Pioneer Natural Resources Announces Acquisition of Carmeuse Industrial Sands
Pioneer Natural Resources Company (NYSE:PXD) ('Pioneer? or 'the
Company?) today announced the Company has signed an agreement with a
subsidiary of Carmeuse Holding S.A. (Luxemburg) to acquire its U.S.
industrial sands business, Carmeuse Industrial Sands ('CIS?), for
approximately $297 million, before normal closing adjustments.
CIS is the number one producer of Hickory frac sand (Brady Brown ?) used
as proppant for fracture stimulating oil and gas wells in the U.S.
Hickory sand is considered to be the highest quality brown sand for
fracture stimulation. CIS′ sand mine in Brady, Texas, has more than 30
years of proven brown sand reserve life and is the industry′s largest
resource base for brown sand in the U.S. The Brady mine currently has
sales capacity of approximately one million tons annually.
Scott Sheffield, Chairman and CEO, stated, 'When Carmeuse recently
announced plans to sell its U.S. sand business, we viewed this as a
strategic opportunity to secure high-quality, low-cost and logistically
advantaged brown sand supply to support our growing fracture stimulation
requirements in three of our four core Texas growth assets ? the
Spraberry vertical, horizontal Wolfcamp Shale and Barnett Shale Combo
plays. The acquisition complements Pioneer′s vertical integration
strategy, which is reducing execution risk and controlling costs. By
securing supply at below market prices, we expect to reduce annual
capital spending by $65 million to $70 million based on our estimated
sand requirements and current market prices.?
Pioneer′s annual demand for proppant to support the Company′s fracture
stimulation operations is forecasted to increase from 1.2 million tons
in 2012 to 1.6 million tons in 2015 as drilling activity continues to
ramp up in the Spraberry vertical, horizontal Wolfcamp Shale, Eagle Ford
Shale and Barnett Shale Combo plays. Seventy percent to eighty percent
of the Company′s forecasted proppant demand is brown sand for the
Spraberry vertical, horizontal Wolfcamp Shale and Barnett Shale Combo
plays. Pioneer′s primary source for brown sand is CIS′ Brady mine. Prior
to the acquisition, the Company expected approximately 700 thousand
tons, or 60%, of its forecasted 2013 brown sand requirements to be
sourced from this location.
The supply of brown sand is expected to continue to be tight as a result
of increasing shale play drilling, with the price of brown sand expected
to escalate further as the growth in demand for this proppant outpaces
new supplies. Other brown sand mines are primarily supplying large
service companies. White and resin coated sand alternatives are more
than two times and seven times the cost of Brady sand (inclusive of
transportation), respectively, and are not necessary for most Spraberry
vertical, horizontal Wolfcamp Shale and Barnett Shale Combo fracture
stimulations.
Assuming Pioneer could replace its current brown sand supply at market
prices and would have to substitute its incremental brown sand
requirements (300 thousand tons in 2013) with white sand due to lack of
brown sand availability, Pioneer estimates that it will save $65 million
to $70 million per year by acquiring CIS. After taking into account an
additional $10 million of annual cash flow from CIS′ other assets,
Pioneer′s total annual savings are estimated to be $75 million to $80
million.
The acquisition also provides Pioneer with significant upside potential.
First, output from the Brady mine can be doubled from one million tons
per year to two million tons per year, which would support any future
increases in Spraberry vertical, horizontal Wolfcamp Shale and Barnett
Shale Combo drilling activity above the Company′s currently announced
drilling growth plans. Second, CIS has 23 million tons of white sand
reserves in Wisconsin, where plans to develop a mine with a production
capacity of up to one million tons per year are being progressed.
CIS is led by a highly experienced and technically proficient management
team with more than 150 years of experience in the industrial sands
business. This management team has agreed to join Pioneer.
The acquisition will be funded from available cash and is expected to
close late in the first quarter or early in the second quarter of 2012.
CIS′ other assets, which make up a relatively small portion of the
industrial sands business, include two outlets (Bakersfield, California
and Colorado Springs, Colorado) for other grades of sand produced in
Brady, two sand mines in Ohio (Glass Rock and Millwood) which produce
oilfield and industrial sands, one sand mine in California (Orange
County) which produces construction and recreational sand, and an
oilfield cement material processing plant in Riverside, California.
Conference Call
On Monday, March 5, 2012, at 10:00 a.m. Central Time, Pioneer will hold
a conference call and webcast to discuss the CIS acquisition, with an
accompanying presentation. Instructions for listening to the call and
viewing the presentation are shown below.
Internet: www.pxd.com
Select
'Investors,? then 'Investor Presentations? to listen to the discussion
and view the presentation.
Telephone: Dial (877) 795-3599 confirmation code: 7784081 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 March 23 by dialing (888)
203-1112 confirmation code: 7784081.
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.
This news release contains forward-looking statements within the
meaning of the safe harbor provisions of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act.These
statements include any statement that does not relate strictly to
historical facts.In particular, statements, express or implied,
regarding the benefits of, and synergies from, the CIS acquisition and
Pioneer′s sand requirements, future growth opportunities and financial
condition and results of operation are forward-looking statements.These
forward-looking statements are based on management′s current plans,
expectations, estimates, assumptions and beliefs concerning future
events. While our management considers these plans, expectations,
estimates, assumptions and beliefs to be reasonable, they are inherently
difficult to predict and subject to a number of risks and uncertainties.These risks and uncertainties include, but are not limited to, the
satisfactory completion of all conditions precedent to the closing of
the proposed CIS acquisition in accordance with the terms and conditions
of the purchase agreement, risks related to mineral estimates,
fluctuation of prices for sand and the risks discussed in the 'Risk
Factors? sections of, as well as any other cautionary language in,
Pioneer′s public filings with the Securities and Exchange Commission
(SEC).Actual results may differ materially from those expressed
or implied in the forward-looking statements contained in this news
release.Each forward-looking statement in this news release
speaks only as of the date of this news release, and Pioneer undertakes
no obligation to update or revise any such statement except as required
by law.
Our pending CIS acquisition may not be consummated.The
closing of the acquisition is subject to certain regulatory conditions
and customary closing conditions, and the acquisition agreement may, in
certain circumstances, be terminated.
Inaccuracies in estimates of mineral reserves and resource deposits
could result in lower than expected supplies and sales and higher than
expected costs.The proved reserve estimates contained in this
news release have been calculated in compliance with the SEC′s Industry
Guide 7 and are based on an independent review by mining and geological
consultants engaged by CIS in 2011.However, commercial sand
reserve estimates are necessarily imprecise and depend to some extent on
statistical inferences drawn from available drilling data, which may
prove unreliable. There are numerous uncertainties inherent in
estimating quantities and qualities of commercial sand reserves and
resources and costs to mine recoverable reserves, including many factors
beyond Pioneer′s control. Estimates of economically recoverable
commercial sand reserves necessarily depend on a number of factors and
assumptions, all of which may vary considerably from actual results,
such as:
- geological and mining conditions and/or effects from prior mining
that may not be fully identified by available data or that may differ
from experience; - assumptions concerning future prices of commercial sand products,
operating costs, mining technology improvements, development costs and
reclamation costs; and - assumptions concerning future effects of regulation, including the
issuance of required permits and taxes by governmental agencies.
Pioneer Natural Resources
Investors:
Frank
Hopkins, 972-969-4065
or
Eric Pregler, 972-969-5756
or
Media
and Public Affairs:
Susan Spratlen, 972-969-4018
or
Suzanne
Hicks, 972-969-4020
