UNITED STATES
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):
September 30, 1999 (FEBRUARY 15, 1999)
PIONEER NATURAL RESOURCES COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 1-13245 75-2702753
(State or other jurisdiction of Registration (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
TABLE OF CONTENTS
Page
Item 5. Other Events............................................... 3
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Introductory Statement................................ 4
Unaudited Pro Forma Condensed Financial Statements:
Unaudited Pro Forma Condensed Statement of Operations
for Pioneer Natural Resources Company for the nine
months ended September 30, 1999.................... 5
Unaudited Pro Forma Condensed Statement of Operations
for Pioneer Natural Resources Company for the year
ended December 31, 1998............................ 6
Notes to Unaudited Pro Forma Condensed Financial
Statements......................................... 7
(c) Exhibits............................................... 11
Signatures.......................................................... 12
2
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PIONEER NATURAL RESOURCES COMPANY
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 (the "Company")
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 1998 Annual
Report on Form 10-K, which is available from the United States Securities and
Exchange Commission (the "SEC").
ITEM 5. OTHER EVENTS
On July 13, 1999, the Company filed a Current Report on Form 8-K dated
June 29, 1999 (the "July 13, 1999 Form 8-K") with the SEC reporting a series of
related asset dispositions under Item 2. Acquisition or Disposition of Assets of
the July 13, 1999 Form 8-K and, associated therewith, presented unaudited
proforma condensed financial statements under Item 7. Financial Statements and
Exhibits of the July 13, 1999 Form 8-K. The purpose of this Current Report on
Form 8-K is to supplement the unaudited proforma condensed financial statements
presented under Item 7 of the July 13, 1999 Form 8-K based on the reported
results of the Company for the nine months ended September 30, 1999, as reported
in the Company's Quarterly Report on Form 10-Q that was filed with the SEC on
November 10, 1999. The Company's unaudited consolidated balance sheet as of
September 30, 1999, as presented in its Quarterly Report on Form 10-Q for the
period ended September 30, 1999, includes the effects of the 1999 asset
divestitures. Accordingly, an unaudited pro forma balance sheet is not presented
herein.
Asset Divestitures
During 1999, the Company completed the divestiture of certain United
States and Canadian non-strategic assets. The Company realized $386.7 million of
net cash proceeds from the divestitures, which was used to reduce the Company's
outstanding indebtedness.
Prize Divestiture. On June 29, 1999, the Company completed the
divestiture (the "Prize Divestiture") of certain oil and gas producing
properties, gas plants and other assets to Prize Energy Corp. ("Prize"). The oil
and gas producing assets sold to Prize include properties located in the Gulf
Coast, Mid Continent and Permian Basin areas of the Company's United States
region.
At December 31, 1998, the Company's interest in these properties
contained 63 million BOE of proved reserves (consisting of 26 million Bbls of
oil and NGL's, and 224 Bcf of gas), representing $199 million of SEC 10 value.
In accordance with the terms of the Prize Divestiture, the Company
received net sales proceeds of $245.0 million, comprised of $215.0 million of
cash and 2,307.693 shares of six percent convertible preferred stock having a
liquidation preference and fair value of $30.0 million. The convertible
preferred stock provides for a six percent annual dividend payment, payable
quarterly in additional shares of Prize six percent convertible preferred stock
through 2001. Subsequent to 2001, Prize has the option of paying the quarterly
dividends on the convertible preferred stock in additional shares of six percent
convertible preferred stock or in cash. Each share of the convertible preferred
stock may, at the option of the Company, be converted into one share of Prize
common stock, subject to certain anti-dilution adjustments. The Company
recognized a loss of $46.4 million from the Prize Divestiture.
The board of directors of Prize is comprised of six directors, which
include Mr. Philip P. Smith, the Chief Executive Officer; Mr. Kenneth A. Hersh;
two directors to be elected by the Company under the terms of the convertible
preferred stock received in this transaction; and, two other directors unrelated
to the Company. Messrs. Smith and Hersh were members of the board of directors
of the Company and resigned their positions with the Company during the second
quarter of 1999. Additionally, Mr. Lon C. Kile resigned his position as
Executive Vice President of the Company to accept the position of President and
Chief Operating Officer of Prize. The sale of the assets to Prize was initiated
3
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through an auction process which, upon receipt of Prize's initial offer, was
placed under the supervision of a special independent committee of the Company's
board of directors (comprised of outside directors unrelated to Prize). Upon the
independent committee's review and consideration of all offers presented to the
Company, the Prize offer was approved.
