Pioneer Natural Resources Company (NYSE:PXD) (“Pioneer”
or “the Company”) today announced the Company has signed an
agreement with a subsidiary of Carmeuse Holding S.A. (Luxemburg) to
acquire its U.S. industrial sands business, Carmeuse Industrial
Sands (“CIS”), for approximately $297 million, before normal
closing adjustments.
CIS is the number one producer of Hickory frac sand (Brady
Brown®) used as proppant for fracture stimulating oil and gas wells
in the U.S. Hickory sand is considered to be the highest quality
brown sand for fracture stimulation. CIS’ sand mine in Brady,
Texas, has more than 30 years of proven brown sand reserve life and
is the industry’s largest resource base for brown sand in the U.S.
The Brady mine currently has sales capacity of approximately one
million tons annually.
Scott Sheffield, Chairman and CEO, stated, “When Carmeuse
recently announced plans to sell its U.S. sand business, we viewed
this as a strategic opportunity to secure high-quality, low-cost
and logistically advantaged brown sand supply to support our
growing fracture stimulation requirements in three of our four core
Texas growth assets – the Spraberry vertical, horizontal Wolfcamp
Shale and Barnett Shale Combo plays. The acquisition complements
Pioneer’s vertical integration strategy, which is reducing
execution risk and controlling costs. By securing supply at below
market prices, we expect to reduce annual capital spending by $65
million to $70 million based on our estimated sand requirements and
current market prices.”
Pioneer’s annual demand for proppant to support the Company’s
fracture stimulation operations is forecasted to increase from 1.2
million tons in 2012 to 1.6 million tons in 2015 as drilling
activity continues to ramp up in the Spraberry vertical, horizontal
Wolfcamp Shale, Eagle Ford Shale and Barnett Shale Combo plays.
Seventy percent to eighty percent of the Company’s forecasted
proppant demand is brown sand for the Spraberry vertical,
horizontal Wolfcamp Shale and Barnett Shale Combo plays. Pioneer’s
primary source for brown sand is CIS’ Brady mine. Prior to the
acquisition, the Company expected approximately 700 thousand tons,
or 60%, of its forecasted 2013 brown sand requirements to be
sourced from this location.
The supply of brown sand is expected to continue to be tight as
a result of increasing shale play drilling, with the price of brown
sand expected to escalate further as the growth in demand for this
proppant outpaces new supplies. Other brown sand mines are
primarily supplying large service companies. White and resin coated
sand alternatives are more than two times and seven times the cost
of Brady sand (inclusive of transportation), respectively, and are
not necessary for most Spraberry vertical, horizontal Wolfcamp
Shale and Barnett Shale Combo fracture stimulations.
Assuming Pioneer could replace its current brown sand supply at
market prices and would have to substitute its incremental brown
sand requirements (300 thousand tons in 2013) with white sand due
to lack of brown sand availability, Pioneer estimates that it will
save $65 million to $70 million per year by acquiring CIS. After
taking into account an additional $10 million of annual cash flow
from CIS’ other assets, Pioneer’s total annual savings are
estimated to be $75 million to $80 million.
The acquisition also provides Pioneer with significant upside
potential. First, output from the Brady mine can be doubled from
one million tons per year to two million tons per year, which would
support any future increases in Spraberry vertical, horizontal
Wolfcamp Shale and Barnett Shale Combo drilling activity above the
Company’s currently announced drilling growth plans. Second, CIS
has 23 million tons of white sand reserves in Wisconsin, where
plans to develop a mine with a production capacity of up to one
million tons per year are being progressed.
CIS is led by a highly experienced and technically proficient
management team with more than 150 years of experience in the
industrial sands business. This management team has agreed to join
Pioneer.
The acquisition will be funded from available cash and is
expected to close late in the first quarter or early in the second
quarter of 2012.
CIS’ other assets, which make up a relatively small portion of
the industrial sands business, include two outlets (Bakersfield,
California and Colorado Springs, Colorado) for other grades of sand
produced in Brady, two sand mines in Ohio (Glass Rock and Millwood)
which produce oilfield and industrial sands, one sand mine in
California (Orange County) which produces construction and
recreational sand, and an oilfield cement material processing plant
in Riverside, California.
Conference Call
On Monday, March 5, 2012, at 10:00 a.m. Central Time, Pioneer
will hold a conference call and webcast to discuss the CIS
acquisition, with an accompanying presentation. Instructions for
listening to the call and viewing the presentation are shown
below.
Internet: www.pxd.comSelect “Investors,” then “Investor
Presentations” to listen to the discussion and view the
presentation.
Telephone: Dial (877) 795-3599 confirmation code: 7784081 five
minutes before the call. View the presentation via Pioneer’s
internet address above.
A replay of the webcast will be archived on Pioneer’s website. A
telephone replay will be available through March 23 by dialing
(888) 203-1112 confirmation code: 7784081.
Pioneer is a large independent oil and gas exploration and
production company, headquartered in Dallas, Texas, with operations
in the United States. For more information, visit Pioneer’s website
at www.pxd.com.
This news release contains forward-looking statements within the
meaning of the safe harbor provisions of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act.
These statements include any statement that does not relate
strictly to historical facts. In particular, statements, express or
implied, regarding the benefits of, and synergies from, the CIS
acquisition and Pioneer’s sand requirements, future growth
opportunities and financial condition and results of operation are
forward-looking statements. These forward-looking statements are
based on management’s current plans, expectations, estimates,
assumptions and beliefs concerning future events. While our
management considers these plans, expectations, estimates,
assumptions and beliefs to be reasonable, they are inherently
difficult to predict and subject to a number of risks and
uncertainties. These risks and uncertainties include, but are not
limited to, the satisfactory completion of all conditions precedent
to the closing of the proposed CIS acquisition in accordance with
the terms and conditions of the purchase agreement, risks related
to mineral estimates, fluctuation of prices for sand and the risks
discussed in the “Risk Factors” sections of, as well as any other
cautionary language in, Pioneer’s public filings with the
Securities and Exchange Commission (SEC). Actual results may differ
materially from those expressed or implied in the forward-looking
statements contained in this news release. Each forward-looking
statement in this news release speaks only as of the date of this
news release, and Pioneer undertakes no obligation to update or
revise any such statement except as required by law.
Our pending CIS acquisition may not be consummated. The closing
of the acquisition is subject to certain regulatory conditions and
customary closing conditions, and the acquisition agreement may, in
certain circumstances, be terminated.
Inaccuracies in estimates of mineral reserves and resource
deposits could result in lower than expected supplies and sales and
higher than expected costs. The proved reserve estimates contained
in this news release have been calculated in compliance with the
SEC’s Industry Guide 7 and are based on an independent review by
mining and geological consultants engaged by CIS in 2011. However,
commercial sand reserve estimates are necessarily imprecise and
depend to some extent on statistical inferences drawn from
available drilling data, which may prove unreliable. There are
numerous uncertainties inherent in estimating quantities and
qualities of commercial sand reserves and resources and costs to
mine recoverable reserves, including many factors beyond Pioneer’s
control. Estimates of economically recoverable commercial sand
reserves necessarily depend on a number of factors and assumptions,
all of which may vary considerably from actual results, such
as:
- geological and mining conditions and/or
effects from prior mining that may not be fully identified by
available data or that may differ from experience;
- assumptions concerning future prices of
commercial sand products, operating costs, mining technology
improvements, development costs and reclamation costs; and
- assumptions concerning future effects
of regulation, including the issuance of required permits and taxes
by governmental agencies.
Pioneer Natural Resources (NYSE:PXD)
Historical Stock Chart
From Apr 2024 to May 2024
Pioneer Natural Resources (NYSE:PXD)
Historical Stock Chart
From May 2023 to May 2024
