SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 10, 1998
PIONEER NATURAL RESOURCES COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 1-13245 75-2702753
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number 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)
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Pioneer Natural Resources Company
Item 5. Other Events
On February 10, 1998, the Company reported its financial results for the
three months and year ended December 31, 1997. The news release is included as
Exhibit 20 to this Report.
Item 7. Financial Statements and Exhibits
c) Exhibits
20. - News Release
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EXHIBIT 20
NEWS RELEASE
Investor Relations Contacts: James Leahy, Susan Spratlen
Media Relations Contact: Marsha Sheffield
(972) 444-9001
Pioneer Reports Results and Announces Fourth Quarter Non-Cash Charge
of $863 Million; Year-End Reserves of 762 Million Barrel Equivalents;
A Divestiture Program for Non-Strategic Assets; a Corporate Restructuring
and an Increase in Stock Repurchase Plan
Dallas, Texas, February 10, 1998 -- Pioneer Natural Resources Company
("Pioneer") (NYSE:PXD) today announced financial and operating results for the
fourth quarter and twelve months ended December 31, 1997. Pioneer also announced
a series of initiatives aimed at unlocking the value contained in its long-lived
reserve base and acreage position. About 95% of the company's domestic fields
generate only 15% of total cash flow. These non-strategic fields will be sold
with proceeds expected to be $375 to $550 million. The current eight operating
divisions will be reduced to five. The reorganization and divestiture program
should reduce total lease operating and administrative expenses by about 12%.
"Over the last several months, the pace of acquisitions and financial
transactions at Pioneer has been rapid. We are now in a position to begin
recognizing the many benefits associated with these transactions," stated Scott
Sheffield, President and CEO.
Fourth Quarter and Year-to-Date Results
Pioneer reported a fourth quarter net loss of $904 million or $11.58 per share.
These results include an $863 million non-cash after tax charge related to the
Statement of Financial Accounting Standard No. 121, Impairment of Long-Lived
Assets.
Fourth quarter oil sales averaged 45,570 barrels per day (BPD), and fourth
quarter natural gas liquid sales were 33,875 BPD. Natural gas sales in the
fourth quarter were 365 million cubic feet per day (MMCFPD). Realized prices for
oil and natural gas liquids in the fourth quarter were $18.07 and $12.47 per
barrel. Fourth quarter realized price for natural gas was $2.18 per thousand
cubic feet. Compared to third quarter production including production from
Mesa's properties for the full quarter, fourth quarter production increased 8%
to 12.9 million equivalent barrels (140,278 equivalent BPD) from 11.9 million
equivalent barrels (129,890 equivalent BPD). On a pro forma basis including the
Chauvco acquisition, fourth quarter volumes were 62,980 BPD for oil, 35,259 BPD
for natural gas liquids and 458 MMCFPD for natural gas (174,572 equivalent BPD).
For the year-ended December 31, 1997, the net loss was $891 million or $17.14
per share. This compares to net income of $140 million or $3.47 per share in
1996.
Oil And Gas Reserves Doubled
During 1997, proved reserves more than doubled from 302 million barrels oil
equivalent (MMBOE) to 762 MMBOE, with the majority of the increase relating to
the acquisitions of Mesa and Chauvco. Reserves added through development
drilling were 53 MMBOE, including revisions, at a cost of $5.44 per barrel
equivalent, producing a replacement ratio of 149%. Year-end 1997 reserves
include 2.3 trillion cubic feet of natural gas and 384 million barrels of
liquids. Proved developed reserves account for 86% of the company's total proved
oil and gas reserves.
Non-Strategic Divestiture Program Accelerated
Pioneer is accelerating its property portfolio management with a major
divestiture program focused on improving operating efficiency and profitability.
During 1998, the company intends to pursue the sale of approximately 95% of its
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its domestic fields, representing 10 to 12% of its total reserve base. The vast
majority of these fields were acquired by Parker & Parsley prior to 1995. Scott
Sheffield stated, "Most of Pioneer's domestic value is attributable to about 25
of the company's 450 fields. The purpose of this program is to shed
non-strategic properties, redeploying the proceeds into higher return assets.
Exact timing of the sales will depend on market conditions."
