Pioneer Southwest Energy Partners L.P. Reports Third Quarter 2012 Financial and Operating Results

  Pioneer Southwest Energy Partners L.P. Reports Third Quarter 2012 Financial
  and Operating Results

Business Wire

DALLAS -- October 31, 2012

Pioneer Southwest Energy Partners L.P. (“Pioneer Southwest” or “the
Partnership”) (NYSE:PSE) today announced financial and operating results for
the quarter ended September 30, 2012.

Pioneer Southwest reported third quarter net income of $6 million, or $0.15
per common unit. Net income for the third quarter included unrealized
mark-to-market derivative losses of $11 million, or $0.32 per common unit.
Without the effect of this item, adjusted income for the third quarter was $17
million, or $0.47 per common unit. Cash flow from operations for the third
quarter was $25 million.

During October, the Partnership purchased a 94% working interest in
approximately 3,000 gross acres in Midland County for $6.3 million. The
acquisition includes all deep drilling rights on the acreage, with
approximately 75 40-acre locations and 75 20-acre locations, which are
expected to be completed in the Spraberry, Dean, Wolfcamp and Strawn intervals
and potentially the Atoka interval. The acreage also has horizontal Wolfcamp
Shale potential. There is no existing production on this acreage. The
Partnership expects to move two of its three drilling rigs to this acreage
during the fourth quarter.

Oil and gas sales for the third quarter averaged 7,664 barrels oil equivalent
per day (BOEPD). Production benefited by 215 barrels per day (BPD) from the
drawdown of natural gas liquids (NGL) inventory at Mont Belvieu, Texas,
associated with unplanned third-party fractionator downtime during the second
quarter. This benefit was offset by a production loss of approximately 450
BOEPD during the third quarter due to continuing third-party fractionator
capacity constraints at Mont Belvieu. The NGL fractionation constraints were
resolved in early October.

The Partnership’s three-rig drilling program continued during the third
quarter, with six new wells being placed on production and the recompletion of
four wells that were previously only producing from one interval. At the end
of the quarter, the Partnership had six wells awaiting completion. The
Partnership has a large inventory of remaining oil drilling locations in the
Spraberry field, with approximately 155 40-acre locations and 1,275 20-acre
locations. The 2012 capital program is expected to result in approximately 50
wells being drilled or recompleted during the year. Essentially all of the
wells drilled will be deepened to the Strawn formation, and 35% of the planned
wells will also be deepened to the Atoka formation. Production data from
current Strawn completions supports the addition of an incremental 30 thousand
barrels oil equivalent (MBOE) of estimated ultimate recovery (EUR) for wells
completed in this interval. Completions in the Atoka interval are estimated to
add an incremental 50 MBOE to 70 MBOE of EUR. Approximately 85% and 70% of the
Partnership’s acreage position has Strawn and Atoka potential, respectively.

The Partnership currently has four downspaced 20-acre wells on production.
Results to date indicate that production from these wells is performing near
the type curve for a 40-acre Wolfcamp well (EUR of 140 MBOE).

Capital spending for 2012 is forecasted to range from $110 million to $120
million. The 2012 capital program is expected to generate full-year production
growth of approximately 8% compared to 2011.

Third quarter oil sales averaged 4,934 BPD, NGL sales averaged 1,665 BPD and
gas sales averaged 6 million cubic feet per day. The third quarter average
price for oil was $88.12 per barrel. The average price for NGLs was $31.60 per
barrel, and the average price for gas was $2.62 per thousand cubic feet.

Production costs (including production and ad valorem taxes) for the third
quarter averaged $26.15 per barrel oil equivalent (BOE). These costs were
higher than the second quarter of 2012 by $2.81 per BOE, primarily due to
increases in salt water disposal costs (principally water hauling costs),
higher electricity costs associated with the increase in gas prices, higher
repair and maintenance costs and higher per BOE costs resulting from the
approximately 450 BOEPD of lost sales volumes, as discussed above.
Depreciation, depletion and amortization expense averaged $8.18 per BOE.

The Partnership has additional borrowing capacity under its credit facility of
$212 million as of September 30, 2012, which is expected to be adequate to
fund future growth from drilling activities and acquisitions.

