Financial and Operating Performance

The Partnership's financial and operating performance for the third quarter of 2008 included the following highlights:

• Net income increased to $24.5 million, as compared to $17.5 million for the third quarter of 2007.

• Daily sales volumes declined by 13 percent to 4,722 BOEPD, as compared to 5,447 BOEPD in the third quarter of 2007, due in part to the effect of Hurricane Ike (see "Recent Events").

• Average reported oil, NGL and gas sales prices increased to $118.03, $55.27 and $8.05, respectively, during the third quarter of 2008 as compared to $74.54, $38.06 and $4.49, respectively, during the third quarter of 2007.

• Net cash provided by operating activities increased to $30.9 million, as compared to $20.7 million in the third quarter of 2007. The increase in 2008, as compared to 2007, is primarily due to increased average oil, NGL and gas prices, partially offset by the decline in sales volumes.

Recent Events

Financial markets. During the third quarter of 2008, the worldwide financial markets experienced significant turmoil as concerns regarding a worldwide economic slowdown increased and the availability of liquidity provided by the financial markets declined. These concerns have continued into the fourth quarter of 2008. In response to these circumstances, governments worldwide have taken steps to enhance confidence and support the financial markets. The success of the steps taken and the duration of the uncertainty in the financial markets cannot be prediceted. The Partnership is closely monitoring the economic environment, but does not expect the current market conditions to significantly impact its liquidty, future results of operations or financial position.

As of September 30, 2008, the Partnership had $28.8 million of cash and cash equivalents on deposit, held approximately $13.1 million of accounts receivable from purchasers of oil, NGL and gas production, was a party to derivative financial instruments, of which $16.7 million represent assets of the Partnership, had no outstanding long-term debt and had approximately $200 million of available borrowing capacity under the Credit Facility. The Partnership is monitoring the liquidity and the credit standings of its counterparties, including its banks, purchasers and derivative counterparties.

Commodity prices. The reduced liquidity provided by the worldwide financial markets and other factors have resulted in an economic slowdown in the United States and other industrialized countries. Concerns that this slowdown will impact energy demand have contributed to a significant drop in commodity prices from their highs earlier in 2008. The price of gas, and Spraberry gas price differentials relative to NYMEX quoted prices, have been negatively impacted by increasing supplies resulting from a rise in domestic production. Although the Partnership has hedged a large portion of its production volumes for the next three years, a sustained lower commodity price environment would result in lower realized prices for unhedged volumes and reduce the prices at which the Partnership could hedge additional volumes in the future. As a result, the Partnership's internal cash flows would be reduced for affected periods. The duration and magnitude of the commodity price declines cannot be predicted.

Hurricane Ike. During the second week of September 2008, Hurricane Ike struck the Texas gulf coast. The Partnership's Spraberry field production facilities were not directly impacted by the hurricane. However, third-party downstream production handling and processing facilities were damaged, which had the effect of delaying sales of portions of the Partnership's third quarter 2008 NGL volumes and temporarily curtailing oil and gas production from certain of the Partnership's properties. Associated therewith, the Partnership recorded $162 thousand of NGL inventories as of September 30, 2008. Third quarter production was negatively impacted by the loss of approximately 250 BOEPD of production as a result of the hurricane. Delays have continued during the fourth quarter of 2008, with full production expected to be restored by mid-November.

Initial public offering. On May 6, 2008, the Partnership completed its initial public offering of 9,487,500 common units, including the units issued pursuant to the exercise of the underwriters' over-allotment option, representing a 31.6 percent limited partner interest in the Partnership. Pioneer owns a 0.1 percent general partner interest and a 68.3 percent limited partner interest in the Partnership. The Partnership used the net proceeds of $163.1 million from the offering to acquire an interest in Pioneer Southwest USA, the entity through which Pioneer

owned the Partnership's oil and gas properties in the Spraberry field, and to acquire an incremental working interest in certain of the oil and gas properties owned by Pioneer Southwest USA.

The acquisition of the incremental interest in certain of the oil and gas properties owned by Pioneer Southwest USA resulted in a change in reporting entity for periods prior to May 6, 2008. Accordingly, the historic financial position, results of operations and cash flows of the Partnership Predecessor have been recast in this Report to effect the change in reporting entity. See Note B of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the change in reporting entity.