Other United States Divestitures. In addition to the Prize Divestiture,
the Company completed the divestitures of non-strategic United States oil and
gas properties located in the South Texas Gulf Coast, the West Texas Permian
Basin and North Dakota areas, an East Texas gas facility and certain other
assets for net cash proceeds of $113.7 million. Associated with these
divestitures, the Company recorded a net gain on disposition of assets of $33.6
million during the nine months ended September 30, 1999.
At December 31, 1998, the Company's interest in these properties,
excluding the North Dakota oil and gas properties held in a Canadian
wholly-owned subsidiary of the Company, contained 12.5 million BOE of proved
reserves (consisting of 6 million Bbls of oil and NGL's, and 37 Bcf of gas),
representing $38 million of SEC 10 value.
Canadian Divestitures. During 1999, the Company completed the divestiture
of certain non-strategic Canadian oil and gas properties, gas plants and other
related assets. In accordance with the terms of the Canadian purchase and sale
agreements, the Company received net cash proceeds of US $58.0 million.
Associated with these divestitures, the Company recognized a net loss of US $8.5
million during the nine months ended September 30, 1999.
At December 31, 1998, the Company's interest in the divested Canadian
properties, including the North Dakota oil and gas properties held in a Canadian
wholly-owned subsidiary of the Company, contained 13.8 million BOE of proved
reserves (consisting of 9 million Bbls of oil and NGL's, and 29 Bcf of gas),
representing $47 million of SEC 10 value.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Introductory Statements
The unaudited pro forma condensed financial statements of the Company
have been prepared to give effect to (i) the divestiture of certain
non-strategic oil and gas properties, gas plants, and other assets to Prize
Energy Corp. in June 1999 and (ii) the aggregate effect of other divestitures of
non-strategic Canadian and United States oil and gas properties, gas plants and
related assets during the period from February 15, 1999 to September 30, 1999
(items (i) and (ii) collectively the "1999 Dispositions").
The unaudited pro forma condensed statements of operations of the Company
for the nine months ended September 30, 1999 and for the year ended December 31,
1998 have been prepared to give effect to the 1999 Dispositions as if they had
occurred on January 1, 1998.
The unaudited pro forma condensed financial statements included herein
are not necessarily indicative of the results that might have occurred had the
transactions taken place on the date that is assumed for the pro forma
presentations and are not intended to be a projection of future results. Future
results may vary significantly from the results reflected in the accompanying
unaudited pro forma condensed financial statements because of normal production
declines, changes in product prices, future acquisitions and divestitures,
future development and exploration activities, and other factors.
The following unaudited pro forma condensed financial statements should
be read in conjunction with the Consolidated Financial Statements (and the
related notes) of the Company included in the Annual Report on Form 10-K for the
year ended December 31, 1998 and the Quarterly Report on Form 10-Q for the nine
months ended September 30, 1999.
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PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
THE 1999 PRO FORMA PRO FORMA
COMPANY DISPOSITIONS ADJUSTMENTS PIONEER
--------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas...................... $ 481,237 $ (76,971) $ $ 404,266
Interest and other............... 81,139 - 81,139
Loss on disposition of assets, net (21,276) 21,276 -
-------- ---------- --------
541,100 (55,695) 485,405
-------- ---------- --------
Cost and expenses:
Oil and gas production........... 123,461 (25,152) 98,309
Depletion, depreciation and
amortization................... 184,588 (31,503) 153,085
Impairment of oil and gas
properties..................... 17,894 - 17,894
Exploration and abandonments..... 41,592 (298) 41,294
General and administrative....... 29,232 - 29,232
Reorganization................... 7,805 - 7,805
Interest......................... 130,426 - (14,867)(a) 115,559
Other............................ 36,291 - 36,291
-------- ---------- --------
571,289 (56,953) 499,469
-------- ---------- --------
Loss from continuing operations before
income taxes..................... (30,189) 1,258 (14,064)
Income tax provision............... (500) - (500)
-------- ---------- --------
Loss from continuing operations.... $ (30,689) $ 1,258 $ (14,564)
======== ========== ========
Loss from continuing operations per
common share:
Basic.......................... $ (.31) $ (.15)
======== ========
Diluted........................ $ (.31) $ (.15)
======== ========
Weighted average shares
outstanding...................... 100,304 100,304
========= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
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PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
THE 1999 PRO FORMA PRO FORMA
COMPANY DISPOSITIONS ADJUSTMENTS PIONEER
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas...................... $ 711,492 $ (159,492) $ $ 552,000
Interest and other............... 10,452 - 10,452
Loss on disposition of assets, net (445) - (445)
--------- ---------- ---------
721,499 (159,492) 562,007
--------- ---------- ---------
Cost and expenses:
Oil and gas production........... 223,551 (55,473) 168,078
Depletion, depreciation and
amortization................... 337,308 (84,472) 252,836
Impairment of long-lived assets.. 459,519 (33,738) 425,781
Exploration and abandonments..... 121,858 (5,824) 116,034
General and administrative....... 73,000 - 73,000
Reorganization................... 33,199 - 33,199
Interest......................... 164,285 - (23,086)(a) 141,199
Other............................ 39,605 - 39,605
--------- ---------- ---------
1,452,325 (179,507) 1,249,732
--------- ---------- ---------
Loss from continuing operations before
income taxes..................... (730,826) 20,015 (687,725)
Income tax provision............... (15,600) - (18,600) (b) (34,200)
--------- ---------- ---------
Loss from continuing operations.... $ (746,426) $ 20,015 $ (721,925)
========= ========== =========
Loss from continuing operations per
common share:
Basic.......................... $ (7.46) $ (7.22)
========= =========
Diluted........................ $ (7.46) $ (7.22)
========= =========
Weighted average shares
outstanding...................... 100,055 100,055
========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed financial information of Pioneer
Natural Resources Company (the "Company") has been prepared to give effect to
(i) the divestiture of certain non-strategic oil and gas properties, gas plants
and other assets to Prize Energy Corp. ("Prize") in June 1999 and (ii) the
aggregate effect of other divestitures of non-strategic Canadian and United
States oil and gas properties, gas plants and related assets during the period
from February 15, 1999 to September 30, 1999 (items (i) and (ii) collectively,
the "1999 Dispositions"). The unaudited pro forma condensed statements of
operations are presented as if the 1999 Dispositions occurred on January 1,
1998. The Company's unaudited consolidated balance sheet as of September 30,
1999, as presented in its Quarterly Report on Form 10-Q for the period ended
September 30, 1999, includes the effects of the 1999 Dispositions. Accordingly,
an unaudited proforma balance sheet is not presented herein.
Following is a description of the individual columns included in these
unaudited pro forma condensed financial statements:
The Company - Represents the consolidated condensed statements of
operations of Pioneer Natural Resources Company for the nine months ended
September 30, 1999 and the year ended December 31, 1998.
1999 Dispositions - Reflects the results of operations (before income
taxes) for the nine months ended September 30, 1999 and the year ended
December 31, 1998 from the oil and gas properties, gas plants and related
assets prior to their sale in 1999.
NOTE 2. PRO FORMA ADJUSTMENTS
Following are descriptions of the pro forma adjustments used in the
preparation of the accompanying unaudited pro forma condensed financial
statements:
(a) Respective pro forma adjustments to reduce interest expense for the
nine months ended September 30, 1999 and for the year ended December
31, 1998 to reflect the use of $386.7 million of net cash proceeds from
divestments to reduce outstanding bank indebtedness. The adjustments
for the nine months ended September 30, 1999 and the year ended
December 31, 1998 are based on historic average annual interest rates
of 7.18 percent and 5.97 percent, respectively, incurred on bank
indebtedness.
(b) Pro forma adjustments to the Company's Canadian income tax provision
for the year ended December 31, 1998. This adjustment is based on an
effective Canadian income tax rate of 43.7 percent. Due to
uncertainties regarding the recoverability of the Company's net
operating loss and tax credit carryovers, an income tax benefit has not
been recognized in the pro forma adjustments associated with the pro
forma 1999 pre-tax loss.
NOTE 3. OIL AND GAS RESERVE DATA
The following unaudited pro forma supplemental information regarding the
oil and gas activities of the Company is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange Commission and Statement
of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas
Producing Activities". The pro forma combined reserve information is presented
as if the 1999 Dispositions had occurred on January 1, 1998. Information for oil
and NGL's are presented in barrels (Bbls) and for gas in thousands of cubic feet
(Mcf).
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The Company emphasizes that reserve estimates are inherently imprecise and
subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available and such changes
could be significant.
Quantities of oil and gas reserves
Set forth below is a pro forma summary of the changes in the net
quantities of oil, NGL and natural gas reserves for the year ended December 31,
1998.