Pioneer Southwest previously announced a cash distribution of $0.52 per
outstanding common unit for the quarter ended September 30, 2012. The
distribution is payable November 9, 2012 to unitholders of record at the close
of business on November 2, 2012. On an annual basis, the cash distribution
equates to $2.08 per common unit.

Distribution sustainability is supported by the Partnership’s low-decline rate
Spraberry properties, its large drilling inventory of 40-acre and 20-acre
locations and its strong derivative position through 2014. Of the
Partnership’s forecasted production, derivative contracts cover approximately
80% in the fourth quarter of 2012, 65% in 2013, 70% in 2014 and 10% in 2015.

Fourth Quarter 2012 Financial Outlook

The following paragraphs provide the Partnership’s fourth quarter of 2012
outlook for certain operating and financial items.

Production is forecasted to average 7,400 BOEPD to 7,900 BOEPD. This assumes
the remaining NGL inventory at Mont Belvieu of 8,400 barrels (approximately 90
BPD) will be drawn down during the fourth quarter, but will be offset by line
fill requirements in the fourth quarter for the new Lone Star NGL pipeline in
which Pioneer Southwest will be a shipper. The fourth quarter production
estimate also assumes a negative impact ranging from 100 BOEPD to 200 BOEPD
due to reduced ethane recoveries associated with gas processing facilities in
the Spraberry field nearing capacity during the fourth quarter due to
greater-than-anticipated industry production growth. New gas processing
capacity of 100 million cubic feet per day is expected to be added in late
March/early April 2013.

Production costs (including production and ad valorem taxes) are expected to
average $22.50 to $26.50 per BOE based on continuing higher salt water
disposal and electricity costs, higher per BOE costs resulting from the gas
processing capacity limitations negatively impacting sales volumes and current
NYMEX strip prices for oil, NGLs and gas. Depreciation, depletion and
amortization expense is expected to average $7.75 to $8.75 per BOE. General
and administrative expense is expected to be $1.5 million to $2.5 million.
Interest expense is expected to be $500 thousand to $800 thousand. Accretion
of discount on asset retirement obligations is forecasted to be nominal.

Pioneer Southwest’s effective income tax rate is expected to be approximately
1% of earnings before income taxes as a result of Pioneer Southwest being
subject to the Texas Margin tax.

Earnings Conference Call

On Thursday, November 1, 2012, at 11:00 a.m. Central Time, Pioneer Southwest
will discuss its financial and operating results for the third quarter with an
accompanying presentation. Instructions for listening to the call and viewing
the accompanying presentation are shown below.

Internet: www.pioneersouthwest.com
Select “Investors,” then “Earnings Calls & Webcasts” to listen to the
discussion and view the presentation.

Telephone: Dial (888) 455-2260 confirmation code: 2684624 five minutes before
the call to listen to the discussion. View the presentation via Pioneer
Southwest’s internet address above.

A replay of the webcast will be archived on Pioneer Southwest’s website. A
telephone replay will be available through November 20, 2012 by dialing (888)
203-1112 confirmation code: 2684624.

Pioneer Southwest is a Delaware limited partnership, headquartered in Dallas,
Texas, with current production and drilling operations in the Spraberry field
in West Texas. For more information, visit www.pioneersouthwest.com.

Except for historical information contained herein, the statements in this
News Release 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 Pioneer Southwest are
subject to a number of risks and uncertainties that may cause Pioneer
Southwest’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 Pioneer
Southwest’s commodity price derivative strategy, reliance on Pioneer Natural
Resources Company and its subsidiaries to manage Pioneer Southwest’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, resources and
personnel required to complete Pioneer Southwest’s operating activities,
access to and availability of transportation, processing and refining
facilities, Pioneer Southwest’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 Pioneer
Southwest’s credit facility and derivative contracts and the purchasers of
Pioneer Southwest’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 Pioneer Southwest’s 10-K and
10-Q Reports and other filings with the Securities and Exchange Commission. In
addition, Pioneer Southwest may be subject to currently unforeseen risks that
may have a materially adverse impact on it. Pioneer Southwest undertakes no
duty to publicly update these statements except as required by law.

