Pioneer Natural Resources Reports Third Quarter 2012 Financial and Operating Results

31.10.2012  |  Business Wire

Pioneer Natural Resources Company (NYSE:PXD) ('Pioneer? or 'the
Company?) today announced financial and operating results for the
quarter ended September 30, 2012.

Pioneer reported third quarter net income attributable to common
stockholders of $19 million, or $0.15 per diluted share (see attached
schedule for a description of the net income per diluted share
calculation). Without the effect of noncash derivative mark-to-market
losses and other unusual items, adjusted income for the third quarter
was $104 million after tax, or $0.82 per share.

Third quarter and other recent highlights included:

• 
  producing 159.9 thousand barrels oil equivalent per day (MBOEPD),
  which is above the top end of the Company′s third-quarter guidance
  range of 155 MBOEPD to 159 MBOEPD (these third quarter production
  volumes include 6.9 MBOEPD from Pioneer′s Barnett Shale properties
  since production from these properties was included in Pioneer′s third
  quarter guidance range; the Barnett Shale properties were reclassified
  to discontinued operations during the third quarter as a result of the
  Company′s decision to divest of these properties),
  
• 
  producing 153.0 MBOEPD from continuing operations (excludes Barnett
  Shale and South Africa production, which is reflected in discontinued
  operations), an increase from the second quarter of 2012 of 10 MBOEPD,
  or 7%, and 33 MBOEPD, or 28%, from the third quarter of 2011 as a
  result of continued strong production growth in the Company′s
  Spraberry vertical, horizontal Wolfcamp Shale and Eagle Ford Shale
  areas,
  
• 
  continuing to deliver strong well performance from deeper vertical
  drilling to the Strawn, Atoka and Mississippian intervals,
  
• 
  achieving record production levels in the Eagle Ford Shale as a result
  of continued strong well performance,
  
• 
  narrowing Pioneer′s 2012 production growth guidance range from 25% to
  29% to 27% to 28% based on year-to-date results,
  
• 
  continuing to drill successful horizontal Wolfcamp Shale wells, with
  well performance in the Company′s southern 200,000 acres of the play
  meeting type curve expectations,
  
• 
  beginning to drill delineation wells in the Company′s northern acreage
  of the horizontal Wolfcamp Shale play,
  
• 
  progressing data room activities to pursue a joint venture partner to
  accelerate development of the horizontal Wolfcamp Shale play in the
  southern 200,000 acres of Pioneer′s total prospective acreage position,
  
• 
  increasing the 2012 drilling budget by $100 million primarily to
  accelerate horizontal Wolfcamp Shale appraisal activity,
  
• 
  drilling two successful Jo Mill interval horizontal wells in the
  Spraberry field,
  
• 
  opening a data room to progress the planned divestiture of the
  Company′s Barnett Shale properties, which will allow the reallocation
  of capital to the higher-return Spraberry vertical, horizontal
  Wolfcamp Shale and Eagle Ford Shale areas,
  
• 
  adding oil derivative positions for 2013 through 2015 and gas
  derivative positions for 2014 through 2015,
  
• 
  expecting the Company to exercise its right to call the convertible
  senior notes due 2038 for redemption early in 2013 (based on the
  September 30^th closing stock price of $104.40, conversion
  of the notes would result in paying $480 million cash and issuing
  approximately 3.3 million shares) and
  
• 
  recognizing that the Company′s oil production will increase by 3,500
  barrels oil per day (BOPD) at the end of 2012 with the expiration of
  the final Spraberry volumetric production payment (VPP) commitment.
  

Scott Sheffield, Chairman and CEO, stated, 'Our Spraberry vertical and
Eagle Ford Shale plays continued to exceed production growth
expectations in the third quarter. Our drilling results from the
horizontal Wolfcamp Shale play are also continuing to meet expectations,
and we expect this asset to significantly contribute to our production
growth going forward. Our joint venture data room for the southern
200,000 acres of the play has been very active, and the data room for
the Barnett Shale divestiture has just opened. We were also able to
begin drilling horizontal wells on our northern acreage earlier than
anticipated to appraise the potential of the horizontal Wolfcamp Shale
in this area.?

Mark-To-Market Derivative Losses and Unusual
Items Included in Third Quarter 2012 Earnings

Pioneer′s third quarter earnings included unrealized mark-to-market
losses on derivatives of $146 million after tax, or $1.19 per diluted
share.

