Pioneer Natural Resources Co. (NYSE: PXD) has sold 2% of total company reserves, or 20.5 million BOE, by means of two volumetric production payments (VPP) for $593 million. Subsidiaries of Wachovia Corp. arranged or provided the capital to the purchaser. Through a VPP primarily related to its Hugoton gas field output, Pioneer sold an overriding royalty interest for a five-year term beginning Feb. 1 for $276 million. The VPP represents approximately 58 billion cu. ft. of gas or about 11% of Pioneer's proved and about 80% of daily gas output in the field. Pioneer also sold an overriding royalty interest in a portion of its Spraberry oil field for a seven-year term beginning Jan. 1, 2006, for proceeds of $317 million. The deal involves approximately 10.8 million bbl. of oil or 3% of Pioneer's proved Spraberry reserves and 38% of its daily oil output from the field. Scott D. Sheffield, chairman and chief executive, says, "By selling reserves through these VPPs, we can capture the true value of our long-lived assets using current oil and gas prices, and we are realizing proceeds equal to approximately 8% of the enterprise value currently being ascribed to Pioneer by the markets in exchange for about 2% of our reserves." The deals will help the company reduce debt and buy back shares, he adds. "The board has just approved a new $300-million share repurchase program, and these asset sales will give us the flexibility to continue to actively buy back shares." The reserves being sold are 3% of those associated with Pioneer's five long-lived onshore U.S. fields, and the 2006 production involved represents approximately 12% of estimated 2006 production. -Petroleum Finance Week
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