In addition to much improved fourth quarter earnings and cash flow and a bullish outlook that includes an expected 45% increase in production this year, Dallas-based Pioneer Natural Resources said it made a significant new deepwater Gulf of Mexico discovery on its Harrier prospect near the Falcon field. The well was drilled to 9,510 feet and encountered over 350 feet of gas-bearing sand in a single zone.

Although he said it is too early to estimate reserves, CEO Scott D. Sheffield said the pay was twice as much as expected and characterized it as a major find. Pioneer operates the block (East Breaks 759) with a 75% working interest and expects to bring the well online in the fourth quarter or in the first quarter of 2004.

It plans to develop the field as a single-well subsea tie-back to its Falcon field. The pipeline connecting the Falcon field to the Falcon Nest platform on the Gulf of Mexico shelf has the working capacity to handle 175 to 200 MMcf/d. This discovery is expected to significantly extend the utilization of the Falcon facilities, the company said. Pioneer also has additional prospects on the 32 blocks it holds in the Falcon area.

But this discovery comes after the company spent significant time and money over the last few years to develop substantial existing holdings. These investments are expected to yield a 45% increase in production this year and a 10-15% increase in 2004.

“We’re just starting to see the returns from our significant past investments and the positive impact they will have on Pioneer, especially in today’s strong commodity price environment,” said Sheffield. “We are looking forward to significant production growth this year and we have visible growth from existing projects of 10 to 15% through 2004. With the big project investments essentially behind us, we plan to ramp up our core-area development drilling activity, continue to appraise existing discoveries to bring these projects on line, and expand our exploration program in 2003. Our focus is on extending this strong pace of production growth into the middle part of the decade.”

After much improved results in the fourth quarter, Pioneer plans to double its rig count in all core areas this year to 450 wells. The company posted net income in the fourth quarter of $18.4 million, or $0.16 per diluted share, compared to a net loss of $20.9 million, or $0.21 per diluted share, in 4Q2001. Cash flow from operations for the 2002 fourth quarter was $104 million compared to $85.6 million. Fourth quarter gas sales averaged 380 MMcf/d, up from 328 MMcf/d in 4Q2001. The realized price for gas was $2.75/Mcf, with North American gas prices averaging $3.20 compared to $2.66 in 4Q2001. For the year, Pioneer reported lower net income of $26.7 million compared to $100 million in 2001. Cash flow from operations was down to $332.2 million from $475.6 million a year earlier.

Sheffield said the company plans an aggressive development drilling program in its core areas this year. Pioneer plans to double its development drilling activity, drilling 150 wells in the Spraberry field, 130 wells in the West Panhandle and Hugoton fields, 10 wells in the Gulf Coast area, 60 wells in Argentina and 40 wells in Canada.

The company also has an active exploration program planned for the first quarter, including continued drilling near the large find in the deepwater Gulf of Mexico near its Falcon field and up to 20 wells in Canada.

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