Third quarter earnings also included income of $61 million after tax, or
$0.52 per diluted share, related to unusual items. These unusual items
included:

• 
  a net gain of $28 million after tax, or $0.23 per diluted share, for
  2014 and 2015 gas derivatives and interest rate swaps that were
  liquidated during the third quarter,
  
• 
  income of $32 million after tax, or $0.26 per diluted share,
  associated with the sale of Pioneer′s South Africa properties
  (recorded in discontinued operations),
  
• 
  other small items that net to income of $1 million after tax, with a
  nominal per diluted share impact and
  
• 
  a $0.03 per diluted share impact of excluding four million incremental
  dilutive shares in computing adjusted income per share that, in
  accordance with GAAP, were not included in the net income per diluted
  share computation because the Company reported a net loss from
  continuing operations for the third quarter of 2012.
  

Operations Update and Drilling Program

Pioneer is the largest acreage holder in the horizontal Wolfcamp Shale
play where the Company believes it has significant resource potential
based on its extensive geologic data covering the Wolfcamp A, B, C and D
intervals and its successful drilling results to date as described below.

Drilling is currently focused primarily in the southern 200,000 acres of
Pioneer′s leasehold in the play (Upton, Reagan and Irion counties) where
the Company expects to drill 90 wells by the end of 2013 to hold
expiring acreage totaling 50,000 acres. Thirty to thirty-five of these
wells are targeted to be drilled in 2012. Twenty-seven wells have been
drilled to date, with 17 wells placed on production.

Of the 17 wells placed on production, two wells are located in northern
Upton county in the Giddings Estate area, and 15 wells are located
further south in Upton and Reagan counties in the University Lands area.

Pioneer′s first two successful horizontal Wolfcamp Shale wells were
drilled in northern Upton County in the Upper B interval in the Giddings
Estate area. The first well had its one-year anniversary from first
production in mid-October and has produced 135 thousand barrels oil
equivalent (MBOE) to date. The second well has been on production for
ten months and has delivered cumulative production of 105 MBOE. For
perspective, a typical vertical well drilled to the Wolfcamp interval
generally takes 40 years to 50 years to produce 140 MBOE.

Of the 15 wells in the University Lands area, 13 wells were drilled in
the Upper B interval and two were drilled in the A interval. Eight of
the Upper B wells and the two A interval wells were placed on production
in the third quarter.

The eight Upper B wells placed on production in the third quarter had
initial 24-hour production rates ranging from 312 barrels oil equivalent
per day (BOEPD) to 759 BOEPD. These wells were drilled to depths ranging
from 7,745 feet to 8,352 feet and have stimulated lateral lengths
ranging from 5,892 feet to 7,142 feet. The wells have oil content
ranging from 80% to 91%.

Earlier this year, based on strong production results and extensive
petrophysical analysis, Pioneer increased its estimated ultimate
recovery (EUR) to 575 MBOE for wells drilled in the Upper B interval in
southern Upton, Reagan and Irion counties, with a stimulated lateral
length of 7,000 feet. Average production from the 15 Upper B interval
wells drilled to date normalized to a 7,000-foot lateral length, except
for one well that had a mechanical failure, is consistent with the
Company′s 575 MBOE type curve.

The two A interval wells were placed on production during the third
quarter, drilled to depths of 7,483 feet and 7,586 feet, with lateral
lengths of 6,902 feet and 6,422 feet. One was successful and had an
initial production rate of 585 BOEPD, of which 85% was oil. The other
was drilled through a fault due to 3-D seismic not being available at
the time the well was drilled. The fracture stimulation was not
effective on this well and it had an initial production rate of 156
BOEPD, of which 70% was oil. Two additional A interval wells have been
drilled and are awaiting completion. Pioneer has also drilled its first
Wolfcamp Lower B interval well which is also awaiting completion.

In the Spraberry interval, Pioneer drilled two highly successful
horizontal Jo Mill wells with lateral lengths of 2,628 feet and 2,178
feet. Current 24-hour production rates are 554 BOEPD and 308 BOEPD, with
oil content greater than 80%. The Company plans drilling additional
horizontal Jo Mill wells in the future, likely with significantly longer
laterals.

