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

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

Business Wire

DALLAS -- February 13, 2013

Pioneer Southwest Energy Partners L.P. (“Pioneer Southwest” or “the
Partnership”) (NYSE: PSE) today announced financial and operating results for
the quarter ended December 31, 2012.

Pioneer Southwest reported fourth quarter net income of $23 million, or $0.65
per common unit. Net income for the fourth quarter included unrealized
mark-to-market derivative gains of $5 million, or $0.15 per common unit.
Without the effect of this item, adjusted income for the fourth quarter was
$18 million, or $0.50 per common unit. Cash flow from operations for the
fourth quarter was $19 million.

Oil and gas sales for the fourth quarter averaged 7,668 barrels oil equivalent
per day (BOEPD). Production for the quarter included a loss of approximately
200 BOEPD due to reduced ethane recoveries associated with gas processing
facilities in the Spraberry field operating above capacity as a result of
greater-than-anticipated industry production growth.

The Partnership’s three-rig drilling program continued during the fourth
quarter, with 13 new wells being placed on production and the recompletion of
one well that was previously producing from only one interval. At the end of
the quarter, the Partnership had nine wells awaiting completion. The
Partnership has a large inventory of remaining oil drilling locations in the
Spraberry field, with approximately 160 40-acre locations and 1,275 20-acre
locations.

For the full year 2012, The Partnership drilled 42 wells and recompleted five
wells. Essentially all of the wells drilled were deepened to the Strawn
formation, and 35% of the wells were also 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. Capital spending for 2012 was $126 million and
generated full-year production growth of approximately 8% compared to 2011.

Pioneer Southwest expects to drill approximately 50 wells during 2013. Capital
expenditures are forecasted to be $120 million, including facilities. The 2013
drilling program is expected to generate production growth of 9% compared to
2012. As in 2012, essentially all of the wells will be drilled to the Strawn
formation, with approximately 65% of these wells drilled to the deeper Atoka
interval. In addition, recent successful horizontal Wolfcamp Shale drilling by
industry participants in Midland County is encouraging for future horizontal
drilling potential on the Partnership’s acreage in the area.

Fourth quarter oil sales averaged 5,291 barrels per day (BPD), natural gas
liquids (NGL) sales averaged 1,208 BPD and gas sales averaged 7 million cubic
feet per day. The fourth quarter average price for oil was $83.78 per barrel.
The average price for NGLs was $30.97 per barrel, and the average price for
gas was $3.05 per thousand cubic feet.

Production costs (including production and ad valorem taxes) for the fourth
quarter averaged $24.86 per barrel oil equivalent (BOE). Depreciation,
depletion and amortization expense averaged $9.15 per BOE.

The Partnership has additional borrowing capacity under its credit facility of
$135 million as of December 31, 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 December 31, 2012. The
distribution was paid on February 11, 2013 to unitholders of record at the
close of business on February 4, 2013. 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
65% in 2013, 70% in 2014 and 10% in 2015.

Proved Reserves

The Partnership’s total proved oil and gas reserves as of December 31, 2012,
were 49 million barrels oil equivalent (MMBOE), a decrease of 1 MMBOE from
year-end 2011. The proved reserve decrease from year-end 2011 was comprised of
production during 2012 of 3 MMBOE and negative price revisions of 1 MMBOE
related to lower gas prices, partially offset by proved reserve additions of 3
MMBOE from the Partnership’s drilling program and acquisitions. The NYMEX
prices used for 2012 reserves reporting purposes were $94.84 per barrel for
oil and $2.76 per million British thermal units (MMBtu) for gas compared to
$96.13 per barrel for oil and $4.12 per MMBtu for gas used to calculate proved
reserves for 2011.

Netherland, Sewell & Associates, Inc., an independent reserve engineering
firm, audited all of Pioneer Southwest’s proved reserves at year-end 2012.

First Quarter 2013 Financial Outlook

The following paragraphs provide the Partnership’s first quarter of 2013
outlook for certain operating and financial items.

Production is forecasted to average 7,400 BOEPD to 7,900 BOEPD. This assumes a
reduction of 200 BOEPD to 300 BOEPD due to continuing reduced ethane
recoveries associated with gas processing facilities in the Spraberry field
operating above capacity during the first quarter. New gas processing capacity
of 200 million cubic feet per day is expected to come on line during April and
eliminate the reduced ethane recoveries thereafter. The guidance for the first
quarter excludes the effects of potential ethane rejection to the extent the
Partnership decides to do so in the future.