1998 Capital Program Reduced
Because of the unsettled pricing environment, Pioneer's 1998 capital program has
been reduced to $500 million ($375 million for development and $125 million for
exploration) from $600 million. "Internally generated cash flow coupled with
divestiture proceeds will fully fund the 1998 capital program and acquisition
activity," said Scott Sheffield.
Reorganization Announced
Pioneer will reorganize and reduce its operating divisions from eight to five.
This reorganization will have significant impact on the company's cost structure
by the end of 1998, with lease operating costs expected to fall by 8% and
administrative expenses expected to fall by 24%. The company has estimated that
on a preliminary basis it will incur approximately $20 million of costs related
to the reorganization over the course of business in 1998. "For an energy
company, value resides in its per unit margin and its volume growth per share.
The actions taken today should substantially improve the long-term profitability
of Pioneer," said Scott Sheffield. Based on fourth quarter pro forma production
and year-end reserves before the impact of divestitures, the new organization
breaks down as follows:
Year-end 4th Qtr.
Reserves Pro forma Volumes
-------- -----------------
Mid-Continent 37% 30%
Permian Basin 34% 31%
Gulf Coast 9% 19%
Argentina 12% 10%
Canada 8% 10%
Stock Repurchase Plan Authorization Increased
Pioneer's Board of Directors has approved an increase to the company's recently
announced stock repurchase plan from $100 million to $200 million. This increase
will give Pioneer further options for the divestiture proceeds, in addition to
reinvestment in higher growth assets and debt reduction.
Current Operating Activity
Drilling activity continued at an aggressive pace in the fourth quarter with 40
rigs in worldwide operation. Recent results have been particularly promising in
Argentina and the Gulf of Mexico. During January, oil production increased by
1,800 BPD in Argentina from four new wells being placed on production. Half of
the increase was from one well in the Puesto Lopez field in the Neuquen Basin.
In the Gulf of Mexico, the Eugene Island Block 208 K-4 well, which logged 90
feet of pay in four zones, has been completed and placed on production at a rate
of 3,200 BPD and 7 MMCFPD. This is the first well completed in the program on
this offshore block acquired from Greenhill in 1997, with three additional wells
to be drilled.
Chairman's Comment
"The effect of today's action adds value to Pioneer by increasing pre-tax
margins by about $3.75 per barrel, and by honing the organization into one that
can prosper and grow in a volatile price environment. We will be quick,
flexible, efficient, and focused. The concentration of our large reserve base in
only 25 fields will produce operating and administrative efficiencies unmatched
within the industry. Pioneer's goal is to be the company of choice to investors,
merger candidates, employees, and strategic partners. With these strategic
initiatives in place, buying back our shares is a no-brainer," stated Jon
Brumley.
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Pioneer
Pioneer was created on August 7, 1997, to effect the merger of MESA, Inc.
("Mesa") and Parker & Parsley Petroleum Company ("Parker & Parsley"). The
financial history reflects the results of Parker & Parsley through July 31,
1997, and reflects the results of the combined companies beginning in August
1997. On December 18, 1997, Pioneer acquired Chauvco Resources, Ltd.
("Chauvco").
This announcement includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
include, without limitation, estimates with respect to production levels, cash
flows, capital expenditures and revenue potential. Among other things, such
forward-looking statements assume limited changes in oil and gas prices and the
accuracy of engineering studies on reserves. Although Pioneer believes that the
expectations and assumptions reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations and assumptions will
prove to have been correct. Such forward-looking statements and assumptions are
qualified as may be provided in Pioneer's annual, quarterly, and current
reports, and registration statements filed with the Securities and Exchange
Commission.
