Dallas-based Pioneer Natural Resources Co. said Pioneer Southwest Energy Partners LP made a regulatory filing Thursday for its initial public (IPO) offering of common units in a master limited partnership (MLP) to hold exploration and production assets in West Texas.

Pioneer Southwest anticipates offering 12,500,000 common units representing a 44.4% limited partner interest in Pioneer Southwest Energy. Upon completion of this offering, Pioneer will own a 0.1% general partner interest and a 55.5% limited partner interest in Pioneer Southwest. The underwriters are expected to be granted a 30-day option to purchase up to 1,875,000 additional common units. Pioneer's limited partner interest would be reduced to 52% if the underwriters exercise their over-allotment option in full. Pioneer Southwest Energy intends to apply to have its common units listed on the New York Stock Exchange under the ticker PSE.

Assuming an IPO price of $20/unit and that the underwriters do not exercise their over-allotment option, estimated gross proceeds from the offering would be $250 million.

Pioneer Southwest is a Delaware limited partnership formed by Pioneer to own producing oil and gas properties in the Spraberry field in the Permian Basin of West Texas, and to acquire producing oil and gas properties in its area of operations. This area includes onshore Texas (excluding 20 counties in the Texas Panhandle) and eight counties in the southeast region of New Mexico. Pioneer Southwest Energy will have interests in producing wells that had estimated proved reserves of 25 MMboe as of Dec. 31, 2006 and average production of 4,611 boe/d during 2006.

The partnership filed a registration statement on Form S-1 with the Securities and Exchange Commission. In April Pioneer said it would spin off two MLPs, one to hold its Spraberry assets, the other to hold its Raton Basin properties in southern Colorado. The Raton Basin partnership will spin off in 2008 (see NGI, April 30).

Last week Pioneer signed an agreement with Atlas Pipeline Partners that gives it the option to purchase an additional 22% interest in the Spraberry Midkiff-Benedum gas processing system in West Texas for $230 million. Pioneer has the option to purchase the additional interest in increments over the next two years, which would ultimately bring Pioneer's total interest in the system to approximately 49%. Atlas last week closed its acquisition of approximately 73% interest in the system from Anadarko Petroleum Co. and has been named operator of the system (see related story).

Pioneer's percentage of proceeds (POP) contract for gas processed by the Midkiff-Benedum system has also been amended, extending the term of the contract ten years to 2022 and allowing for incremental increases in Pioneer's POP beginning in 2009.

The Midkiff-Benedum system handles gas gathering, field compression and processing for a majority of Pioneer's Spraberry production. During 2006, the system processed more than 138 MMcf/d, the majority of which was supplied by Pioneer. Plant capacity is currently 173 MMcf/d. Other facilities associated with the system include 12 field compressor stations and approximately 2,500 miles of gathering pipelines.

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