Pioneer Natural Finds New Buyer for Properties
Pioneer Natural Resources, a Dallas-based independent producer,
announced an agreement Monday to sell $245 million worth of oil and
gas fields to Prize Energy Co., a Tulsa, OK-based producer. Last
month, Pioneer had planned to sell most of these same properties to
Costilla Energy, but Costilla was unable to close the deal. The
Prize acquisition is expected to close June 29 with an effective
date of July 1.
The sale is composed of 400 domestic onshore fields in Texas and
Oklahoma. Proven reserves are estimated at 60 million Boe. A
Pioneer spokesperson said 1998 gas production from these fields
averaged 60 Mcf/d. "The fields only made up 10% of our overall
production last year, but there is much more work to be done down
there," she said. Prize Energy will pay $215 million in cash and
$30 million in convertible preferred stock, giving an initial 32%
equity interest to Pioneer. The deal also includes a $15 million
non-refundable payment to Pioneer.
"This agreement offers superior value, a timely closing, and
allows Pioneer as a preferred shareholder of Prize to retain a
significant interest in the upside related to these properties.
This transaction is a great start toward meeting our debt reduction
and asset divestiture targets. Another advantage of this sale is
that it allows the company to focus on its core domestic
properties. Coupled with improved commodity prices, we should begin
to see real operational and financial benefits from our core
properties," said Scott Sheffield, CEO of Pioneer.
These fields represent Prize Energy's initial assets. The
company is headed by Philip Smith (CEO) and Kenneth Hersh
(Director), who are in the process of retiring from Pioneer's board
of directors. Lon Kile, who is presently Pioneer's executive vice
president, will soon be taking Prize Energy's COO position, Pioneer
said. "We are confident that they will maximize the value of our
new equity ownership in Prize," Sheffied said. Once Prize Energy
entered its bid, these executives were removed from the
This sale represents 93% of the properties included in the
now-terminated Pioneer-Costilla deal, which was officially canceled
in April (See Daily GPI, April 19).
For Costilla, this announcement continues a string of bad news.
Last month, Oneok terminated a plan to invest a total of $95
million in Costilla, because the agreement was contingent upon
Costilla closing the property acquisition with Pioneer. Also last
month, Costilla reported a first quarter loss of $7.67/share
compared to a loss of $3.54 in 1Q98.
"Our unsuccessful pursuit of the Pioneer properties was very
costly to Costilla and our recovery will clearly take time,'' said
Cadell Liedtke, chairman of Costilla's board of directors. "We are
firmly committed to re-building our Company, and have initiated
measures we believe will assist in achieving this goal. We have cut
overhead expenses substantially and are actively marketing some of
our oil and gas assets to address our short-term obligations. For
the long-term, we intend to retain our interests in our key
producing areas and the properties we believe hold significant
exploration and development potential."
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