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PSE > SEC Filings for PSE > Form 8-K on 18-Oct-2012All Recent SEC Filings




Results of Operations and Financial Condition, Regulation

Item 2.02. Results of Operations and Financial Condition

Explanatory note: Pioneer Southwest Energy Partners L.P. (the "Partnership") presents in this Item 2.02 certain information regarding the impact of changes in the fair values of derivative instruments on its results of operations for the three and nine months ended September 30, 2012 and certain other information regarding its derivative instruments.

The following table summarizes non-hedge net derivative gains and losses that the Partnership expects to record in its earnings for the three and nine months ended September 30, 2012:

                         DERIVATIVE GAINS (LOSSES), NET
                                 (in thousands)

                                                  Three Months Ended     Nine Months Ended
                                                  September 30, 2012     September 30, 2012
Noncash changes in fair value:
  Oil derivative gains (losses)                  $          (9,000 )      $         28,726
  Natural Gas Liquids ("NGL") derivative gains
  (losses)                                                    (267 )                 4,747
  Gas derivative losses                                     (2,330 )                (4,773 )
     Total noncash derivative gains (losses),
     net                                                   (11,597 )                28,700

Cash settled changes in fair value:
  Oil derivative losses                                     (3,424 )               (13,831 )
  NGL derivative losses                                       (197 )                (1,815 )
  Gas derivative gains                                       1,626                   5,122
     Total cash derivative losses, net                      (1,995 )               (10,524 )
        Total derivative gains (losses), net     $         (13,592 )      $         18,176

Item 7.01 Regulation FD Disclosure

The following table presents the Partnership's open commodity derivative positions as of October 16, 2012:

                                                                                                  Twelve Months Ending
                                                                              2012                    December 31,
                                                                         Fourth Quarter       2013         2014        2015

Average Daily Oil Production Associated with Derivatives (Bbls):
       Collar Contracts with Short Puts:
              Volume                                                             1,500        1,750        5,000          -
              Price per Bbl:
                     Ceiling                                            $       109.00     $ 116.00     $ 124.00     $    -
                     Floor                                              $        85.00     $  88.14     $  90.00     $    -
                     Short Put                                          $        70.00     $  73.14     $  72.00     $    -
       Swap Contracts:
              Volume                                                             3,000        3,000            -          -
              Price per Bbl                                             $        79.32     $  81.02     $      -     $    -
Average Daily NGL Production Associated with Derivatives (Bbls):
       Swap Contracts:
              Volume                                                               750            -            -          -
              Price per Bbl (a)                                         $        35.03     $      -     $      -     $    -
Average Daily Gas Production Associated with Derivatives (MMBtu):
       Collar Contracts with Short Puts:
              Volume                                                                 -            -            -      5,000
              Price per MMBtu:
                     Ceiling                                            $            -     $      -     $      -     $ 5.00
                     Floor                                              $            -     $      -     $      -     $ 4.00
                     Short Put                                          $            -     $      -     $      -     $ 3.00
       Swap Contracts:
              Volume                                                             5,000        2,500        5,000          -
              Price per MMbtu (b)                                       $         6.43     $   6.89     $   4.00     $    -
       Basis Swap Contracts:
              Permian Basin Index Swaps volume (c)                               2,500        2,500            -          -
              Price differential                                        $        (0.30 )   $  (0.31 )   $      -     $    -


(a) Represents weighted average index price per Bbl of each NGL component.
(b) Represents the NYMEX Henry Hub index price on the derivative trade date.
(c) Represents swaps that fix the basis differentials between the Permian Basin index price and the NYMEX Henry Hub index price used in gas swap contracts.

Cautionary Statement Concerning Forward-Looking Statements

Except for historical information contained herein, the statements in Items 2.02 and 7.01 of this Current Report on Form 8-K are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and the business prospects of the Partnership are subject to a number of risks and uncertainties that may cause the Partnership's actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, volatility of commodity prices, the effectiveness of the Partnership's commodity price derivative strategy, reliance on Pioneer Natural Resources Company and its subsidiaries to manage the Partnership's business and identify and evaluate drilling opportunities and acquisitions, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services and personnel required to complete the Partnership's operating activities, access to and availability of transportation, processing and refining facilities, the Partnership's ability to replace reserves, including through acquisitions, and implement its business plans or complete its development activities as scheduled, uncertainties associated with acquisitions, access to and cost of capital, the financial strength of counterparties to the Partnership's credit facility and derivative contracts and the purchasers of the Partnership's oil, NGL and gas production, uncertainties about estimates of reserves and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data and environmental and weather risks, including the possible impacts of climate change. These and other risks are described in the Partnership's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the United States Securities and Exchange Commission. In addition, the Partnership may be subject to currently unforeseen risks that may have a materially adverse effect on it. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. The Partnership undertakes no duty to publicly update these statements except as required by law.

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