Houston-based independent Pioneer Natural Resources Co. on Tuesday reduced its third quarter production forecast after shutting in production from its Harrier field in the Falcon Corridor of the deepwater Gulf of Mexico following early water encroachment. A sidetrack well is expected to spud in mid-September to access an adjacent fault block in the field, and Pioneer said it could be producing by the end of October.

“Proved reserves for the Falcon Corridor are not expected to change significantly as any impact to Harrier reserves should be offset by reserve additions related to better than expected production data for the Falcon field,” Pioneer said in a statement. Pioneer expects to initiate a drilling campaign in the Falcon Corridor during the first half of 2005 that is expected to include two-to-three exploration wells and another sidetrack targeting additional reserves.

Total company production for the third quarter is expected to average 180,000-185,000 boe/d, “reflecting the impact of downtime for the…Harrier operations and weather-related downtime on the Canyon Express and Devils Tower systems stemming from personnel evacuations for hurricanes Charlie and Earl. The new third quarter production range does not include allowances for any additional downtime related to weather.”

Following the announcement, Prudential Equity Group reiterated a “neutral weight” rating and $41 price target on the independent. Prudential reduced its 3Q2004 forecast to 55 cents/share from 65 cents, and for the fourth quarter, the forecast was lowered to 75 cents/share to 80 cents.

“With early water encroachment in the Harrier Field only nine months after initial production, we believe that ultimate recovery from this reservoir could be lower than initially thought,” Prudential said in a report. “However, the company does not expect the overall reserves from the [Gulf of Mexico] Falcon Corridor to change significantly, as reserve additions from other reservoirs in the Falcon field will likely offset lower reserves in the Harrier Field.”

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