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PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
1997 1996
------------ ------------
ASSETS
Current assets $ 308,188 $ 117,039
Oil and gas properties 4,121,045 1,426,382
Gas processing facilities - 59,276
Accumulated depletion, depreciation
and amortization (605,203) (445,238)
Other assets, net 122,560 42,406
----------- -----------
$ 3,946,590 $ 1,199,865
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 261,552 $ 90,970
Long-term debt 1,943,718 320,908
Other noncurrent liabilities 180,275 8,071
Deferred income taxes 12,200 60,800
Preferred stock of subsidiary - 188,820
Stockholders' equity 1,548,845 530,296
----------- -----------
$ 3,946,590 $ 1,199,865
=========== ===========
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
<TABLE>
Three months ended Year ended
December 31, December 31,
----------------------- -----------------------
1997 1996 1997 1996
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 187,802 $ 113,604 $ 536,782 $ 396,931
Natural gas processing - 7,004 - 23,814
Interest and other 629 2,462 4,278 17,458
Gain on disposition of assets, net 2,224 253 4,969 97,140
---------- -------- --------- --------
190,655 123,323 546,029 535,343
Costs and expenses:
Oil and gas production 52,496 28,101 144,170 110,334
Natural gas processing - 3,405 - 12,528
Depletion, depreciation and amortization -
oil and gas 83,148 24,347 204,450 105,259
Depletion, depreciation and amortization -
other 2,390 1,559 7,985 6,875
Impairment of oil and gas properties 1,356,390 - 1,356,390 -
Exploration and abandonments 42,850 8,068 77,160 23,030
General and administrative 16,994 8,943 48,763 28,363
Interest 33,286 10,050 77,550 46,155
Other 4,142 1,533 7,124 2,451
---------- -------- --------- --------
1,591,696 86,006 1,923,592 334,995
---------- -------- --------- --------
Income (loss) before income taxes and
extraordinary item (1,401,041) 37,317 (1,377,563) 200,348
Income tax benefit (provision) 508,800 (12,900) 500,300 (60,100)
---------- -------- --------- --------
Income (loss) before extraordinary item (892,241) 24,417 (877,263) 140,248
Extraordinary loss on early extinguishment
of debt, net of tax (11,890) - (13,408) -
---------- -------- --------- --------
Net income (loss) $ (904,131) $ 24,417 $ (890,671) $ 140,248
========== ======== ========== ========
Net income (loss) per share:
Basic:
Income (loss) before extraordinary item $ (11.43) $ .69 $ (16.88) $ 3.95
Extraordinary item (.15) - (.26) -
---------- ------- --------- --------
Net income (loss) $ (11.58) $ .69 $ (17.14) $ 3.95
========== ======= ========== ========
Diluted:
Income (loss) before extraordinary item $ (11.43) $ .62 $ (16.88) $ 3.47
Extraordinary item (.15) - (.26) -
---------- ------- --------- --------
Net income (loss) $ (11.58) $ .62 $ (17.14) $ 3.47
========== ======= ========== ========
Dividends declared per share $ .05 $ .05 $ .10 $ .10
========== ======= ========== ========
Weighted average shares outstanding 78,063 35,522 51,973 35,475
=========== ======== =========== =========
</TABLE>
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PIONEER NATURAL RESOURCES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
Three months ended Year ended
December 31, December 31,
----------------------- -----------------------
1997 1996 1997 1996
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Cash flows from operations:
Net income (loss) $ (904,131) $ 24,417 $ (890,671) $ 140,248
Depletion, depreciation and amortization 85,538 25,906 212,435 112,134
Impairment of oil and gas properties 1,356,390 - 1,356,390 -
Exploration expenses, including dry holes 37,707 6,876 63,288 17,262
Deferred income taxes (508,700) 10,500 (501,300) 57,400
Gain on disposition of assets, net (2,224) (253) (4,969) (97,140)
Loss on early extinguishment of debt 11,890 - 13,408 -
Other noncash items 8,304 956 18,886 (1,360)
Net changes in operating assets and
liabilities, net of effects from
acquisitions and dispositions (35,633) (27,710) (39,258) 1,562
---------- -------- --------- --------
Net cash provided by operations 49,141 40,692 228,209 230,106
Net cash provided by (used in) investing (97,045) (76,496) (341,178) 13,729
Net cash provided by (used in) financing 78,986 (13,124) 165,971 (245,354)
---------- -------- --------- --------
Effect of exchange rate changes on cash
and cash equivalents - - - 290
Net increase (decrease) in cash and cash
equivalents 31,082 (48,928) 53,002 (1,519)
Cash and cash equivalents, beginning of
period 40,631 67,639 18,711 19,940
---------- -------- --------- --------
Cash and cash equivalents, end of period $ 71,713 $ 18,711 $ 71,713 $ 18,71
========== ======== ========== ========
</TABLE>
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