UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2017~~2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 1-13245

______________________________

PIONEER NATURAL RESOURCES COMPANY

(Exact name of Registrant as specified in its charter)



Delaware		75-2702753
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5205 N. O'Connor Blvd., Suite 200, Irving, Texas		75039
(Address of principal executive offices)		(Zip Code)

(972) 444-9001

(Registrant's telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No ý

Number of shares of Common Stock outstanding as of May ~~1, 2017 170,094,162~~2, 2018 170,427,473

PIONEER NATURAL RESOURCES COMPANY

TABLE OF CONTENTS



		Page
Cautionary Statement Concerning Forward-Looking Statements		3

Definitions of Certain Terms and Conventions Used Herein		4

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, ~~2017~~2018 and December 31, ~~2016~~2017	5

	Consolidated Statements of Operations for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017	7

	Consolidated Statement of Equity for the three months ended March 31, ~~2017~~2018	8

	Consolidated Statements of Cash Flows for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017	9

	Notes to Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2325

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3336

Item 4.	Controls and Procedures	3740

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3841

Item 1A.	Risk Factors	3841

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3941

Item 4.	Mine Safety Disclosures	3941

Item 6.	Exhibits	4042

Signatures		41

~~Exhibit Index~~		4243

PIONEER NATURAL RESOURCES COMPANY

Cautionary Statement Concerning Forward-Looking Statements

The information in this Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate" or the negative of such terms and similar expressions as they relate to Pioneer Natural Resources Company ("Pioneer" or the "Company") are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control.

These risks and uncertainties include, among other things, volatility of commodity prices, 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, completion of planned divestitures, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company's drilling and operating activities, access to and availability of transportation, processing, fractionation, refining and ~~refining~~export facilities, Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer's credit facility, investment instruments and derivative contracts and purchasers of Pioneer's oil, NGL and gas production, uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, cybersecurity risks, ability to implement planned stock repurchases, the risks associated with the ownership and operation of the Company's industrial sand mining and oilfield services businesses, and acts of war or terrorism. These and other risks are described in the Company's Annual Report on Form 10-K, this Report and other filings with the United States Securities and Exchange Commission. In addition, the Company 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. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part 1, Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition, Markets and Regulations," "Part I, Item 1A. Risk Factors," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no duty to publicly update these statements except as required by law.

PIONEER NATURAL RESOURCES COMPANY

Definitions of Certain Terms and Conventions Used Herein

Within this Report, the following terms and conventions have specific meanings:

"Bbl" means a standard barrel containing 42 United States gallons.

"BOE" means a barrel of oil equivalent and is a standard convention used to express oil and gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the relative energy content method by using the ratio of six thousand cubic feet of gas to one Bbl of oil or natural gas liquid.

"BOEPD" means BOE per day.

"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.

"Conway" means the daily average natural gas liquids components as priced in Oil Price Information Service ("OPIS") in the table "U.S. and Canada LP – Gas Weekly Averages" at Conway, Kansas.

"DD&A" means depletion, depreciation and amortization.

"GAAP" means accounting principles that are generally accepted in the United States of America.

"HH" means Henry Hub, a distribution hub on the natural gas pipeline in Louisiana that serves as the delivery location for futures contracts on the NYMEX.

"LIBOR" means London Interbank Offered Rate, which is a market rate of interest.

"LLS" means Louisiana Light Sweet oil, a light, sweet blend of oil produced from the Gulf of Mexico.

"Mcf" means one thousand cubic feet and is a measure of gas volume.

"MMBtu" means one million Btus.

"Mont Belvieu" means the daily average natural gas liquids components as priced in OPIS in the table "U.S. and Canada LP – Gas Weekly Averages" at Mont Belvieu, Texas.

"NGL" means natural gas liquid.

"NYMEX" means the New York Mercantile Exchange.

"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.

"Proved reserves" mean the quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons ("LKH") as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil ("HKO") elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

"U.S." means United States.

With respect to information on the working interest in wells, drilling locations and acreage, "net" wells, drilling locations and acres are determined by multiplying "gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.

Unless otherwise indicated, all currency amounts are expressed in U.S. dollars.

"WTI" means West Texas Intermediate oil, a light, sweet blend of oil produced from the fields in western Texas.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions)


	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	663		$	1,118		$	1,001		$	896
Short-term investments	1,546			1,441			722			1,213
Accounts receivable:
Trade, net	426			517			826			644
Due from affiliates	1			1			—			1
Income taxes receivable	3			3			7			7
Inventories	200			181			218			212
Assets held for sale							20			—
Derivatives	73			14			7			11
Other	28			23			23			23
Total current assets	2,940			3,298			2,824			3,007
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of accounting:
Proved properties	18,780			18,566			20,892			20,404
Unproved properties	448			486			568			558
Accumulated depletion, depreciation and amortization	(8,546		)	(8,211		)	(9,230		)	(9,196		)
Total property, plant and equipment	10,682			10,841			12,230			11,766
Long-term investments	168			420			93			66
Goodwill	272			272			269			270
Other property and equipment, net	1,577			1,529			1,799			1,762
Derivatives	9			—
Other assets, net	101			99			108			132
	$	15,749		$	16,459		$	17,323		$	17,003

The financial information included as of March 31, ~~2017~~2018 has been prepared by management

without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS (continued)

(in millions, except share data)


	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(Unaudited)						(Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade	$	751		$	741		$	1,222		$	1,174
Due to affiliates	51			134			48			108
Interest payable	39			68			38			59
Income taxes payable							1			—
Current portion of long-term debt	—			485			449			449
Liabilities held for sale							6			—
Derivatives	9			77			333			232
Other	102			61			153			106
Total current liabilities	952			1,566			2,250			2,128
Long-term debt	2,729			2,728			2,284			2,283
Derivatives	2			7			54			23
Deferred income taxes	1,366			1,397			928			899
Other liabilities	352			350			405			391
Equity:
Common stock, $.01 par value; 500,000,000 shares authorized; 173,779,363 and 173,221,845 shares issued as of March 31, 2017 and December 31, 2016, respectively	2			2
Common stock, $.01 par value; 500,000,000 shares authorized; 174,288,821 and 173,796,743 shares issued as of March 31, 2018 and December 31, 2017, respectively							2			2
Additional paid-in capital	8,914			8,892			8,991			8,974
Treasury stock at cost: 3,685,461 and 3,497,742 shares as of March 31, 2017 and December 31, 2016, respectively	(254		)	(218		)
Treasury stock at cost: 3,869,865 and 3,608,132 shares as of March 31, 2018 and December 31, 2017, respectively							(294		)	(249		)
Retained earnings	1,679			1,728			2,698			2,547
Total equity attributable to common stockholders	10,341			10,404			11,397			11,274
Noncontrolling interests in consolidated subsidiaries	7			7			5			5
Total equity	10,348			10,411			11,402			11,279
Commitments and contingencies
	$	15,749		$	16,459		$	17,323		$	17,003

The financial information included as of March 31, ~~2017~~2018 has been prepared by management

without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2017			2016			2018			2017
Revenues and other income:
Oil and gas	$	809		$	409		$	1,266		$	809
Sales of purchased oil and gas	484			223			1,070			316
Interest and other	13			8			18			13
Derivative gains, net	151			43
Derivative gains (losses), net							(208		)	151
Gain on disposition of assets, net	11			2			4			11
	1,468			685			2,150			1,300
Costs and expenses:
Oil and gas production	141			156			213			141
Production and ad valorem taxes	47			29			76			47
Depletion, depreciation and amortization	337			353			357			337
Purchased oil and gas	503			243			1,054			335
Impairment of oil and gas properties	285			32			—			285
Exploration and abandonments	33			59			35			33
General and administrative	84			74			90			84
Accretion of discount on asset retirement obligations	5			5			4			5
Interest	46			55			36			46
Other	60			87			57			60
	1,541			1,093			1,922			1,373
Loss before income taxes	(73		)	(408		)
Income tax benefit	31			141
Net loss attributable to common stockholders	$	(42	)	$	(267	)
Income (loss) before income taxes							228			(73		)
Income tax benefit (provision)							(50		)	31
Net income (loss) attributable to common stockholders							$	178		$	(42	)

Basic and diluted net loss per share attributable to common stockholders	$	(0.25	)	$	(1.65	)
Basic and diluted net income (loss) per share attributable to common stockholders							$	1.04		$	(0.25	)

Weighted average shares outstanding:
Basic	170			162			170			170
Diluted	170			162			171			170

Dividends declared per share	$	0.04		$	0.04		$	0.16		$	0.04

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENT OF EQUITY

(in millions, except share data and dividends per share)

(Unaudited)

Equity Attributable To Common Stockholders

Shares
Outstanding

Common
Stock

Additional
Paid-in
Capital

Treasury
Stock

Retained
Earnings

Noncontrolling
Interests
Total Equity
(in thousands)
Balance as of December 31, 2016 169,724
$ 2
$ 8,892
$ (218 ) $ 1,728
$ 7
$ 10,411
Dividends declared ($0.04 per share) —
—
—
—
(7 ) —
(7 )
Purchases of treasury stock (188 ) —
—
(36 ) —
—
(36 )
Compensation costs:
Vested compensation awards 558
—
—
—
—
—
—
Compensation costs included in net loss —
—
22
—
—
—
22
Net loss —
—
—
—
(42 ) —
(42 )
Balance as of March 31, 2017 170,094
$ 2
$ 8,914
$ (254 ) $ 1,679
$ 7
$ 10,348



			Equity Attributable To Common Stockholders
	Shares Outstanding		Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings			Noncontrolling Interests		Total Equity
	(in thousands)
Balance as of December 31, 2017	170,189		$	2	$	8,974	$	(249	)	$	2,547		$	5	$	11,279
Dividends declared ($0.16 per share)	—		—		—		—			(27		)	—		(27		)
Purchases of treasury stock	(262	)	—		—		(45		)	—			—		(45		)
Compensation costs:
Vested compensation awards	492		—		—		—			—			—		—
Compensation costs included in net income	—		—		17		—			—			—		17
Net income	—		—		—		—			178			—		178
Balance as of March 31, 2018	170,419		$	2	$	8,991	$	(294	)	$	2,698		$	5	$	11,402

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows from operating activities:
Net loss	$	(42	)	$	(267	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)							$	178		$	(42	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization	337			353			357			337
Impairment of oil and gas properties	285			32			—			285
Impairment of inventory and other property and equipment	—			4
Exploration expenses, including dry holes	10			40			7			10
Deferred income taxes	(31		)	(141		)	50			(31		)
Gain on disposition of assets, net	(11		)	(2		)	(4		)	(11		)
Accretion of discount on asset retirement obligations	5			5			4			5
Interest expense	1			5			1			1
Derivative related activity	(141		)	175			136			(141		)
Amortization of stock-based compensation	22			21			17			22
Other	25			17			20			25
Change in operating assets and liabilities:
Accounts receivable	92			33			(181		)	92
Income taxes receivable	—			40
Inventories	(19		)	—			(6		)	(19		)
Investments	4			—			4			4
Other current assets	(6		)	(3		)	(3		)	(6		)
Accounts payable	(153		)	(169		)	(9		)	(153		)
Interest payable	(29		)	(16		)	(21		)	(29		)
Income taxes payable							1			—
Other current liabilities	15			(17		)	3			15
Net cash provided by operating activities	364			110			554			364
Cash flows from investing activities:
Proceeds from disposition of assets, net of cash sold	78			1
Proceeds from disposition of assets							4			78
Proceeds from investments	458			—			555			458
Purchase of investments	(315		)	(914		)	(94		)	(315		)
Additions to oil and gas properties	(433		)	(471		)	(818		)	(433		)
Additions to other assets and other property and equipment, net	(86		)	(79		)	(51		)	(86		)
Net cash used in investing activities	(298		)	(1,463		)	(404		)	(298		)
Cash flows from financing activities:
Principal payments on long-term debt	(485		)	—			—			(485		)
Proceeds from issuance of common stock, net of issuance costs	—			1,597
Purchases of treasury stock	(36		)	(23		)	(45		)	(36		)
Net cash provided by (used in) financing activities	(521		)	1,574
Net cash used in financing activities							(45		)	(521		)
Net increase (decrease) in cash and cash equivalents	(455		)	221			105			(455		)
Cash and cash equivalents, beginning of period	1,118			1,391			896			1,118
Cash and cash equivalents, end of period	$	663		$	1,612		$	1,001		$	663

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

NOTE A.1. Organization and Nature of Operations

Pioneer Natural Resources Company ("Pioneer" or the "Company") is a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. The Company is a large independent oil and gas exploration and production company that explores for, develops and produces oil, natural gas liquids ("NGLs") and gas within the United States, with operations primarily in the Permian Basin in West Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado and the West Panhandle field in the Texas Panhandle.

NOTE B.2. Basis of Presentation

Presentation. In the opinion of management, the consolidated financial statements of the Company as of March 31, ~~2017~~2018 and for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed in or omitted from this report pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). These consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017.

Certain reclassifications have been made to the ~~2016~~2017 financial statement and footnote amounts in order to conform to the ~~2017~~2018 presentation.

~~Issuance of common stock.~~Assets held for sale. ~~During~~On the ~~first and second quarters of 2016,~~date at which the Company ~~issued 13.8 million~~meets all the held for sale criteria, the Company discontinues the recording of depletion and ~~6.0 million shares~~depreciation of ~~common stock, respectively,~~the assets or asset group to be sold and ~~received cash proceeds~~reclassifies the assets and related liabilities to be sold as held for sale on the accompanying consolidated balance sheets. The assets and liabilities are measured at the lower of ~~$1.6 billion and $937 million, respectively, net of associated underwriter discounts and offering expenses.~~their carrying amount or estimated fair value less cost to sell. See Note 3 for additional information about the Company's divestitures.

Adoption of New ~~accounting pronouncements.~~Accounting Standards. In ~~March 2016,~~May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 ("ASC 606") "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in ASC 605 “Revenue Recognition” ("ASC 605"), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective transition method. See Note 11 for a discussion of the impact to the Company's recognition of revenue associated with the adoption of ASC 606.

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as certain classification changes in the statement of cash flows. The Company adopted this standard on January 1, 2017. See Note M14 for ~~additional~~a discussion ~~on the impact~~ of the ~~adoption~~impact to the Company's income tax ~~provision.~~provision associated with the adoption of ASU 2016-09.

New accounting pronouncements. In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and makes certain changes to the ~~way~~accounting for lease ~~expenses are accounted for.~~expenses. This update is effective for fiscal years beginning after December 15, 2018 and for interim periods beginning the following year. This update should be applied using a modified retrospective approach, and early adoption is permitted. The Company anticipates that the adoption of ASU 2016-02 for its leasing arrangements will likely (i) increase the Company's recorded assets and liabilities, (ii) increase depreciation, depletion and amortization expense, (iii) increase interest expense and (iv) decrease lease/rental expense. The Company is currently evaluating each of its lease arrangements and has not determined the aggregate amount of change expected for each category.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, "Revenue Recognition," and most industry-specific guidance. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 for one year to fiscal years beginning after December 15, 2017. Early adoption is permitted for fiscal years beginning after December 15, 2016. In May 2016, the FASB issued ASU 2016-11, which rescinded guidance from the SEC on accounting for gas balancing arrangements and will eliminate the use of the entitlements method. Entities have the option of using either a full retrospective or modified approach to adopt the new standards and the Company plans to utilize the modified approach to adopt the new standard upon its effective date. The Company is evaluating the new guidance, including identifying revenue

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

~~streams~~NOTE 3. Divestitures

In February 2018, the Company announced its intention to divest its properties in the South Texas, Raton and ~~reviewing contracts~~West Panhandle fields and ~~procedures currently in place. The Company does not anticipate this standard will have a material impact~~focus its efforts and capital resources on its ~~consolidated financial statements.~~

~~NOTE C. Acquisitions and Divestitures~~

Permian Basin ~~Acquisition.~~assets. No assurance can be given that the sales will be completed in accordance with the Company's plan or on terms and at prices acceptable to the Company.

In ~~August 2016,~~March 2018, the Company ~~acquired~~entered into a purchase and sale agreement with an unaffiliated third party to sell approximately ~~28,000~~10,200 net acres in the ~~Permian Basin, with net production~~western portion of the Eagle Ford Shale ("West Eagle Ford Shale") for cash proceeds, before normal closing adjustments, of approximately ~~1,400 barrels~~$103 million, of ~~oil equivalent per day ("BOEPD"), from an unaffiliated third party for $428~~which $22 million ~~including normal closing adjustments.~~was received in March 2018. The ~~acquisition was accounted for using~~Company classified the ~~acquisition method under ASC 805, "Business Combinations," which requires acquired~~West Eagle Ford Shale assets and liabilities ~~to be recorded at fair value~~as held for sale in the accompanying consolidated balance sheet as of ~~the acquisition date.~~

~~The following table represents the allocation~~March 31, 2018. These asset and liabilities were composed of the ~~acquisition price to the~~following as of March 31, 2018 (the Company had no assets ~~acquired and the liabilities assumed based on their fair value at the acquisition date (in millions)~~held for sale as of December 31, 2017):

Assets acquired:
Proved properties $ 79
Unproved properties 347
Other property and equipment 5
Liabilities assumed:
Asset retirement obligations (2 )
Other liabilities (1 )
Net assets acquired $ 428



	March 31, 2018
	(in millions)
Composition of assets included in assets held for sale:
Current assets	$	19
Goodwill	1
Total assets	$	20

Composition of liabilities included in liabilities held for sale:
Other liabilities	6
Total liabilities	$	6

~~The fair value measurements~~See Note 16 for additional information about the completion of the ~~net assets acquired are based on inputs that are not observable in the market and, therefore, represent Level 3 inputs in the fair value hierarchy (see Note D for a description~~sale of the input levels in the fair value hierarchy). The Company calculated the fair values of the acquired proved properties and asset retirement obligations using a discounted future cash flow model that utilizes management's estimates of (i) proved reserves, (ii) forecasted production rates, (iii) future operating, development and plugging and abandonment costs, (iv) future commodity prices and (v) a discount rate of 10 percent for proved properties and seven percent for asset retirement obligations. The Company calculated the fair values of the acquired unproved properties based on the average price per acre in comparable market transactions. The operating results attributableCompany's West Eagle Ford Shale assets subsequent to ~~the acquired assets and liabilities assumed are included in the Company's accompanying consolidated statements of operations since the date of acquisition.~~

~~Divestitures.~~ ~~For the three months ended~~March 31, ~~2017 and March 31, 2016, the Company recorded net gains on the disposition of assets of $11 million and $2 million, respectively.~~ 2018.