Cautionary Note to U.S. Investors --The U.S. Securities and Exchange
Commission (“SEC”) prohibits oil and gas companies, in their filings with the
SEC, from disclosing estimates of oil or gas resources other than “reserves,”
as that term is defined by the SEC. In this news release, Pioneer Southwest
includes estimates of quantities of oil and gas using certain terms, such as
“estimated ultimate recovery,” “EUR” or other descriptions of volumes of
reserves, which terms include quantities of oil and gas that may not meet the
SEC’s definitions of proved, probable and possible reserves, and which the
SEC's guidelines strictly prohibit Pioneer Southwest from including in filings
with the SEC. These estimates are by their nature more speculative than
estimates of proved reserves and accordingly are subject to substantially
greater risk of being recovered by Pioneer Southwest. U.S. investors are urged
to consider closely the disclosures in the Partnership’s periodic filings with
the SEC. Such filings are available from the Partnership at 5205 N. O'Connor
Blvd., Suite 200, Irving, Texas 75039, Attention: Investor Relations, and the
Partnership’s website at www.pioneersouthwest.com. These filings also can be
obtained from the SEC by calling 1-800-SEC-0330.


PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                          
                                                  September 30,   December 31,
                                                  2012            2011
                                                                    
ASSETS
Current assets:
  Cash                                            $  3,494        $ 1,176
  Accounts receivable - trade                        16,532         18,063
  Inventories                                        1,273          920
  Prepaid expenses                                   331            240
  Deferred income taxes                              122            207
  Derivatives                                       4,354        5,619    
                 Total current assets               26,106       26,225   
                                                                    
Property, plant and equipment, at cost:
  Oil and gas properties, using the
  successful efforts method of accounting:
        Proved properties                            514,727        437,085
        Unproved properties                          98             —
        Accumulated depletion, depreciation         (157,086 )    (141,498 )
        and amortization
                 Total property, plant and          357,739      295,587  
                 equipment
                                                                    
Deferred income taxes                                136            1,008
Derivatives                                          5,621          3,665
Other, net                                          1,162        242      
                                                  $  390,764     $ 326,727  
                                                                    
                                                                    
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
  Accounts payable:
                 Trade                            $  17,655       $ 10,756
                 Due to affiliates                   1,012          830
  Interest payable                                   143            16
  Income taxes payable to affiliate                  120            550
  Derivatives                                        14,353         28,101
  Asset retirement obligations                       900            500
  Other current liabilities                         143          —        
                 Total current liabilities          34,326       40,753   
                                                                    
Long-term debt                                       88,000         32,000
Derivatives                                          2,692          16,953
Asset retirement obligations                         8,628          9,815
Other noncurrent liabilities                         333            —
Partners' equity                                     256,785        227,206
Commitments and contingencies                                    
                                                  $  390,764     $ 326,727  
                                                                             


PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per unit data)
                                                          
                                                                     
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2012          2011          2012          2011
Revenues:
   Oil and gas           $ 46,385      $ 55,200      $ 139,655     $ 159,486
   Other income            —             —             —             2
   Derivative gains       (13,592 )    55,761      18,176      28,852  
   (losses), net
                          32,793      110,961     157,831     188,340 
                                                                     
Costs and expenses:
   Oil and gas             14,468        10,002        36,487        28,378
   production
   Production and ad       3,974         3,629         11,801        10,460
   valorem taxes
   Depletion,
   depreciation and        5,771         4,372         15,589        11,272
   amortization
   General and             1,888         1,873         5,548         5,287
   administrative
   Accretion of
   discount on asset       189           229           567           684
   retirement
   obligations
   Interest                638           413           1,456         1,206
   Other                  221         —           969         —       
                          27,149      20,518      72,417      57,287  
                                                                     
Income before income       5,644         90,443        85,414        131,053
taxes
Income tax provision      (111    )    (946    )    (1,062  )    (1,353  )
Net income               $ 5,533      $ 89,497     $ 84,352     $ 129,700 
                                                                     
Allocation of net
income:
   General partner's     $ 6           $ 90          $ 84          $ 130
   interest
   Limited partners'       5,474         89,231        84,058        129,335
   interest
   Unvested
   participating          53          176         210         235     
   securities'
   interest
   Net income            $ 5,533      $ 89,497     $ 84,352     $ 129,700 
                                                                     
Net income per
common unit - basic      $ 0.15       $ 2.69       $ 2.35       $ 3.91    
and diluted
                                                                     
Weighted average
common units              35,714      33,114      35,714      33,114  
outstanding - basic
and diluted
                                                                     
Distributions
declared per common      $ 0.52       $ 0.51       $ 1.55       $ 1.52    
unit
                                                                             

                                                      
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                                     
                                                                     
                       Three Months Ended            Nine Months Ended
                       September 30,                 September 30,
                       2012          2011            2012          2011
                                                                     
Cash flows from
operating
activities:
Net income             $ 5,533       $ 89,497        $ 84,352      $ 129,700
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depletion,
depreciation and         5,771         4,372           15,589        11,272
amortization
Deferred income          90            885             957           943
taxes
Accretion of
discount on              189           229             567           684
asset retirement
obligations
Amortization of
debt related             64            45              174           136
costs
Amortization of
unit-based               228           141             639           372
compensation
Commodity
derivative               11,597        (62,330 )       (28,700 )     (52,702 )
related activity
Other noncash            221           —               969           —
expense
Change in
operating assets
and liabilities:
Accounts                 (3,014  )     (1,153  )       1,531         (3,116  )
receivable
Inventories              368           131             (353    )     (11     )
Prepaid expenses         (220    )     (242    )       (91     )     (93     )
Accounts payable         4,798         657             6,241         3,037
Interest payable         143           3               127           116
Income taxes
payable to               (514    )     (420    )       (430    )     (69     )
affiliate
Asset retirement         (576    )     (182    )       (1,477  )     (468    )
obligations
Other current           (82     )    —             (296    )    —       
liabilities
Net cash
provided by             24,596      31,633        79,799      89,801  
operating
activities
Cash flows from
investing
activities:
Additions to oil
and gas                 (25,160 )    (20,774 )      (76,778 )    (50,170 )
properties
Net cash used in
investing               (25,160 )    (20,774 )      (76,778 )    (50,170 )
activities
Cash flows from
financing
activities:
Borrowings under         21,000        17,500          107,000       50,404
credit facility
Principal
payments on              (2,000  )     (7,500  )       (51,000 )     (34,604 )
credit facility
Payment of               —             —               (1,291  )     —
financing fees
Distributions to        (18,590 )    (16,905 )      (55,412 )    (50,383 )
unitholders
Net cash
provided by
(used in)               410         (6,905  )      (703    )    (34,583 )
financing
activities
Net increase
(decrease) in            (154    )     3,954           2,318         5,048
cash
Cash, beginning         3,648       1,201         1,176       107     
of period
Cash, end of           $ 3,494      $ 5,155        $ 3,494      $ 5,155   
period
                                                                             


PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED SUMMARY PRODUCTION AND PRICE DATA
                                                
                           Three Months Ended           Nine Months Ended
                           September 30,                September 30,
                           2012        2011           2012        2011
                                                                        
Average Daily
Sales Volumes:
  Oil (Bbls) -              4,934       4,598        4,900       4,263
                                                                        
  Natural gas               1,665       1,707        1,449       1,578
  liquids (Bbls) -
                                                                        
  Gas (Mcf) -               6,388       6,744        6,665       6,503
                                                                        
  Total (BOE) -             7,664       7,429        7,459       6,925
                                                                        
Average Reported
Prices:
  Oil (per Bbl) -          $ 88.12       $ 108.46       $ 91.13       $ 115.95
                                                                        
  Natural gas
  liquids (per             $ 31.60       $ 45.27        $ 33.29       $ 42.94
  Bbl) -
                                                                        
  Gas (per Mcf) -          $ 2.62        $ 3.57         $ 2.24        $ 3.41
                                                                        
  Total (per BOE)          $ 65.79       $ 80.77        $ 68.33       $ 84.36
  -
                                                                        

                    PIONEER SOUTHWEST ENERGY PARTNERS L.P.
             UNAUDITED SUPPLEMENTAL EARNINGS PER UNIT INFORMATION
                 (in thousands, except for per unit amounts)

The Partnership follows the two-class method of calculating basic and diluted
net income per unit. Under the two-class method, generally accepted accounting
principles ("GAAP") provide that the net income applicable to the Partnership
be allocated to all securities that participate in the Partnership's earnings.
Accordingly, net income applicable to the Partnership is allocated to the
General Partner, unvested participating securities and common unitholders. Net
losses applicable to the Partnership are allocated to the General Partner and
common unitholders but only to unvested participating securities to the extent
that they receive distributions during loss periods because unvested
participating securities are not contractually obligated to share in the
Partnership's net losses. Unit- and unit-based awards with guaranteed dividend
or distribution participation rights qualify as "participating securities"
during their vesting periods. The Partnership's basic and diluted net income
per unit attributable to common unitholders is computed as (i) net income
applicable to the Partnership, (ii) less General Partner net income, (iii)
less unvested participating securities' basic and diluted net income (iv)
divided by weighted average basic and diluted units outstanding.

The following table provides a reconciliation of the Partnership's net income
applicable to the Partnership to basic and diluted net income attributable to
common unitholders, and the calculation of net income per common unit - basic
and diluted, for the three and nine months ended September30, 2012 and 2011:

                                               
                          Three Months Ended          Nine Months Ended
                          September 30,               September 30,
                          2012        2011           2012        2011
                                                                     
                                                                     
Net income
applicable to the         $ 5,533      $ 89,497       $ 84,352     $ 129,700
Partnership
Less:
    General
    partner's               (6     )     (90    )       (84    )     (130    )
    interest
    Unvested
    participating          (53    )    (176   )      (210   )    (235    )
    securities'
    interest
Basic and diluted
net income                $ 5,474     $ 89,231      $ 84,058    $ 129,335 
applicable to
common unitholders
                                                                     
Weighted average
basic and diluted          35,714     33,114       35,714     33,114  
units outstanding
                                                                     
    Net income per
    common unit -         $ 0.15      $ 2.69        $ 2.35      $ 3.91    
    basic and
    diluted
                                                                             

                    PIONEER SOUTHWEST ENERGY PARTNERS L.P.
              UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
                                (in thousands)

EBITDAX and distributable cash flow (as defined below) are presented herein
and reconciled to the GAAP measures of net cash provided by operating
activities and net income. Management of Pioneer Southwest Energy Partners
L.P. believes these financial measures provide additional information to the
investment community about the Partnership's ability to generate sufficient
cash flow to sustain or increase distributions to its unitholders, among other
items. In particular, EBITDAX is used in the Partnership's credit facility to
determine the interest rate that the Partnership will pay on outstanding
borrowings and to determine compliance with the leverage coverage test.
EBITDAX and distributable cash flow should not be considered as alternatives
to net cash provided by operating activities or net income, as defined by
GAAP.

                                                   
                                     Three Months Ended     Nine Months Ended
                                     September 30, 2012     September 30, 2012
                                                                 
Net cash provided by                 $    24,596            $    79,799
operating activities
  Add/(Deduct):
    Depletion, depreciation               (5,771    )            (15,589   )
    and amortization
    Deferred income taxes                 (90       )            (957      )
    Accretion of discount on
    asset retirement                      (189      )            (567      )
    obligations
    Amortization of debt                  (64       )            (174      )
    issuance costs
    Amortization of                       (228      )            (639      )
    unit-based compensation
    Commodity derivative                  (11,597   )            28,700
    related activity
    Other noncash expense                 (221      )            (969      )
    Changes in operating                 (903      )           (5,252    )
    assets and liabilities
                                                                 
Net income                                5,533                  84,352
  Add/(Deduct):
    Depletion, depreciation               5,771                  15,589
    and amortization
    Accretion of discount on
    asset retirement                      189                    567
    obligations
    Interest expense                      638                    1,456
    Income tax provision                  111                    1,062
    Amortization of                       228                    639
    unit-based compensation
    Commodity derivative                  11,597                 (28,700   )
    related activity
    Other noncash expense                221                  969       
                                                                 
EBITDAX (a)                               24,288                 75,934
  Add/(Deduct):
    Cash reserves to
    maintain production and               (6,149    )            (19,950   )
    cash flow
    Cash interest expense                 (574      )            (1,282    )
    Cash income taxes                    (21       )           (105      )
                                                                 
Distributable cash flow (b)          $    17,544           $    54,597    

_____________

(a) "EBITDAX" represents earnings before depletion, depreciation and
amortization expense; accretion of discount on asset retirement obligations;
interest expense; income taxes; amortization of unit-based compensation;
noncash commodity derivative related activity and other noncash expenses.
(b) Distributable cash flow equals EBITDAX adjusted for the Partnership's
estimated cash reserves to maintain production and cash flow, cash interest
expense and cash income taxes.