Production costs (including production and ad valorem taxes) are expected to
average $23.50 to $26.50 per BOE based on current NYMEX strip prices for oil,
NGLs and gas. Depreciation, depletion and amortization expense is expected to
average $9.00 per BOE to $10.00 per BOE. General and administrative expense is
expected to be $1.5 million to $2.5 million. Interest expense is expected to
be $0.7 million to $1.0 million. 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, February 14, 2013, at 11:00 a.m. Central Time, Pioneer Southwest
will discuss its financial and operating results for the fourth 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.
                   
                   Dial (888) 556-4997 confirmation code: 7448707 five minutes
      Telephone:   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 March 11, 2013 by dialing (888)
203-1112 confirmation code: 7448707.

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, fractionation 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.

An audit of proved reserves follows the general principles set forth in the
standards pertaining to the estimating and auditing of oil and gas reserve
information promulgated by the Society of Petroleum Engineers ("SPE"). A
reserve audit as defined by the SPE is not the same as a financial audit.
Please see the Partnership’s Annual Report on Form 10-K for a general
description of the concepts included in the SPE's definition of a reserve
audit.

                                                              
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                                  
                                                 December 31,     December 31,
                                                 2012             2011
                                                                  
ASSETS
Current assets:
Cash                                             $ 1,601          $ 1,176
Accounts receivable - trade                        15,651           18,063
Inventories                                        1,388            920
Prepaid expenses                                   228              240
Deferred income taxes                              89               207
Derivatives                                       4,553          5,619    
Total current assets                              23,510         26,225   
                                                                  
Property, plant and equipment, at cost:
Oil and gas properties, using the successful
efforts method of accounting:
Proved properties                                  556,915          437,085
Unproved properties                                5,682            —
Accumulated depletion, depreciation and           (163,542 )      (141,498 )
amortization
Total property, plant and equipment               399,055        295,587  
                                                                  
Deferred income taxes                              —                1,008
Derivatives                                        7,227            3,665
Other, net                                        1,097          242      
                                                 $ 430,889       $ 326,727  
                                                                  
                                                                  
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable:
Trade                                            $ 15,557         $ 10,756
Due to affiliates                                  1,277            830
Interest payable                                   9                16
Income taxes payable to affiliate                  70               550
Derivatives                                        13,390           28,101
Asset retirement obligations                       900              500
Other current liabilities                         146            —        
Total current liabilities                         31,349         40,753   
                                                                  
Long-term debt                                     126,000          32,000
Derivatives                                        150              16,953
Deferred income taxes                              156              —
Asset retirement obligations                       11,201           9,815
Other noncurrent liabilities                       400              —
Partners' equity                                   261,633          227,206
Commitments and contingencies                                    
                                                 $ 430,889       $ 326,727  
                                                                             

                                                          
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per unit data)
                                                                      
                                                                      
                   Three Months Ended               Twelve Months Ended
                   December 31,                     December 31,
                   2012           2011              2012            2011
Revenues:
Oil and gas        $ 46,193       $ 53,876          $ 185,848       $ 213,362
Other income         —              —                 —               2
Derivative
gains               4,262        (40,577 )        22,438        (11,725 )
(losses), net
                    50,455       13,299          208,286       201,639 
                                                                      
Costs and
expenses:
Oil and gas          13,421         10,049            49,908          38,427
production
Production and
ad valorem           4,114          3,324             15,915          13,784
taxes
Depletion,
depreciation         6,455          4,262             22,044          15,534
and
amortization
General and          1,868          1,935             7,416           7,222
administrative
Accretion of
discount on
asset                191            229               758             913
retirement
obligations
Interest             731            399               2,187           1,605
Other               189          —               1,158         —       
                    26,969       20,198          99,386        77,485  
                                                                      
Income (loss)
before income        23,486         (6,899  )         108,900         124,154
taxes
Income tax
benefit             (275   )      15              (1,337  )      (1,338  )
(provision)
Net income         $ 23,211      $ (6,884  )       $ 107,563      $ 122,816 
(loss)
                                                                      
Allocation of
net income
(loss):
General
partner's          $ 24           $ (7      )       $ 108           $ 123
interest
Limited
partners'            23,121         (6,910  )         107,179         122,466
interest
Unvested
participating       66           33              276           227     
securities'
interest
Net income         $ 23,211      $ (6,884  )       $ 107,563      $ 122,816 
(loss)
                                                                      
Net income
(loss) per
common unit -      $ 0.65        $ (0.21   )       $ 3.00         $ 3.68    
basic and
diluted
                                                                      
Weighted
average common
units               35,714       33,651          35,714        33,249  
outstanding -
basic and
diluted
                                                                      
Distributions
declared per       $ 0.52        $ 0.51           $ 2.07         $ 2.03    
common unit
                                                                              

