UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
______________________________ | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20222023
or | | | | | |
| ☐ | 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.) |
777 Hidden Ridge
Irving, Texas 75038
(Address of principal executive offices and zip code)
(972) 444-9001
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common Stock, par value $.01 per share | | PXD | | New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | | ☒ | | Accelerated filer | | ☐ |
| | | |
| Non-accelerated filer | | ☐ | | 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 ☒
Number of shares of Common Stockcommon stock outstanding as of October 27, 2022 237,598,733November 1, 2023 233,308,884
PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS
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| Controls and Procedures | | |
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| Legal Proceedings | | |
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| Risk Factors | | |
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| and Issuer Purchases of Equity Securities | |
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| Other Information | |
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| Item 6. | Exhibits | |
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Definitions of Certain Terms and Conventions Used Herein
Within this Report, the following terms and conventions have specific meanings:
Measurements.
•"Bbl" means a standard barrel containing 42 United States gallons.
•"Bcf" means one billion cubic feet and is a measure of gas volume.
•"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.
•"MMBOPD" means one million barrels of oil 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.
•"MBbl" means one thousand Bbls.
•"MBOE" means one thousand BOEs.
•"Mcf" means one thousand cubic feet and is a measure of gas volume.
•"MMBbl" means one million Bbls.
•"MMBOE" means one million BOEs.
•"MMBtu" means one million Btus.
•"MMcf" means one million cubic feet.
Indices.
•"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
•"Dutch TTF"WAHA" means Dutch Title Transfer Facility, a virtual trading hub for gas in the Netherlands and the primary gas pricing hub for the European gas market.
•"HH" means Henry Hub, a distribution hub in Louisiana that serves as the delivery location for gas futures contracts on the NYMEX.
•"Houston Ship Channel" is a benchmark pricing hub for South Texas gas.
•"MEH" means Magellan East Houston, an oil index benchmark price of WTI at Magellan East Houston.
•"SoCal" is a benchmark pricing hub for Southern California gas.
•"WAHA"is a benchmark pricing hub for West Texas gas.
•"WTI" means West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil used as a benchmark in oil pricing.
General terms and conventions.
•"DD&A" means depletion, depreciation and amortization.
•"ESG" means environmental, social and governance.
•"Field fuel" means gas consumed to operate field equipment (primarily compressors) prior to the gas being delivered to a sales point.
•"GAAP" means accounting principles generally accepted in the United States of America.
•"GHG" means greenhouse gases.
•"LNG" means liquefied natural gas.
•"NGLs" means natural gas liquids, which are the heavier hydrocarbon liquids that are separated from the gas stream; such liquids include ethane, propane, isobutane, normal butane and natural gasoline.
•"NYMEX" means the New York Mercantile Exchange.
•"NYSE" means the New York Stock Exchange.
•"OPEC" means the Organization of Petroleum Exporting Countries.
•"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.
•"Proved developed reserves" means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.
•"Proved reserves" means those quantities of oil and gas, which, by analysis of geosciences 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.
•"Proved undeveloped reserves" means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.
(ii) Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.
(iii) Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.
•"SEC" means the United States Securities and Exchange Commission.
•"Standardized Measure" means the after-tax present value of estimated future net cash flows of proved reserves, determined in accordance with the rules and regulations of the SEC, using prices and costs employed in the determination of proved reserves and a ten10 percent discount rate.
•"U.S." means United States.
•"WASP" means weighted average sales price.
•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.
•"WASP" means weighted average sales price.
•All currency amounts are expressed in U.S. dollars.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
TheThis 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," "models," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate," or the negative of such terms and similar expressions as they relate to 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. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.