Pioneer currently has four horizontal rigs running in the southern
200,000 acres of the play and plans to add three rigs in this area late
in the fourth quarter of 2012 or early in the first quarter of 2013.
During the third quarter, Pioneer added a fifth horizontal rig to
accelerate the delineation of the Company′s northern portion of its
Spraberry acreage position in Midland, Martin and Gaines Counties.
Pioneer continues to believe a successful drilling program in this area
could substantially increase its prospective horizontal Wolfcamp Shale
acreage position.

In order to better delineate the Wolfcamp intervals, a high percentage
of the horizontal wells drilled to date have been drilled and completed
with extra 'science,? including coring, extensive logging and
micro-seismic, resulting in well costs of $9 million to $10 million per
well. Pioneer began drilling 'development? wells in the third quarter
and is targeting to lower its well cost to $7 million per well for a
7,000-foot stimulated lateral with 35 to 40 fracture stimulation stages.
This will include the utilization of Brady Brown ^? sand
produced by the U.S. industrial sands business acquired by Pioneer in
early April. Pioneer is currently targeting 7,000-foot or longer
laterals on most of its horizontal wells. The Company recently drilled
its first 10,000-foot lateral in 19 days.

Pioneer has a data room underway to pursue a joint venture partner to
accelerate the development of the horizontal Wolfcamp Shale in the
southern 200,000 acres of the Company′s total prospective acreage
position. Pioneer is offering 33% to 50% of its working interest in the
southern acreage. The acreage position being offered is estimated to
have more than 4,000 potential horizontal development locations, with
downspacing upside, and a total gross resource potential of more than
two billion barrels oil equivalent. Wells in this area are expected to
have liquids content of approximately 90% and EURs of 575 MBOE for
7,000-foot laterals.

Pioneer had originally planned to reduce the vertical drilling program
in the Spraberry field from 40 rigs to 27 to 30 rigs during the second
half of 2012 as the Company increased its horizontal rig count in the
Wolfcamp Shale play. However, the Company has reduced its vertical rig
count to 25 rigs in response to the earlier-than-anticipated increase to
five horizontal Wolfcamp Shale rigs.

The Company continues to drill vertically to deeper intervals in the
Spraberry field below the Wolfcamp interval (vertical Wolfcamp 40-acre
type curve EUR of 140 MBOE with typical 24-hour initial production
('IP?) rate of 90 BOEPD). Production from this deeper drilling has
exceeded expectations and is the primary contributor to the production
outperformance by this asset over the first nine months of 2012. The
deeper drilling includes the Strawn, Atoka and Mississippian intervals.
The original 2012 drilling program called for the Wolfcamp to be the
deepest interval completed in approximately 50% of the wells, with the
remaining 50% of the wells to be drilled deeper to intervals below the
Wolfcamp interval. The latest drilling program now calls for 65% of the
wells to be deepened below the Wolfcamp interval.

Pioneer placed 43 vertical comingled Strawn wells on production in the
third quarter, with an average 24-hour IP rate of 175 BOEPD. Production
data continues to support an incremental gross EUR per well from the
Strawn interval of 30 MBOE. Pioneer continues to estimate that 70% of
its Spraberry acreage position is prospective for the Strawn interval.

The Company placed 27 comingled vertical Atoka wells on production
during the third quarter, with an average 24-hour IP rate of 167 BOEPD.
Results from well tests continue to support an incremental gross EUR of
50 MBOE to 70 MBOE for wells completed in the Atoka interval. Pioneer
continues to believe the Atoka interval is prospective in 40% to 50% of
its Spraberry acreage position.

Thirty-one comingled vertical wells were also placed on production
through the Mississippian interval during the third quarter, with an
average initial 24-hour IP rate of 118 BOEPD. Data from Mississippian
wells drilled to date continues to support an incremental gross EUR per
well of 15 MBOE to 40 MBOE from this interval. Pioneer continues to
believe the Mississippian interval is prospective in 20% of its
Spraberry acreage.

Third quarter production from the Spraberry field averaged 69 MBOEPD, an
increase of 5 MBOEPD from the second quarter of 2012. Production
benefited by approximately 1,800 barrels per day (BPD) from the partial
drawdown of NGL inventory at Mont Belvieu that was built during the
second quarter as a result of third-party NGL fractionation capacity
constraints. However, this benefit was offset by a production loss of
approximately 4,000 BOEPD due to continuing NGL fractionation
constraints during the third quarter. The fractionation capacity
constraints were resolved in early October.

The remaining NGL inventory of 90 thousand barrels (approximately 1,000
BPD) is expected to be drawn down in the fourth quarter, but will be
offset by line fill requirements that Pioneer must provide during the
quarter for the start-up of the new Lone Star NGL pipeline. Pioneer has
also been informed that gas processing capacity in the Spraberry area is
expected to be nearing capacity in the fourth quarter due to
greater-than-anticipated Pioneer and industry production growth. This is
expected to negatively impact Pioneer′s fourth quarter production by
1,000 BOEPD to 2,000 BOEPD due to reduced ethane recoveries and result
in total Spraberry production ranging from 69 MBOEPD to 71 MBOEPD for
the quarter. New gas processing capacity is expected to be on line late
in the first quarter or early in the second quarter of 2013 to alleviate
the capacity bottleneck and increase ethane recoveries.

Based on the Company′s fourth quarter production forecast, Spraberry
production is forecasted to grow from an average of 45 MBOEPD in 2011 to
66 MBOEPD to 67 MBOEPD in 2012. This reflects achieving the top end of
Pioneer′s original guidance range for 2012.

In the liquids-rich Eagle Ford Shale in South Texas, Pioneer expects to
drill approximately 125 wells in 2012. The 2012 drilling program
continues to focus on liquids-rich drilling, with only 10% of the wells
designated to hold strategic dry gas acreage in response to the current
low gas price environment. The Company drilled 38 wells in the third
quarter and placed 35 wells on production.

Pioneer′s drilling operations in the Eagle Ford Shale continue to become
more efficient. The Company′s average drilling cost per foot has
decreased by 18% and drilling feet per day has increased by 28% since
the second quarter of 2011. The number of wells drilled from pads, as
opposed to single-well locations, is expected to increase from 30% of
the wells drilled in the first nine months of 2012 to 80% of the wells
drilled in 2013, reflecting the fact that most of Pioneer′s acreage will
be held by production next year.

Pioneer has been testing the use of lower-cost white sand instead of
ceramic proppant to fracture stimulate wells drilled in shallower areas
of the field. The Company is now expanding the use of white sand
proppant to deeper areas of the field to further define its performance
limits. The Company has tested 74 wells with white sand proppant through
the third quarter, three of which were deeper dry gas wells, with a
savings of approximately $700 thousand per well. Early well performance
has been similar to direct offset ceramic-stimulated wells. Pioneer is
continuing to monitor the performance of these wells and expects that
50% of its 2012 drilling program will have used the lower-cost white
sand proppant. During 2013, the Company expects that greater than 50% of
the wells drilled will use white sand proppant.

Pioneer increased its Eagle Ford Shale production from 24 MBOEPD in the
second quarter of 2012 to 29 MBOEPD in the third quarter, achieving
another record production level. Strong well performance continues to
drive this growth. Fifty percent of Pioneer′s wells across the entire
play are in the top quartile of industry EURs, while 80% of the
Company′s wells are above the industry mean EUR. The choke management
program being utilized by Pioneer on its wells is contributing to the
strong well performance. The Company expects fourth quarter production
to range from 32 MBOEPD to 35 MBOEPD. On a full-year basis, this will
result in average production of 27 MBOEPD to 28 MBOEPD, up from 12
MBOEPD in 2011. The updated production forecast for 2012 reflects a
narrowing from the previous guidance range of 25 MBOEPD to 29 MBOEPD.

Eleven central gathering plants (CGPs) are now operational as part of
the joint venture′s Eagle Ford Shale midstream business. Pioneer′s share
of its Eagle Ford Shale joint venture midstream activities is conducted
through a partially-owned, unconsolidated entity. Funding for ongoing
midstream infrastructure build-out costs that are in excess of operating
cash flow is provided from external debt sources. Cash flow from the
services provided by the midstream operations is not included in
Pioneer′s forecasted operating cash flow.

On the North Slope of Alaska, Pioneer continues to operate one rig and
drill development wells from its island drill site targeting the Nuiqsut
and Torok intervals. The Company′s third quarter production was 4.5
thousand barrels oil per day, down slightly as expected from the second
quarter of 2012. During the first quarter of 2012, the Company completed
its first successful mechanically diverted fracture stimulation of a
Nuiqsut interval well. Based on the success of this mechanically
diverted fracture stimulation, the Company is currently drilling four
more wells that will be stimulated early next year during the winter
drilling season. Three of these wells will be in the Nuiqsut interval
and one will be in the Torok interval. During the first quarter of 2012,
the Company also drilled a successful onshore appraisal well to test the
southern extent of the Torok interval. The production and subsurface
data provided by this successful well supported the addition of 50
million barrels of oil to the resource potential of the Torok interval
within Pioneer′s acreage. The well is now shut in awaiting permanent
onshore production facilities for which an onshore development FEED
study has been initiated. Pioneer is planning a second onshore Torok
well for the first quarter of next year (winter drilling season) to
further appraise this interval.

2012 Capital Budget

Pioneer′s capital program for 2012 of $3.0 billion (excludes
acquisitions, asset retirement obligations, capitalized interest and
geological and geophysical G&A) includes drilling capital of $2.5
billion and capital for vertical integration of $0.5 billion.

The Company is increasing its 2012 drilling budget from $2.4 billion to
$2.5 billion. The increase of $100 million primarily supports the
acceleration of appraisal activity in the horizontal Wolfcamp Shale. The
overall program continues to be focused on liquids-rich drilling, with
approximately 75% of the spending earmarked for Spraberry vertical and
horizontal Wolfcamp Shale drilling and 10% for Eagle Ford Shale drilling.

The capital for vertical integration of $500 million includes $300
million for the U.S. industrial sands business acquired by Pioneer in
early April, $100 million for pressure pumping and well service
equipment and $100 million for the accelerated construction of field
offices and facilities from 2013 into 2012.

The 2012 capital budget is expected to be funded from forecasted
operating cash flow of $1.8 billion, assuming commodity prices of $85
per barrel for oil and $3 per thousand cubic feet (MCF) for gas for the
fourth quarter of 2012; proceeds of $500 million from Pioneer′s equity
offering during the fourth quarter of 2011; net proceeds of $200 million
from the liquidation of certain 2014 and 2015 gas derivatives,
liquidating expiring interest rate swaps and the utilization of existing
pipe and equipment inventory; proceeds from the divestiture of South
African and certain South Texas assets of $100 million and borrowings of
$400 million under Pioneer′s credit facility.

Third Quarter 2012 Financial Review

The following financial results for the third quarter of 2012 reflect
continuing operations and exclude the results of operations attributable
to South Africa and the Barnett Shale that are included in discontinued
operations.

Liquids and gas sales averaged 153 MBOEPD, consisting of oil sales
averaging 63 thousand barrels per day (MBPD), NGL sales averaging 30
MBPD and gas sales averaging 357 million cubic feet per day (MMCFPD).

The average price for oil was $89.87 per barrel including $1.82 per
barrel related to deferred revenue from VPPs for which production was
not recorded. The average reported price for NGLs was $31.28 per barrel
and the average reported price for gas was $2.62 per MCF.

Production costs averaged $16.03 per barrel oil equivalent (BOE). These
costs were higher than the second quarter of 2012 by $1.54 per BOE,
primarily due to increases in salt water disposal costs (principally
water hauling costs), higher electricity costs associated with the
increase in gas prices, higher repair and maintenance costs and higher
per-BOE costs resulting from the approximately 4,000 BOEPD of lost sales
volumes associated with the NGL fractionation capacity constraints at
Mont Belvieu. Depreciation, depletion and amortization (DD&A) expense
averaged $14.51 per BOE. Exploration and abandonment costs were $27
million for the quarter and included $3 million of seismic related
activity, $9 million associated with the abandonment of dry gas acreage
that is not expected to be drilled and $11 million for personnel costs.
General and administrative expense totaled $63 million. Interest expense
was $54 million, and other expense was $32 million, including $7 million
for non-recurring rig termination fees.

Fourth Quarter 2012 Financial Outlook

The Company′s fourth quarter 2012 outlook for certain operating and
financial items (excluding the Barnett Shale, which will be reflected in
discontinued operations) is provided below.

Production is forecasted to average 154 MBOEPD to 158 MBOEPD. This
assumes the remaining NGL inventory at Mont Belvieu of 90,000 barrels
(approximately 1,000 BPD) will be drawn down during the fourth quarter,
but will be offset by line fill requirements in the fourth quarter for
the new Lone Star NGL pipeline in which Pioneer will be a shipper. The
fourth quarter production estimate also assumes a negative impact
ranging from 1,000 BOEPD to 2,000 BOEPD due to reduced ethane recoveries
associated with gas processing facilities in the Spraberry field nearing
capacity during the fourth quarter as described above.

Production costs are expected to average $14.50 to $16.50 per BOE, based
on continuing higher salt water disposal and electricity costs, higher
per-BOE costs resulting from the gas processing capacity limitations
negatively impacting sales volumes and current NYMEX strip commodity
prices. DD&A expense is expected to average $13.50 to $15.50 per BOE.
Total exploration and abandonment expense is forecasted to be $25
million to $35 million.

General and administrative expense is expected to be $60 million to $65
million, interest expense is expected to be $53 million to $58 million
and other expense is expected to be $25 million to $35 million.
Accretion of discount on asset retirement obligations is expected to be
$2 million to $4 million.

Noncontrolling interest in consolidated subsidiaries′ income, excluding
unrealized derivative mark-to-market adjustments, is expected to be $8
million to $11 million, primarily reflecting the public ownership in
Pioneer Southwest Energy Partners L.P.

The Company′s effective income tax rate is expected to range from 35% to
40% based on current capital spending plans and the assumption of no
significant unrealized derivative mark-to-market changes in the
Company′s derivative position. Current income taxes are expected to be
$2 million to $7 million and are primarily attributable to state taxes.

The Company's financial and derivative mark-to-market results, open
derivatives positions and future VPP amortization are outlined on the
attached schedules.

Earnings Conference Call

On Thursday, November 1, 2012, at 9:00 a.m. Central Time, Pioneer will
discuss its financial and operating results for the quarter ended
September 30, 2012, with an accompanying presentation. Instructions for
listening to the call and viewing the accompanying presentation are
shown below.

Internet: www.pxd.com

Select
'Investors,? then 'Earnings & Webcasts? to listen to the discussion,
view the presentation and see other related material.

Telephone: Dial (888) 296-4217 confirmation code: 4877153 five minutes
before the call. View the presentation via Pioneer′s internet address
above.

A replay of the webcast will be archived on Pioneer′s website. A
telephone replay will be available through November 20 by dialing (888)
203-1112 confirmation code: 4877153.

Pioneer is a large independent oil and gas exploration and production
company, headquartered in Dallas, Texas, with operations in the United
States. For more information, visit Pioneer′s website at www.pxd.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 are subject to a number of risks and uncertainties
that may cause Pioneer'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, 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 (including joint venture agreements) with third
parties on mutually acceptable terms, litigation, the costs and results
of drilling and operations, availability of equipment, services,
resources and personnel required to complete the Company′s operating
activities, access to and availability of transportation, processing and
refining facilities, Pioneer's ability to replace reserves, implement
its business plans or complete its development activities as scheduled,
access to and cost of capital, the financial strength of counterparties
to Pioneer′s credit facility and derivative contracts and the purchasers
of Pioneer′s oil, NGL and gas production, uncertainties about estimates
of reserves and resource potential and the ability to add proved
reserves in the future, the assumptions underlying production forecasts,
quality of technical data, environmental and weather risks, including
the possible impacts of climate change, the risks associated with the
ownership and operation of an industrial sand mining business and acts
of war or terrorism. These and other risks are described in Pioneer's
10-K and 10-Q Reports and other filings with the U.S. Securities and
Exchange Commission (SEC). In addition, Pioneer may be subject to
currently unforeseen risks that may have a materially adverse impact on
it. Pioneer undertakes no duty to publicly update these statements
except as required by law.

Cautionary Note to U.S. Investors --The SEC prohibits oil and gas
companies, in their filings with the SEC, from disclosing estimates of
oil or gas resources other than 'reserves,? as that term is defined by
the SEC. In this news release, Pioneer includes estimates of quantities
of oil and gas using certain terms, such as 'resource potential,?
'estimated ultimate recovery,? 'EUR? or other descriptions of volumes of
reserves, which terms include quantities of oil and gas that may not
meet the SEC′s definitions of proved, probable and possible reserves,
and which the SEC's guidelines strictly prohibit Pioneer from including
in filings with the SEC. These estimates are by their nature more
speculative than estimates of proved reserves and accordingly are
subject to substantially greater risk of being recovered by Pioneer.
U.S. investors are urged to consider closely the disclosures in the
Company′s periodic filings with the SEC.Such filings are
available from the Company at 5205 N. O'Connor Blvd., Suite 200, Irving,
Texas 75039, Attention: Investor Relations, and the Company′s website at www.pxd.com.These filings also can be obtained from the SEC by calling
1-800-SEC-0330.

The Company uses the two-class method of calculating basic and diluted
earnings per share. Under the two-class method of calculating earnings
per share, generally acceptable accounting principles ('GAAP') provide
that share- and unit-based awards with guaranteed dividend or
distribution participation rights qualify as 'participating securities'
during their vesting periods. The Company's basic net income per share
attributable to common stockholders is computed as (i) ?net income
attributable to common stockholders, (ii) ?less participating share- and
unit-based basic earnings (iii) ?divided by weighted average basic shares
outstanding. The Company's diluted net income per share attributable to
common stockholders is computed as (i) ?basic net income attributable to
common stockholders, (ii) ?plus the reallocation of participating
earnings (iii) ?divided by weighted average diluted shares outstanding.
During periods in which the Company realizes a loss from continuing
operations attributable to common stockholders, securities or other
contracts to issue common stock would be dilutive to loss per share;
therefore, conversion into common stock is assumed not to occur.

The following table is a reconciliation of the Company's net income
attributable to common stockholders to basic net income attributable to
common stockholders and to diluted net income attributable to common
stockholders for the three and nine months ended September 30, 2012 and
2011:

The following table is a reconciliation of basic weighted average common
shares outstanding to diluted weighted average common shares outstanding
for the three and nine months ended September 30, 2012 and 2011:

EBITDAX and discretionary cash flow ('DCF') (as defined below) are
presented herein, and reconciled to the GAAP measures of net income and
net cash provided by operating activities because of their wide
acceptance by the investment community as financial indicators of a
company's ability to internally fund exploration and development
activities and to service or incur debt. The Company also views the
non-GAAP measures of EBITDAX and DCF as useful tools for comparisons of
the Company's financial indicators with those of peer companies that
follow the full cost method of accounting. EBITDAX and DCF should not be
considered as alternatives to net income or net cash provided by
operating activities, as defined by GAAP.

Adjusted income excluding unrealized mark-to-market ('MTM') derivative
losses, and adjusted income excluding unrealized MTM derivative losses
and unusual items, as presented in this press release, are presented and
reconciled to Pioneer's net income attributable to common stockholders
and diluted common shares outstanding (determined in accordance with
GAAP) because Pioneer believes that these non-GAAP financial measures
reflect an additional way of viewing aspects of Pioneer's business that,
when viewed together with its financial results computed in accordance
with GAAP, provides a more complete understanding of factors and trends
affecting its historical financial performance and future operating
results, greater transparency of underlying trends and greater
comparability of results across periods. In addition, management
believes that these non-GAAP measures may enhance investors' ability to
assess Pioneer's historical and future financial performance. These
non-GAAP financial measures are not intended to be substitutes for the
comparable GAAP measure and should be read only in conjunction with
Pioneer's consolidated financial statements prepared in accordance with
GAAP. Unrealized MTM derivative gains and losses and unusual items will
recur in future periods; however, the amount and frequency can vary
significantly from period to period. The tables below reconcile
Pioneer's net income attributable to common stockholders and diluted
shares outstanding for the three months ended September 30, 2012, as
determined in accordance with GAAP, to income adjusted for unrealized
MTM derivative losses and adjusted income excluding unrealized MTM
derivative losses and unusual items for that quarter.

Interest rate derivatives. ?As of October ?30, 2012, the
Company had interest rate derivative contracts that lock in a fixed
forward annual interest rate of 3.21%, for a 10-year period ending in
December 2025, on a notional amount of $250 million. These derivative
contracts mature and settle by their terms during December 2015.

Marketing and basis transfer derivatives. ?Periodically,
the Company enters into gas buy and sell marketing arrangements to
fulfill firm pipeline transportation commitments. Associated with these
gas marketing arrangements, the Company may enter into gas index swaps
to mitigate price risk.

From time to time, the Company also enters into long and short gas swap
contracts that transfer gas basis risk from one sales index to another
sales index. The following table presents Pioneer′s open marketing and
basis transfer derivative positions as of October ?30, 2012: