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PIONEER SOUTHWEST ENERGY PARTNERS LP Reports Operating Results (10-Q)

May 06, 2010 | About:
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10qk

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PIONEER SOUTHWEST ENERGY PARTNERS LP (PSE) filed Quarterly Report for the period ended 2010-05-06.

Pioneer Southwest Energy Partners Lp has a market cap of $752 million; its shares were traded at around $22.71 with a P/E ratio of 7.8 and P/S ratio of 4.5. The dividend yield of Pioneer Southwest Energy Partners Lp stocks is 8.8%.PSE is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Production costs (including production and ad valorem taxes) are expected to average $20.00 to $23.00 per BOE based on current NYMEX strip prices for oil, NGLs and gas. Depletion, depreciation and amortization ("DD&A") expense is expected to average $5.00 to $6.00 per BOE.

General and administrative expense is expected to be $1 million to $2 million. Interest expense is expected to be $400 thousand to $600 thousand and accretion of discount on asset retirement obligations is expected to be nominal.

Depletion, depreciation and amortization expense. The Partnership's DD&A expense was $3.0 million ($5.14 per BOE) for the three months ended March 31, 2010, as compared to $4.1 million ($6.68 per BOE) for the same period of 2009. The decrease in DD&A expense was primarily due to positive price revisions to proved reserves since March 31, 2009. Effective December 31, 2009, the Partnership adopted the SEC's final rule on "Modernization of Oil and Gas Reporting" (the "Reserve Ruling") and the FASB's ASU 2010-03, which conforms ASC 932 to the Reserve Ruling. Among other things, the Reserve Ruling and ASU 2010-03 require companies to report oil and gas reserves using an average price based upon the prior 12-month period rather than a period-end price.

Interest expense. Interest expense was $363 thousand for the three months ended March 31, 2010, as compared to $189 thousand for the same period of 2009. Interest expense increased during the three months ended March 31, 2010, as compared to the same period of 2009, because of borrowings under the credit facility in August 2009 to fund a portion of the cash consideration associated with the 2009 Acquisition. Prior to the 2009 Acquisition, the Partnership's interest expense related primarily to fees associated with maintaining its credit facility. Outstanding borrowings under the credit facility as of March 31, 2010 were $69.0 million.

contingent VPP obligations. Borrowings outstanding under its credit facility were $69.0 million at March 31, 2010. As of March 31, 2010, the Partnership's derivative instruments represented assets of $38.1 million and liabilities of $24.9 million; however, they continue to have market risk and represent contractual obligations of the Partnership. The ultimate liquidation value of the Partnership's commodity derivatives will be dependent upon actual future commodity prices, which may differ materially from the inputs used to determine the derivatives' fair values at any point in time. The Partnership entered into these derivatives for the primary purpose of reducing commodity price risk on forecasted physical commodity sales and has an expectation of a high degree of correlation between changes in the derivative values and the forecasted commodity risks. See Notes C and G of Notes to the Consolidated Financial Statements included in "Item 1. Financial Statements " and "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for additional information regarding the Partnership's derivative positions and credit facility. As of March 31, 2010, the Partnership's asset retirement obligations and contingent VPP obligations had not materially changed since December 31, 2009. As of March 31, 2010, the Partnership was not a party to any material off-balance sheet arrangements.

Financing activities. Net cash used in financing activities during the three months ended March 31, 2010 was $14.6 million, as compared to net cash used financing activities of $16.9 million for the three months ended March 31, 2009. The decrease in net cash used by financing activities during the three months ended March 31, 2010, as compared to the three months ended March 31, 2009, was primarily due to net borrowings of $2.0 million under the credit facility during the first quarter of 2010.

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