These risks and uncertainties include, among other things, volatility of commodity prices; product supply and demand; the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity and oil and gas demand; the impact of armed conflict (including in Ukraine and the Middle East) and related political instability on economic activity and oil and gas supply and demand; competition; the ability to obtain drilling, environmental and other permits and the timing thereof; the effect of future regulatory or legislative actions on Pioneer or the industriesindustry in which it operates, including potential changes to tax laws; the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms; potential liability resulting from pending or future litigation; the costs, including the potential impact of cost increases due to inflation and supply chain disruptions, and results of development and operating activities; the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity, oil and gas demand, and global and U.S. supply chains; the risk of new restrictions with respect to development activities, including potential changes to regulations resulting in limitations on the Company's ability to dispose of produced water; availability of equipment, services, resources and personnel required to perform the Company's development and operating activities; access to and availability of transportation, processing, fractionation, refining, storage and export facilities; Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled; the risk that the transaction between Pioneer and Exxon Mobil Corporation ("ExxonMobil") may not be completed on anticipated terms and timing, or at all, including obtaining regulatory approvals that may be required on anticipated terms and Pioneer stockholder approval; the possibility that any of the anticipated benefits of the transaction will not be realized or will not be realized within the expected time period; the risk that disruptions from the transaction will harm Pioneer's business, including current plans and operations and that management's time and attention will be diverted on transaction-related issues; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transaction; potential litigation relating to the transaction that could be instituted against Pioneer or its directors; the Company's ability to achieve its emissions reductions, flaring and other ESG goals; access to and cost of capital; the financial strength of (i) counterparties to Pioneer's credit facility, and derivative contracts, (ii) issuers of Pioneer's investment securities and (iii) purchasers of Pioneer's oil, NGL and gas production and downstream sales of purchased oil and gas;commodities; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying forecasts, including forecasts of production, operating cash flow, well costs, capital expenditures, rates of return, expenses, and cash flow from downstream purchases and sales of oil and gas, net of firm transportation commitments; tax rates; quality of technical data; environmental and weather risks, including the possible impacts of climate change on the Company's operations and demand for its products; cybersecurity risks; the risks associated with the ownership and operation of the Company's water services business and acts of war or terrorism. 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," "Part I, Item 1. Business —Regulation," "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, 20212022 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. Pioneer undertakes no duty to publicly update these statements except as required by law.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions, except share data) | | | | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
| | (Unaudited) | | | | (Unaudited) | | |
| ASSETS | ASSETS | ASSETS |
| Current assets: | Current assets: | | Current assets: | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,316 | | | $ | 3,847 | | Cash and cash equivalents | $ | 98 | | | $ | 1,032 | |
| Restricted cash | 6 | | | 37 | | |
| | Accounts receivable, net | Accounts receivable, net | 1,938 | | | 1,685 | | Accounts receivable, net | 1,850 | | | 1,853 | |
| | Inventories | Inventories | 420 | | | 369 | | Inventories | 496 | | | 424 | |
| Investment in affiliate | Investment in affiliate | 134 | | | 135 | | Investment in affiliate | 176 | | | 172 | |
| Short-term investments, net | 372 | | | 58 | | |
| Other | 97 | | | 42 | | |
| | Prepaids and other | | Prepaids and other | 165 | | | 245 | |
| Total current assets | Total current assets | 4,283 | | | 6,173 | | Total current assets | 2,785 | | | 3,726 | |
| Oil and gas properties, using the successful efforts method of accounting: | Oil and gas properties, using the successful efforts method of accounting: | | | | Oil and gas properties, using the successful efforts method of accounting: | | | |
| Proved properties | Proved properties | 37,217 | | | 34,454 | | Proved properties | 42,163 | | | 38,465 | |
| Unproved properties | Unproved properties | 5,943 | | | 6,063 | | Unproved properties | 5,861 | | | 6,008 | |
| Accumulated depletion, depreciation and amortization | Accumulated depletion, depreciation and amortization | (14,199) | | | (12,335) | | Accumulated depletion, depreciation and amortization | (16,876) | | | (14,843) | |
| Total oil and gas properties, net | Total oil and gas properties, net | 28,961 | | | 28,182 | | Total oil and gas properties, net | 31,148 | | | 29,630 | |
| Other property and equipment, net | Other property and equipment, net | 1,668 | | | 1,694 | | Other property and equipment, net | 1,639 | | | 1,658 | |
| Operating lease right-of-use assets | Operating lease right-of-use assets | 360 | | | 348 | | Operating lease right-of-use assets | 376 | | | 340 | |
| Goodwill | Goodwill | 243 | | | 243 | | Goodwill | 242 | | | 243 | |
| Other assets | Other assets | 231 | | | 171 | | Other assets | 170 | | | 143 | |
| | $ | 35,746 | | | $ | 36,811 | | | $ | 36,360 | | | $ | 35,740 | |
| LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
| Current liabilities: | Current liabilities: | | Current liabilities: | |
| Accounts payable: | Accounts payable: | | Accounts payable: | |
| Trade | Trade | $ | 2,328 | | | $ | 2,380 | | Trade | $ | 2,577 | | | $ | 2,487 | |
| Due to affiliates | Due to affiliates | 151 | | | 179 | | Due to affiliates | 93 | | | 150 | |
| Interest payable | Interest payable | 21 | | | 53 | | Interest payable | 16 | | | 33 | |
| Income taxes payable | Income taxes payable | 45 | | | 45 | | Income taxes payable | 43 | | | 63 | |
| Current portion of long-term debt | 986 | | | 244 | | |
| Current portion of debt | | Current portion of debt | 44 | | | 779 | |
| Derivatives | Derivatives | 304 | | | 538 | | Derivatives | 158 | | | 44 | |
| Operating leases | Operating leases | 128 | | | 121 | | Operating leases | 156 | | | 125 | |
| Other | Other | 207 | | | 513 | | Other | 196 | | | 206 | |
| Total current liabilities | Total current liabilities | 4,170 | | | 4,073 | | Total current liabilities | 3,283 | | | 3,887 | |
| Long-term debt | Long-term debt | 4,228 | | | 6,688 | | Long-term debt | 4,880 | | | 4,125 | |
| Derivatives | Derivatives | 1 | | | 25 | | Derivatives | 152 | | | 96 | |
| Deferred income taxes | Deferred income taxes | 3,301 | | | 2,038 | | Deferred income taxes | 4,231 | | | 3,867 | |
| Operating leases | Operating leases | 246 | | | 243 | | Operating leases | 245 | | | 236 | |
| Other liabilities | Other liabilities | 851 | | | 907 | | Other liabilities | 850 | | | 988 | |
| Equity: | Equity: | | Equity: | |
Common stock, $.01 par value; 500,000,000 shares authorized; 244,694,426 and 244,144,444 shares issued as of September 30, 2022 and December 31, 2021, respectively | 2 | | | 2 | | |
