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Pioneer-Costilla Property Deal Cancelled

Pioneer-Costilla Property Deal Cancelled

Pioneer Natural Resources Co. of Dallas announced the termination of a purchase and sale agreement between Pioneer and Costilla Energy Inc. for the sale of certain oil and gas properties to Costilla. As a result of Costilla's failure to close the April 1 agreement, Pioneer has received one million additional shares of Costilla common stock as liquidated damages.

"We are clearly disappointed that Costilla was not able to close this transaction, but we remain committed to the divestiture of approximately $500 million of non-core, non-strategic properties," said Scott D. Sheffield, Pioneer CEO. "We will immediately execute our contingency plan to re-market these properties. Strengthening oil and natural gas prices and the considerable level of third-party interest in these properties combine to support our confidence that re-marketing will be successful. Under our re-marketing plan, we anticipate closing new transactions related to these properties by the end of the third quarter."

Pioneer also said it has signed a letter of intent with an undisclosed third party, providing for the sale of certain unrelated gas properties in South Texas, with existing production and exploration potential, for consideration of $65 to $70 million. Closing is anticipated by the end of the second quarter.

Pioneer is also soliciting bids on several divestiture packages of Canadian non-core gas and oil properties with bids due April 29 and mid-May. The divestitures are expected to close by the end of the second quarter with anticipated proceeds of $60 to $80 million.

Southern Energy Inc., a unit of Southern Company, completed its $801 million purchase of power plants totaling 3,065 MW of capacity from San Francisco-based Pacific Gas and Electric Co. PG&E. The PG&E stations, fueled mostly by natural gas, were sold in a competitive bidding process Nov. 24.

Southern Energy is focusing its efforts to buy or build power plants in four U.S. regions where it says generating assets are necessary to be successful as an energy marketer - the California/Desert Southwest, Texas/Louisiana, the Midwest and the Northeast United States. The company will own power plants in all four areas by October. With the California transaction, Southern Energy now owns seven gas-fired generation units at the Pittsburg station and two at the Contra Costa station near the San Francisco Bay Delta, along with a gas-fired unit and three jet fuel-powered combustion turbines at Southeast San Francisco's Potrero plant.

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