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Pioneer Sells Three Canadian Properties for $207M

The Canadian subsidiary of Dallas-based Pioneer Natural Resources Co. has signed a definitive agreement to sell its Martin Creek, Conroy Black and Lookout Butte oil and gas properties to Ketch Resources Ltd. for $207 million. The transaction is expected to close by May 31.

Pioneer announced it would sell the nonstrategic properties late last year. As of the effective date of March 1, the properties' net proved reserves were estimated to be approximately 9 MMboe, with current net production averaging 3,000 boe/d.

"We had strong interest in the divestiture package and are very pleased with the sales price," said CEO Scott D. Sheffield. "Combined with our excess cash flow and proceeds from the volumetric production payment transactions we closed earlier this year, the proceeds significantly enhance our financial flexibility. By divesting these non-strategic properties, our Canadian team can now focus all of their efforts on increasing the value of our remaining core areas."

Pioneer is retaining its core areas in Canada, the Chinchaga natural gas and the Horseshoe Canyon coalbed gas fields, where it has an extensive inventory of drilling locations. It recently completed its largest-ever winter drilling campaign in Canada, drilling 56 wells. During the summer drilling season, Pioneer plans to drill up to 100 wells to assess the potential of its extensive Horseshoe Canyon coalbed acreage position.

Tristone Capital acted as financial adviser, with TD Securities as lead strategic adviser and Scotia Capital as strategic adviser.

Following the announcement, Lehman Brothers analyst Thomas Driscoll said the sale "should be positive. The sale price of $207 million is significantly higher than the $100-150 million that the company had indicated as a possible sale price. Transaction price works out to a very high $23/boe (9 MMboe) and $69,000/boe/d (3,000 boe/d)," and in comparison, he noted that Pioneer trades at $8.73/boe and $45,218/boe/d.

"The sale was not a surprise as the company had previously announced its plan to sell Canadian assets which it did not believe offered sufficient growth/reinvestment opportunities," Driscoll wrote in a note to clients. "The company will retain the Canadian coalbed methane assets that it acquired through the Evergreen merger as well as properties in the Chinchaga area. "

At the end of 2004, Lehman estimates that Pioneer's Canadian reserves were 24 MMboe and 2004 production was 8,000 boe/d. "Thus the company appears to be selling 38% of its Canadian reserves and a similar percentage of production," said Driscoll.

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