During the three months ended March 31, 2017, the Company completed the sales of nonstrategic proved and unproved properties in the Permian Basin for cash proceeds of ~~$77~~$72 million, which resulted in a gain of $10 million.

NOTE D.4. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company's own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The three input levels of the fair value hierarchy are as follows:

Level 1 – quoted prices for identical assets or liabilities in active markets.

Level 2 – quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – unobservable inputs for the asset or liability.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2017~~

~~(Unaudited)~~

Assets and liabilities measured at fair value on a recurring basis. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 for each of the fair value hierarchy levels:


	Fair Value Measurement at March 31, 2017 Using								Fair Value Measurement as of March 31, 2018 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at March 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Fair Value as of March 31, 2018
	(in millions)								(in millions)
Assets:
Commodity derivatives	$	—	$	76	$	—	$	76	$	—	$	7		$	—	$	7
Interest rate derivatives	—		6		—		6
Deferred compensation plan assets	86		—		—		86		92		—			—		92
Total assets	86		82		—		168		92		7			—		99
Liabilities:
Commodity derivatives	—		11		—		11		—		387			—		387
Total liabilities	—		11		—		11		—		387			—		387
Total recurring fair value measurements	$	86	$	71	$	—	$	157	$	92	$	(380	)	$	—	$	(288	)



	Fair Value Measurement as of December 31, 2017 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Fair value as of December 31, 2017
	(in millions)
Assets:
Commodity derivatives	$	—	$	11		$	—	$	11
Deferred compensation plan assets	95		—			—		95
Total assets	95		11			—		106
Liabilities:
Commodity derivatives	—		255			—		255
Total liabilities	—		255			—		255
Total recurring fair value measurements	$	95	$	(244	)	$	—	$	(149	)

Commodity derivatives. The Company's commodity derivatives represent oil, NGL ~~gas~~ and ~~diesel~~gas swap contracts, collar contracts and collar contracts with short puts. The asset and liability measurements for the Company's commodity derivative contracts represent Level 2 inputs in the hierarchy. The Company utilizes discounted cash flow and option-pricing models for valuing its commodity derivatives.

The asset and liability values attributable to the Company's commodity derivatives were determined based on inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) the implied rate of volatility inherent in the collar contracts and collar contracts with short puts, which is based on active and independent market-quoted volatility factors.

Deferred compensation plan assets. The Company's deferred compensation plan assets represent investments in equity and mutual fund securities that are actively traded on major exchanges. These investments are measured based on observable prices on major exchanges. As of March 31, ~~2017~~2018, and December 31, 2017, the significant inputs to these asset exchange values represented Level 1 independent active exchange market price inputs.

~~Interest rate derivatives.~~ The Company's interest rate derivative liabilities represent interest rate swap contracts. The Company utilizes discounted cash flow models for valuing its interest rate derivatives. The derivative values attributable to the Company's interest rate derivative contracts are based on (i) the contracted notional amounts, (ii) forward active market-quoted London Interbank Offered Rates ("LIBOR") and (iii) the applicable credit-adjusted risk-free rate yield curve. The Company's interest rate derivative fair value measurements represent Level 2 inputs in the hierarchy.

Assets and liabilities measured at fair value on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

fair value adjustments in certain circumstances. These assets and liabilities can include inventory, proved and unproved oil and gas properties and other long-lived assets ~~or liabilities~~ that are ~~acquired or~~ written down to fair value when they are impaired or held for sale. ~~See Note C for information on the fair value of assets and liabilities acquired in the Permian Basin acquisition.~~

Proved oil and gas properties. As a result of the Company's proved property impairment assessments, the Company recognized a noncash impairment ~~charges~~charge of $285 million to reduce the carrying ~~values~~value of ~~(i)~~ the Raton field during the three months ended March 31, 2017 ~~and (ii) the West Panhandle field during the three months ended March 31, 2016~~ to ~~their~~its estimated fair ~~values.~~

~~Table~~value of ~~Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2017~~

~~(Unaudited)~~

$186 million.

The Company calculated the fair ~~values~~value of the Raton ~~and West Panhandle fields~~field as of March 31, 2017 using a discounted future cash flow model. Significant Level 3 assumptions associated with the ~~calculations~~calculation of the Raton field's discounted future cash flows as of March 31, 2017 included management's longer-term commodity price ~~outlooks~~outlook ("Management's Price ~~Outlooks"~~Outlook") for oil of $53.65 per barrel ("Bbl") and gas of $3.00 per million British thermal units ("MMBtu") and management's ~~outlooks~~outlook for (i) production, ~~costs,~~ (ii) capital expenditures, (iii) production costs and (iv) estimated proved reserves and risk-adjusted probable reserves. Management's Price Outlooks are developed based on third-party longer-term commodity futures price outlooks as of each measurement date. The expected future net cash flows were discounted using an annual rate of 10 percent to determine fair value.

The following table presents the fair value and fair value adjustments (in millions) for the Company's 2017 and 2016 proved property impairments, as well as the average oil price per barrel ("Bbl") and gas price per British thermal unit ("MMBtu") utilized in the respective Management's Price Outlooks:

Management's Price Outlooks
Impairment Date Fair Value Fair Value Adjustment Oil Gas
Raton March 2017 $ 186
$ (285 ) $ 53.65
$ 3.00
West Panhandle March 2016 $ 33
$ (32 ) $ 49.77
$ 3.24

It is reasonably possible that the Company's estimate of undiscounted future net cash flows attributable to these or other properties may change in the future resulting in the need to impair their carrying values. The primary factors that may affect estimates of future cash flows are (i) future adjustments, both positive and negative, to proved and risk-adjusted probable and possible oil and gas reserves, (ii) results of future drilling activities, (iii) Management's Price Outlooks and (iv) increases or decreases in production and capital costs associated with these reserves.

~~Unproved oil and gas properties.~~ ~~During March 2016, the Company recorded an impairment charge of~~ ~~$32 million~~ to write-off the carrying value of its unproved royalty acreage in Alaska (reported in exploration and abandonments in the accompanying consolidated statements of operations) as a result of the operator curtailing operations in the area and Management's Price Outlooks.

Financial instruments not carried at fair value. Carrying values and fair values of financial instruments that are not carried at fair value in the accompanying consolidated balance sheets as of March 31, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows:


	March 31, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)								(in millions)
Commercial paper, corporate bonds and time deposits	$	1,724	$	1,721	$	1,906	$	1,901	$	815	$	817	$	1,279	$	1,277
Current portion of long-term debt	$	—	$	—	$	485	$	490	$	449	$	451	$	449	$	457
Long-term debt	$	2,729	$	2,961	$	2,728	$	2,956	$	2,284	$	2,423	$	2,283	$	2,479

Commercial paper, corporate bonds and time deposits. Periodically, the Company invests in commercial paper and corporate bonds with investment grade rated entities. The Company also periodically enters into time deposits with financial institutions. The investments are carried at amortized cost and classified as held-to-maturity as the Company has the intent and ability to hold them until they mature. The carrying values of held-to-maturity investments are adjusted for amortization of premiums and accretion of discounts over the remaining life of the investment. Income related to these investments is recorded in interest and other income in the Company's consolidated ~~statement~~statements of operations. The Company's investments in corporate bonds represent Level 1 inputs in the hierarchy, while other investments represent Level 2 inputs in the hierarchy. Commercial paper and time deposits are included in cash and cash equivalents if they have maturity dates that are less than 90 days at the date of purchase; otherwise, investments are reflected in short-term investments or long-term investments in the accompanying consolidated balance sheets based on their maturity dates. ~~The following table provides the components of the Company's cash and cash equivalents and investments as of March 31, 2017:~~

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

The following tables provide the components of the Company's cash and cash equivalents and investments as of March 31, 2018 and December 31, 2017:


	March 31, 2017										March 31, 2018
Consolidated Balance Sheet Location	Cash		Commercial Paper		Corporate Bonds		Time Deposits		Total		Cash		Commercial Paper		Corporate Bonds		Time Deposits		Total
	(in millions)										(in millions)
Cash and cash equivalents	$	653	$	10	$	—	$	—	$	663	$	931	$	20	$	—	$	50	$	1,001
Short-term investments	—		199		813		534		1,546		—		125		398		199		722
Long-term investments	—		—		168		—		168		—		—		93		—		93
	$	653	$	209	$	981	$	534	$	2,377	$	931	$	145	$	491	$	249	$	1,816



	December 31, 2017
Consolidated Balance Sheet Location	Cash		Commercial Paper		Corporate Bonds		Time Deposits		Total
	(in millions)
Cash and cash equivalents	$	846	$	—	$	—	$	50	$	896
Short-term investments	—		124		642		447		1,213
Long-term investments	—		—		66		—		66
	$	846	$	124	$	708	$	497	$	2,175

Debt obligations. The Company's debt obligations are composed of its ~~credit facility and~~ senior ~~notes. The~~notes whose fair value ~~of the Company's debt obligations~~ is determined utilizing inputs that are Level 2 measurements in the fair value hierarchy. The fair value of the Company's credit facility is calculated using a discounted cash flow model based on (i) forecasted contractual interest and fee payments, (ii) forward active market-quoted United States Treasury Bill rates and (iii) the applicable credit-adjustments. The Company's senior notes represent debt securities that are quoted but not actively traded on major ~~exchanges. The~~exchanges; therefore, fair values of the Company's senior notes are based on their periodic values as quoted on the major exchanges.

The Company has other financial instruments consisting primarily of receivables, payables and other current assets and liabilities that approximate fair value due to the nature of the instrument and their relatively short maturities. Non-financial assets and liabilities initially measured at fair value include assets acquired and liabilities assumed in a business combination, goodwill and asset retirement obligations.

NOTE E.5. Derivative Financial Instruments

The Company utilizes commodity swap contracts, collar contracts and collar contracts with short puts to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. The Company also, from time to time, utilizes interest rate contracts to reduce the effect of interest rate volatility on the Company's indebtedness.

Periodically, the Company may pay a premium to enter into commodity contracts. Premiums paid, if any, have been nominal in relation to the value of the underlying asset in the contract. The Company recognizes the nominal premium payments as an increase to the value of derivative assets when paid. All derivatives are adjusted to fair value as of each balance sheet date.

Oil production derivative activities. All material physical sales contracts governing the Company's oil production are tied directly to, or are highly correlated with, New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI") oil prices. The Company uses derivative contracts to manage oil price volatility and basis swap contracts to reduce basis risk between NYMEX prices and the actual index prices at which the oil is sold.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

The following table sets forth the volumes per day associated with the Company's outstanding oil derivative contracts as of March 31, ~~2017~~2018 and the weighted average oil prices for those contracts:


	2017									Year Ending December 31,				2018						Year Ending December 31, 2019
	Second Quarter			Third Quarter			Fourth Quarter			2018		2019		Second Quarter		Third Quarter		Fourth Quarter		Year Ending December 31, 2019
Collar contracts:
Volume (Bbl)	6,000			6,000			6,000			—		—		3,000		3,000		3,000		—
Price per Bbl:
Ceiling	$	70.40		$	70.40		$	70.40		$	—	$	—	$	58.05	$	58.05	$	58.05	$	—
Floor	$	50.00		$	50.00		$	50.00		$	—	$	—	$	45.00	$	45.00	$	45.00	$	—
Collar contracts with short puts (a):
Collar contracts with short puts:
Volume (Bbl)	129,000			147,000			155,000			20,000		—		149,000		154,000		159,000		65,000
Price per Bbl:
Ceiling	$	61.19		$	62.03		$	62.12		$	65.14	$	—	$	57.79	$	57.70	$	57.62	$	60.74
Floor	$	48.46		$	49.81		$	49.82		$	50.00	$	—	$	47.42	$	47.34	$	47.26	$	52.69
Short put	$	40.45		$	41.07		$	41.02		$	40.00	$	—	$	37.38	$	37.31	$	37.23	$	42.69
Rollfactor swap contracts (b):
Volume (Bbl)	20,000			20,000			20,000			—		—
NYMEX roll price	$	(0.32	)	$	(0.32	)	$	(0.32	)	$	—	$	—

~~____________________~~


~~(a)~~	Subsequent to March 31, 2017, the Company entered into additional oil collar contracts with short puts for 26,000 Bbl per day of 2018 production with a ceiling price of $60.49 per Bbl, a floor price of $50.19 per Bbl and a short put price of $40.00 per Bbl.

~~(b)~~

Represents swaps that fix the difference between (i) each day's price per Bbl of WTI for the first nearby NYMEX month less (ii) the price per Bbl of WTI for the second nearby NYMEX month, multiplied by .6667; plus (iii) each day's price per Bbl of WTI for the first nearby NYMEX month less (iv) the price per Bbl of WTI for the third nearby NYMEX month, multiplied by .3333. Subsequent to March 31, 2017, the Company paid a nominal amount to terminate its oil rollfactor swap contracts for the third quarter of 2017.

NGL production derivative activities. All material physical sales contracts governing the Company's NGL production are tied directly or indirectly to either Mont Belvieu, Texas or Conway, Kansas NGL component product prices. The Company uses derivative contracts to manage NGL component price volatility.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2017~~

~~(Unaudited)~~

The following table sets forth the volumes per day associated with the Company's outstanding NGL derivative contracts as of March 31, ~~2017~~2018 and the weighted average NGL prices for those contracts:

2017 Year Ending December 31,
Second Quarter Third Quarter Fourth Quarter 2018 2019
Butane swap contracts (a):
Volume (Bbl) 2,000
2,000
—
—
—
Price per Bbl: $ 34.86
$ 34.86
$ —
$ —
$ —
Butane collar contracts with short puts (b):
Volume (Bbl) 2,000
2,000
—
—
—
Price per Bbl:
Ceiling $ 36.12
$ 36.12
$ —
$ —
$ —
Floor $ 29.25
$ 29.25
$ —
$ —
$ —
Short put $ 23.40
$ 23.40
$ —
$ —
$ —
Ethane collar contracts (c):
Volume (Bbl) 3,000
3,000
3,000
—
—
Price per Bbl:
Ceiling $ 11.83
$ 11.83
$ 11.83
$ —
$ —
Floor $ 8.68
$ 8.68
$ 8.68
$ —
$ —
Ethane basis swap contracts (d):
Volume (MMBtu) 6,920
6,920
6,920
6,920
6,920
Price differential ($/MMBtu) $ 1.60
$ 1.60
$ 1.60
$ 1.60
$ 1.60



	2018						Year Ending December 31, 2019
	Second Quarter		Third Quarter		Fourth Quarter		Year Ending December 31, 2019
Ethane basis swap contracts (a):
Volume (MMBtu)	6,920		6,920		6,920		6,920
Price differential ($/MMBtu)	$	1.60	$	1.60	$	1.60	$	1.60

____________________


(a)	Represent swap contracts that reduce the price volatility of butane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. Subsequent to March 31, 2017, the Company terminated its butane swap contracts for cash proceeds of $1 million.


~~(b)~~	~~Represent collar contracts with short puts that reduce the price volatility of butane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.~~


~~(c)~~	~~Represent collar contracts that reduce the price volatility of~~The ethane ~~forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.~~

~~(d)~~

~~Represent~~ basis swap contracts ~~that~~ reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. The ethane basis swap contracts fix the basis differential on a NYMEX Henry Hub ("HH") MMBtu equivalent basis. The Company will receive the HH price plus the price differential on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of ethane.

Gas production derivative activities. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to HH gas prices or regional index prices where the gas is sold. The Company uses derivative contracts to manage gas price volatility and basis swap contracts to reduce basis risk between HH prices and actual index prices at which the gas is sold.

1615

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

The following table sets forth the volumes per day associated with the Company's outstanding gas derivative contracts as of March 31, ~~2017~~2018 and the weighted average gas prices for those contracts:


	2017									Year Ending December 31,				2018						Year Ending December 31, 2019
	Second Quarter			Third Quarter			Fourth Quarter			2018		2019		Second Quarter		Third Quarter		Fourth Quarter		Year Ending December 31, 2019
Swap contracts:
Volume (MMBtu)														100,000		100,000		100,000		—
Price per MMBtu														$	3.00	$	3.00	$	3.00	$	—
Collar contracts with short puts:
Volume (MMBtu)	270,000			290,000			300,000			62,329		—		50,000		50,000		50,000		—
Price per MMBtu:
Ceiling	$	3.56		$	3.57		$	3.60		$	3.56	$	—	$	3.40	$	3.40	$	3.40	$	—
Floor	$	2.95		$	2.95		$	2.96		$	2.91	$	—	$	2.75	$	2.75	$	2.75	$	—
Short put	$	2.47		$	2.47		$	2.47		$	2.37	$	—	$	2.25	$	2.25	$	2.25	$	—
Basis swap contracts:
Mid-Continent index swap volume (a)	45,000			45,000			45,000			—		—
Basis swap contracts (a):
Southern California index swap volume (MMBtu) (b)														40,000		80,000		66,522		84,932
Price differential ($/MMBtu)	$	(0.32	)	$	(0.32	)	$	(0.32	)	$	—	$	—	$	0.30	$	0.30	$	0.50	$	0.33
Permian Basin index swap volume (b)	—			—			26,522			9,863		—
Price differential ($/MMBtu)	$	—		$	—		$	0.30		$	0.30	$	—

____________________

(a)

~~Represent~~Subsequent to March 31, 2018, the Company entered into additional basis swap contracts that fix the basis differentials between the index price at which the Company sells its ~~Mid-Continent~~Permian Basin gas and the HH index price used in swap contracts and collar contracts with short ~~puts.~~puts for (i) 20,000 MMBtu per day of July 2018 through September 2019 production with a price differential of $1.54 per MMBtu and (ii) 30,000 MMBtu per day of January through September 2019 production with a price differential of $1.47 per MMBtu.


(b)	~~Represent~~The referenced basis swap contracts ~~that~~ fix the basis differentials between Permian Basin index prices and southern California index prices for Permian Basin gas forecasted for sale in southern California.

Marketing ~~and basis derivative activities.~~derivatives.Periodically, the Company enters into buy and sell marketing arrangements to fulfill firm pipeline transportation commitments. Associated with these marketing arrangements, the Company may enter into index ~~swaps~~swap contracts to mitigate price risk. As

The following table sets forth the volumes per day associated with the Company's outstanding marketing derivative contracts as of March 31, ~~2017,~~2018 and the ~~Company did not have any marketing derivatives outstanding.~~weighted average prices for those contracts:

~~Diesel derivative activities.~~ Periodically, the Company enters into diesel derivative swap contracts to mitigate fuel price risk. The diesel derivative swap contracts are priced at an index that is highly correlated to the prices that the Company incurs to fuel drilling rigs and its fracture stimulation fleet equipment. As of March 31, 2017, the Company was party to diesel derivative swap contracts for 1,000 Bbls per day for the remainder of 2017 at an average per Bbl fixed price of $62.98. In early April 2017, the Company terminated its diesel derivative swap contracts that were held at March 31, 2017 for cash proceeds of $1 million. In late April 2017, the Company entered into diesel swap contracts for 1,000 Bbls per day for the remainder of 2017 at an average per Bbl fixed price of $63.00.

~~Interest rate derivative activities.~~ As of March 31, 2017, the Company was party to interest rate derivative contracts whereby the Company will receive the three-month LIBOR rate for the 10-year period from December 2017 through December 2027 in exchange for paying a fixed interest rate of 1.81 percent on a notional amount of $100 million on December 15, 2017.



	2018
	Second Quarter		Third Quarter
Average Daily Oil Transportation Commitments Associated with Derivatives (Bbl):
Basis swap contracts:
Louisiana Light Sweet index swap volume (a) (b)	10,000		6,739
Price differential ($/Bbl)	$	3.18	$	3.18
Magellan East Houston index swap volume (a)	8,659		2,022
Price differential ($/Bbl)	$	3.29	$	3.30

____________________


(a)	The referenced basis swap contracts fix the basis differentials between NYMEX WTI and Louisiana Light Sweet or Magellan East Houston oil prices for Permian Basin oil forecasted for sale in the Gulf Coast region.


(b)	Subsequent to March 31, 2018, the Company liquidated its Louisiana Light Sweet basis swap contracts for 10,000 Bbl per day of June 2018 through August 2018 transportation commitments for a nominal gain.

Tabular disclosure of derivative financial instruments. All of the Company's derivatives are accounted for as non-hedge derivatives as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, and therefore all changes in the fair values of its derivative contracts are recognized as gains or losses in the earnings of the periods in which they occur. The Company classifies the fair value amounts

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

of derivative assets and liabilities as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by commodity and counterparty. The Company enters into derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2017~~

~~(Unaudited)~~

The aggregate fair value of the Company's derivative instruments reported in the accompanying consolidated balance sheets by type and counterparty, including the classification between current and noncurrent assets and liabilities, consists of the following:



Fair Value of Derivative Instruments as of March 31, 2018
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet			Net Fair Value Presented in the Consolidated Balance Sheet
		(in millions)
Derivatives not designated as hedging instruments
Asset Derivatives:
Commodity price derivatives	Derivatives - current	$	14	$	(7	)	$	7
Commodity price derivatives	Derivatives - noncurrent	$	8	$	(8	)	—
							$	7
Liability Derivatives:
Commodity price derivatives	Derivatives - current	$	340	$	(7	)	$	333
Commodity price derivatives	Derivatives - noncurrent	$	62	$	(8	)	54
							$	387


Fair Value of Derivative Instruments as of March 31, 2017
Fair Value of Derivative Instruments as of December 31, 2017										Fair Value of Derivative Instruments as of December 31, 2017
Type		Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet			Net Fair Value Presented in the Consolidated Balance Sheet			Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet			Net Fair Value Presented in the Consolidated Balance Sheet
			(in millions)									(in millions)
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments									Derivatives not designated as hedging instruments
Asset Derivatives:	Asset Derivatives:									Asset Derivatives:
Commodity price derivatives		Derivatives - current	$	75	$	(8	)	$	67		Derivatives - current	$	13	$	(2	)	$	11
Interest rate derivatives		Derivatives - current	$	6	$	—		6
Commodity price derivatives		Derivatives - noncurrent	$	9	$	—		9			Derivatives - noncurrent	$	3	$	(3	)	—
								$	82								$	11
Liability Derivatives:	Liability Derivatives:									Liability Derivatives:
Commodity price derivatives		Derivatives - current	$	17	$	(8	)	$	9		Derivatives - current	$	234	$	(2	)	$	232
Commodity price derivatives		Derivatives - noncurrent	$	2	$	—		2			Derivatives - noncurrent	$	26	$	(3	)	23
								$	11								$	255

The following table details the location of gains and losses recognized on the Company's derivative contracts in the accompanying consolidated statements of operations:

Fair Value of Derivative Instruments as of December 31, 2016
Type
Consolidated
Balance Sheet
Location

Fair
Value
Gross Amounts Offset in the Consolidated Balance Sheet Net Fair Value Presented in the Consolidated Balance Sheet
(in millions)
Derivatives not designated as hedging instruments
Asset Derivatives:
Commodity price derivatives Derivatives - current $ 33
$ (25 ) $ 8
Interest rate derivatives Derivatives - current $ 6
$ —
6
$ 14
Liability Derivatives:
Commodity price derivatives Derivatives - current $ 102
$ (25 ) $ 77
Commodity price derivatives Derivatives - noncurrent $ 7
$ —
7
$ 84



Derivatives Not Designated as Hedging Instruments	Location of Gain/(Loss) Recognized in Earnings on Derivatives	Three Months Ended March 31,
Derivatives Not Designated as Hedging Instruments		2018			2017
		(in millions)
Commodity price derivatives	Derivative gains (losses), net	$	(208	)	$	151

Derivative Counterparties. The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company's credit risk policies and procedures.

1817

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

~~The following table details the location of gains and losses recognized on the Company's derivative contracts in the accompanying consolidated statements of operations:~~

Derivatives Not Designated as Location of Gain / (Loss) Recognized in Three Months Ended
March 31,
Hedging Instruments Earnings on Derivatives 2017 2016
(in millions)
Commodity price derivatives Derivative gains, net $ 151
$ 45
Interest rate derivatives Derivative gains, net —
(2 )
Total $ 151
$ 43

NOTE F.6. Exploratory Costs

The Company capitalizes exploratory well and project costs until a determination is made that the well or project has either found proved reserves, is impaired or is sold. The Company's capitalized exploratory well and project costs are presented in proved properties in the accompanying consolidated balance sheets. If the exploratory well or project is determined to be impaired, the impaired costs are charged to exploration and abandonments expense.

The following table reflects the Company's capitalized exploratory well and project activity during the three months ended March 31, ~~2017~~2018:


	Three Months Ended March 31, 2017			Three Months Ended March 31, 2018
	(in millions)			(in millions)
Beginning capitalized exploratory well costs	$	323		$	505
Additions to exploratory well costs pending the determination of proved reserves	406			582
Reclassification due to determination of proved reserves	(287		)	(607		)
Exploratory well costs charged to exploration and abandonment expense	(10		)	(4		)
Ending capitalized exploratory well costs	$	432		$	476

The following table provides an aging as of March 31, ~~2017~~2018 and December 31, ~~2016~~2017 of capitalized exploratory costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year, based on the date drilling was completed:


	March 31, 2017		December 31, 2016		March 31, 2018		December 31, 2017
	(in millions, except well counts)				(in millions, except well counts)
Capitalized exploratory well costs that have been suspended:
One year or less	$	411	$	318	$	464	$	493
More than one year	21		5		12		12
	$	432	$	323	$	476	$	505
Number of wells or projects with exploratory well costs that have been suspended for a period greater than one year	12		3		7		7

The ~~12 wells~~projects with exploratory well costs that ~~were~~have been suspended for a period greater than one year as of March 31, ~~2017~~2018 are in the Eagle Ford Shale area. The Company is evaluating both the well performance of similar wells completed in 2017 and whether to drill additional wells near these wells in order for all of the wells in the area to be fracture stimulated as a package, thereby improving the resource recovery for the area. The Company expects to complete ~~five~~its evaluation of these ~~wells in 2017 and the remaining~~ seven wells induring 2018.

NOTE G.7. Long-term Debt

Credit facility. The Company's long-term debt consists of senior notes, a revolving corporate credit facility (the "Credit Facility") and the effects of issuance costs ~~issuance discounts~~ and ~~net deferred fair value hedge losses.~~discounts. The Credit Facility is maintained with a syndicate of financial institutions and has aggregate loan commitments of $1.5 billion that expire in August 2020. As of March 31, ~~2017,~~2018, the Company had no outstanding borrowings under the Credit Facility and was in compliance with its debt covenants.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2017~~

~~(Unaudited)~~

Senior notes. The Company's 6.65% senior notes (the "6.65% Senior Notes") matured and were repaid in March 2017. The Company funded the $485 million repayment of the 6.65% Senior Notes with cash on hand. The Company's 6.875% senior notes (the "6.875% Senior Notes"), with an outstanding debt principal balance of $450 million, mature in May 2018 and are classified as current in the accompanying consolidated balance sheets as of March 31, 2018 and December 31, 2017. See Note 16 for additional information regarding the repayment of the Company's 6.875% Senior Notes in May 2018.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

NOTE H.8. Incentive Plans

Stock-based ~~compensation~~compensation.

For the three months ended March 31, ~~2017,~~2018, the Company recorded ~~$30~~$23 million of stock-based compensation expense for all plans, as compared to ~~$25~~$30 million for the same period in ~~2016.~~2017. As of March 31, ~~2017,~~2018, there was ~~$164~~$163 million of unrecognized stock-based compensation expense related to unvested share-based compensation plans, including ~~$42~~$35 million attributable to stock-based awards that are expected to be settled on their vesting date in cash, rather than in equity shares ("Liability Awards"). The unrecognized compensation expense will be recognized on a straight-line basis over the remaining vesting periods of the awards, which is a period of less than three years on a weighted average basis. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, accounts payable – due to affiliates included $5$4 million and ~~$22~~$20 million, respectively, of liabilities attributable to Liability Awards.

The following table summarizes the activity that occurred during the three months ended March 31, ~~2017~~2018 for ~~each type of share-based incentive award~~restricted stock awards and performance units issued by Pioneer:


	Restricted Stock Equity Awards		Restricted Stock Liability Awards		Performance Units	Stock Options	Restricted Stock Equity Awards		Restricted Stock Liability Awards		Performance Units
Outstanding as of December 31, 2016	1,077,227		290,552		178,556	159,378
Outstanding as of December 31, 2017							916,223		252,735		163,158
Awards granted	300,350		114,287		59,044	—	369,170		108,129		62,541
Awards forfeited	(4,740	)	(1,480	)	—	—	(11,986	)	(2,652	)	(1,285	)
Awards vested	(432,316	)	(128,618	)	—	—	(395,682	)	(121,776	)	—
Outstanding as of March 31, 2017	940,521		274,741		237,600	159,378
Outstanding as of March 31, 2018							877,725		236,436		224,414

As of March 31, 2018 and December 31, 2017, the Company also had 138,493 stock options outstanding and exercisable. There were no stock options exercised during the three months ended March 31, 2018.

NOTE I.9. Asset Retirement Obligations

The Company's asset retirement obligations primarily relate to the future plugging and abandonment of wells and related facilities. The following table summarizes the Company's asset retirement obligation activity during the three months ended March 31, ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended March 31,						Three Months Ended March 31,
	2017			2016			2018			2017
	(in millions)						(in millions)
Beginning asset retirement obligations	$	297		$	285		$	271		$	297
New wells placed on production	1			—			1			1
Changes in estimates							2			—
Obligations reclassified to liabilities held for sale							(6		)	—
Liabilities settled	(6		)	(5		)	(9		)	(6		)
Accretion of discount	5			5			4			5
Ending asset retirement obligations	$	297		$	285		$	263		$	297

The Company records the current and noncurrent portions of asset retirement obligations in other current liabilities and other liabilities, respectively, in the accompanying consolidated balance sheets. As of ~~both~~ March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the current portion of the Company's asset retirement obligations was ~~$39 million.~~$40 million and $41 million, respectively.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2017~~

~~(Unaudited)~~

NOTE J.10. Commitments and Contingencies

Legal actions.The Company is a party to various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to such proceedings and claims will not have a material adverse effect on the Company's financial position as a whole or on its liquidity, capital resources or future annual results of operations. The Company records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Obligations following divestitures.In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified pre-closing matters, including matters of litigation, environmental contingencies, royalty obligations and income taxes. The Company does not believe these obligations are probable of having a material impact on its liquidity, financial position or future results of operations.

Lease agreements. In June 2017, the Company entered into a 20-year operating lease for the Company's new corporate headquarters that is currently being constructed in Irving, Texas. Annual base rent is expected to be $33 million and lease payments are expected to commence once the building is complete, which is anticipated to occur during the second half of 2019. The Company has a variable equity interest in the entity that is constructing the building. The Company is not the primary beneficiary of the variable interest entity and only has a profit sharing interest after certain economic returns are achieved. The Company has no exposure to the variable interest entity's losses or future liabilities, if any. The Company is the deemed owner of the building (for accounting purposes) during the construction period and is following the build-to-suit accounting guidance. Accordingly, as of March 31, 2018, the Company has capitalized $79 million of construction costs, including capitalized interest, within other property and equipment and has recognized a corresponding build-to-suit lease liability. The recording of these assets and liabilities are considered noncash investing and financing items, respectively, for purposes of the consolidated statements of cash flows.

Firm purchase, gathering, processing, transportation, and fractionation commitments.The Company from time to time enters into, and as of March 31, 2018 was a party to, take-or-pay agreements, which include contractual commitments to purchase sand and water for use in the Company's drilling operations and contractual commitments with midstream service companies and pipeline carriers for future gathering, processing, transportation, storage and fractionation. These commitments are normal and customary for the Company's business activities.

NOTE K.11. Revenue Recognition

Impact of ASC 606 adoption. On January 1, 2018, the Company adopted ASC 606 by applying the modified retrospective method to all revenue contracts as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under ASC 605. The Company completed a detailed review of its revenue contracts, which represent all of the Company's revenue streams including oil, NGL and gas sales and sales of purchased oil and gas, to determine the effect of the new standard for the three months ended March 31, 2018. The Company did not record a change to its opening retained earnings as of January 1, 2018 as there was no material change to the timing or pattern of revenue recognition due to the adoption of ASC 606.

The adoption of ASC 606 as of January 1, 2018 had the following impact on the Company's results of operations for the three months ended March 31, 2018:



	Three Months Ended March 31, 2018
	As Reported		ASC 605 (Without Adoption of ASC 606)		Effect of Change Higher (Lower)
	(in millions)
Revenues and other income:
Oil and gas	$	1,266	$	1,223	$	43
Costs and expenses:
Oil and gas production	$	213	$	170	$	43

Changes in oil and gas revenues and oil and gas production costs (specifically gathering, processing and transportation costs) are due to the conclusion under the control model in ASC 606 that the third-party processor or transporter is only providing gas processing or transportation services and that the Company remains the principal owner of the commodity until sold to the ultimate purchaser. This is a change from ASC 605 where the Company historically recorded gas processing fees as a reduction of revenue recognized by the Company, as these fees were considered necessary to separate the wet gas stream into its sellable components (i.e. dry gas and individual NGL components). Under ASC 605, third-party processing and transportation companies were determined to have control of the commodities being processed and transported. As a result of adopting ASC 606, the Company has modified its presentation of revenues and expenses for these arrangements. Revenues related to these agreements are now presented on a gross basis for amounts expected to be received from third-party purchasers through the marketing process. Gathering,

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

processing and transportation expenses related to these agreements, incurred prior to the transfer of control to the purchaser, are now presented as oil and gas production costs.

Disaggregated revenue from contracts with purchasers.Revenues on sales of oil, NGLs, gas and purchased oil and gas are recognized when control of the product is transferred to the purchaser and payment can be reasonably assured. Sales prices for oil, NGL and gas production are negotiated based on factors normally considered in the industry, such as an index or spot price, distance from the well to the pipeline or market, commodity quality and prevailing supply and demand conditions. As such, the prices of oil, NGLs and gas generally fluctuate based on the relevant market index rates. The following table provides information about disaggregated revenue from contracts with purchasers by product type:



	Three Months Ended March 31, 2018
	(in millions)
Oil sales	$	1,013
NGL sales	165
Gas sales	88
Total oil and gas sales	1,266
Sales of purchased oil and gas	1,070
Total revenue derived from contracts with purchasers	$	2,336

Oil sales. Sales under the Company's oil contracts are generally considered performed when the Company sells oil production at the wellhead and receives an agreed-upon index price, net of any price differentials. The Company recognizes revenue when control transfers to the purchaser at the wellhead based on the net price received.

NGL and gas sales. Sales under the Company's gas processing contracts are recognized when the Company delivers gas to a midstream processing entity at the wellhead or the inlet of the midstream processing entity's system. The midstream processing entity gathers and processes the gas and remits proceeds to the Company for the resulting sales of NGLs and gas. In many cases, the Company elects to take its NGLs and residue gas in-kind at the tailgate of the midstream entity's processing plant and subsequently market the products itself. When the Company elects to take-in-kind, it delivers NGLs and gas to a third-party purchaser at a contractually agreed-upon delivery point and receives a specified index price from the purchaser.

The Company evaluated whether it was the principal or the agent in the natural gas processing transactions and concluded that it is the principal when it has the ability to take-in-kind, which is the case in the majority of the Company's gas processing and transportation contracts. Therefore, beginning January 1, 2018, the Company began recognizing revenue on a gross basis, with the gathering, processing and transportation costs associated with its take-in-kind arrangements being recognized as oil and gas production costs in the Company's accompanying consolidated statement of operations.

Sales of purchased oil and gas. The Company periodically enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's WTI oil sales to the Gulf Coast refinery or international export markets and to satisfy unused pipeline capacity commitments. Revenues and expenses from these transactions are presented on a gross basis as the Company acts as a principal in the transaction by assuming control of the commodities purchased and the responsibility to deliver the commodities sold. Revenue is recognized when control transfers to the purchaser at the delivery point based on the price received from the purchaser. The transportation costs associated with these transactions are presented as a component of purchased oil and gas expense. Firm transportation payments on excess pipeline capacity are included in other expense in the accompanying consolidated statements of operations.

Performance obligations and contract balances. The majority of the Company's product sale commitments are short-term in nature with a contract term of one year or less. The Company typically satisfies its performance obligations upon transfer of control as described above in Disaggregated revenue from contracts with purchasers and records the related revenue in the month production is delivered to the purchaser. Settlement statements for sales of oil, NGLs and gas and sales of purchased oil and gas may not be received for 30 to 60 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. The Company records the differences between estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. The implementation of ASC 606 has not changed existing controls around revenue estimates and the accrual

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

process. Historically, differences between the Company's revenue estimates and actual revenue received have not been significant. As of March 31, 2018, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers was $793 million.

NOTE 12. Interest and Other Income

The following table provides the components of the Company's interest and other income for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
	(in millions)				(in millions)
Interest income	$	6	$	4	$	7	$	6
Deferred compensation plan income	2		2		4		2
Seismic data sales					3		—
Severance and sales tax refunds					2		3
Other income	5		2		2		2
Total interest and other income	$	13	$	8	$	18	$	13

NOTE L.13. Other Expense

The following table provides the components of the Company's other expense for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
	(in millions)				(in millions)
Transportation commitment charges (a)	$	40	$	24	$	34	$	40
Loss from vertical integration services (b)	5		13		6		5
Idle drilling and well service equipment charges (c)	—		36
Other	15		14		17		15
Total other expense	$	60	$	87	$	57	$	60

____________________


(a)	Primarily represents firm transportation payments on excess pipeline capacity commitments.

(b)

Loss from vertical integration services primarily represents net margins (attributable to third party working interest owners) that result from Company-provided fracture stimulation and well service operations, which are ancillary to and supportive of the Company's oil and gas joint operating activities, and do not represent intercompany transactions. For the three months ended March 31, 2018, these vertical integration net margins included $34 million of revenues and $40 million of costs and expenses. For the same period in 2017, these vertical integration net margins included $19 million of revenues and $24 million of costs and expenses. ~~For the same period in 2016, these vertical integration net margins included $69 million of revenues and $82 million of costs and expenses.~~


~~(c)~~	Primarily represents expenses attributable to idle drilling rig fees that are not chargeable to joint operations and charges to terminate rig contracts that were not required to meet planned drilling activities.

2122

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2017~~2018

(Unaudited)

NOTE M.14. Income Taxes

The Company's income tax benefit (provision) consisted of the following for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:

Three Months Ended
March 31,
2017 2016
(in millions)
Deferred tax benefit $ 31
$ 141



	Three Months Ended March 31,
	2018			2017
	(in millions)
Deferred tax benefit (provision)	$	(50	)	$	31

For the three months ended March 31, ~~2017,~~2018, the Company's effective tax rate, excluding income attributable to noncontrolling interests, was 4222 percent, as compared to an effective rate of 3542 percent for the same ~~respective~~ period in ~~2016.~~2017. The U.S. statutory rate for the three months ended March 31, 2018 was 21 percent, reflecting the reduction in the federal corporate income tax rate from 35 percent to 21 percent beginning in 2018 as a result of the Tax Cuts and Jobs Act that was enacted in December 2017. The Company's effective tax rate for the three months ended March 31, 2017 differs from the U.S. statutory rate in effect during 2017 of 35 percent primarily due to recognizing excess tax benefits of $8 million associated with the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which requires excess tax benefits or deficiencies associated with the vesting of long-term incentive awards to be recorded as income tax expense or benefit in the statement of operations rather than as an adjustment to additional paid-in capital in the balance sheet.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based upon the technical merits of the position. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had cumulative unrecognized tax benefits of ~~$115~~$127 million and ~~$112~~$124 million, respectively, resulting from research and experimental expenditures related to horizontal drilling and completions innovations. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company's deferred tax liability and will affect the Company's ~~effectiv~~eeffective tax rate in the period it is recognized. The Company expects to substantially resolve the uncertainties associated with the unrecognized tax benefit by December 2018.

The Company files income tax returns in the U.S. federal and various state and foreign jurisdictions. The Internal Revenue Service has closed examinations of the 2012 and prior tax years and, with few exceptions, the Company believes that it is no longer subject to examinations by state and foreign tax authorities for years before ~~2011.~~2012. As of March 31, ~~2017,~~2018, no adjustments had been proposed in any jurisdiction that would have a significant effect on the Company's liquidity, future results of operations or financial position.

NOTE N.15. Net ~~Loss~~Income (Loss) Per Share

~~Basic and diluted~~The following table reconciles the Company's net ~~loss~~income (loss) attributable to common stockholders ~~were $42 million~~to basic and ~~$267 million~~diluted net income (loss) attributable to common stockholders for the three months ended March 31, ~~2017~~2018 and ~~2016, respectively.~~2017:

~~Basic and~~



	Three Months Ended March 31,
	2018			2017
	(in millions)
Net income (loss) attributable to common stockholders	$	178		$	(42	)
Participating share-based earnings	(1		)	—
Basic and diluted net income (loss) attributable to common stockholders	$	177		$	(42	)

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The following table is a reconciliation of basic weighted average shares outstanding to diluted weighted average ~~common~~ shares outstanding ~~were 170 million~~ for the three months ended March 31, ~~2017~~2018 and ~~162~~2017:



	Three Months Ended March 31,
	2018	2017
	(in millions)
Basic weighted average shares outstanding	170	170
Dilution attributable to stock-based compensation awards	1	—
Diluted weighted average shares outstanding	171	170

Stock repurchase program. In February 2018, the Company's board of directors (the "Board") approved a $100 million common stock repurchase program to offset the impact of dilution associated with annual employee stock awards, of which $83 million remained available for use to purchase shares as of March 31, 2018. During the ~~same period in 2016.~~three months ended March 31, 2018, the Company purchased $17 million of common stock pursuant to the program.

NOTE O.16. Subsequent Events

~~Permian Basin Divestiture.~~ Divestitures.In April ~~2017,~~2018, the sale of the West Eagle Ford Shale assets was completed, and during April 2018 the Company ~~completed~~received the ~~sale, effective January 1, 2017,~~remaining cash proceeds of approximately 20,500 acres in the Martin County region of the Permian Basin, with net production of approximately 1,500 BOEPD, to an unaffiliated third party for $266 million, before normal closing adjustments.$81 million. Associated with the sale of the West Eagle Ford Shale assets, the Company expects to ~~record~~recognize a ~~pretax~~ gain ~~ranging from $215~~on unproved properties sold of $75 million to ~~$245 million.~~$85 million (after normal closing adjustments) during the second quarter of 2018. See Note 3 for additional information about the Company's sale of its West Eagle Ford Shale assets.

Senior notes. The Company's outstanding 6.875% Senior Notes matured on May 1, 2018. The Company funded the payment of the $450 million principal balance with cash on hand. See Note 7 for additional information regarding the Company's 6.875% Senior Notes.

2224

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial and Operating Performance

The Company's financial and operating performance for the ~~first quarter of 2017~~three months ended March 31, 2018 included the following highlights:

Net ~~loss~~income attributable to common stockholders for the ~~first quarter of 2017~~three months ended March 31, 2018 was ~~$42~~$178 million ($~~0.25~~1.04 per diluted share), as compared to a net loss of ~~$267~~$42 million ($~~1.65~~0.25 per diluted share) for the ~~first quarter of 2016.~~same period in 2017. The primary components of the ~~decrease~~increase in ~~net loss~~earnings attributable to common stockholders include:

a ~~$400~~$457 million increase in oil and gas revenues as a result of a 7825 percent increase in sales volumes and a 25 percent increase in average realized commodity prices per BOE ~~and~~ (inclusive of the effect of the adoption of ASC 606 as described below in Adoption of New Accounting Standards);

a ~~12 percent~~$285 million decrease in impairment charges as a result of the impairment recorded in 2017 to reduce the carrying value of the Company's Raton field;

a $35 million increase in net sales ~~volumes;~~of purchased oil and gas, primarily due to favorable downstream oil margins on the Company's Gulf Coast refinery and export sales; and

a ~~$108~~$10 million decrease in interest expense, primarily due to the repayment of the Company's 6.65% senior notes (the "6.65% Senior Notes"), which matured in March 2017; partially offset by

a $359 million increase in net derivative ~~gains,~~losses, primarily as a result of changes in forward commodity prices and the Company's portfolio of derivatives;

a ~~$27~~$101 million ~~decrease in other expense, primarily related to a decrease in idle drilling and well service equipment charges, partially offset by an~~ increase in ~~unused firm transportation costs;~~

~~a $26 million~~ ~~decrease~~ ~~in exploration~~total oil and ~~abandonment expense,~~gas production costs and production and ad valorem taxes, primarily due to the ~~2016 write-off~~aforementioned increases in commodity prices and sales volumes (inclusive of ~~the Company's overriding royalty interest in the Nuna prospect in Alaska; and~~

~~a $16 million decrease in DD&A expense, primarily attributable to commodity price increases and the Company's cost reduction initiatives, both of which had~~ the effect of ~~adding proved reserves by lengthening~~ the ~~economic lives~~adoption of ~~the Company's producing wells; offset by~~

a ~~$253 million~~ ~~increase~~ASC 606 as described below in ~~impairment charges, principally related to the impairment recorded in 2017 to reduce the carrying value~~Adoption of ~~the Company's Raton field; and~~New Accounting Standards);

a ~~$110~~$81 million ~~reduction~~increase in the Company's income tax ~~benefit~~provision as a result of the improvement in earnings during the three months ended March 31, ~~2017~~2018, as compared to the same period in 2017; and

a $20 million increase in DD&A expense, primarily due to the aforementioned increase in sales volumes.

During the three months ended March 31, ~~2016.~~

~~During the~~ ~~first~~ ~~quarter of~~ ~~2017~~,2018, average daily sales volumes increased by 1225 percent to ~~248,881~~311,845 BOEPD, as compared to ~~221,809~~248,881 BOEPD during the same period in ~~first~~ ~~quarter of~~ ~~2016~~2017. The increase in ~~first~~ ~~quarter~~ ~~2017~~average daily sales volumes for the three months ended March 31, 2018, as compared to the same period in ~~first~~ ~~quarter of~~ ~~2016~~2017, is primarily due to the Company's successful Spraberry/Wolfcamp horizontal drilling program.

Average oil ~~NGL~~ and ~~gas~~NGL prices increased during the ~~first quarter of 2017~~three months ended March 31, 2018 to $61.64 per Bbl and $27.74 per Bbl, respectively, as compared to $49.05 per Bbl and $19.33 per Bbl, ~~and~~respectively, for the same period in 2017. Average gas prices decreased during the three months ended March 31, 2018 to $2.59 per Mcf, as compared to $2.79 per Mcf ~~respectively,~~for the same period in 2017. Pricing is inclusive of the effect of the adoption of ASC 606 as ~~compared to $28.09 per Bbl, $10.33 per Bbl and $1.79 per Mcf, respectively,~~described below in ~~the first quarter~~Adoption of ~~2016.~~New Accounting Standards.

Net cash provided by operating activities increased to ~~$364~~$554 million for the three months ended March 31, ~~2017,~~2018, as compared to ~~$110~~$364 million for the ~~three months ended March 31, 2016.~~same period in 2017. The ~~$254~~$190 million increase in net cash provided by operating activities for the three months ended March 31, 2018, as compared to the same period in 2017, is primarily due to increases in the Company's oil and gas revenues ~~for the three months ended March 31, 2017~~ as a result of increases in commodity prices and sales volumes, partially offset by ~~a $208 million reduction~~increases in oil and gas production costs, production and ad valorem taxes, cash ~~provided by commodity derivatives during the three months ended March 31, 2017 as compared to the same period in 2016.~~derivative payments and working capital.

As of March 31, ~~2017,~~2018, the Company's net debt to book capitalization was ~~three~~seven percent, as compared to ~~two~~five percent at December 31, ~~2016.~~2017.

Adoption of New Accounting Standard

On January 1, 2018, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2014-09 (ASC 606) "Revenue from Contracts with Customers." ASC 606 requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As a result of adopting ASC 606, the Company has modified its presentation of revenues and expenses for certain processing and transportation contracts that were previously netted in oil and gas revenues. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with historical accounting under ASC 605.

PIONEER NATURAL RESOURCES COMPANY

Changes in oil and gas revenues and oil and gas production costs (specifically gathering, processing and transportation costs) are due to the conclusion under the control model in ASC 606 that the third-party processor or transporter is only providing gas processing or transportation services and the Company remains the principal owner of the commodity until sold to the ultimate purchaser. This is a change from ASC 605 where the Company historically recorded gas processing fees as a reduction of revenue recognized by the Company, as these fees were considered necessary to separate the wet gas stream into its sellable components (i.e. dry gas and individual NGL components). Under ASC 605, third-party processing and transportation companies were determined to have control of the commodities being processed and transported. As a result, the Company has modified its presentation of revenues and expenses for these arrangements. Sales to third-party purchasers are now presented on a gross basis and gathering, processing and transportation expenses related to these agreements, incurred prior to the transfer of control to the purchaser, are now presented as oil and gas production costs.

The adoption of ASC 606 as of January 1, 2018 had the following impact on the Company's results of operations for the three months ended March 31, 2018:



	As Reported					ASC 605 (Without Adoption of ASC 606)					Effect of Change
	(in millions)		Realized Price			(in millions)		Realized Price			(in millions)		Price impact
Oil and Gas Sales:
Oil sales	$	1,013	$	61.64	per Bbl	$	1,013	$	61.64	per Bbl	$	—	$	—	per Bbl
NGL sales	165		$	27.74	per Bbl	130		$	21.81	per Bbl	35		$	5.93	per Bbl
Gas sales	88		$	2.59	per Mcf	80		$	2.37	per Mcf	8		$	0.22	per Mcf
Oil and gas sales	$	1,266	$	45.11	per BOE	$	1,223	$	43.58	per BOE	$	43	$	1.53	per BOE

Production Costs	$	213	$	7.60	per BOE	$	170	$	6.07	per BOE	$	43	$	1.53	per BOE

See Notes 2 and 11 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information regarding the Company's adoption of ASC 606.

Second Quarter ~~2017~~2018 Outlook

Based on current estimates, the Company expects the following operating and financial results for the quarter ending June 30, ~~2017~~2018:

Production is forecasted to average ~~254,000~~312,000 to ~~259,000~~322,000 BOEPD. Permian Basin production is forecasted to average between 268 MBOEPD to 276 MBOEPD.

Production costs (including production and ad valorem taxes and transportation costs) are expected to average ~~$7.75~~$10.00 to ~~$9.75~~$12.00 per BOE, ~~based on~~reflecting current NYMEX strip commodity ~~prices.~~prices and the adoption of ASC 606 (see Adoption of New Accounting Standards above and Notes 2 and 11 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the adoption of ASC 606). DD&A expense is expected to average ~~$15.00~~$12.50 to ~~$17.00~~$14.50 per BOE.

Total exploration and abandonment expense is expected to be $20 million to $30 million. General and administrative expense is expected to be ~~$80~~$90 million to ~~$85~~$95 million. Interest expense is expected to be ~~$43~~$30 million to ~~$48~~$35 million, and other expense is expected to be $60 million to $70 ~~million. Other expense is expected to include (i)~~million, including $40 million to $45 million of charges associated with excess firm gathering and transportation ~~commitments, (ii) $5 million to $10 million of losses (principally noncash) associated~~

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

with the portion of vertical integration services provided to nonaffiliated working interest owners, including joint venture partners, in wells operated by the Company and (iii) other miscellaneous charges.commitments. Accretion of discount on asset retirement obligations is expected to be $4 million to $7 million.

The Company's effective income tax rate is expected to range from 3521 percent to ~~40 percent assuming current capital spending plans and no significant mark-to-market changes in the Company's derivative position.~~25 percent. Current income taxes are expected to be less than $5 million.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Operations and Drilling Highlights

The following table summarizes the Company's average daily oil, NGL, gas and total production by asset area during the three months ended March 31, ~~2017~~2018:


	Oil (Bbls)	NGLs (Bbls)	Gas (Mcf)	Total (BOE)	Oil (Bbls)	NGLs (Bbls)	Gas (Mcf)	Total (BOE)
Permian Basin	134,521	36,529	178,587	200,814	169,820	54,396	215,986	260,214
South Texas - Eagle Ford Shale(a)	7,871	6,799	45,070	22,182	9,011	8,178	48,849	25,331
Raton Basin	—	—	89,959	14,993	—	—	83,505	13,917
West Panhandle	1,997	3,344	5,390	6,240	1,368	3,091	11,324	6,346
South Texas - Other(a)	1,226	154	19,565	4,641	2,312	515	19,155	6,019
Other	4	2	31	11	8	1	50	18
Total	145,619	46,828	338,602	248,881	182,519	66,181	378,869	311,845

____________________

(a)

Includes 474 Bbls of oil, 165 Bbls of NGLs and 1,559 Mcf of gas (total of 898 BOEPD) associated with acreage in the western portion of the Eagle Ford Shale, the assets and liabilities of which the Company has classified as held for sale in the accompanying consolidated balance sheet as of March 31, 2018. See Note 3 and Note 16 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information about the Company's sale of its West Eagle Ford Shale assets.

The Company's liquids production increased to 7780 percent of total production on a BOE basis for the three months ended March 31, ~~2017,~~2018, as compared to 7377 percent for the same period last year.

The following table summarizes by geographic area the Company's finding and development costs incurred during the three months ended March 31, ~~2017:~~2018:


	Acquisition Costs				Exploration		Development				Acquisition Costs		Exploration Costs			Development Costs			Asset Retirement Obligations		Total
	Proved		Unproved		Costs		Costs		Total		Unproved					Development Costs			Asset Retirement Obligations		Total
	(in millions)										(in millions)
Permian Basin	$	2	$	8	$	418	$	111	$	539	$	13	Exploration Costs		$	605		$	231	$	1		$	850
South Texas - Eagle Ford Shale	—		—		6		3		9		—		1			7			—		8
Raton Basin											—		—			1			—		1
West Panhandle	—		—		—		2		2		—		2			—			—		2
Other	—		—		1		—		1
Total	$	2	$	8	$	425	$	116	$	551	$	13	$	608		$	239		1		$	861

The following table summarizes the Company's development and exploration/extension drilling activities for the three months ended March 31, ~~2017:~~2018:

Development Drilling

Beginning Wells
in Progress

Wells
Spud

Successful
Wells

Ending Wells
in Progress
Permian Basin 8
5
3
10
South Texas - Eagle Ford Shale 4
—
—
4
Total 12
5
3
14



	Development Drilling
	Beginning Wells in Progress	Wells Spud	Successful Wells	Unsuccessful Wells	Ending Wells in Progress
Permian Basin	14	9	5	1	17


	Exploration/Extension Drilling					Exploration/Extension Drilling
	Beginning Wells in Progress	Wells Spud	Successful Wells	Unsuccessful Wells	Ending Wells in Progress	Beginning Wells in Progress	Wells Spud	Successful Wells	Unsuccessful Wells	Ending Wells in Progress
Permian Basin	119	62	39	1	141	125	50	65	—	110
South Texas - Eagle Ford Shale	14	3	—	1	16	8	—	—	—	8
West Panhandle						3	—	—	2	1
Total	133	65	39	2	157	136	50	65	2	119

Permian Basin area. ~~In the first quarter of 2017,~~During 2018, the Company ~~increased its rig count~~plans to operate 20 rigs in the Spraberry/Wolfcamp ~~area from 17 rigs at year-end 2016 to 18 rigs at March 31, 2017. During 2017, the Company~~field and expects to place on production ~~approximately 260~~between 250 and 275 horizontal wells ~~(220~~(200 to 225 horizontal wells in the northern portion of the play and 40approximately 50 horizontal wells in the southern portion of

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

the play). Approximately 5560 percent of the horizontal wells are planned to be drilled in the Wolfcamp B interval, 3025 percent in the Wolfcamp A interval and the remaining 15 percent will be a combination of wells in the Spraberry Shale intervals (Jo Mill, Lower Spraberry and Middle Spraberry) and a limited appraisal program for the Clearfork and Wolfcamp D intervals. The Company's 2018 appraisal program includes appraising: (i) its first Clearfork

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

horizontal well (located in Midland County), (ii) seven wells in the Jo Mill and Middle Spraberry intervals in conjunction with nine Lower Spraberry Shale ~~interval. The Company also plans to drill a small number of~~ wells to ~~appraise the shallower Clearfork formation, the Jo Mill interval within~~determine an optimal development strategy for the Spraberry formation (testing different spacing, staggering, sequencing, and ~~the~~completion design) and (iii) three Wolfcamp D interval inwells. Of the ~~Wolfcamp formation~~wells expected to be placed on production during ~~2017. The~~2018, the Company expects to ~~spend $2.4 billion~~test an additional 45 higher intensity completions during the first half of ~~capital~~2018. In addition, based on strong well results from the 20 higher intensity completion wells placed on production in ~~the Spraberry/Wolfcamp field~~2017 and 16 wells placed on production during 2017, including $1.9 billion of horizontal drilling and completion capital, $265 million for tank battery and disposal facilities, $115 million for gas processing facilities and $110 million for land, science and other costs. During the first quarter of ~~2017,~~2018, the Company anticipates that it will likely add more higher intensity completions to its program during the second half of 2018.

The Company's capital spending for 2018 is expected to be weighted towards the first half of 2018 based on the 45 planned higher intensity completions, 3-D seismic surveys, pad construction, three deeper Wolfcamp D wells and a higher number of wells with longer laterals being placed on production during the first half of the year. First quarter spending was also impacted by carryover costs from 2017. In addition, with the steady increase in oil prices during the first part of the year, combined with high industry activity levels in the Permian Basin, the Company is seeing early signs of inflation, especially in labor, fuel, mud, chemicals, wireline and steel costs. Furthermore, the industry activity levels in the Permian Basin are also leading to a tight labor market for the Company's service providers, resulting in less experienced personnel performing services for the Company.

Based on the strong results to date from the higher intensity completions, it is likely that the Company will add more higher intensity completions during the second half of the year. The Company also is likely to add rigs later in the year to accomplish its 2019 growth plan. As a result of these two factors and the likelihood of additional inflation if oil prices and industry activity levels remain high, it is expected that the Company's 2018 capital budget of $2.9 billion will increase. The Company is still evaluating its plans and does not expect to be able to quantify the amount of this increase until mid-year. However, any budget increase is expected to be funded from the Company's forecasted cash flow for 2018, which is based on current NYMEX forward commodity prices.

During the first three months of 2018, the Company successfully completed 3953 horizontal wells in the northern portion of the play and 317 horizontal wells in the southern portion of the play. In the northern portion of the play, approximately 4060 percent of wells placed on production were Wolfcamp B interval wells, ~~and the remaining 60~~approximately 30 percent were ~~split predominantly between~~ Wolfcamp A interval wells and the remaining 10 percent were were primarily Lower Spraberry Shale wells. In the southern portion of the play, ~~all~~approximately 55 percent of the wells placed on production were Wolfcamp B interval wells and approximately 45 percent were Wolfcamp A interval wells.

The Company continues to utilize its integrated services to control well costs and operating costs ~~in addition~~and to ~~supporting~~support the execution of its drilling and production activities in the Spraberry/Wolfcamp field. During the ~~first quarter of 2017,~~three months ended March 31, 2018, the Company utilized ~~five~~six of its eight Company-owned fracture stimulation fleets to support its drilling operations in the Spraberry/Wolfcamp field. The Company also owns other field service equipment that supports its drilling and production operations, including pulling units, fracture stimulation tanks, water transport trucks, hot oilers, blowout preventers, construction equipment and fishing tools. In addition, Premier Silica (the Company's wholly-owned sand mining subsidiary) is supplying high-quality and logistically advantaged brown sand for proppant, which is being used to fracture stimulate horizontal wells inDuring 2018, the ~~Spraberry and Wolfcamp Shale intervals.~~

~~The~~ Company has been and continues to pursue initiatives to improve drilling and completion efficiencies and reduce costs. The most significant drilling and completion cost reductions to date have been for casing, tubing, materials for drilling and fracture stimulation, fuel charges, labor and transportation, rental equipment and well services, while efficiency gains include reducing the time needed to drill and complete the wells and optimizing completions in the Spraberry and Wolfcamp Shale intervals.

The Company's long-term growth plan continues to focus on optimizing the development of the field and addressing the future requirements for water sourcing and disposal, field infrastructure, gas processing, sand, pipeline takeaway capacity for its products, oilfield services, tubulars, electricity, buildings, roads and labor.

The Company is constructing a field-wide water distribution system to reduce the cost of water for drilling and completion activities and to ensure that adequate supplies of water are available to support the Company's long-term growth plan for the Spraberry/Wolfcamp field. The 2017 capital program includes $160 million for expansion of the mainline system, subsystems and frac ponds to efficiently deliver water to Pioneer's drilling locations. The Company signed an agreement with the city of Midland to upgrade the city's wastewater treatment plant in return for a dedicated long-term supply of water from the plant. The 2017 program includes $10 million of engineering capital to begin work on this upgrade. Pioneer expects to spend ~~approximately $110~~$78 million ~~over the 2017 through 2019 period~~ for ~~the Midland plant upgrade. In return, the Company will receive approximately two billion barrels of low-cost, non-potable water over a 28-year contract period (up~~upgrades and maintenance to ~~240 thousand barrels per day) to support~~ its ~~completion operations. The water contract is subject to State of Texas legislative validation during the second quarter of 2017.~~pressure pumping and well service equipment.

The Company's sand mine in Brady, Texas, which is strategically located within close proximity (approximately 190 miles) of the Spraberry/Wolfcamp field, provides a secure sand source for the Company's horizontal drilling program. In addition, Pioneer has signed a contract for its initial offtake of sand sourced in West Texas where significant new sand supplies are expected to be available in 2018. The ~~2017 capital program includes $30~~Company is evaluating additional contracts for lower cost sand sourced in West Texas.

The Company continues to pursue initiatives to improve drilling and completion efficiencies and reduce costs. The Company's long-term growth plan also continues to focus on optimizing the development of the field and addressing the future requirements for water sourcing and disposal, field infrastructure, gas processing, pipeline takeaway capacity for its products, oilfield services, tubulars, electricity, buildings and roads.

The Company is constructing a field-wide water distribution system to reduce the cost of water for drilling and completion activities and to secure adequate supplies of non-potable water to support the Company's long-term growth plan for the Spraberry/Wolfcamp field. Over the past few years, the Company has expanded its mainline system, subsystems and frac ponds to efficiently deliver water to many of Pioneer's drilling locations. The Company is purchasing approximately 120 thousand barrels per day of effluent water from the City of Odessa and has signed an agreement with the city of Midland to upgrade the city's wastewater treatment plant in return for a dedicated long-term supply of water from the plant. Once the Midland plant upgrade is complete, the Company expects to receive approximately two billion barrels of low-cost, non-potable water over a 28-year contract period (up to 240 thousand barrels per day) to support its completion operations. During 2018, the Company expects to spend approximately $135 million to ~~complete an optimization project for~~begin the ~~Company's existing sand mining~~Midland plant upgrade construction and build additional subsystems, frac ponds and produced water reuse facilities. ~~This project is expected~~

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

The Company has entered into firm pipeline commitments to ~~improve yields~~deliver approximately 160 thousand barrels per day (MBOPD), or approximately 95 percent of its current Permian Basin net oil production, to Gulf Coast refineries and ~~reduce the Company's overall cost of sand supplies.~~export markets. The ~~2017 capital program also includes $45 million for upgrades and maintenance~~Company delivered 160 MBOPD to the ~~six Company-owned pressure pumping fleets that the Company plans to operate~~Gulf Coast during ~~2017.~~

~~Eagle Ford Shale area. In~~ the first quarter, of ~~2017,~~which 87 MBOPD were exported. These firm pipeline contracts insulate Pioneer from the recent widening of the Midland-Cushing oil price basis differential by providing exposure to Brent-related pricing. As a result of this pricing benefit, Gulf Coast refinery and export sales added $16 million of incremental cash flow in the first quarter of 2018. Pioneer’s oil volumes under firm transportation contracts increase through 2021 commensurate with the Company’s forecasted Permian Basin oil production growth. The Company is targeting to transport greater than 90 percent of the Company’s long-term Permian Basin net oil production under firm pipeline transportation agreements to the Gulf Coast for refinery sales and exports. The Company expects exports in the second quarter of 2018 to be similar to the first quarter. During the second half of 2018, export volumes are expected to grow as Pioneer’s export capacity is increased from approximately 110 MBOPD to 150 MBOPD.

The Company also remains well positioned to move its Permian Basin gas production. Approximately 75 percent of Pioneer’s Midland Basin gas production is transported under firm pipeline transportation agreements to the southern California market where it is sold. The remainder is primarily sold under term contracts in the Waha market. Additional firm pipeline transportation has been secured on a third-party pipeline to the Gulf Coast, which is anticipated to be placed into service late in the third quarter of 2019. Firm transportation on the pipeline will provide access to LNG exports, refineries, petrochemical facilities and Mexican markets.

Asset Divestitures.

South Texas area. In February 2018, the Company ~~increased~~announced its ~~rig count~~intention to divest its properties in South Texas. In March 2018, the Company entered into a purchase and sale agreement with an unaffiliated third party to sell approximately 10,200 net acres in the western portion of the Eagle Ford Shale ("West Eagle Ford Shale"), with first quarter 2018 production of 898 BOEPD, for cash proceeds of approximately $103 million. The Company has classified the West Eagle Ford Shale assets and liabilities as held for sale in the accompanying consolidated balance sheet as of March 31, 2018. The sale closed in April 2018. See Notes 3 and 16 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information about the Company's sale of its West Eagle Ford Shale assets.

After the sale, the Company's position in the Eagle Ford Shale ~~area from zero rigs~~is approximately 59,000 net acres, all of which is held by production. The Company has opened a data room for its remaining Eagle Ford Shale assets and expects bids in mid-May 2018. A data room for the Company's remaining South Texas assets is expected to open during the second quarter of 2018. No assurance can be given that the sales will be completed in accordance with the Company's plan or on terms and at ~~year-end 2016~~prices acceptable to ~~two rigs at March 31, 2017. During 2017,~~the Company.

Raton and West Panhandle areas. The Raton sales process is underway and the Company expects to ~~spend $95 million~~open a data room for its West Panhandle area assets during the second quarter of ~~capital to drill and complete 11 new Eagle Ford Shale wells and to complete nine wells~~2018. No assurance can be given that ~~were drilled but not~~these sales will be completed in ~~2016. The objective of this drilling program is~~accordance with the Company's plan or on terms and at prices acceptable to ~~test longer laterals with higher intensity completions.~~the Company.

Results of Operations

Oil and gas revenues. Oil and gas revenues totaled ~~$809 million~~$1.3 billion for the three months ended March 31, ~~2017~~2018, as compared to ~~$409~~$809 million for the same period in ~~2016.~~2017.

The increase in oil and gas revenues during the three months ended March 31, ~~2017,~~2018, as compared to the same period in ~~2016,~~2017, is primarily due to increases of ~~75 percent, 87~~26 percent and 5644 percent in oil and NGL prices, respectively, and increases of 25 percent, 41 percent and 12 percent in daily oil, NGL and gas ~~prices, respectively, and 19 percent increases in both daily oil and NGL~~ sales volumes, respectively, partially offset by a ~~six~~7 percent ~~decline~~decrease in ~~daily~~ gas ~~sales volumes.~~

~~Table~~prices during the three months ended March 31, 2018, as compared to the same period in 2017. Realized prices are inclusive of ~~Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

the effect of the adoption of ASC 606 as described above in Adoption of New Accounting Standards.

The following table provides average daily sales volumes for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended March 31,		Three Months Ended March 31,
	2017	2016	2018	2017
Oil (Bbls)	145,619	122,802	182,519	145,619
NGLs (Bbls)	46,828	39,232	66,181	46,828
Gas (Mcf)	338,602	358,651	378,869	338,602
Total (BOEs)	248,881	221,809	311,845	248,881

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Average daily BOE sales volumes increased by 1225 percent for the three months ended March 31, ~~2017~~2018, respectively, as compared to the same period in ~~2016~~2017, principally due to the Company's successful Spraberry/Wolfcamp horizontal drilling program. NGL production volumes are lower for the three months ended March 31, 2017 and 2016 by approximately 5,000 Bbls per day for each respective period due to voluntary reductions in recoveries of ethane as a result of it having a higher value if sold as part of the gas stream.

The oil, NGL and gas prices that the Company reports are based on the market prices received for each commodity. The following table provides the Company's average prices for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
Oil (per Bbl)	$	49.05	$	28.09	$	61.64	$	49.05
NGL (per Bbl)	$	19.33	$	10.33	$	27.74	$	19.33
Gas (per Mcf)	$	2.79	$	1.79	$	2.59	$	2.79
Total (per BOE)	$	36.14	$	20.28	$	45.11	$	36.14

Sales of purchased oil and gas. The Company periodically enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the ~~Company’s~~Company's areas of production. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's WTI oil sales to athe Gulf Coast ~~market price~~refinery or international export markets and to satisfy unused pipeline capacity commitments. Revenues and expenses from these transactions are presented on a gross basis as the Company acts as a principal in the transaction by assuming both the risk and rewards of ownership, including credit risk, of the commodities purchased and ~~assuming~~ the responsibility to deliver the commodities sold. The transportation costs associated with these transactions are presented as a component of purchased oil and gas expense. The net effect of third party purchases and sales of oil and gas for the three months ended March 31, ~~2017~~2018 was ~~a loss~~income of ~~$19~~$16 million, as compared to a loss of ~~$20~~$19 million for the same period in ~~2016.~~2017. Firm transportation payments on excess pipeline capacity commitments are included in other expense in the accompanying consolidated statements of operations. See Note L13 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information on transportation commitment charges.

Interest and other income. ~~Interest~~The Company's interest and other income for the three months ended March 31, ~~2017~~2018 was ~~$13~~$18 million, as compared to $8$13 million for the same period in ~~2016.~~2017. The increase in interest and other income during the three months ended March 31, 2018, as compared to the same period in 2017, was primarily due to increases of (i) $3 million in seismic data sales and (ii) $2 million in deferred compensation plan income. See Note K12 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional ~~information.~~information about the Company's interest and other income.