Common shares, $.01 par value; 500,000,000 shares authorized; 245,080,115 and 244,703,342 shares issued as of September 30, 2023 and December 31, 2022, respectively | | Common shares, $.01 par value; 500,000,000 shares authorized; 245,080,115 and 244,703,342 shares issued as of September 30, 2023 and December 31, 2022, respectively | 2 | | | 2 | |
| Additional paid-in capital | Additional paid-in capital | 18,911 | | | 19,123 | | Additional paid-in capital | 18,506 | | | 18,779 | |
Treasury stock, at cost; 6,958,828 and 1,366,610 shares as of September 30, 2022 and December 31, 2021, respectively | (1,525) | | | (248) | | |
Treasury shares, at cost; 11,771,231 and 8,667,824 shares as of September 30, 2023 and December 31, 2022, respectively | | Treasury shares, at cost; 11,771,231 and 8,667,824 shares as of September 30, 2023 and December 31, 2022, respectively | (2,572) | | | (1,925) | |
| Retained earnings | Retained earnings | 5,561 | | | 3,960 | | Retained earnings | 6,783 | | | 5,685 | |
| Total equity | Total equity | 22,949 | | | 22,837 | | Total equity | 22,719 | | | 22,541 | |
| Commitments and contingencies | Commitments and contingencies | | Commitments and contingencies | | | |
| | $ | 35,746 | | | $ | 36,811 | | | $ | 36,360 | | | $ | 35,740 | |
The financial information included as of September 30, 20222023 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 September 30, | | Nine Months Ended September 30, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 | |
| Revenues and other income: | Revenues and other income: | | | | | | | | | Revenues and other income: | | | | | | | | |
| Oil and gas | Oil and gas | $ | 4,224 | | | $ | 3,282 | | | $ | 12,794 | | | $ | 7,787 | | | Oil and gas | $ | 3,460 | | | $ | 4,224 | | | $ | 9,603 | | | $ | 12,794 | | |
| Sales of purchased commodities | Sales of purchased commodities | 1,833 | | | 1,679 | | | 6,416 | | | 4,507 | | | Sales of purchased commodities | 1,681 | | | 1,833 | | | 4,695 | | | 6,416 | | |
| Interest and other income (loss), net | Interest and other income (loss), net | (12) | | | 2 | | | 57 | | | 42 | | | Interest and other income (loss), net | 52 | | | (12) | | | 59 | | | 57 | | |
| Derivative gain (loss), net | Derivative gain (loss), net | 13 | | | (501) | | | (187) | | | (2,024) | | | Derivative gain (loss), net | (190) | | | 13 | | | (235) | | | (187) | | |
| Gain on disposition of assets, net | Gain on disposition of assets, net | 35 | | | 1 | | | 105 | | | 14 | | | Gain on disposition of assets, net | 1 | | | 35 | | | 23 | | | 105 | | |
| | 6,093 | | | 4,463 | | | 19,185 | | | 10,326 | | | | 5,004 | | | 6,093 | | | 14,145 | | | 19,185 | | |
| Costs and expenses: | Costs and expenses: | | | | | | | | | Costs and expenses: | | | | | | | | |
| Oil and gas production | Oil and gas production | 562 | | | 323 | | | 1,457 | | | 890 | | | Oil and gas production | 564 | | | 562 | | | 1,506 | | | 1,457 | | |
| Production and ad valorem taxes | Production and ad valorem taxes | 260 | | | 179 | | | 755 | | | 445 | | | Production and ad valorem taxes | 205 | | | 260 | | | 598 | | | 755 | | |
| Depletion, depreciation and amortization | Depletion, depreciation and amortization | 641 | | | 704 | | | 1,874 | | | 1,825 | | | Depletion, depreciation and amortization | 728 | | | 641 | | | 2,087 | | | 1,874 | | |
| Purchased commodities | Purchased commodities | 1,968 | | | 1,762 | | | 6,502 | | | 4,644 | | | Purchased commodities | 1,662 | | | 1,968 | | | 4,789 | | | 6,502 | | |
| | Exploration and abandonments | Exploration and abandonments | 8 | | | 10 | | | 32 | | | 40 | | | Exploration and abandonments | 18 | | | 8 | | | 56 | | | 32 | | |
| General and administrative | General and administrative | 90 | | | 72 | | | 252 | | | 216 | | | General and administrative | 87 | | | 90 | | | 259 | | | 252 | | |
| Accretion of discount on asset retirement obligations | Accretion of discount on asset retirement obligations | 4 | | | 2 | | | 12 | | | 5 | | | Accretion of discount on asset retirement obligations | 4 | | | 4 | | | 12 | | | 12 | | |
| Interest | Interest | 30 | | | 41 | | | 100 | | | 122 | | | Interest | 44 | | | 30 | | | 114 | | | 100 | | |
