Encouraged by early drilling success from its new coalbed methane (CBM) fields in the Raton Basin, Pioneer Natural Resource Co. expects to increase its natural gas-heavy production by as much as 6% this year, the CEO said Tuesday.

Speaking at the Howard Weil Energy Conference in New Orleans, CEO Scott Sheffield said that most of the growth to between 70-74 MMboe this year will come from CBM fields acquired through the $2.1 billion purchase of Evergreen Resources last year (see Daily GPI, May 5, 2004).

The producer plans to spend $900-950 million on exploration and production activities in 2005, with 21%, or about $200 million, focused on unconventional natural gas resources such as CBM and tight gas from sandstone formations in South Texas. Pioneer also will spend another $200 million on high-risk exploration, Sheffield said.

Development well drilling also will rise substantially this year, he said. Pioneer is scheduled to drill 780 development wells this year, up from 480 in 2004. Although the bulk of new drilling will be in the Raton Basin, Sheffield said there also will be increased output from conventional gas fields in South Texas, Canada and Argentina.

The rise in drilling and expected output will overcome projected declines from Pioneer’s deepwater drilling in the Gulf of Mexico, he added. If deepwater output was not down over a year ago, Pioneer’s production would be up more than 10% this year.

With the Evergreen acquisition, Pioneer added more than 2,000 drilling locations, but initially, the fields will be explored slowly, and the most significant volume increases are anticipated in 2006, said Sheffield. Already, Pioneer has moved staff from its Dallas headquarters to Colorado and hired about 60 to focus on developing properties in the Piceance and Uinta basins in Colorado and Utah. Evergreen had been understaffed, he said.

In the Piceance and Uinta basins, Pioneer expects to drill 30 gas wells total, which will help ramp up production late this year from its current 6 MMcf/d. The company also is preparing for more output by adding rigs and fracturing equipment.

Pioneer also is evaluating whether it will participate in another volumetric production payment (VPP), in which a portion of production is sold forward to lock in current gas prices and to accelerate revenue. Earlier this year, Pioneer sold 2.5% of its Spraberry volumes in South Texas to Wachovia Securities (see Daily GPI, Jan. 28).

“The purchase price we could receive is up 50%, to $45-to-$50, versus $30/boe in January,” said Sheffield.

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