Derivative gains (losses), net. The Company utilizes commodity swap contracts, collar contracts and collar contracts with short puts to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. During the three months ended March 31, ~~2017~~2018, the Company recorded $208 million of net derivative losses on commodity price and marketing derivatives, of which $72 million represented net cash payments. During the three months ended March 31, 2017, the Company recorded $151 million of net derivative gains on commodity ~~price~~ and ~~interest rate~~diesel price derivatives, of which $10 million represented net cash receipts. During the three months ended March 31, 2016, the Company recorded $43 million of net derivative gains on commodity price and interest rate derivatives, of which $218 million represented net cash receipts.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

The following tables detail the net cash receipts (payments) on the Company's commodity derivatives and the relative price impact (per Bbl or Mcf) for the three months ended March 31, ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended March 31, 2017							Three Months Ended March 31, 2018
	Net cash receipts			Price impact				Net cash receipts (payments)			Price impact
	(in millions)							(in millions)
Oil derivative receipts	$	11		$	0.84		per Bbl
Oil derivative payments								$	(74	)	$	(4.49	)	per Bbl
NGL derivative receipts	—			$	0.04		per Bbl	—			$	0.08		per Bbl
Gas derivative receipts	(1		)	$	(0.03	)	per Mcf	2			$	0.05		per Mcf
Total net commodity derivative receipts	$	10
Total net commodity derivative payments								$	(72	)

Table of Contents

PIONEER NATURAL RESOURCES COMPANY


	Three Months Ended March 31, 2016					Three Months Ended March 31, 2017
	Net cash receipts		Price impact			Net cash receipts (payments)			Price impact
	(in millions)					(in millions)
Oil derivative receipts	$	194	$	17.26	per Bbl	$	11		$	0.84		per Bbl
NGL derivative receipts	4		$	1.09	per Bbl	—			$	0.04		per Bbl
Gas derivative receipts	20		$	0.61	per Mcf
Gas derivative payments						(1		)	$	(0.03	)	per Mcf
Total net commodity derivative receipts	$	218				$	10

The Company's open derivative contracts are subject to continuing market risk. See Note E5 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 Company's derivative contracts.

Gain on disposition of assets, net. The Company recorded a net ~~gains~~gain on the disposition of assets of ~~$11~~$4 million for the three months ended March 31, ~~2017,~~2018, as compared to $2$11 million for the same period in ~~2016.~~2017. See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Company's plan to sell its South Texas, Raton and West Panhandle assets and the Company's gain on disposition of assets for the three months ended March 31, 2017.

Oil and gas production costs. The Company recognized oil and gas production costs of ~~$141~~$213 million during the three months ended March 31, ~~2017~~2018, as compared to ~~$156~~$141 million during the same period in ~~2016~~2017. Gathering, processing and transportation charges are inclusive of the effect of the adoption of ASC 606 as described above in Adoption of New Accounting Standards.Lease operating expenses and workover ~~costs~~expenses represent the components of oil and gas production costs over which the Company has management ~~control, while third-party transportation charges represent~~control.

The following table provides the ~~cost to transport volumes produced to a sales point. Net natural gas plant/gathering charges represent the net costs to gather and process~~components of the Company's ~~gas, reduced by net revenues earned from gathering~~total production costs per BOE for the three months ended March 31, 2018 and ~~processing of third-party gas in Company-owned facilities.~~2017:



	Three Months Ended March 31,
	2018			2017
Lease operating expenses	$	4.41		$	4.99
Gathering, processing and transportation charges	2.47			1.01
Net natural gas plant (income) charges	(0.10		)	(0.28		)
Workover costs	0.82			0.59
Total production costs	$	7.60		$	6.31

Total oil and gas production costs per BOE for the three months ended March 31, ~~2017 decreased~~2018 increased by 1820 percent, as compared to the same period in ~~2016.~~2017. The decrease in lease operating expenses per BOE during the three months ended March 31, ~~2017,~~2018, as compared to the same period in ~~2016,~~2017, was primarily due to a greater proportion of the Company's production coming from horizontal wells in Spraberry/Wolfcamp area that have lower per BOE lease operating ~~costs~~costs. Gathering, processing and ~~cost reduction initiatives. The decrease in third-party~~transportation charges include transportation costs paid to third-party carriers and costs associated with gas processing. The adoption of ASC 606 had the effect of increasing gathering, processing and transportation charges by $1.53 per BOE during the three months ended March 31, 2017, as compared to the same period in 2016, was due to a lower proportion of the Company's production being subject to transportation costs (principally due to the decline in Eagle Ford Shale production).2018 over what would have been reported if these charges were accounted for under ASC 605. The ~~change~~decrease in net natural gas plant ~~charges~~income per BOE ~~during the three months ended March 31, 2017, as compared to the same period in 2016,~~ is primarily reflective of ~~increased earnings on third-party volumes that are processed~~reduced net revenues earned from gathering and processing of third party gas in Company-owned ~~facilities due to higher NGL and gas prices.~~facilities. The increase in workover costs per BOE during the three months ended March 31, ~~2017,~~2018, as compared to the same period in ~~2016,~~2017, was primarily due to an increase in Permian vertical well workover activity due to the improvement in commodity prices.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~The following table provides the components of the Company's oil and gas production costs per BOE for the three months ended March 31, 2017 and 2016:~~

Three Months Ended
March 31,
2017 2016
Lease operating expenses $ 4.99
$ 5.45
Third-party transportation charges 1.01
1.76
Net natural gas plant (income) charges (0.28 ) 0.22
Workover costs 0.59
0.28
Total production costs $ 6.31
$ 7.71

Production and ad valorem taxes. The Company's production and ad valorem taxes were ~~$47~~$76 million during the three months ended March 31, ~~2017~~2018, as compared to ~~$29~~$47 million for the same period in ~~2016~~2017. In general, production taxes and ad valorem taxes are directly related to commodity price changes; however, Texas ad valorem taxes are based upon prior year commodity prices, whereas production taxes are based upon current year commodity prices. The increase in production and ad valorem taxes per BOE for the three months ended March 31, 2018, as compared to the same period in 2017, is primarily due the increase in commodity prices during 2018 and, for ad valorem tax purposes, the higher valuation attributable to the Company's successful Spraberry/Wolfcamp horizontal drilling program during 2017 and 2018.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

The following table provides the Company's production and ad valorem taxes per BOE for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
Production taxes	$	1.59	$	0.80	$	2.01	$	1.59
Ad valorem taxes	0.52		0.66		0.69		0.52
Total production and ad valorem taxes	$	2.11	$	1.46	$	2.70	$	2.11

Depletion, depreciation and amortization expense. The Company's DD&A expense was ~~$337~~$357 million ($~~15.04~~12.72 per BOE) for the three months ended March 31, ~~2017,~~2018, as compared to ~~$353~~$337 million ($~~17.49~~15.04 per BOE) during the same period in 2016. The change in per BOE DD&A expense during the three months ended March 31, 2017, as compared to the same period in 2016, is primarily due to a decrease in depletion expense per BOE on oil and gas properties.

2017. Depletion expense on oil and gas properties was ~~$14.51~~$12.32 per BOE during the three months ended March 31, ~~2017,~~2018, as compared to ~~$16.94~~$14.51 per BOE during the same period in ~~2016. The change in~~2017.

Depletion expense on oil and gas properties per BOE ~~depletion expense during~~for the three months ended March 31, ~~2017,~~2018 decreased 15 percent as compared to the same period in ~~2016, is~~2017, primarily due to (i) additions to proved reserves attributable to the Company's successful Spraberry/Wolfcamp horizontal drilling program and (ii) commodity price increases and cost reduction initiatives, both of which had the effect of adding proved reserves by lengthening the economic lives of the Company's producing ~~wells and (ii) additions to proved reserves attributable to the Company's successful Spraberry/Wolfcamp horizontal drilling program.~~wells.

Impairment of oil and gas ~~properties.~~properties and other long-lived assets. The Company performs assessments of its long-lived assets to be held and used, including oil and gas properties, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. ~~To the extent such~~In order to perform these assessments, ~~indicate~~management uses various observable and unobservable inputs, including management's outlooks for (i) proved reserves and risk-adjusted probably and possible reserves, (ii) commodity prices, (iii) production costs, (iv) capital expenditures and (v) production. Management's long-term commodity price outlooks are developed based on third-party, longer-term commodity future price outlooks as of a ~~reduction of the estimated useful life or estimated future cash flows~~measurement date ("Management's Price Outlooks").

As a result of the Company's ~~oil and gas properties,~~impairment assessments, the ~~carrying value may not be recoverable and therefore an~~Company recognized pretax, noncash impairment ~~charge would be required~~charges of $285 million to reduce the carrying ~~value~~values of the ~~proved properties~~Raton field to ~~their~~its estimated fair ~~value.~~value during the three months ended March 31, 2017.

~~The~~It is reasonably possible that the Company's estimate of undiscounted future net cash ~~flow model~~flows may change in the ~~Company uses~~future resulting in the need to ~~assess proved properties for impairment includes numerous assumptions.~~impair the carrying values of its properties. The primary factors that may affect estimates of future cash flows are (i) future reserve adjustments, both positive and negative, to proved reserves and ~~appropriate~~ risk-adjusted probable and possible reserves, (ii) results of future drilling activities, (iii) changes in Management's Price ~~Outlook~~Outlooks and (iv) increases or decreases in production ~~costs~~ and capital costs associated with ~~those reserves. All inputs to the cash flow model are evaluated at each measurement date.~~these properties.

As a result of the Company's proved property impairment assessments, the Company recognized noncash impairment charges to reduce the carrying values of (i) the Raton field during the three months ended March 31, 2017 ($285 million impairment charge) and (ii) its West Panhandle field during the three months ended March 31, 2016 ($32 million impairment charge) to their estimated fair values. See Note D4 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Company's proved oil and gas property impairment charges.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

Exploration and abandonments expense. The following table provides the Company's geological and geophysical costs, exploratory dry holes expenses and lease abandonments and other exploration expenses for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
	(in millions)				(in millions)
Geological and geophysical	$	23	$	19	$	28	$	23
Exploratory well costs	10		1		4		10
Leasehold abandonments and other	—		39		3		—
	$	33	$	59	$	35	$	33

The geological and geophysical expenses for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 were primarily related to acquiring seismic surveys over a portion of the northern Spraberry/Wolfcamp area and geological and geophysical personnel costs.

During the three months ended March 31, ~~2016,~~2018, the Company ~~incurred leasehold abandonments primarily related to the abandonment~~drilled and evaluated 67 exploration/extension wells, 65 of ~~unproved properties in the Permian Basin and unproved acreage in Alaska in~~ which ~~the Company held an overriding royalty interest.~~

were successfully completed as discoveries. During the ~~three months ended March 31,~~same period in 2017, the Company drilled and evaluated 41 exploration/extension wells, 39 of which were successfully completed as discoveries. ~~During the same period in~~

32~~2016, the Company drilled and evaluated 53 exploration/extension wells, all~~

Table of ~~which were successfully completed as discoveries.~~Contents

PIONEER NATURAL RESOURCES COMPANY

General and administrative expense. General and administrative expense for the three months ended March 31, ~~2017~~2018 was ~~$84~~$90 million ($~~3.74~~3.22 per BOE), as compared to ~~$74~~$84 million ($~~3.66~~3.74 per BOE) for the same period in ~~2016.~~2017. The increase in general and administrative costs during the three months ended March 31, 2018, as compared to the same period in 2017, was primarily due to an increase in contract labor associated with upgrading the Company's information technology systems. The decrease in general and administrative expense per BOE during the three months ended March 31, ~~2017,~~2018, as compared to the same period in ~~2016,~~2017, was primarily due to ~~increases~~a 25 percent increase in ~~employee-related compensation and benefit costs.~~sales volumes during the three months ended March 31, 2018, as compared to the same period in 2017.

Accretion of discount on asset retirement obligations. Accretion of discount on asset retirement obligations was $5$4 million for ~~both~~ the three months ended March 31, ~~2017 and 2016, respectively.~~2018, as compared to $5 million for the same period in 2017. See Note I9 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for information regarding the Company's asset retirement obligations.

Interest expense. Interest expense was ~~$46 million and $55~~$36 million for the three months ended March 31, ~~2017 and 2016, respectively.~~2018, as compared to $46 million for the same period in 2017. The decrease in interest expense during the three months ended March 31, ~~2017,~~2018, as compared to the same ~~respective~~ period in ~~2016,~~2017, was primarily due to the repayment of the Company's ~~5.875% senior notes,~~6.65% Senior Notes, which matured in ~~July 2016.~~March 2017. The weighted average interest ~~rates~~rate on the Company's indebtedness for the three months ended March 31, ~~2017, including the effects of capitalized interest,~~2018 was ~~5.8~~5.6 percent, as compared to ~~6.2~~5.8 percent for the same period in ~~2016.~~2017. See Note 7 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information about the Company's long-term debt and interest expense.

Other expense. Other expense was ~~$60~~$57 million for the three months ended March 31, ~~2017,~~2018, as compared to ~~$87~~$60 million ~~during~~for the same period in ~~2016.~~2017. See Note 13 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information regarding the Company's other expenses.

Income tax benefit (provision). The ~~decrease in other expense~~Company recognized an income tax provision of $50 million for the three months ended March 31, ~~2017,~~2018, as compared to the same period in 2016, was primarily due to a decrease of $36 million in idle drilling and well service equipment charges, partially offset by an increase of $16 million in unused firm transportation costs.

The Company expects to continue to incur charges associated with excess firm gathering and transportation commitments and vertical integration operations until commodity prices improve, allowing the Company to increase its drilling activities, or, in the case of gathering and transportation commitments, the contractual obligations expire. Based on current drilling plans for 2017, the Company does not expect to incur any idle drilling rig charges. See Note L of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.

~~Income tax benefit.~~ ~~The Company recognized~~ an income tax benefit of $31 million for the ~~three months ended March 31, 2017, as compared to an income tax benefit of $141 million for the~~ same period in ~~2016.~~2017. The Company's effective tax rate for the three months ended March 31, ~~2017~~2018 was 4222 percent, as compared to 3542 percent for the same period in 2017. The U.S. statutory rate for the three months ended March 31, ~~2016.~~2018 was 21 percent, reflecting the reduction in the federal corporate income tax rate from 35 percent to 21 percent beginning in 2018 as a result of the Tax Cuts and Jobs Act that was enacted in December 2017. The Company's effective tax rate for the three months ended March 31, 2017 differs from the U.S. statutory rate in effect during 2017 of 35 percent primarily due to recognizing excess tax benefits of $8 million associated with the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which requires excess tax benefits or deficiencies associated with the vesting of long-term incentive awards to be recorded as income tax expense or benefit in the statement of operations rather than as an adjustment to additional paid-in capital in the balance sheet.

As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had cumulative unrecognized tax benefits of ~~$115~~$127 million and ~~$112~~$124 million respectively, resulting from research and experimental expenditures related to horizontal drilling and completions innovations. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company's deferred tax liability and will affect the Company's effective tax rate

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

in the period it is recognized. The Company expects to substantially resolve the uncertainties associated with the unrecognized tax benefit by December ~~2018~~. 2018.

See Note M14 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Company's income ~~taxes.~~tax rates and tax attributes.

~~Capital Commitments,~~Liquidity and Capital Resources

Liquidity. The Company's primary sources of short-term liquidity are (i) cash and ~~Liquidity~~cash equivalents, (ii) net cash provided by operating activities, (iii) sales of short-term and long-term investments, (iv) proceeds from divestitures and (iv) unused borrowing capacity under its credit facility. Although the Company expects that these sources of funding will be adequate to fund its 2018 capital expenditures, dividend payments and provide adequate liquidity to fund other needs, including previously announced stock repurchases, no assurance can be given that such funding sources will be adequate to meet the Company's future needs.

~~Capital commitments.~~The Company's primary needs for cash are for (i) capital expenditures, ~~and acquisition expenditures on~~(ii) acquisitions of oil and gas properties, ~~and related~~ vertical integration assets and facilities, ~~payment~~(iii) payments of contractual obligations, including debt maturities, (iv) dividends and share repurchases and (v) working capital obligations. Funding for these cash needs may be provided by any combination of ~~internally-generated~~the Company's sources of liquidity.

As of March 31, 2018, the Company had cash ~~flow, cash and cash equivalents~~ on hand ~~sales~~ of $1.0 billion, short-term investments of $722 million and long-term investments of $93 million. The Company had no outstanding borrowings under its credit facility as of March 31, 2018, leaving $1.5 billion of unused borrowing capacity, and was in compliance with all of its debt covenants.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Capital resources. Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows as of March 31, 2018 and 2017, are summarized below.

Operating activities. Net cash provided by operating activities was $554 million during the three months ended March 31, 2018, as compared to $364 million during the same period in 2017. The increase in net cash provided by operating activities for the three months ended March 31, 2018, as compared to the same period in 2017, is primarily due to increases in the Company's oil and gas revenues for the three months ended March 31, 2018 as a result of increases in commodity prices and sales volumes, partially offset by increases in oil and gas production costs, production and ad valorem taxes, cash derivative payments and working capital.

Investing activities. Net cash used in investing activities was $404 million during the three months ended March 31, 2018, as compared $298 million during same period in 2017. The increase in net cash used in investing activities during the three months ended March 31, 2018, as compared to the same period in 2017, is primarily due to (i) an increase of $385 million in additions to oil and gas properties and (ii) a decrease of $74 million in proceeds from ~~divestitures~~dispositions of ~~nonstrategic~~ assets, ~~or external~~partially offset by (iii) an increase of $318 million in net proceeds from investments and (iv) a decrease of $35 million in additions to other assets and other property and equipment. During the three months ended March 31, 2018, the Company's expenditures for investing activities were primarily funded by net cash provided by operating activities.

Financing activities. Net cash used in financing activities was $45 million during the three months ended March 31, 2018, as compared to $521 million during the same period in 2017. The decrease in net cash used in financing activities during the three months ended March 31, 2018, as compared to the same period in 2017, is primarily due to the repayment of $485 million associated with the Company's 6.65% Senior Notes that matured in March 2017. See Note 7 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information regarding the Company's repayment of the 6.65% Senior Notes.

As the Company pursues its strategy, it may utilize various financing sources, including fixed and floating rate debt, convertible securities and preferred or common stock. The Company cannot predict the timing or ultimate outcome of any such actions, as ~~discussed~~they are subject to market conditions, among other factors. The Company may also issue securities in ~~"Capital resources" below.~~exchange for oil and gas properties, stock or other interests in other oil and gas companies or related assets. Additional securities may be of a class preferred to common stock, with respect to such matters as dividends and liquidation rights, and may also have other rights and preferences as determined by the Company's Board.

