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Pioneer (PXD) In $1.7 Bln Deal With Sinochem, Drops Barnett Shale Sale Plans

 January 30, 2013 09:12 AM
 


(By Mani) Pioneer Natural Resources Co. (NYSE: PXD) said it has agreed to sell its 40 percent stake in in the horizontal Wolfcamp Shale play in the southern portion of the Spraberry Trend Area Field to Sinochem for $1.7 billion.

Sinochem is expected to pay $500 million in cash, while the remaining $1.2 billion by carrying a portion of Pioneer's share of future drilling and facilities costs. The sale is expected to close during the second quarter of 2013, subject to customary governmental approvals.

Under the agreement, Sinochem will acquire approximately 82,800 net acres of leasehold held by Pioneer for all Wolfcamp depths and deeper horizons. Pioneer retains 60 percent of its interest in the Wolfcamp depths and deeper horizons.

The joint interest area covers defined portions of Upton, Reagan, Irion, Crockett and Tom Green Counties in Texas. Pioneer retains its current working interests in all horizons shallower than the Wolfcamp horizon.

In addition to funding its own drilling obligations for the horizontal Wolfcamp Shale, Sinochem has agreed to fund 75 percent of Pioneer's portion of drilling and facilities costs after closing until the $1.2 billion of drilling carry is fully utilized. Pioneer has six years to utilize the drilling carry, subject to extension under certain circumstances.

At closing, Sinochem will pay its 40 percent share of net expenditures in the joint interest area from the Dec. 1, 2012 effective date of the transaction to the closing date. Pioneer and Sinochem have agreed to a development plan which forecasts the drilling of 86 horizontal Wolfcamp Shale wells during 2013, increasing to 120 wells in 2014 and 165 wells in 2015.

Separately, Pioneer said it has dropped its plans to divest its properties in the Barnett Shale as the offers were not up to the mark.

Pioneer commenced a divestiture process for these properties in September 2012. Several bids were received in December, but none were representative of the value Pioneer places on these properties. As a result, Pioneer will retain operatorship of this asset.

Pioneer holds about 155,000 gross acres in the play, of which approximately two-thirds are located in the liquids-rich Barnett Shale Combo play. The remaining one-third is located in the dry gas area of the play. Production in the fourth quarter of 2012 was approximately nine thousand barrels oil equivalent per day, of which approximately 55 percent was liquids (oil and natural gas liquids) and 45 percent was dry gas.

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