Pioneer Commences Gas Production offshore south africa

Pioneer Commences Gas Production Offshore South Africa

10-06-2007

Pioneer Natural Resources Company announces the start up of production from the South Coast Gas project (SCG) in Block 9, offshore South Africa. Pioneer holds a 45% working interest in the project, and PetroSA, the South African national oil company, has a 55% working interest and is operator. Pioneer's production from the project is sold to PetroSA under a gas and condensate sales agreement and will provide feedstock for PetroSA's onshore gas-to-liquids (GTL) plant in Mossel Bay. The prices to be received for both gas and condensate sold under the sales agreement are tied to Brent oil prices.
Gas and condensate production from five wells is expected to reach approximately 50 million cubic feet of gas equivalent per day (MMCFEPD) by the end of 2007. Within 12 to 18 months, production from the project is expected to rise significantly as oil production operations are completed at the Sable field and Sable gas production is tied into the project.

As a result of higher oil prices, the oil production life of the Sable field has been extended, and gas will continue to be reinjected into the field to enhance oil recovery. Gas development drilling in the Sable field is complete, and when Sable gas production is tied into SCG in late 2008 or early 2009, the project is expected to reach peak production of 100 MMCFEPD to 120 MMCFEPD. On average, gas condensate is expected to represent approximately 20% to 30% of total SCG production.

"The South Coast Gas project is an important component of our 12+% production per share annual growth target over the 2007 through 2010 period, and we're very pleased that the development phase of the project has been completed in the time expected. We appreciate the efforts of PetroSA in accomplishing this goal, and look forward to continuing our successful relationship," stated Scott Sheffield, Pioneer's Chairman and CEO. "With the completion of SCG and considering that a majority of the capital costs related to our Oooguruk development on the North Slope will be invested by the end of 2007, we expect our 2008 drilling and development budget to decrease significantly as compared to 2007 to approximately $1 billion, primarily focused on Pioneer's four core areas - Spraberry, Raton, Edwards and Tunisia."