Novation of derivative agreements. On May 6, 2008, novation agreements were entered into among Pioneer, the Partnership and certain derivative instrument counterparties, which transferred Pioneer's rights and responsibilities under certain derivative instruments to the Partnership. The novated derivative agreements were designated as cash flow hedges of portions of the Partnership's oil, NGL and gas commodity price risk for forecasted sales for the periods from May 2008 through December 2008 and the years of 2009 and 2010. As of May 6, 2008, the aggregate fair value of the derivative instruments novated to the Partnership represented a liability of approximately $37.2 million. Changes in the fair values of the derivative instruments subsequent to May 6, 2008, to the extent that they are effective as hedges of the designated commodity price risk, are being deferred and recognized in the Partnership's earnings in the same periods as the forecasted commodity sales being hedged. See Note H of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for additional information regarding these derivative instruments.

Midkiff-Benedum Gas Processing System. During the third quarter of 2008, Pioneer entered into negotiations with the Partnership relating to the assignment of a portion of Pioneer's option to acquire an interest in the Spraberry Midkiff-Benedum gas processing system (the "System") in West Texas from Atlas Pipeline Partners, and the Partnership has been evaluating the option and the underlying assets of the System. The Partnership and Pioneer have decided not to pursue the assignment or the acquisition of an interest in the System at this time due to the uncertainty underlying current market conditions.

Pioneer currently owns a 27 percent interest in the System and the option is exercisable for an additional 22 percent interest in the System for $230 million, subject to normal closing adjustments. Under the terms of the option agreement, the option is exercisable by Pioneer (the holder) for up to a 14.56 percent interest in 2008, and any unexercised portion of the option, up to the full 22 percent, may be exercised between June and November 2009.

The Partnership expects that in the future Pioneer will consider the assignment to the Partnership of the option, or some portion thereof. Any such assignment would be subject to negotiation of definitive agreements and the approval of the board of directors of Pioneer GP and the Conflicts Committee of the board. There can be no assurance that Pioneer will assign all or any portion of the option to the Partnership or as to the terms of any such assignment.

Fourth Quarter 2008 Outlook

Based on current estimates, the Partnership expects that fourth quarter 2008 production will average 4,600 to 4,800 BOEPD, reflecting the continuation of shut in and curtailed wells until the third-party NGL fractionation facilities are restored in mid-November. Production lost for the quarter is estimated to be approximately 150 BOEPD.

Fourth quarter production costs (including production and ad valorem taxes and transportation costs) are expected to average $24.00 to $27.00 per BOE based on current NYMEX strip prices for oil, NGLs and gas. Depletion, depreciation and amortization ("DD&A") expense is expected to average $4.00 to $4.50 per BOE.

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

The Partnership's fourth quarter 2008 cash taxes and effective income tax rate are expected to be approximately one percent as a result of the Partnership being subject to the Texas Margin tax.

Operations Highlights

The Partnership's properties are entirely composed of producing oil and gas properties. Producing oil and gas reservoirs are characterized by declining production rates. Because the Partnership does not own any undeveloped properties or leasehold acreage, its reserves and production are expected to decline continually over time unless the Partnership mitigates the declines through production enhancement or drilling initiatives or acquires additional properties to replace its declining production. The Partnership may benefit from production and reserve enhancements as a result of infill drilling and secondary recovery initiatives that are being advanced by Pioneer. At Pioneer's request, the Railroad Commission of Texas amended its rules in October 2008 to allow Pioneer and other operators, at their option, to down space well locations in the Spraberry field to 20-acre spacing. The Partnership has the right to drill the 20-acre locations surrounding its wells and is considering drilling a limited number of wells in 2009 if margins improve. Pioneer is also evaluating waterflood projects in the Spraberry field. The ultimate outcome and impact to the Partnership of these initiatives cannot be predicted at this time.

To fund production enhancement and drilling initiatives and future property acquisitions, the Partnership anticipates reserving a portion of its net cash provided by operating activities. The Partnership may also use, to the extent available, external financing sources to fund acquisitions, including borrowings under the Credit Facility and funds from future private and public equity and debt offerings. See "Recent Events - Financial markets" for a discussion of the recent uncertainties in traditional short- and long-term liquidity sources, and "Capital Commitments, Capital Resources and Liquidity" below.