Capital commitments. During 2018, the Company plans to focus its capital spending primarily on oil drilling activities in the Spraberry/Wolfcamp area of the Permian Basin. The Company's current 2018 capital budget ~~for 2017~~ is ~~$2.8~~$2.9 billion (excluding acquisitions, asset retirement obligations, capitalized interest, geological and geophysical administrative costs and information technology system upgrades), consisting of ~~$2.5~~$2.6 billion for drilling ~~operations~~ and ~~$275~~completion related activities, including additional tank batteries, saltwater disposal facilities and gas processing facilities, and $260 million for water infrastructure, vertical integration, field facilities and ~~field facilities.~~vehicles. The Company's capital expenditures during the three months ended March 31, ~~2017~~2018 were ~~$611~~$879 million, consisting of ~~$524~~$830 million for drilling operations (excluding acquisitions, asset retirement obligations, capitalized interest and geological and geophysical administrative costs) and ~~$87~~$49 million for water infrastructure, vertical integration, system upgrades and other plant and equipment additions.

The Company expects to increase its 2018 capital program to reflect (i) additional higher intensity completions during the second half of 2018, (ii) potential drilling rig additions later in 2018 to support its 2019 growth plan and (iii) inflationary pressures associated with the current commodity price environment. It is too early to determine the amount of the increase to the Company's capital budget, but the Company believes that any increases will be funded from forecasted cash flow. See Operations and Drilling Highlights above for additional information regarding the Company's planned capital expenditures for 2018.

Based on results for the three months ended March 31, ~~2017~~2018 and the Company's current Management's Price Outlook, the Company expects that it will be able to fund its needs for cash (excluding acquisitions, if any), including the repayment of the May 2018 debt maturity and 2018 stock repurchases, with net cash flows from operating activities, cash and cash equivalents on hand, sales of short-term and long-term investments, proceeds from divestitures ~~of nonstrategic assets~~ and, if necessary, availability under the Credit ~~Facility~~Facility; however, no assurances can be given that such funding will be adequate to ~~be sufficient to fund its planned capital expenditures, acquisitions and contractual obligations, including debt maturities.~~

~~Investing activities.~~ Investing activities used $298 million of cash during the three months ended March 31, 2017, as compared to $1.5 billion of cash used in investing activities during the three months ended March 31, 2016. The decrease in cash used in investing activities for the three months ended March 31, 2017, as compared to the three months ended March 31, 2016, is primarily due to net proceeds from the maturity of investments (commercial paper, corporate bonds and time deposits) of $143 million during the three months ended 2017, as compared to investment purchases of $914 million during the three months ended March 31, 2016. During the three months ended March 31, 2017,meet the Company's ~~expenditures for investing activities were primarily funded by net cash provided by operating activities and cash on hand.~~future needs.

Dividends/distributions. During ~~March~~February of ~~2017~~2018 and ~~2016~~2017, the Board declared semiannual dividends of $0.16 and $0.04 per common ~~share.~~share, respectively. Future dividends are at the discretion of the Board, and, if declared, the Board may change the current dividend amount based on the Company's liquidity and capital resources at the time.

Contractual ~~obligations, including off-balance sheet~~ obligations. The Company's contractual obligations include long-term debt, operating leases, drilling commitments (primarily related to commitments to pay day rates for contracted drilling rigs), capital funding obligations, derivative obligations, ~~firm transportation and fractionation commitments,~~ minimum annual gathering, processing and transportation commitments, ~~and~~ other liabilities (including postretirement

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

benefit obligations). and firm transportation and fractionation commitments. Other joint interest owners in properties operated by the Company will incur portions of the costs represented by these commitments.

Firm purchase, gathering, transportation and fractionation commitments represent take-or-pay agreements, which include (i) contractual commitments to purchase sand and water for use in the Company's drilling operations and (ii) estimated fees on production throughput commitments and demand fees associated with volume delivery obligations from projected production of available reserves; consequently, the Company plans to purchase third party volumes to satisfy its commitments if it is economic to do so; otherwise, it will pay demand fees for any commitment shortfalls.

Off-balance sheet arrangements. From time-to-time, the Company enters into arrangements and transactions that can give rise to material off-balance sheet obligations of the Company. As of March 31, ~~2017~~2018, the material off-balance sheet arrangements and transactions that the Company had entered into included (i) operating lease agreements, (ii) drilling commitments, (iii) firm purchase, transportation and fractionation commitments, (iv) open purchase commitments and (v) contractual obligations for which the ultimate settlement amounts are not fixed and determinable. The contractual obligations for which the ultimate settlement amounts are not fixed and determinable include (i) derivative contracts that are sensitive to future changes in commodity prices or interest rates, (ii) gathering, processing (primarily treating and fractionation) and transportation commitments on uncertain volumes of future throughput, (iii) open delivery commitments and (iv) indemnification obligations following certain divestitures. Other than the off-balance sheet arrangements described above, the Company has no transactions, arrangements or other relationships with unconsolidated entities or other parties that are reasonably likely to materially affect the Company's liquidity or availability of or requirements for capital resources. The Company expects to enter into similar contractual arrangements in the future, including incremental derivative contracts and additional firm purchase and transportation arrangements, in order to support the ~~Company’s~~Company's business plans. There were no material changes to the Company's contractual obligations during the ~~first quarter~~three months ended March 31, 2018.

See Note 10 of ~~2017 other than the repayment of~~Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information about the Company's ~~6.65% Senior Notes in March 2017.~~Commitments and Contingencies.

The Company's commodity and interest rate derivative contracts are periodically measured and recorded at fair value and continue to be subject to market orand credit risk. As of March 31, ~~2017~~2018, these contracts represented net ~~assets~~liabilities of $71380 million. The ultimate ~~liquidation~~settlement value of the Company's commodity ~~and interest rate~~ derivatives will be dependent upon actual future commodity prices, ~~and interest rates,~~ which may differ materially from the inputs used to determine the derivatives' fair values as of March 31, ~~2017~~2018.

See Note E5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and "Item 3.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

Quantitative and Qualitative Disclosures About Market Risk" for additional information about the Company's derivative instruments and market risk.

~~Capital resources.~~ The Company's primary capital resources are cash and cash equivalents, short-term and long-term investments, net cash provided by operating activities, proceeds from divestitures and proceeds from financing activities (principally borrowings under the Company's Credit Facility or issuances of debt or equity securities). If internal cash flows do not meet the Company's expectations, the Company may reduce its level of capital expenditures, and/or fund a portion of its capital expenditures (i) using cash on hand, (ii) through sales of short-term and long-term investments, (iii) with borrowings under the Company's Credit Facility, (iv) through issuances of debt or equity securities or (v) through other sources, such as sales of nonstrategic assets.New Accounting Pronouncements

~~Operating activities.~~ ~~Net cash provided by operating activities~~ ~~during~~ ~~the~~ ~~three~~ ~~months ended~~ ~~March 31, 2017~~ was $364 million, as compared to $110 million during the same period in 2016. The increase in net cash provided by operating activities for the three months ended March 31, 2017, as compared to the three months ended March 31, 2016, is primarily due to increases in the Company's oil and gas revenues for the three months ended March 31, 2017 as a result of increases in commodity prices and sales volumes, partially offset by a $208 million reduction in cash provided by commodity derivatives during the three months ended March 31, 2017, as compared to the same period in 2016.

~~Financing activities.~~ Net cash used by financing activities during the three months ended March 31, 2017 was $521 million, as compared to net cash provided by financing activities of $1.6 billion during the same period in 2016. The decrease in net cash provided by financing activities during the three months ended March 31, 2017, as compared to the same period in 2016, is primarily the result of the Company's issuance of 13.8 million shares of common stock during the first quarter of 2016 for cash proceeds of $1.6 billion and the principal repayment of $485 million attributable to the Company's 6.65% Senior Notes that matured in March 2017.

As the Company pursues its strategy, it may utilize various financing sources, including fixed and floating rate debt, convertible securities, preferred stock or common stock. The Company cannot predict the timing or ultimate outcome of any such actions as they are subject to market conditions, among other factors. The Company may also issue securities in exchange for oil and gas properties, stock or other interests in other oil and gas companies or related assets. Additional securities may be of a class preferred to common stock with respect to such matters as dividends and liquidation rights and may also have other rights and preferences as determined by the Board.

~~Liquidity.~~ ~~The Company's principal sources of short-term liquidity are cash and cash equivalents, sales of short-term and long-term investments and unused borrowing capacity under its Credit Facility. As of~~ ~~March 31, 2017, the Company had no outstanding borrowings under its Credit Facility, leaving~~ ~~$1.5 billion~~ ~~of unused borrowing capacity. The Company was in compliance with all of its debt covenants as of~~ ~~March 31, 2017. The Company also had cash on hand of~~ ~~$663 million, short-term investments of $1.5 billion and long-term investments of $168 million as of~~ ~~March 31, 2017~~. If internal cash flows do not meet the Company's expectations, the Company may fund a portion of its capital expenditures using cash on hand, sales of short-term and long-term investments, availability under its Credit Facility, issuances of debt or equity securities or other sources, such as sales of nonstrategic assets and/or reduce its level of capital expenditures or reduce dividend payments. The Company cannot provide any assurance that needed short- term or long-term liquidity will be available on acceptable terms or at all. Although the Company expects that the combination of internal operating cash flows, cash and cash equivalents on hand, sales of short-term and long-term investments, proceeds from divestitures of nonstrategic assets and, if necessary, available capacity under the Company's Credit Facility will be adequate for the remainder of 2017 to fund planned capital expenditures, acquisitions, dividend payments and provide adequate liquidity to fund other needs, no assurances can be given that such funding sources will be adequate to meet the Company's future needs.

~~Debt ratings.~~ The Company is rated as mid-investment grade by three credit rating agencies. The Company receives debt credit ratings from several of the major ratings agencies, which are subject to regular reviews. The Company believes that each of the rating agencies considers many factors in determining the Company's ratings including: (i) production growth opportunities, (ii) liquidity, (iii) debt levels, (iv) asset composition and (v) proved reserve mix. A reduction in the Company's debt ratings could increase the interest rates that the Company incurs on Credit Facility borrowings and could negatively impact the Company's ability to obtain additional financing or the interest rate, fees and other terms associated with such additional financing.

~~Book capitalization and current ratio.~~ ~~The Company's net book capitalization at~~ ~~March 31, 2017~~ was $10.7 billion, consisting of $663 million of cash and cash equivalents, short-term and long-term investments of $1.7 billion, debt of $2.7 billion and equity of $10.3 billion. The Company's net debt to net book capitalization increased to three percent at March 31, 2017 from two percent at December 31, 2016. The Company's ratio of current assets to current liabilities increased to 3.09 to 1.00 at March 31, 2017, as compared to 2.11 to 1.00 at December 31, 2016, primarily due to the reclassification of investments with maturities of less than one year to short-term and repayment of the Company's 6.65% Senior Notes that matured in March 2017.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~New accounting pronouncements.~~The effects of new accounting pronouncements are discussed in Note B2 and Note 11 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements."

3235

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following quantitative and qualitative disclosures about market risk are supplementary to the quantitative and qualitative disclosures provided in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2017. As such, the information contained herein should be read in conjunction with the related disclosures in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2017.

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about the Company's potential exposure to market risks. The term "market risks," insofar as it relates to currently anticipated transactions of the Company, refers to the risk of loss arising from changes in commodity prices and interest rates. These disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators regarding how the Company views and manages ongoing market risk exposures. None of the Company's market risk sensitive instruments are entered into for speculative purposes.

The Company had no interest rate derivative activity during the three months ended March 31, 2018. The following table reconciles the changes that occurred in the fair values of the Company's open commodity derivative contracts during the three months ~~ending~~ ended March 31, ~~2017~~:2018:


	Derivative Contract Net Assets								Derivative Contract Net Assets (Liabilities)
	Commodities			Interest Rates		Total			(in millions)
	(in millions)
Fair value of contracts outstanding as of December 31, 2016	$	(76	)	$	6	$	(70	)
Fair value of contracts outstanding as of December 31, 2017									$	(244	)
Changes in contract fair value	151			—		151			(208		)
Contract maturity receipts	(10		)	—		(10		)	72
Fair value of contracts outstanding as of March 31, 2017	$	65		$	6	$	71
Fair value of contracts outstanding as of March 31, 2018									$	(380	)

Interest rate sensitivity. See Note G7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and Capital Commitments, Capital Resources and Liquidity included in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information regarding the Company's ~~long-term debt.~~outstanding debt and debt transactions.

3336

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

The following table provides information about financial instruments to which the Company was a party as of March 31, ~~2017~~2018 and that are sensitive to changes in interest rates. The table presents debt maturities by expected maturity dates, the weighted average interest rates expected to be paid on the debt given current contractual terms and market conditions and the aggregate estimated fair value of the Company's outstanding debt. For fixed rate debt, the weighted average interest rates represent the contractual fixed rates that the Company was obligated to periodically pay on the debt as of March 31, ~~2017~~2018. Although the Company had no outstanding variable rate debt as of March 31, ~~2017,~~2018, the average variable contractual rates for its ~~Credit Facility~~credit facility (that matures in August 2020) projected forward proportionate to the forward yield curve for LIBOR on May 1, ~~2017~~2018 is presented in the table below.


	Nine Months Ending December 31,			Year Ending December 31,																	Asset (Liability) Fair Value at March 31,			Nine Months Ending December 31,			Year Ending December 31,																	Liability Fair Value at March 31,
	2017			2018			2019			2020			2021			Thereafter			Total		2017			2018			2019			2020			2021			2022			Thereafter			Total		2018
	(dollars in millions)																							(dollars in millions)
Total Debt:
Fixed rate principal maturities (a)	$	—		$	450		$	—		$	450		$	500		$	1,350		$	2,750	$	(2,961	)	$	450		$	—		$	450		$	500		$	600		$	750		$	2,750	$	2,874
Weighted average fixed interest rate	5.31		%	5.11		%	5.00		%	4.42		%	4.72		%	5.49		%						5.11		%	5.00		%	4.42		%	4.72		%	4.94		%	5.70		%
Average variable interest rate	2.89		%	3.23		%	3.54		%	3.77		%												3.76		%	4.15		%	4.30		%
Interest Rate Swaps:
Notional debt amount (b)	$	100		$	—		$	—		$	—		$	—		$	—				$	6
Fixed rate payable (%)	1.81		%
Variable rate receivable (%) (c)	2.38		%

____________________


(a)	Represents maturities of principal amounts, excluding debt issuance costs and debt issuance discounts.


~~(b)~~	As of March 31, 2017, the Company was party to interest rate derivative contracts whereby the Company will receive the three-month LIBOR rate for the 10-year period from December 2017 through December 2027 in exchange for paying a fixed interest rate of 1.81 percent on a notional amount of $100 million on December 15, 2017.


~~(c)~~	~~The variable rate receivable represents the May 1, 2017 forecasted three-month LIBOR rate for the 10-year period from December 2017 through December 2027.~~

Commodity derivative instruments and price sensitivity. The following table provides information about the Company's oil, NGL and gas derivative financial instruments that were sensitive to changes in oil, NGL and gas prices as of March 31, ~~2017~~2018. Although mitigated by the Company's derivative activities, declines in oil, NGL and gas prices would reduce the Company's revenues.

The Company manages commodity price risk with derivative contracts, such as swap contracts, collar contracts and collar contracts with short put options. Swap contracts provide a fixed price for a notional amount of sales volumes. Collar contracts provide minimum ("floor" or "long put") and maximum ("ceiling") prices on a notional amount of sales volumes, thereby allowing some price participation if the relevant index price closes above the floor price. Collar contracts with short put options differ from other collar contracts by virtue of the short put option price, below which the Company's realized price will exceed the variable market prices by the long put-to-short put price differential.

See Notes D4 and E5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a description of the accounting procedures followed by the Company for its derivative financial instruments and for specific information regarding the terms of the Company's derivative financial instruments that are sensitive to changes in oil, NGL or gas prices.

