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Big Three Texas Plays Lift Pioneer's Production

During the first quarter Pioneer Natural Resources Co. grew production by 10,000 boe/d to 147,000 boe/d, a 7% increase from the year-ago period, thanks to growth in its three core liquids-rich assets in Texas: the Spraberry field, the Eagle Ford Shale and the Barnett Shale Combo play.

"Importantly, oil production increases accounted for 74% of the quarter-to-quarter growth," said CEO Scott Sheffield.

Pioneer expects production growth to range 23-27% this year compared with 2011. This year's capital program is $2.8 billion, with $2.4 billion designated for drilling and $400 million designated for vertical integration.

"We expect the company to achieve a compound annual production growth rate of 20%-plus through 2014, with liquids increasing from 58% of total production currently to 65% in 2014," Sheffield said. "Revenue from liquids production is expected to grow from 80% of Pioneer's total revenue currently to 90% by 2014, assuming commodity prices of $100/bbl for oil and $3/Mcf for gas in 2012 and $100/bbl for oil and $4/Mcf for gas in 2013 and 2014."

Pioneer is the largest acreage holder in the horizontal Wolfcamp Shale in the Permian Basin with more than 400,000 prospective acres, according to the company. Pioneer is running four rigs in the southern portion of the play. "Our first two successful wells in Upton County have been producing above expectations for more than six months and four months, respectively, and continue to flow naturally," Sheffield said. "We recently put two wells on production in Reagan County...Plans call for increasing our rig count to seven rigs and drilling 30 wells to 35 wells by year-end."

The company's deeper vertical drilling program in the Spraberry Field has been adding incremental production from completions in the Strawn, Atoka and Mississippian intervals. "Production data continues to support an incremental estimated ultimate recovery (EUR) of 30,000 boe for wells completed in the Strawn," Sheffield said. "This data also suggests that Atoka and Mississippian can potentially deliver incremental EURs of 50,000 boe to 70,000 boe and 15,000 boe to 40,000 boe, respectively."

In the Spraberry Pioneer is operating 44 rigs, of which 40 are drilling vertical wells (including 15 company-owned rigs) and four are drilling horizontal wells. Pioneer has continued to expand its integrated services to control drilling costs and support the execution of its drilling program. Five company-owned fracture stimulation fleets totaling 100,000 hp are operating in the Spraberry supporting vertical drilling operations. An additional 10,000 hp will be added to these five fleets by midyear, Pioneer said. The first of two additional fleets (totaling 60,000 hp) to support Pioneer's horizontal drilling program in the Wolfcamp Shale were recently delivered, with the second fleet scheduled to be delivered by midyear.

In the liquids-rich Eagle Ford Shale in South Texas, Pioneer and its partners are running 12 rigs. The company drilled 28 wells in the first quarter and placed 26 on production. To improve completions and lower costs, Pioneer said it is operating two company-owned fracture stimulation fleets totaling 100,000 hp. It is also utilizing a dedicated third-party fracture stimulation fleet, which commenced operating in April 2011 under a two-year contract.

Pioneer plans to continue running 12 rigs in 2012 and drill about 125 wells in the Eagle Ford. The 2012 drilling program will continue to focus on liquids-rich drilling, with only 15% of the wells designated to hold strategic dry gas acreage in response to the current low gas price environment. Future plans call for the rig count to increase to 14 rigs in 2013, 16 rigs in 2014 and 19 rigs in 2015, Pioneer said.

The company increased Eagle Ford production from 20,000 boe/d in the fourth quarter of 2011 to 23,000 boe/d in the first quarter. The company said it expects production to increase from an average of 12,000 boe/d in 2011 to 25,000-29,000 boe/d in 2012, 37,000-41,000 boe/d in 2013 and 47,000-53,000 boe/d in 2014.

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. Forty-five wells have been tested to date, with a savings of about $700,000 per well. Early well performance has been similar to direct offset ceramic-stimulated wells. Pioneer said it plans to continue to monitor the performance of these wells and plans to use white sand in 50% of its 2012 drilling program.

In the liquids-rich Barnett Shale Combo play, Pioneer has built an 80,000 net acreage position, representing more than 1,000 drilling locations. The company drilled nine wells in the first quarter and placed 10 on production. Pioneer is operating two rigs in the play and plans to increase to four rigs in 2013.

Production in the first quarter for the Barnett Combo play was 6,000 boe/d, up 7% from the fourth quarter of 2011. The company expects production to increase from an average of 4,000 boe/d in 2011 to 7,000-9,000 boe/d in 2012. With the expected increase to four rigs in 2013, production is forecasted to grow to 12,000-16,000 boe/d in 2013 and 18,000-23,000 boe/d in 2014. Production is 60% liquids (oil and natural gas liquids) and 40% gas, Pioneer said.

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