(Source: Business Wire)
Pioneer Southwest Energy Partners L.P. ("Pioneer Southwest" or
"the Partnership") (NYSE:PSE) today announced financial and
operating results for the quarter ended September 30, 2009. The
Partnership acquired assets and liabilities from a subsidiary of Pioneer
Natural Resources Company in August 2009, which represents a transaction
between entities under common control under generally accepted
accounting standards. As a result, the following financial and operating
results of the Partnership for the third quarter and nine-month periods
include the results of the acquired assets as if the Partnership had
acquired the assets at the beginning of the periods presented.
Net income for the third quarter was $25 million, of which $29 million,
or $.96 per common unit, was attributable to the Partnership, offset by
a loss of $4 million attributable to the acquired assets prior to the
acquisition date of August 31, 2009. Net income attributable to the
Partnership included noncash mark-to-market derivative gains of $7
million. Without the effect of this item, adjusted income applicable to
the Partnership for the third quarter would have been $22 million, or
$.74 per common unit. Cash flow from operating activities for the period
was $25 million.
Oil and gas sales for the third quarter averaged 5,853 barrels oil
equivalent per day (BOEPD). Third quarter oil sales averaged 3,482
barrels per day (BPD), natural gas liquid (NGL) sales averaged 1,333
BPD, and gas sales averaged 6 million cubic feet per day (MMCFPD).
The third quarter average price for oil was $109.61 per barrel. The
price for NGLs was $45.42 per barrel, and the price for gas was $5.05
per thousand cubic feet. The average prices reported for the third
quarter benefitted from the Partnership's attractive commodity
derivative position.
The Partnership acquired Spraberry properties from a subsidiary of
Pioneer Natural Resources Company on August 31, 2009 at a price of
$171.2 million, before customary purchase price adjustments. The
properties included proved reserves of 18.9 million barrels of oil
equivalent (BOE), production of approximately 1,300 BOEPD, 170
forty-acre drilling locations and 250 twenty-acre locations. Also
included in the acquisition were certain derivative positions.
The Partnership commenced a two-rig drilling program in early November
and expects to drill 50 to 60 wells through 2010. As a result, 2010
production is forecasted to grow by more than 15% compared to 2009, with
operating cash flow increasing by approximately 35% in 2010, resulting
in an improved distribution coverage ratio. The drilling program is
expected to generate internal rates of return of approximately 50%.
Current liquidity of $140 million under the Partnership's credit
facility is expected to be adequate to fund future growth through
drilling and acquisitions.
Pioneer Southwest previously announced a cash distribution of $15
million, or $.50 per outstanding common unit, for the quarter ended
September 30, 2009. The distribution is payable November 12, 2009 to
holders of record at the close of business on November 5, 2009.
Distribution sustainability and growth potential are supported by
significant derivative positions through 2013 (derivative contracts
cover approximately 85% through 2010, 75% in 2011 and 2012, and 60% in
2013 of the Partnership's forecasted production for those periods).
Financial Outlook
Fourth quarter 2009 production is forecasted to average 5,600 BOEPD to
5,900 BOEPD. Fourth quarter production costs (including production and
ad valorem taxes) are expected to average $20.00 to $23.00 per BOE based
on current NYMEX strip prices for oil, NGLs and gas. Depreciation,
depletion and amortization expense is expected to average $5.00 to $6.00
per BOE based on the new SEC reserve pricing methodology that is
expected to be implemented during the fourth quarter of 2009.
General and administrative expense is expected to be $1 million to $2
million. Interest expense is expected to be $500,000 to $700,000.
Accretion of discount on asset retirement obligations is forecasted to
be nominal.
Pioneer Southwest's fourth quarter cash taxes and effective income tax
rate are expected to be approximately 1% as a result of Pioneer
Southwest being subject to the Texas margin tax.
Earnings Conference Call
On Wednesday, November 4 at 11:00 a.m. Central Time, Pioneer Southwest
will discuss its financial and operating results with an accompanying
presentation. The call will be webcast on Pioneer Southwest's website, www.pioneersouthwest.com.
The presentation will be available on the website for preview in advance
of the call. At the website, select ˜INVESTORS' at the top of the page.
For those who cannot listen to the live webcast, a replay will be
available shortly thereafter. Or you may choose to dial (888) 378-4350
(confirmation code: 1552499) to listen by telephone and view the
accompanying presentation at the website above. A telephone replay will
be available by dialing (888) 203-1112 (confirmation code: 1552499).
Pioneer Southwest is a Delaware limited partnership headquartered in
Dallas. Pioneer Natural Resources formed Pioneer Southwest to own and
acquire oil and gas assets in its area of operations. This area includes
onshore Texas and eight counties in the southeast region of New Mexico.
For more information, visit Pioneer Southwest's website at www.pioneersouthwest.com.
Except for historical information contained herein, the statements in
this News Release are forward-looking statements that are made pursuant
to the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements and the business
prospects of Pioneer Southwest are subject to a number of risks and
uncertainties that may cause Pioneer Southwest's actual results in
future periods to differ materially from the forward-looking statements.
These risks and uncertainties include, among other things, volatility of
commodity prices, the effectiveness of Pioneer Southwest's commodity
price derivative strategy, reliance on Pioneer Natural Resources Company
and its subsidiaries to manage Pioneer Southwest's business and identify
and evaluate acquisitions, product supply and demand, competition, the
ability to obtain environmental and other permits and the timing
thereof, other government regulation or action, the ability to obtain
approvals from third parties and negotiate agreements with third parties
on mutually acceptable terms, litigation, the costs and results of
drilling and operations, access to and availability of drilling
equipment and transportation, processing and refining facilities,
Pioneer Southwest's ability to replace reserves, including through
acquisitions, and implement its business plans or complete its
development activities as scheduled, uncertainties associated with
acquisitions, access to and cost of capital, the financial strength of
counterparties to Pioneer Southwest's credit facility and derivative
contracts and the purchasers of Pioneer Southwest's oil, NGL and gas
production, uncertainties about estimates of reserves, the assumptions
underlying production forecasts, quality of technical data and
environmental and weather risks. These and other risks are described in
Pioneer Southwest's 10-K and 10-Q Reports and other filings with the
Securities and Exchange Commission. In addition, Pioneer Southwest may
be subject to currently unforeseen risks that may have a materially
adverse impact on it. Pioneer Southwest undertakes no duty to publicly
update these statements except as required by law.
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2009 2008
ASSETS
Current assets:
Cash and cash equivalents $ 6,032 $ 29,936
Accounts receivable 12,342 12,606
Inventories 1,018 1,941
Prepaid expenses 381 105
Derivatives 27,167 51,261
Total current assets 46,940 95,849
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of accounting 305,688 305,075
Accumulated depletion, depreciation and amortization (110,436 ) (100,370 )
Total property, plant and equipment 195,252 204,705
Deferred income taxes 1,806 -
Other assets:
Derivatives 34,603 65,804
Other, net 652 806
$ 279,253 $ 367,164
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 6,995 $ 5,824
Due to affiliates 2,042 5,968
Interest payable 110 -
Income taxes payable to affiliate 371 492
Deferred income taxes 307 521
Derivatives 951 -
Asset retirement obligations 715 99
Total current liabilities 11,491 12,904
Long-term debt 135,000 -
Derivatives 4,828 -
Deferred income taxes - 101
Asset retirement obligations 5,337 6,328
Partners' equity 122,597 347,831
$ 279,253 $ 367,164
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PIONEER SOUTHWEST ENERGY PARTNERS L.P.