PIONEER SOUTHWEST ENERGY PARTNERS L.P.
SUPPLEMENTAL INFORMATION
Open Commodity Derivative Positions as of October 30, 2012
                                       
                                               Twelve Months Ending
                                  2012         December 31,
                                  Fourth                             
                                  Quarter      2013         2014        2015
                                                                        
Oil Derivatives:
Collar contracts with short
puts:
Volume (Bbls per day)             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 (Bbls per day)             3,000        3,000        —           —
Price per Bbl                     $ 79.32      $ 81.02      $ —         $ —
NGL Derivatives:
Swap contracts:
Volume (Bbls per day)             750          —            —           —
Price per Bbl (a)                 $ 35.03      $ —          $ —         $ —
Gas Derivatives:
Collar contracts with short
puts:
Volume (MMBtus per day)           —            —            —           5,000
Price per MMBtu:
Ceiling                           $ —          $ —          $ —         $ 5.00
Floor                             $ —          $ —          $ —         $ 4.00
Short put                         $ —          $ —          $ —         $ 3.00
Swap contracts:
Volume (MMBtus per day)           5,000        2,500        5,000       —
Price per MMBtu (b)               $ 6.43       $ 6.89       $ 4.00      $ —
Basis swap contracts:
Permian Basin index swaps         2,500        2,500        —           —
(MMBtus per day) (c)
Price differential                $ (0.30  )   $ (0.31  )   $ —         $ —
($/MMBtu)

_____________

(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.

                                                                           
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
                                                                           
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               $    (9,000    )       $    28,726
  (losses)
  NGL derivative gains                    (267      )            4,747
  (losses)
  Gas derivative losses                  (2,330    )           (4,773    )
    Total noncash derivative             (11,597   )           28,700    
    gains (losses), net
                                                                 
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                (1,995    )           (10,524   )
    losses, net
        Total derivative             $    (13,592   )       $    18,176    
        gains (losses), net
                                                                           

                    PIONEER SOUTHWEST ENERGY PARTNERS L.P.
              UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
                     (in millions, except per unit data)

Adjusted income excluding unrealized mark-to-market derivative losses, as
presented in this press release, is presented and reconciled to the
Partnership’s net income determined in accordance with GAAP because the
Partnership believes that this non-GAAP financial measure reflects an
additional way of viewing aspects of the Partnership’s business that, when
viewed together with its financial results computed in accordance with GAAP,
provides a more complete understanding of factors and trends affecting its
historical financial performance and future operating results, greater
transparency of underlying trends and greater comparability of results across
periods. In addition, management believes that this non-GAAP measure may
enhance investors’ ability to assess the Partnership’s historical and future
financial performance. This non-GAAP financial measure is not intended to be a
substitute for the comparable GAAP measure and should be read only in
conjunction with the Partnership’s consolidated financial statements prepared
in accordance with GAAP. Unrealized mark-to-market derivative gains and losses
will recur in future periods; however, the amount can vary significantly from
period to period. The table below reconciles the Partnership’s net income for
the three months ended September30, 2012, as determined in accordance with
GAAP, to adjusted income excluding unrealized mark-to-market derivative losses
for that quarter.

                                                              
                                                      After-tax     Per Common
                                                      Amounts       Unit
                                                                        
Net income                                            $    6        $   0.15
                                                                        
Unrealized mark-to-market derivative losses               11          0.32
                                                                        
Adjusted income excluding unrealized                  $    17       $   0.47
mark-to-market derivative losses

Contact:

Pioneer Southwest Energy Partners L.P.
Investors
Frank Hopkins, 972-969-4065
or
Eric Pregler, 972-969-5756
or
Media and Public Affairs
Susan Spratlen, 972-969-4018
or
Suzanne Hicks, 972-969-4020
 
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