During the three and nine months ended September 30, 2008, the Partnership expended approximately $1.3 million and $1.5 million, respectively, for additions to its oil and gas properties, which expenditures primarily represented development recompletions of existing horizontal wells owned by the Partnership.

Results of Operations

Oil and gas revenues. Oil and gas revenues totaled $40.2 million and $117.4 million for the three and nine months ended September 30, 2008, respectively, as compared to $29.0 million and $76.5 million for the same respective periods of 2007.

The increase in oil and gas revenues during the three and nine months ended September 30, 2008, as compared to the same periods of 2007, is primarily due to increases in commodity prices, partially offset by decreases of 13 percent and eight percent, respectively, in total sales volumes on an average daily sales volume basis. In the quarter-to-quarter and nine month-to-nine month comparisons, the average reported oil price increased by 58 percent and 70 percent, respectively; the average reported NGL price increased by 45 percent and 47 percent, respectively; and the average reported gas price increased by 79 percent and 46 percent, respectively. The decreases in sales volumes were due to normal production declines and to the aforementioned effect of Hurricane Ike.

The following table provides average daily sales volumes for the three and nine months ended September 30, 2008 and 2007:

                           Three Months Ended      Nine Months Ended
                             September 30,           September 30,
                           2008         2007        2008        2007

Oil (Bbls)                   2,886        3,232      3,060       3,253
NGLs (Bbls)                  1,090        1,314      1,123       1,267
Gas (Mcf)                    4,479        5,409      4,772       5,206
Daily sales volume (BOE)     4,722        5,447      4,979       5,388

The following table provides the Partnership's average reported prices for the three and nine months ended September 30, 2008 and 2007:

                Three Months Ended       Nine Months Ended
                  September 30,            September 30,
                 2008         2007        2008        2007

Oil (Bbls)    $    118.03    $ 74.54   $    110.17   $ 64.87
NGLs (Bbls)   $     55.27    $ 38.06   $     50.16   $ 34.11
Gas (Mcf)     $      8.05    $  4.49   $      7.32   $  5.02
Total (BOE)   $     92.52    $ 57.86   $     86.04   $ 52.04

The Partnership's NGL price realizations were approximately 50 percent and 52 percent of NYMEX calendar month average oil prices for the three and nine month periods ended September 30, 2007, respectively; however, during the three and nine month periods ended September 30, 2008, the Partnership's NGL price realizations declined to approximately 47 percent and 44 percent of NYMEX calendar month average oil prices, respectively. The decreases resulted primarily from propane and ethane prices (the principal components of the Partnership's NGL stream) not increasing proportionately with NYMEX calendar month oil prices due to the supply and demand fundamentals specific to those products.

Since September 30, 2008, market-quoted commodity prices have significantly declined from levels reported by the Partnership as of and for the periods ended September 30, 2008. Although mitigated by the Partnership's hedging activities, the decline in commodity prices will reduce the Partnership's revenues and distributable cash. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for information regarding commodity price risk and the Partnership's derivative financial instruments.

Hedging activities. The Partnership expects to utilize commodity swap and option contracts primarily to reduce the impact on the Partnership's net cash provided by operating activities and results of operations from the price volatility of the commodities the Partnership produces and sells. During the three and nine months ended September 30, 2007, the Partnership Predecessor had no hedging activities. On May 6, 2008, Pioneer novated oil, NGL and gas swap contracts to the Partnership that have been designated as hedges of portions of the Partnership's forecasted May through December 2008, and annual 2009 and 2010 oil, NGL and gas sales. In addition to the novated hedges, the Partnership has entered into incremental 2009 and 2010 NGL swap contracts and an oil collar contract for a portion of the Partnership's forecasted 2011 oil sales. See Note H of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for additional information about these derivatives.