                                                           
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                                     
                                                                     
                  Three Months Ended                Twelve Months Ended
                  December 31,                      December 31,
                  2012            2011              2012             2011
                                                                     
Cash flows
from
operating
activities:
Net income        $ 23,211        $ (6,884  )       $ 107,563        $ 122,816
(loss)
Adjustments
to reconcile
net income
(loss) to net
cash provided
by operating
activities:
Depletion,
depreciation        6,455           4,262             22,044           15,534
and
amortization
Deferred            325             (142    )         1,282            801
income taxes
Accretion of
discount on
asset               191             229               758              913
retirement
obligations
Amortization
of debt             65              46                239              182
related costs
Amortization
of unit-based       227             142               866              514
compensation
Commodity
derivative          (5,310  )       33,135            (34,010  )       (19,567  )
related
activity
Other noncash       189             —                 1,158            —
expense
Change in
operating
assets and
liabilities:
Accounts            881             877               2,412            (2,239   )
receivable
Inventories         (115    )       (26     )         (468     )       (37      )
Prepaid             103             113               12               20
expenses
Accounts            (6,143  )       (3,732  )         98               (695     )
payable
Interest            (134    )       (130    )         (7       )       (14      )
payable
Income taxes
payable to          (50     )       127               (480     )       58
affiliate
Asset
retirement          (351    )       (167    )         (1,828   )       (635     )
obligations
Other current      (119    )      —               (415     )      —        
liabilities
Net cash
provided by        19,425        27,850          99,224         117,651  
operating
activities
Cash flows
from
investing
activities:
Additions to
oil and gas        (40,728 )      (22,504 )        (117,506 )      (72,674  )
properties
Net cash used
in investing       (40,728 )      (22,504 )        (117,506 )      (72,674  )
activities
Cash flows
from
financing
activities:
Borrowings
under credit        38,000          15,000            145,000          65,404
facility
Principal
payments on         —               (80,000 )         (51,000  )       (114,604 )
credit
facility
Proceeds from
issuance of
partnership         —               72,504            —                72,504
units, net of
issuance
costs
Partner             —               76                —                76
contributions
Payment of
financing           —               —                 (1,291   )       —
fees
Distributions
to                 (18,590 )      (16,905 )        (74,002  )      (67,288  )
unitholders
Net cash
provided by
(used in)          19,410        (9,325  )        18,707         (43,908  )
financing
activities
Net increase
(decrease) in       (1,893  )       (3,979  )         425              1,069
cash
Cash,
beginning of       3,494         5,155           1,176          107      
period
Cash, end of      $ 1,601        $ 1,176          $ 1,601         $ 1,176    
period
                                                                                

                                                    
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
UNAUDITED SUMMARY PRODUCTION AND PRICE DATA
                                                          
                               Three Months Ended         Twelve Months Ended
                               December 31,               December 31,
                               2012      2011           2012      2011
                                                                      
Average Daily Sales
Volumes:
Oil (Bbls)                      5,291      4,430         4,998      4,305
                                                                      
Natural gas liquids (Bbls)      1,208      1,478         1,388      1,553
                                                                      
Gas (Mcf)                       7,013      6,527         6,753      6,509
                                                                      
Total (BOE)                     7,668      6,995         7,512      6,943
                                                                      
Average Reported Prices:
Oil (per Bbl)                  $ 83.78     $ 113.87       $ 89.18     $ 115.41
                                                                      
Natural gas liquids (per       $ 30.97     $ 42.12        $ 32.78     $ 42.74
Bbl)
                                                                      
Gas (per Mcf)                  $ 3.05      $ 2.91         $ 2.45      $ 3.28
                                                                      
Total (per BOE)                $ 65.48     $ 83.72        $ 67.60     $ 84.20
                                                                        

                    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 (loss) 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 (loss) per unit attributable to common
unitholders is computed as (i) net income (loss) applicable to the
Partnership, (ii) less General Partner net income (loss), (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
(loss) applicable to the Partnership to basic and diluted net income (loss)
attributable to common unitholders, and the calculation of net income (loss)
per common unit - basic and diluted, for the three and twelve months ended
December31, 2012 and 2011:

                 Three Months Ended           Twelve Months Ended
                   December 31,                    December 31,
                   2012         2011             2012          2011
                                                                   
                                                                   
Net income
(loss)
applicable to      $ 23,211       $ (6,884 )       $ 107,563       $ 122,816
the
Partnership
Less:
General
partner's            (24    )       7                (108    )       (123    )
interest
Unvested
participating       (66    )      (33    )        (276    )      (227    )
securities'
interest
Basic and
diluted net
income (loss)      $ 23,121      $ (6,910 )       $ 107,179      $ 122,466 
applicable to
common
unitholders
                                                                   
Weighted
average basic
and diluted         35,714       33,651         35,714        33,249  
units
outstanding
                                                                   
Net income
(loss) per
common unit -      $ 0.65        $ (0.21  )       $ 3.00         $ 3.68    
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 (loss). 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 and
interest coverage tests. EBITDAX and distributable cash flow should not be
considered as alternatives to net cash provided by operating activities or net
income (loss), as defined by GAAP.

                                  Three Months Ended   Twelve Months Ended
                                    December 31, 2012      December 31, 2012
                                                           
Net cash provided by operating      $    19,425            $    99,224
activities
Add/(Deduct):
Depletion, depreciation and              (6,455    )            (22,044    )
amortization
Deferred income taxes                    (325      )            (1,282     )
Accretion of discount on asset           (191      )            (758       )
retirement obligations
Amortization of debt issuance            (65       )            (239       )
costs
Amortization of unit-based               (227      )            (866       )
compensation
Commodity derivative related             5,310                  34,010
activity
Other noncash expense                    (189      )            (1,158     )
Changes in operating assets and         5,928                676        
liabilities
                                                           
Net income                               23,211                 107,563
Add/(Deduct):
Depletion, depreciation and              6,455                  22,044
amortization
Accretion of discount on asset           191                    758
retirement obligations
Interest expense                         731                    2,187
Income tax provision                     275                    1,337
Amortization of unit-based               227                    866
compensation
Commodity derivative related             (5,310    )            (34,010    )
activity
Other noncash expense                   189                  1,158      
                                                           
EBITDAX (a)                              25,969                 101,903
Add/(Deduct):
Cash reserves to maintain                (4,856    )            (24,806    )
production and cash flow
Cash interest expense                    (666      )            (1,948     )
Current income taxes                    50                   (55        )
                                                           
Distributable cash flow (b)         $    20,497           $    75,094     

__________

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

                                        
PIONEER SOUTHWEST ENERGY PARTNERS L.P.
SUPPLEMENTAL INFORMATION
Open Commodity Derivative Positions as of February 8, 2013
                                           
                                           Twelve Months Ending
                                           December 31,
                                                                  
                                           2013           2014         2015
                                                                       
Oil Derivatives:
Collar contracts with short puts:
Volume (Bbls per day)                        1,750          5,000        —
Price per Bbl:
Ceiling                                    $ 116.00       $ 105.74     $ —
Floor                                      $ 88.14        $ 100.00     $ —
Short put                                  $ 73.14        $ 80.00      $ —
Swap contracts:
Volume (Bbls per day)                        3,000          —            —
Price per Bbl                              $ 81.02        $ —          $ —
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)                      2,500          5,000        —
Price per MMBtu (a)                        $ 6.89         $ 4.00       $ —
Basis swap contracts:
Permian Basin index swaps (MMBtus per        2,500          —            —
day) (b)
Price differential ($/MMBtu)               $ (0.31  )     $ —          $ —

__________

(a)  Represents the NYMEX Henry Hub index price on the derivative trade date.
      Represents swaps that fix the basis differentials between the Permian
(b)   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, Net
(in thousands)
                                                      
                                    Three Months Ended     Twelve Months Ended
                                    December 31, 2012      December 31, 2012
                                                           
Noncash changes in fair value:
Oil derivative gains                $    5,623             $    34,349
NGL derivative gains                     248                    4,995
Gas derivative losses                   (561      )           (5,334     )
Total noncash derivative gains,         5,310                34,010     
net
                                                           
Cash settled changes in fair
value:
Oil derivative losses                    (2,139    )            (15,970    )
NGL derivative losses                    (269      )            (2,084     )
Gas derivative gains                    1,360                6,482      
Total cash derivative losses,           (1,048    )           (11,572    )
net
Total derivative gains, net         $    4,262            $    22,438     
                                                                           

                    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 gains, 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 December31, 2012, as determined in accordance with
GAAP, to adjusted income excluding unrealized mark-to-market derivative gains
for that quarter.

                                                    After-tax   Per Common
                                                      Amounts       Unit
                                                                    
Net income                                            $  23         $  0.65
                                                                    
Unrealized mark-to-market derivative gains              (5  )        (0.15 )
                                                                    
Adjusted income excluding unrealized                  $  18        $  0.50  
mark-to-market derivative gains

Contact:

Pioneer Southwest Energy Partners L.P.
Investors:
Frank Hopkins, 972-969-4065
or
Eric Pregler, 972-969-5756
or
Josh Jones, 972-969-5822
or
Media and Public Affairs:
Susan Spratlen, 972-969-4018
or
Suzanne Hicks, 972-969-4020
 
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