Dallas-based producer Pioneer Natural Resources Co. will spend up to $600 million in the new year to fund development and exploration activities, with most of the money focused on 400 wells onshore and offshore the United States. The natural gas producer, which is forecasting five-year average annual growth at 10%, also will begin a dividend program next year.
Pioneer’s dividend program, approved by the board of directors, will begin next year at 20 cents/share, payable in two semi-annual installments of 10 cents/share.
Flush with strong production results this year, Pioneer said Tuesday that 65% of its capital budget next year will be directed toward development activities and facilities, with the remainder allocated to exploration. Most of the money will be spent in the United States, with more than a third directed toward Gulf of Mexico deepwater development. Another third will be spent on its onshore U.S. assets, with another 2% in Alaska. The rest of the budget will be allocated for Argentina, Gabon, Canada, Tunisia and South Africa.
“Having identified and initiated development of the projects that are expected to drive our production growth into 2005, we can focus our attention on building long-term value and growth through the last half of the decade,” said CEO Scott Sheffield. He said the company would “strive to invest in only the highest-return projects.” Pioneer now has the flexibility to “choose among developing exploration successes,” he said, which would include acquiring more core assets, repurchasing common shares and reducing debt.
Fourth quarter production to date has “exceeded expectations,” and the company now expects to be “nearer the top end” of its announced range of 150-160 Mboe/d. Production for 2004 is expected to range between 65-73 MMboe, or 178-200 Mboe/d.
“The outlook for continued growth in 2005 is strong, considering that first production from several new projects is not expected until well into 2004,” Pioneer stated. By then, Pioneer will mark the first full year of production from the Devils Tower, Tomahawk and Raptor deepwater fields, and the company believes it will have a sufficient development inventory to support production growth in North America, Argentina and Tunisia. At a minimum, Pioneer currently expects production in 2005 to match 2004.
Because of its strengthened position, management also reiterated its commitment to reduce debt by a minimum of $100 million next year, and has established a targeted long-term range for debt to book capitalization of 37% to 43%. On Tuesday, Pioneer also closed a new $700 million five-year unsecured revolving senior credit facility, replacing its existing $575 million unsecured facility scheduled to mature in March 2005.
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