Oil and gas production costs. The Partnership recorded oil and gas production costs of $12.1 million and $32.5 million during the three and nine months ended September 30, 2008, respectively, as compared to $7.9 million and $23.5 million for the same respective periods of 2007. In general, lease operating expenses and workover expenses represent the components of oil and gas production costs over which the Partnership has management control, while production and ad valorem taxes are directly related to commodity price changes. During the three and nine months ended September 30, 2008, total oil and gas production costs per BOE increased by 76 percent and 49 percent, respectively, as compared to the three and nine months ended September 30, 2007, primarily due to (i) declines in the volumes over which the fixed portion of production costs per BOE are attributed, which declines are due to normal production declines and to production declines due to Hurricane Ike, (ii) increases in lease operating expense due to increased electricity costs, salt water disposal fees and oilfield well servicing activity and general oilfield services price inflation,
(iii) increases in production taxes due to commodity price increases and (iv) increases in workover costs incurred to maximize production volumes as wells mature, partially offset by (v) a slight decline in ad valorem taxes in the nine month comparisons, primarily resulting from the effects of tax reform legislation in Texas.

In addition to the above explanation of higher lease operating expenses, the Partnership's lease operating expense also included an allocation of Pioneer's direct internal costs associated with the operation of the Partnership Properties for periods prior to the Offering. In May 2008, Pioneer, as operator, began charging the Partnership

overhead charges associated with operating the Partnership Properties (commonly referred to as the Council of Petroleum Accountants Societies (or "COPAS") fee), instead of the direct internal costs incurred by Pioneer. Assuming the COPAS fee had been charged in the Partnership Predecessor's historical results, the lease operating expense would have been higher on a BOE basis by $3.04 for the three months ended September 30, 2007 and $1.32 and $3.02 for the nine months ended September 30, 2008 and 2007, respectively.

The following table provides the components of the Partnership's total oil and gas production costs per BOE for the three and nine months ended September 30, 2008 and 2007:

                             Three Months Ended       Nine Months Ended
                               September 30,            September 30,
                              2008         2007        2008        2007

Lease operating expenses   $    19.33    $   9.67   $    15.38    $  9.96
Taxes:
Ad valorem                       2.13        1.97         1.99       2.02
Production                       4.80        2.98         4.50       2.71
Workover costs                   1.60        1.22         1.96       1.31

Total production costs     $    27.86    $  15.84   $    23.83    $ 16.00

Depletion, depreciation and amortization expense. The Partnership's DD&A expense was $1.8 million ($4.06 per BOE) and $5.2 million ($3.79 per BOE) for the three and nine months ended September 30, 2008, respectively, as compared to $2.2 million ($4.41 per BOE) and $6.6 million ($4.46 per BOE) for the three and nine months ended September 30, 2007, respectively. The decrease in DD&A expense was primarily due to production declines and proved reserve increases reflecting commodity price increases and, to a lesser extent, positive 2007 drilling results.

General and administrative expense. General and administrative expense was $1.1 million and $3.8 for the three and nine months ended September 30, 2008, respectively, as compared to $1.1 million and $3.3 million for the three and nine months ended September 30, 2007, respectively. The increase in general and administrative expense in the nine month comparisons is due primarily to legal, accounting and other costs associated with being a public company that were not necessary prior to the Offering. For periods prior to the Offering, general and administrative expense consisted of an allocation of a portion of Pioneer's general and administrative expense based on the Partnership Predecessor's production as compared to Pioneer's total production from its United States properties (other than Alaska), as measured on a per barrel of oil equivalent basis. The Partnership and Pioneer entered into an Administrative Services Agreement as of May 6, 2008, pursuant to which Pioneer agreed to perform, either itself or through its affiliates or other third parties, administrative services for the Partnership, and the Partnership agreed to reimburse Pioneer for its expenses incurred in providing such services. Pioneer has informed the Partnership that, initially, expenses will be reimbursed based on a methodology of determining the Partnership's share, on a per BOE basis, of certain of the general and administrative costs incurred by Pioneer. Subsequent to the Offering, the Partnership is also responsible for paying for third-party services. See Note I of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the general and administrative expense allocations to the Partnership.

Income tax provision. The Partnership recognized income tax provisions of $311 thousand and $839 thousand during the three and nine months ended September 30, 2008, respectively, as compared to $187 thousand and $462 thousand for the same respective periods of 2007. The Partnership's effective tax rate is approximately one percent, reflective of the Texas Margin tax. See Note E of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Partnership's income taxes.