3437

Table of Contents

PIONEER NATURAL RESOURCES COMPANY


	2017									Year Ending December 31,				Asset (Liability) Fair Value at March 31, 2017 (a)			2018						Year Ending December 31, 2019		Asset (Liability) Fair Value at March 31, 2018 (a)
	Second Quarter			Third Quarter			Fourth Quarter			2018		2019		Asset (Liability) Fair Value at March 31, 2017 (a)			Second Quarter		Third Quarter		Fourth Quarter				Asset (Liability) Fair Value at March 31, 2018 (a)
														(in millions)									Year Ending December 31, 2019			(in millions)
Oil Derivatives:
Average daily notional Bbl volumes:
Collar contracts	6,000			6,000			6,000			—		—		$	4		3,000		3,000		3,000		—		$	(5	)
Weighted average ceiling price per Bbl	$	70.40		$	70.40		$	70.40		$	—	$	—				$	58.05	$	58.05	$	58.05	$	—
Weighted average floor price per Bbl	$	50.00		$	50.00		$	50.00		$	—	$	—				$	45.00	$	45.00	$	45.00	$	—
Collar contracts with short puts ~~(b)~~	129,000			147,000			155,000			20,000		—		$	68		149,000		154,000		159,000		65,000		$	(358	)
Weighted average ceiling price per Bbl	$	61.19		$	62.03		$	62.12		$	65.14	$	—				$	57.79	$	57.70	$	57.62	$	60.74
Weighted average floor price per Bbl	$	48.46		$	49.81		$	49.82		$	50.00	$	—				$	47.42	$	47.34	$	47.26	$	52.69
Weighted average short put price per Bbl	$	40.45		$	41.07		$	41.02		$	40.00	$	—				$	37.38	$	37.31	$	37.23	$	42.69
Average forward NYMEX oil prices ~~(c)~~(b)	$	48.84		$	49.40		$	50.02		$	50.21	$	—				$	67.25	$	66.77	$	65.27	$	61.33
Rollfactor swap contracts (d)	20,000			20,000			20,000			—		—		$	—
Weighted average fixed price per Bbl	$	(0.32	)	$	(0.32	)	$	(0.32	)	$	—	$	—
Average forward NYMEX rollfactor prices (c)	$	(0.40	)	$	(0.30	)	$	(0.19	)	$	—	$	—
NGL Derivatives:
Butane swap contracts (Bbl) (e):	2,000			2,000			—			—		—		$	1
Weighted average fixed price per Bbl	$	34.86		$	34.86		$	—		$	—	$	—
Butane collar contracts with short puts (Bbl) (f):	2,000			2,000			—			—		—		$	—
Weighted average ceiling price per Bbl	$	36.12		$	36.12		$	—		$	—	$	—
Weighted average floor price per Bbl	$	29.25		$	29.25		$	—		$	—	$	—
Weighted average short put price per Bbl	$	23.40		$	23.40		$	—		$	—	$	—
Average forward butane prices (c)	$	31.29		$	31.78		$	—		$	—	$	—
Ethane collar contracts (Bbl) (g)	3,000			3,000			3,000			—		—		$	—
Weighted average ceiling price per Bbl	$	11.83		$	11.83		$	11.83		$	—	$	—
Weighted average floor price per Bbl	$	8.68		$	8.68		$	8.68		$	—	$	—
Average forward ethane prices (c)	$	10.50		$	10.82		$	11.29		$	12.35	$	13.39
Ethane basis swap contracts (MMBtu) (h)	6,920			6,920			6,920			6,920		6,920		$	—
Ethane basis swap contracts (MMBtu) (c)																	6,920		6,920		6,920		6,920		$	1
Weighted average price differential per MMBtu	$	1.60		$	1.60		$	1.60		$	1.60	$	1.60				$	1.60	$	1.60	$	1.60	$	1.60
Average forward NYMEX gas prices (c)	$	3.22		$	3.30		$	3.39		$	3.08	$	2.87
Average forward NYMEX gas prices (b)																	$	2.80	$	2.83	$	2.90	$	2.74
Gas Derivatives:
Average daily notional MMBtu volumes:
Swap contracts																	100,000		100,000		100,000		—		$	5
Weighted average fixed price per MMBtu																	$	3.00	$	3.00	$	3.00	$	—
Collar contracts with short puts	270,000			290,000			300,000			62,329		—		$	(9	)	50,000		50,000		50,000		—		$	1
Weighted average ceiling price per MMBtu	$	3.56		$	3.57		$	3.60		$	3.56	$	—				$	3.40	$	3.40	$	3.40	$	—
Weighted average floor price per MMBtu	$	2.95		$	2.95		$	2.96		$	2.91	$	—				$	2.75	$	2.75	$	2.75	$	—
Weighted average short put price per MMBtu	$	2.47		$	2.47		$	2.47		$	2.37	$	—				$	2.25	$	2.25	$	2.25	$	—
Average forward NYMEX gas prices (c)	$	3.22		$	3.30		$	3.39		$	3.08	$	—
Basis swap contracts														$	—
Mid-Continent index swap contracts (i)	45,000			45,000			45,000			—		—
Average forward NYMEX gas prices (b)																	$	2.80	$	2.83	$	2.90	$	—
Basis swap contracts (d):
Southern California index swap contracts (e)																	40,000		80,000		66,522		84,932		$	(24	)
Weighted average fixed price per MMBtu	$	(0.32	)	$	(0.32	)	$	(0.32	)	$	—	$	—				$	0.30	$	0.30	$	0.50	$	0.33
Average forward basis differential prices (j)	$	(0.42	)	$	(0.39	)	$	(0.35	)	$	—	$	—
Permian Basin index swap contracts (k)	—			—			26,522			9,863		—
Weighted average fixed price per MMBtu	$	—		$	—		$	0.30		$	0.30	$	—
Average forward basis differential prices (l)	$	—		$	—		$	0.26		$	0.29	$	—
Average forward basis differential prices (f)																	$	0.75	$	1.06	$	1.21	$	1.00

___________________

(a)

In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 210-20 and ASC 815-10, the Company classifies the fair value amounts of derivative assets and liabilities executed under master netting arrangements as net derivative assets or net derivative liabilities, as the case may be. The net asset and liability amounts shown above have been provided on a commodity contract-type basis, which may differ from their master netting arrangements classifications.


(b)	The average forward NYMEX oil and gas prices are based on May 1, 2018 market quotes.


(c)	The ethane basis swap contracts reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. The ethane basis swap contracts fix the basis differential on a HH MMBtu equivalent basis. The Company will receive the HH price plus the price differential on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of ethane.

(d)

Subsequent to March 31, 2018, the Company entered into additional basis swap contracts that fix the basis differentials between the index price at which the Company sells its Permian Basin gas and the NYMEX HH index price used in swap contracts and collar contracts with short puts for (i) 20,000 MMBtu per day of July 2018 through September 2019 production with a price differential of $1.54 per MMBtu and (ii) 30,000 MMBtu per day of January 2019 through September 2019 production with a price differential of $1.47 per MMBtu.


(e)	The referenced swap contracts fix the basis differential between Permian Basin index prices and southern California index prices for Permian Basin gas forecasted for sale in southern California.


(f)	The average forward basis differential prices are based on May 1, 2018 market quotes for basis differentials between Permian Basin index prices and southern California index prices.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Marketing derivatives. Periodically, the Company enters into buy and sell marketing arrangements to fulfill firm pipeline transportation commitments. Associated with these marketing arrangements, the Company may enter into index swap contracts that mitigate price risk. The following table provides information about the Company's marketing derivative financial instruments that were sensitive to changes in oil prices as of March 31, 2018:



	2018				Asset (Liability) Fair Value at March 31, 2018 (a)
	Second Quarter		Third Quarter		Asset (Liability) Fair Value at March 31, 2018 (a)
					(in millions)
Oil Derivatives:
Average daily notional Bbl volumes:
Basis swap contracts
Louisiana Light Sweet index swap volume (b) (c)	10,000		6,739		$	—
Price differential ($/Bbl)	$	3.18	$	3.18
Average forward basis differential prices (d)	$	3.60	$	3.50
Magellan East Houston index swap volume (b)	8,659		2,022		$	—
Price differential ($/Bbl)	$	3.29	$	3.30
Average forward basis differential prices (d)	$	6.75	$	11.08

____________________

(a)

In accordance with FASB ASC 210-20 and ASC 815-10, the Company classifies the fair value amounts of derivative assets and liabilities executed under master netting arrangements as net derivative assets or net derivative liabilities, as the case may be. The net asset and liability amounts shown above have been provided on a commodity contract-type basis, which may differ from their master netting arrangements classifications.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~


(b)	~~Subsequent to March 31, 2017, the Company entered into additional oil collar~~The referenced basis swap contracts ~~with short puts for 26,000 Bbl per day of 2018 production with a ceiling price of $60.49 per Bbl, a floor price of $50.19 per Bbl and a short put price of $40.00 per Bbl.~~

~~(c) The average forward NYMEX oil, oil rollfactors, ethane, butane and gas prices are based on May 1, 2017 market quotes.~~

~~(d)~~

~~Represent swaps that~~ fix the ~~difference~~basis differentials between ~~(i) each day's price per Bbl of~~NYMEX WTI and Louisiana Light Sweet ("LLS") or Magellan East Houston ("MEH") oil prices for Permian Basin oil forecasted for sale in the first nearby NYMEX month less (ii) the price per Bbl of WTI for the second nearby NYMEX month, multiplied by .6667; plus (iii) each day's price per Bbl of WTI for the first nearby NYMEX month less (iv) the price per Bbl of WTI for the third nearby NYMEX month, multiplied by .3333. Subsequent to March 31, 2017, the Company paid a nominal amount to terminate its oil rollfactor swap contracts for the third quarter of 2017.Gulf Coast region.

~~(e)~~(c)

~~Represent swap contracts that reduce the price volatility of butane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.~~ Subsequent to March 31, ~~2017,~~2018, the Company ~~terminated~~liquidated its ~~butane~~Louisiana Light Sweet basis swap contracts for ~~cash proceeds~~10,000 Bbl per day of ~~$1 million.~~June 2018 through August 2018 transportation commitments for a nominal gain.


~~(f)~~	~~Represent collar contracts with short puts that reduce the price volatility of butane forecasted for sale by the Company at Mont Belvieu, Texas-posted price.~~


~~(g)~~	~~Represent collar contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.~~


~~(h)~~	Represent basis swap contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. The basis swap contracts fix the basis differential on a HH MMBtu equivalent basis. The Company will receive the HH price plus the price differential on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of ethane.


~~(i)~~	Represent swap contracts that fix the basis differentials between the index prices at which the Company sells its Mid-Continent gas and the NYMEX HH index price used in collar contracts with short puts.


~~(j)~~(d)	The average forward basis differential prices are based on May 1, ~~2017~~2018 market quotes for basis differentials between ~~the relevant index prices~~NYMEX WTI and ~~the NYMEX-quoted forward prices.~~


~~(k)~~	~~Represent swap contracts that fix the basis differentials between Permian Basin index prices and southern California index prices for Permian Basin gas forecasted for sale in southern California.~~


~~(l)~~	~~The average forward basis differential prices are based on May 1, 2017 market quotes for basis differentials between Permian Basin index prices and southern California index~~LLS or MEH oil prices.

~~Marketing and basis differential derivatives.~~ Periodically, the Company enters into buy and sell marketing arrangements to fulfill firm pipeline transportation commitments. Associated with these marketing arrangements, the Company may enter into index swaps to mitigate price risk. As of March 31, 2017, the Company did not have any marketing derivatives outstanding.

~~Diesel derivatives~~. Periodically, the Company enters into diesel derivative swap contracts to mitigate fuel price risk. The diesel derivative swap contracts are priced at an index that is highly correlated to the prices that the Company incurs to fuel drilling rigs and its fracture stimulation fleet equipment. As of March 31, 2017, the Company was party to diesel derivative swap contracts for 1,000 Bbls per day for the remainder of 2017 at an average per Bbl fixed price of $62.98. As of March 31, 2017, these positions had an asset fair value of $1 million. In early April 2017, the Company terminated its diesel derivative swap contracts that were held at March 31, 2017 for cash proceeds of $1 million. In late April 2017, the Company entered into diesel swap contracts for 1,000 Bbls per day for the remainder of 2017 at an average per Bbl fixed price of $63.00. Based on May 1, 2017 market quotes, the respective average forward diesel price was $61.94 per Bbl.

3639

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. The Company's management, with the participation of its principal executive officer and principal financial officer, have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"), the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based on that evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective, as of the end of the period covered by this Report, in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including that such information is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended March 31, ~~2017~~2018 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

3740

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations.

~~The Company has been advised by~~See Note 10 of Notes to Consolidated Financial Statements included in "Part I, Item 1. Financial Statements" for additional information regarding legal proceedings involving the U.S. Environmental Protection Agency ("EPA") that the agency is considering an enforcement action against the Company seeking monetary sanctions for alleged failures to prevent emissions occurring at the Company's Fain gas plant in the West Panhandle region of Texas on five separate occasions. The Company has asserted defenses to the EPA's allegations and is in discussions with the EPA regarding these matters. Although the Company cannot predict the outcome of these discussions with any certainty, the Company believes such monetary sanctions will not exceed $45,000 for any single event, but could exceed $100,000 in the aggregate.Company.

Item 1A. Risk Factors

In addition to the information set forth in this Report, the risks that are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, under the headings "Part I, Item 1. Business – Competition, Markets and Regulations," "Part I, Item 1A. Risk Factors" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market ~~Risk,"~~Risk" should be carefully considered as such risks could materially affect the Company's business, financial condition or future results. There has been no material change in the Company's risk factors from those described in the Annual Report on Form 10-K.

These risks are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may have a material adverse effect on the Company's business, financial condition or future results.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the Company's purchases of treasury stock under plans or programs during the three months ended March 31, ~~2017~~2018:

Period
Total Number of
Shares Purchased (a)

Average Price Paid per
Share

Total Number of
Shares
Purchased As Part of
Publicly Announced
Plans or Programs

Approximate Dollar
Amount of Shares that
May Yet Be Purchased
under Plans or
Programs
January 2017 42,640
$ 180.07
—

February 2017 144,969
$ 194.77
—

March 2017 110
$ 191.42
—

Total 187,719
$ 191.43
—
$ —



Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under Plans or Programs (b)
January 2018	51,401	$	172.85	—	$	—
February 2018	108,812	$	177.79	—	$	100,000,000
March 2018	101,520	$	167.52	101,512	$	82,995,111
Total	261,733			101,512

____________________


(a)	~~Consists of~~Includes 51,401 shares, 108,812 shares and 8 shares purchased from employees during January, February and March 2018, respectively, in order for the employee to satisfy tax withholding payments related to share-based awards that vested during the period.


(b)	In February 2008, the Company's board of directors approved a common stock repurchase program to offset the impact of dilution associated with annual employee stock awards. The stock repurchase program allows for up to $100 million of common stock to be repurchased during 2018.

Item 4. Mine Safety Disclosures

The Company's sand mines are subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977, as amended by the Mine Improvement and New Emergency Response Act of 2006. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Report.

3941

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

Item 6. Exhibits

Exhibits



Exhibit Number		Description

3.1	(a) —	Amended and Restated Certificate of Incorporation of the Company, dated June 26, 1997, and Certificate of Amendment of the Amended and Restated Certificate of Incorporation, effective May 18, 2012

10.1	—	~~Amended and Restated Severance~~ Change in Control Agreement dated February 27, ~~2017,~~2018, between the Company and Timothy L. Dove, together with a schedule identifying other substantially identical agreements between the Company and each of the executive officers identified on the schedule and identifying the material differences between each of those agreements and the filed Change in Control Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on March ~~3, 2017)~~5, 2018).

10.2	(a) —	Form of Performance Unit Award Agreement between the Company and Timothy L. Dove, with respect to awards made under the Company's 2006 Long-Term Incentive ~~Plan.~~Plan, commencing in 2018, together with a schedule identifying other substantially identical agreements between the Company and each of its other executive officers and identifying the material differences between each of those agreements and the filed Performance Unit Award Agreement.

10.3	(a) —	Form of Restricted Stock Unit Agreement between the Company and Timothy L. Dove, with respect to annual awards made under the Company's 2006 Long-Term Incentive ~~Plan.~~Plan, commencing in 2018, together with a schedule identifying other substantially identical agreements between the Company and each of its other executive officers who received this award and identifying the material differences between each of those agreements and the filed Restricted Stock Unit Agreement.

10.4	(a) —	Form of Restricted Stock Award Agreement between the Company and executive officers of the Company with respect to annual awards made under the Company's 2006 Long-Term Incentive Plan, commencing in 2018.

12.1	(a) —	Computation of Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends.

31.1	(a) —	Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

31.2	(a) —	Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

32.1	(b) —	Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

32.2	(b) —	Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

95.1	(a) —	Mine Safety Disclosures.

101.INS	(a) —	XBRL Instance Document.

101.SCH	(a) —	XBRL Taxonomy Extension Schema.

101.CAL	(a) —	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	(a) —	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	(a) —	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	(a) —	XBRL Taxonomy Extension Presentation Linkbase Document.

_____________


(a)	Filed herewith.


(b)	Furnished herewith.

4042

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereto duly authorized.



	PIONEER NATURAL RESOURCES COMPANY

Date: May ~~3, 2017~~4, 2018	By:	/s/ RICHARD P. DEALY
		Richard P. Dealy,
		Executive Vice President and Chief Financial Officer

Date: May ~~3, 2017~~4, 2018	By:	/s/ MARGARET M. MONTEMAYOR
		Margaret M. Montemayor,
		Vice President and Chief Accounting Officer

4143

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~Exhibit Index~~



~~Exhibit~~ ~~Number~~		~~Description~~
~~10.1~~	—	Amended and Restated Severance Agreement dated February 27, 2017, between the Company and Timothy L. Dove (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on March 3, 2017).

~~10.2~~	~~(a) —~~	~~Form of Performance Unit Award Agreement between the Company and Timothy L. Dove, with respect to awards made under the Company's 2006 Long-Term Incentive Plan.~~

~~10.3~~	~~(a) —~~	~~Form of Restricted Stock Unit Agreement between the Company and Timothy L. Dove, with respect to annual awards made under the Company's 2006 Long-Term Incentive Plan.~~

~~12.1~~	~~(a) —~~	~~Computation of Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends.~~

~~31.1~~	~~(a) —~~	~~Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.~~

~~31.2~~	~~(a) —~~	~~Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.~~

~~32.1~~	~~(b) —~~	~~Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.~~

~~32.2~~	~~(b) —~~	~~Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.~~

~~95.1~~	~~(a) —~~	~~Mine Safety Disclosures.~~

~~101.INS~~	~~(a) —~~	~~XBRL Instance Document.~~

~~101.SCH~~	~~(a) —~~	~~XBRL Taxonomy Extension Schema.~~

~~101.CAL~~	~~(a) —~~	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~

~~101.DEF~~	~~(a) —~~	~~XBRL Taxonomy Extension Definition Linkbase Document.~~

~~101.LAB~~	~~(a) —~~	~~XBRL Taxonomy Extension Label Linkbase Document.~~

~~101.PRE~~	~~(a) —~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~

~~_____________~~


~~(a)~~	~~Filed herewith.~~


~~(b)~~	~~Furnished herewith.~~



Assets acquired:
Proved properties	$	79
Unproved properties	347
Other property and equipment	5
Liabilities assumed:
Asset retirement obligations	(2		)
Other liabilities	(1		)
Net assets acquired	$	428



							Management's Price Outlooks
	Impairment Date	Fair Value		Fair Value Adjustment			Oil		Gas
Raton	March 2017	$	186	$	(285	)	$	53.65	$	3.00
West Panhandle	March 2016	$	33	$	(32	)	$	49.77	$	3.24




Derivatives Not Designated as	Location of Gain / (Loss) Recognized in	Three Months Ended March 31,
Hedging Instruments	Earnings on Derivatives	2017		2016
		(in millions)
Commodity price derivatives	Derivative gains, net	$	151	$	45
Interest rate derivatives	Derivative gains, net	—		(2		)
Total		$	151	$	43



Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs	Approximate Dollar Amount of Shares that May Yet Be Purchased under Plans or Programs
January 2017	42,640	$	180.07	—
February 2017	144,969	$	194.77	—
March 2017	110	$	191.42	—
Total	187,719	$	191.43	—	$	—