
indebtedness. Interest on the 6.5% and 7.2% senior notes is payable
semi-annually on January 15 and July 15 of each year, commencing July 15, 1998.
These two senior note issuances are governed by an Indenture between the Company
and The Bank of New York dated January 13, 1998. Both senior note issuances are
general unsecured obligations of the Company ranking equally in right of payment
with all other senior unsecured indebtedness of the Company and are senior in
right of payment to all existing and future subordinated indebtedness of the
Company. In addition, the Company is a holding company that conducts all its
operations through subsidiaries, and the senior notes are structurally
subordinated to all obligations of its subsidiaries. The senior notes were fully
and unconditionally guaranteed by Pioneer Natural Resources USA, Inc. ("Pioneer
USA"), a wholly-owned subsidiary of the Company.
As the Company continues to pursue its strategy, it may utilize
alternative financing sources, including the issuance for cash of fixed rate
long-term public debt, convertible securities or preferred stock. The Company
may also issue securities in exchange for oil and gas properties, stock or other
interests in other oil and gas companies or related assets. Additional
securities may be of a class preferred to common stock with respect to such
matters as dividends and liquidation rights and may also have other rights and
preferences as determined by the Company's Board of Directors.
Sales of Nonstrategic Assets. During the three months ended March 31,
1998 and 1997, proceeds from the sale of domestic nonstrategic assets totaled
$12.9 million and $5.7 million, respectively. The proceeds from these sales were
utilized to reduce the Company's outstanding bank indebtedness and for general
working capital purposes. In February 1998, the Company announced its intentions
to sell domestic nonstrategic properties for proceeds ranging from $375 to $550
million. These properties represent an estimated 10% to 12% of the Company's
reserves at December 31, 1997. The Company plans to complete this divestiture in
the latter part of 1998. The Company anticipates that it will continue to sell
nonstrategic properties from time to time to increase capital resources
available for other activities and to achieve operating and administrative
efficiencies and improved profitability.
The consummation of the Company's 1998 divestiture plans is entirely
dependent on finding one or more willing buyers who have the financial
wherewithal to complete such a purchase. Until such a buyer is found, the
Company may reevaluate its portfolio of properties and at any time may adjust
its plans concerning divestitures. As a result, there can be no assurance that
the divestiture of any or all of these properties will be completed or that the
estimated proceeds will be realized.
25
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
Liquidity. At March 31, 1998, the Company had $74.2 million of cash and
cash equivalents on hand, compared to $71.7 million at December 31, 1997. The
Company's ratio of current assets to current liabilities was 1.30 at March 31,
1998 and 1.18 at December 31, 1997.
- ---------------
(1) The information in this document includes forward-looking statements that
are based on assumptions that in the future may prove not to have been
accurate. Those statements, and Pioneer Natural Resources Company's
business and prospects, are subject to a number of risks including the
volatility of oil and gas prices, environmental risks, operating hazards
and risks, risks associated with natural gas processing plants, risks
related to exploration and development drilling, uncertainties about
estimates of reserves, competition, government regulation, and the ability
of the Company to implement its business strategy. These and other risks
are described in the Company's 1997 Annual Report on Form 10-K which is
available from the United States Securities and Exchange Commission.
26
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As discussed in Note D of Notes to Consolidated Financial Statements included in
"Item 1. Financial Statements", the Company is a party to various legal actions
incidental to its business. The claims for damages from such legal actions are
not in excess of 10% of the Company's current assets and the Company believes
none of these actions to be material.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27. Financial Data Schedule
Reports on Form 8-K
During the quarter ended March 31, 1998, the Company filed the following Current
Reports on Form 8-K:
(1) On January 2, 1998, the Company filed a Current Report on Form 8-K dated
December 18, 1997 (a) reporting under Item 2 (Acquisition of Assets) the
acquisition of the Canadian and Argentine oil and gas businesses of
Chauvco, (b) reporting under Item 5 (Other Events) the tender offer for
the Company's 11-5/8% Senior Subordinated Discount Notes due 2006 and
the 10-5/8% Senior Subordinated Notes due 2006; the sale of certain
nonstrategic domestic properties; and amended and restated domestic
credit facilities substituting the Company as borrower in place of
Pioneer USA and (c) reporting under Item 7 (Financial Statements and
Exhibits) the pro forma financial information of the Company giving
effect to the acquisition of Chauvco. The following unaudited pro forma
consolidated information of the Company gives effect to (i) the
divestitures of certain wholly-owned Australasian subsidiaries; (ii) the
divestitures of the wholly-owned subsidiary Bridge Oil Timor Sea, Inc.,
(iii) the acquisition of Mesa by the Company, (iv) the 1996
recapitalization of Mesa's balance sheet, (v) the acquisition of all of
the outstanding equity of Greenhill Corporation and additional
borrowings to finance such acquisition by Mesa, (vi) the disposition by
Chauvco of its investment in Chauvco Resources International Ltd. and
the Alliance projects; and (vii) the acquisition of Chauvco Canadian and
Argentine oil and gas businesses.
I. Preliminary Statement
II. Unaudited Pro Forma Combined Financial Statements of the Company:
(a) Unaudited Pro Forma Combined Balance Sheet of the Company
as of September 30, 1997
(b) Unaudited Pro Forma Combined Statement of Operations of the
Company for the nine months ended September 30, 1997
(c) Unaudited Pro Forma Combined Statement of Operations of the
Company for the year ended December 31, 1996
III. Unaudited Pro Forma Financial Statements of the Company:
(a) Unaudited Pro Forma Statement of Operations of the Company
for the nine months ended September 30, 1997
(b) Unaudited Pro Forma Statement of Operations of the Company
for the year ended December 31, 1996
(c) Unaudited Pro Forma Adjusted Statement of Operations of the
Company for the year ended December 31, 1996
(d) Unaudited Pro Forma Statement of Operations of Mesa for the
year ended December 31, 1996
27
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
IV. Unaudited Pro Forma Financial Statements of Chauvco:
(a) Unaudited Pro Forma Balance Sheet of Chauvco as of September
30, 1997
(b) Unaudited Pro Forma Statement of Operations of Chauvco for
the nine months ended September 30, 1997
V. Notes to Unaudited Pro Forma Combined Financial Statements
(2) On January 9, 1998, the Company filed a Current Report on Form 8-K/A
dated December 18, 1997, reporting under Item 5 (Other Events) the
tender offer for the Company's 11-5/8% Senior Subordinated Discount
Notes due 2006 and the 10-5/8% Senior Subordinated Notes due 2006; the
sale of certain non-strategic domestic properties; and amended and
restated domestic credit facilities substituting the Company as borrower
in place of Pioneer USA.
(3) On January 12, 1998, the Company filed a Current Report on Form 8-K
dated January 8, 1998, reporting under Item 7 (Financial Statements and
Exhibits) the Underwriting Agreement, dated January 8, 1998, among the
Company, Pioneer USA, Salomon Brothers Inc., Chase Securities Inc., J.P.
Morgan Securities Inc., Morgan Stanley & Co. Incorporated and
NationsBanc Montgomery Securities LLC (for themselves and the other
several Underwriters, if any, named in Schedule II thereto).
(4) On January 14, 1998, the Company filed a Current Report on Form 8-K
dated January 13, 1998, reporting under Item 7 (Financial Statements and
Exhibits) the Indenture, dated January 13, 1998, between the Company and
The Bank of New York, as Trustee; First Supplemental Indenture, dated as
of January 13, 1998, among the Company, Pioneer USA, as the subsidiary
guarantor, and The Bank of New York, as Trustee; Form of 6.50% Senior
Notes Due 2008 of the Company; Form of 7.20% Senior Notes Due 2028 of
the Company; Guarantee (2008 Notes), dated as of January 13, 1998,
entered into by Pioneer USA; and Guarantee (2028 Notes), dated as of
January 13, 1998, entered into by Pioneer USA.
(5) On February 13, 1998, the Company filed a Current Report on Form 8-K
dated February 10, 1998 reporting under Item 5 (Other Events) and under
Item 7 (Financial Statements and Exhibits) the new release of the
Company's financial results for the fourth quarter of 1997 as reported
on February 10, 1998.
(6) On February 23, 1998, the Company filed a Current Report on Form 8-K
dated February 13, 1998, reporting under Item 7 (Financial Statements
and Exhibits) the Share Purchase Agreement, dated February 13, 1998,
among the Company, Trimac Corporation and 761795 Alberta Ltd. and the
Share Purchase Agreement, dated February 13, 1998, among the Company,
398215 Alberta Ltd. and Guy J. Turcotte.
28
<PAGE>
PIONEER NATURAL RESOURCES COMPANY
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
PIONEER NATURAL RESOURCES COMPANY
Date: May 8, 1998 By: /s/ M. Garrett Smith
---------------------------
M. Garrett Smith
Executive Vice President and Chief
Financial Officer
Date: May 8, 1998 By: /s/ Rich Dealy
---------------------------
Rich Dealy
Vice President and Chief
Accounting Officer
29
<PAGE>
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