Capital Commitments, Capital Resources and Liquidity

Capital commitments. The Partnership's primary needs for cash will be for production growth through acquisitions, production enhancements and/or drilling initiatives and for unitholder distributions. The Partnership

may use any combination of internally- and externally-financed sources to fund acquisitions and unitholder distributions, including borrowings under the Credit Facility and funds from future private and public equity and debt offerings. As a result of the current circumstances in worldwide financial markets, the availability of external sources of short- and long-term capital funding is uncertain. Consequently, the Partnership expects that (i) capital expenditures and unitholder distributions will be funded by internal operating cash flows and
(ii) acquisitions will be funded by cash reserves and availability under the Credit Facility for the foreseeable future. Although the Partnership expects that internal cash flows will be adequate to fund capital expenditures and unitholder distributions, and that available borrowing capacity under the Credit Facility will provide adequate liquidity to fund future acquisitions, no assurances can be given that such funding sources will be adequate to meet the Partnership's future needs.

The Partnership Agreement requires that the Partnership distribute all of its available cash to its partners. In general, available cash is defined to mean cash on hand at the end of a quarter after the payment of expenses and the establishment of cash reserves for future capital expenditures (including acquisitions), operational needs and distributions for any one or more of the next four quarters. Because the Partnership's proved reserves and production decline continually over time, the Partnership will need to acquire income producing assets to sustain its level of distributions to unitholders over time. Currently, the Partnership expects to reserve approximately 25 percent to 35 percent of its cash flow to acquire oil and gas assets in order to maintain its production and proved reserves. The Partnership has adopted a cash distribution policy pursuant to which it intends to declare distributions of $0.50 per unit per quarter, or $2.00 per unit per year, to be paid no later than 45 days after the end of each fiscal quarter. The distribution for the third quarter of 2008 of $0.50 per unit was declared by the Board of Directors of Pioneer GP and is to be paid on November 12, 2008 to unitholders of record on November 3, 2008.

Although Pioneer has no obligation to sell assets to the Partnership, and the Partnership is not obligated to purchase from Pioneer any additional assets, Pioneer has informed the Partnership that it intends to offer to the Partnership periodically the opportunity to purchase from Pioneer assets in the Partnership's area of operations. The Partnership also may make acquisitions of oil and gas assets in its area of operations from third parties and may participate jointly in acquisitions with Pioneer in which the Partnership could acquire the producing oil and gas properties and Pioneer could acquire the undeveloped properties. Any assets that the Partnership acquires from either Pioneer or third parties may include interests in midstream assets.

Oil and gas properties. The Partnership's cash expenditures for additions to oil and gas properties during the three and nine month periods ended September 30, 2008, totaled $1.3 million and $1.5 million, respectively, as compared to $1.2 million and $7.9 million for the same respective periods of 2007. The Partnership's expenditures for additions to oil and gas properties for the three and nine month periods ended September 30, 2008 and 2007 were funded by net cash provided by operating activities.

Contractual obligations, including off-balance sheet obligations. As of September 30, 2008, the Partnership's contractual obligations were limited to asset retirement obligations, contingent VPP obligations and derivative obligations. The Partnership's asset retirement obligations and contingent VPP obligations have not materially changed since December 31, 2007. The fair value of the Partnership's derivative instruments represented a net asset of approximately $10.3 million as of September 30, 2008, which was comprised of approximately $16.7 million of derivative assets and approximately $6.4 million of derivative obligations. As of September 30, 2008, the Partnership was not a party to any material off-balance sheet arrangements. See Note H of Notes to 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 obligations.

Virtually all of the properties that the Partnership owns are subject to the VPP. Pioneer has agreed that production from its retained properties subject to the VPP will be utilized to meet the VPP obligation prior to utilization of production from the Partnership Properties subject to the VPP, and it is expected that the VPP obligation can be fully satisfied by delivery of production from properties that are retained by Pioneer. If any production from the interests in the properties that the Partnership owns is required to meet the VPP obligation, Pioneer has agreed that it will make a cash payment to the Partnership for the value of the production (computed by taking the volumes . . .