Oil
NGLs Gas
(Mbbls) (Mmcf) MBOE
--------- --------- -------
TOTAL PROVED RESERVES:
UNITED STATES
Balance, January 1.................. 274,261 1,437,847 513,902
Revisions of previous estimates..... (15,422) (48,068) (23,433)
Purchases of mineral in place....... - - -
New discoveries and extensions...... 183 3,438 756
Production.......................... (20,946) (101,932) (37,936)
Sales of mineral in place........... (323) (7,070) (1,501)
------- --------- -------
Balance, December 31................ 237,753 1,284,215 451,788
CANADA
Balance, January 1.................. 3,783 167,558 31,709
Revisions of previous estimates..... 249 65,662 11,193
Purchases of mineral in place....... 2 - 2
New discoveries and extensions...... 261 5,951 1,253
Production.......................... (670) (13,542) (2,927)
Sales of mineral in place........... (111) (5,465) (1,022)
------- --------- -------
Balance, December 31................ 3,514 220,164 40,208
ARGENTINA
Balance, January 1.................. 31,612 340,392 88,344
Revisions of previous estimates..... (7,615) 76,843 5,192
Purchases of mineral in place....... - - -
New discoveries and extensions...... 3,522 37,900 9,839
Production.......................... (3,300) (26,801) (7,767)
Sales of mineral in place........... - - -
--------- --------- --------
Balance, December 31................ 24,219 428,334 95,608
TOTAL
Balance, January 1.................. 309,656 1,945,797 633,955
Revisions of previous estimates..... (22,788) 94,437 (7,048)
Purchases of mineral in place....... 2 - 2
New discoveries and extensions...... 3,966 47,289 11,848
Production.......................... (24,916) (142,275) (48,630)
Sales of mineral in place........... (434) (12,535) (2,523)
--------- --------- --------
Balance, December 31................ 265,486 1,932,713 587,604
========= ========= ========
PROVED DEVELOPED RESERVES
January 1........................ 268,458 1,710,202 553,492
========= ========= ========
December 31...................... 237,366 1,754,557 529,792
========= ========= ========
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Standardized measure of discounted future net cash flows
The standardized measure of discounted future net cash flow is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of oil and gas reserves less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves
discounted using a rate of 10 percent per year to reflect the estimated timing
of the future cash flows. Future income taxes are calculated by comparing
undiscounted future cash flows to the tax basis of oil and gas properties plus
available carryforwards and credits and applying the current tax rate to the
difference.
UNITED STATES (in thousands)
Oil and gas producing activities:
Future cash inflows........................................ $ 4,310,270
Future production costs.................................... (1,989,640)
Future development costs................................... (192,273)
Future income tax expenses................................. -
----------
2,128,357
10% annual discount factor.................................. (1,138,006)
----------
Standardized measure of discounted future net cash flows.... $ 990,351
==========
ARGENTINA
Oil and gas producing activities:
Future cash inflows........................................ $ 686,911
Future production costs.................................... (196,446)
Future development costs................................... (45,710)
Future income tax expenses................................. -
----------
444,755
10% annual discount factor.................................. (211,956)
----------
Standardized measure of discounted future net cash flows.... $ 232,799
==========
CANADA
Oil and gas producing activities:
Future cash inflows........................................ $ 383,118
Future production costs.................................... (87,734)
Future development costs................................... (46,860)
Future income tax expenses................................. (30,566)
----------
217,958
10% annual discount factor.................................. (75,947)
----------
Standardized measure of discounted future net cash flows.... $ 142,011
==========
TOTAL
Oil and gas producing activities:
Future cash inflows........................................ $ 5,380,299
Future production costs.................................... (2,273,820)
Future development costs................................... (284,843)
Future income tax expenses................................. (30,566)
----------
2,791,070
10% annual discount factor.................................. (1,425,909)
----------
Standardized measure of discounted future net cash flows.... $ 1,365,161
==========
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Changes relating to the standardized measure of discounted future net cash flows
The principal sources of the change in the pro forma combined standardized
measure of discounted future net cash flows for the year ended December 31, 1998
are as follows:
(in thousands)
Oil, NGL and gas sales, net of production costs $ (383,922)
Net changes in prices and production costs (1,066,988)
Extension and discoveries 44,018
Sales of minerals-in-place (12,748)
Purchases of mineral-in-place 3
Revisions of estimated future development costs (31,220)
Revisions of previous quantity estimates 15,924
Accretion of discount 244,696
Changes in production rates, timing and other 108,440
-----------
Change in present value of future net revenues (1,081,797)
Net change in present value of future income taxes 23,908
(1,057,889)
Balance, beginning of year 2,423,050
-----------
Balance, end of year $ 1,365,161
===========
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PIONEER NATURAL RESOURCES COMPANY
(d) EXHIBITS
10.1 Purchase and Sale Agreement, dated May 16, 1999, by and between
Pioneer Natural Resources USA, Inc. and Pioneer Resources Producing,
L.P. as Seller and Prize Energy Corp. as Purchaser (incorporated by
reference to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on July 13, 1999.)
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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 hereunto duly authorized.
PIONEER NATURAL RESOURCES COMPANY
Date: December 13, 1999 By: /s/ RICH DEALY
-------------------------------------------
Rich Dealy
Vice President and Chief Accounting Officer
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