S&P: Pioneer Natural Resources unaffected

Standard & Poor's said its ratings on Pioneer Natural Resources Co. (BBB-/negative/--) will not be affected by the company's announcement that it has entered into a volumetric production payment agreement to deliver 7.3 million barrel of oil equivalent over six years for proceeds of $300 million.

This transaction is in addition to two production agreements closed earlier in 2005 for proceeds of $593 million.

S&P said it expects Pioneer to use the majority of proceeds to reduce bank debt. The remainder will be used, along with cash flow from operations, to partially fund a $300 million share-repurchase program.

While use of proceeds for purposes other than balance sheet debt reduction has the effect of increasing financial leverage, S&P said it expects Pioneer to generate adequate cash from operations in the near term to fund capital expenditures and share repurchases.

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