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Pioneer Natural Resources Company at Bear, Stearns & Co. Inc. 1st Annual Global Oil and Gas Conference - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

ELLEN HANNAN, ANALYST, BEAR STEARNS: We're ready for our next presentation. Thank you for joining us. The next presentation is Pioneer Natural Resources and our speaker today is Scott Sheffield, the Chairman and CEO of Pioneer. Scott?

SCOTT SHEFFIELD, CHAIRMAN, CEO, PIONEER NATURAL RESOURCES: Thanks, Ellen. It's a pleasure to come to your first conference. Let me give you an update on Pioneer and I'll be finished in about 15 or 20 minutes and then open it up for Q&A. Everybody sees this slide with everybody, forward-looking statements.

Obviously our focus in 2007 after reformulating a lower risk strategy in early 2006 -- four key things are going to be happening in 2007. After proving that we can grow the two biggest asset bases last year substantially, Spraberry and Raton. They make up about two-thirds of the Company. Those two asset bases, both assets have produced for about 60 to 70 years. They grew at about 15%. We really have four key assets that will be growing in 2007.

Those assets are basically Tunisia and the Edwards play in South Texas followed by South Coast Gas, the gas and liquids project we're in with Petro SA, national oil company in South Africa, and our Alaska project will be coming on right after the first of the year in early 2008. So that's where the key driver is taking these next four asset bases that make up the rest of the Company and start growing those asset bases.

So 2007 obviously is a big swing year. With our strategy we feel like it's a slam dunk to grow production at 10% plus over the next five years. We grew 7% last year in our first year of this strategy. That was -- North American grew 12% and the reason we only grew 7% was we had a declining asset in South Africa, our Sable project.

We continue to build up and add bolt-on acquisitions, especially in '05-'06. Also we're advancing several unconventional resource plays. We have bought back about 20% of our stock; we'll continue to reduce the share count. We want to continue to reduce the share count by several million shares between now and the next five years into 2010.

I've made most of these points already. Production is up substantially primarily in North America, it's up 12% primarily driven by the Spraberry and Raton assets followed by Canada. Our guidance we put out last year, we were at the high end of that guidance. Fourth-quarter -- exited fourth-quarter production about 101,000 barrels a day.

CapEx, we're one of the few companies that has actually reduced CapEx going into 2007. We're still spending about $250 million a year like we did last year on our two big projects, Alaska and South Coast Gas. That will essentially be through with both of those projects essentially by the end of 2007. So you'll see a shift in this budget to a lot more development drilling. So that 25% for development projects will go down to 5% next year. Over the next several years we'll probably increase the resource plays a little bit, but development drilling will be increasing going into 2008, '09 and '10.

Strong returns on all of our development projects. We run everything at 60 flat and 750 gas flat. We also test everything at 50 flats and 550 flat. In the sensitivity case we do not reduce the cost structure; we're using today's cost. Obviously if we had the strip environment drop at 50 and 550 you'd see a substantial reduction in service cost. You can see the DRI, we use both internally returned -- discounted return on investment; that's just comparing the -- divided by your future net revenues at PV10 divided by your investment is a ratio that we use.

You can see we have strong returns in all of our key projects, strong margins. Most of our growth in the next...

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