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Pioneer's North American Production Climbs 6%

North American natural gas production, which represents 92% of sales from continuing operations, will continue to drive Pioneer Natural Resources Co.'s earnings going forward, the company said last week. Quarterly oil and gas output was up 6% over a year ago, and the company said it is on track to hit double-digit growth by the end of 2006.

The Dallas-based independent reported net income of $543 million ($4.28/share), compared with $85 million (58 cents) for 1Q2005. The quarter's earnings included a charge of 21 cents/share related to last year's Hurricane Rita. Excluding nonrecurring earnings, Pioneer's income was 60 cents/share, about 10 cents higher than Wall Street estimates. Revenues rose 21.0% to $396.5 million.

"Our first quarter achievements in accelerating field development, establishing new field opportunities and progressing our longer-term projects support our confidence in delivering double-digit compound average production growth over the next five years," said CEO Scott D. Sheffield.

U.S. production from the Spraberry, Raton and Canadian fields continues to exceed expectations, Sheffield said in a conference call with analysts. Oil and gas sales averaged 95,250 boe/d in the quarter, and drilling activity is expected to "progressively" increase throughout 2006. The North American rig count grew to 25 in the quarter, with contracts for 15 additional rigs by year-end, and growth is on track to meet or exceed the targeted 2006 exit rate of 95,000-100,000 boe/d.

Because of asset sales and production losses related to last year's hurricanes, total gas sales in the quarter averaged 311 MMcf/d, down from 317 MMcf/d in 1Q2005. U.S. gas sales fell to 274 MMcf/d from 283 MMcf/d, while in Canada, sales rose to 358 MMcf/d from 352 MMcf/d. Oil sales averaged 24,896 bbl/d, compared with 34,650 bbl/d a year earlier, and natural gas liquids sales averaged 18,595 bbl/d, up from 17,906 bbl/d.

Pioneer's oil prices averaged $60.01/bbl, which included $12.91/bbl related to deferred revenue from volumetric production payments (VPP), which are not recorded. The price for natural gas liquids was $34.20/bbl. The reported price for gas was $6.72/Mcf, which included 68 cents/Mcf related to deferred revenue from VPPs.

Quarterly production costs averaged $11.04/boe, which Pioneer said reflected the impact of the divestitures of fields in Argentina and the deepwater Gulf of Mexico, incremental workover costs to maximize production, an increase in pipeline transportation costs and an increase in the VPP volumes for which costs are included but production is not recorded.

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