| Other | Other | 36 | | | 34 | | | 118 | | | 384 | | | Other | 25 | | | 36 | | | 93 | | | 118 | | |
| | 3,599 | | | 3,127 | | | 11,102 | | | 8,571 | | | | 3,337 | | | 3,599 | | | 9,514 | | | 11,102 | | |
| Income before income taxes | Income before income taxes | 2,494 | | | 1,336 | | | 8,083 | | | 1,755 | | | Income before income taxes | 1,667 | | | 2,494 | | | 4,631 | | | 8,083 | | |
| Income tax provision | Income tax provision | (510) | | | (291) | | | (1,719) | | | (400) | | | Income tax provision | (366) | | | (510) | | | (1,006) | | | (1,719) | | |
| Net income attributable to common stockholders | $ | 1,984 | | | $ | 1,045 | | | $ | 6,364 | | | $ | 1,355 | | | |
| Net income attributable to common shareholders | | Net income attributable to common shareholders | $ | 1,301 | | | $ | 1,984 | | | $ | 3,625 | | | $ | 6,364 | | |
| | Net income per share attributable to common stockholders: | | | |
| Net income per share attributable to common shareholders: | | Net income per share attributable to common shareholders: | | |
| Basic | Basic | $ | 8.29 | | | $ | 4.27 | | | $ | 26.36 | | | $ | 5.88 | | | Basic | $ | 5.56 | | | $ | 8.29 | | | $ | 15.47 | | | $ | 26.36 | | |
| Diluted | Diluted | $ | 7.93 | | | $ | 4.07 | | | $ | 25.11 | | | $ | 5.60 | | | Diluted | $ | 5.41 | | | $ | 7.93 | | | $ | 14.96 | | | $ | 25.11 | | |
| | Weighted average shares outstanding: | Weighted average shares outstanding: | | | Weighted average shares outstanding: | | |
| Basic | Basic | 239 | | | 244 | | | 241 | | | 230 | | | Basic | 233 | | | 239 | | | 234 | | | 241 | | |
| Diluted | Diluted | 250 | | | 257 | | | 253 | | | 242 | | | Diluted | 240 | | | 250 | | | 242 | | | 253 | | |
| | Dividends declared per share | Dividends declared per share | $ | 8.57 | | | $ | 2.07 | | | $ | 19.73 | | | $ | 3.19 | | | Dividends declared per share | $ | 1.84 | | | $ | 8.57 | | | $ | 10.76 | | | $ | 19.73 | | |
|
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 EQUITY
(in millions, except share data and dividends per share)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares
Outstanding | | Common
Stock | | Additional
Paid-in
Capital | | Treasury
Stock | | Retained
Earnings | | Total Equity |
| (in thousands) | | | | | | | | | | |
| Balance as of December 31, 2021 | 242,778 | | | $ | 2 | | | $ | 19,123 | | | $ | (248) | | | $ | 3,960 | | | $ | 22,837 | |
| | | | | | | | | | | |
| Dividends declared ($3.78 per share) | — | | | — | | | — | | | — | | | (922) | | | (922) | |
| Exercise of long-term incentive stock options | 6 | | | — | | | — | | | 1 | | | — | | | 1 | |
| | | | | | | | | | | |
| Purchases of treasury stock | (1,175) | | | — | | | — | | | (276) | | | — | | | (276) | |
| Stock-based compensation: | | | | | | | | | | | |
| Vested compensation awards, net | 350 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | — | | | — | | | 19 | | | — | | | — | | | 19 | |
| Net income | — | | | — | | | — | | | — | | | 2,009 | | | 2,009 | |
| Balance as of March 31, 2022 | 241,959 | | | 2 | | | 19,142 | | | (523) | | | 5,047 | | | 23,668 | |
| | | | | | | | | | | |
| Dividends declared ($7.38 per share) | — | | | — | | | — | | | — | | | (1,788) | | | (1,788) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Convertible senior note conversions: | | | | | | | | | | | |
| Conversion premium | — | | | — | | | (2) | | | — | | | — | | | (2) | |
| Capped call proceeds | — | | | — | | | 26 | | | — | | | — | | | 26 | |
| Issuance fees and deferred taxes | — | | | — | | | (6) | | | — | | | — | | | (6) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Purchases of treasury stock | (2,126) | | | — | | | — | | | (499) | | | — | | | (499) | |
| Stock-based compensation: | | | | | | | | | | | |
| Vested compensation awards, net | 5 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | — | | | — | | | 20 | | | — | | | — | | | 20 | |
| Net income | — | | | — | | | — | | | — | | | 2,371 | | | 2,371 | |
| