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Pioneer Continues Liquids Focus for 2011

Pioneer Natural Resources Co. last year ramped up its activity in the Spraberry Field of West Texas and the Eagle Ford Shale of South Texas, both of which were drivers for growth in 2010.

"In 2010, we ramped up drilling in the Spraberry Field and the Eagle Ford Shale faster than originally planned and delivered production growth from these assets in excess of our initial targets, while continuing to spend within cash flow," said CEO Scott Sheffield. "For 2011 we are further accelerating drilling in these two core plays and expect to deliver production growth for the company ranging from 15% to 19% compared to 2010 [reflecting production from the company's Tunisia operations as discontinued operations]."

Pioneer's capital program for 2011 totals $1.8 billion, consisting of $1.6 billion for drilling operations and $200 million for vertical integration and facilities. Drilling capital continues to be focused on oil and liquids-rich drilling, with 75% allocated to the Spraberry and Eagle Ford plays. By asset area Pioneer spending looks like:

"Pioneer is fortunate to have over 20,000 drilling locations in the liquids-rich areas, primarily in the Spraberry, Eagle Ford and the Barnett Combo play in Texas, very low-risk resource plays," Sheffield told financial analysts during an earnings conference call. "Obviously, we're accelerating activity in, really, all three areas, primarily in the Spraberry and Eagle Ford."

Starting in 2006 Pioneer returned from a foray into the Gulf of Mexico to focus again on the Spraberry as well as the Eagle Ford and Barnett Combo. "I never would have thought we would have found what we have in any of these three plays to date," Pioneer CEO Scott Sheffield said at a conference last fall (see Daily GPI, Oct. 7, 2010).

In the Spraberry Field Pioneer's drilling program continues to ramp up, with 30 rigs operating. The company said it expects to accelerate drilling in the field and increase the rig count to 35 by mid-2011 and to 40 or more rigs in 2012.

In the Eagle Ford Shale Pioneer and its joint venture (JV) partners have drilled 41 horizontal wells to date, the company said. Twenty-one of the wells are on production. Performance from the 21 wells continues as expected, Pioneer said. Of the remaining 20 wells, three have been completed and are awaiting hookup to gathering systems. Completion of the remaining 17 wells has been slower than anticipated due to limited third-party fracture stimulation fleet availability, Pioneer said, a situation the company is working to correct.

Pioneer recently bought two fracture stimulation fleets, with one expected to be in service during the second quarter and the other during the fourth quarter. The company has also entered into a two-year contract for a dedicated third-party fracture stimulation fleet beginning later this quarter and is pursuing opportunities to contract additional third-party equipment.

The company has seven rigs running in the Eagle Ford. The initial JV development plan called for an increase to 10 rigs by the end of 2011, 14 rigs by the end of 2012 and remaining at this level thereafter. An accelerated plan for 2011 has been approved by the company's JV partners and now reflects increasing to 12 rigs by the middle of 2011. The rig count is expected to increase to 14 rigs in 2012 and 16 rigs in 2013.

Initiatives to control drilling, completion and production costs in the play continue despite significant service cost inflation. Drilling times have been reduced and completion techniques continue to be optimized, Pioneer said. Agreements have also been executed with third parties to process, fractionate and transport gas and oil production.

Pioneer said it continues to acquire acreage in the liquids-rich Barnett Shale Combo play, where the company has 65,000 net acres under lease, representing more than 600 drilling locations. Pioneer began drilling in the play in the latter part of 2010 and currently has two rigs operating in Montague County, TX.

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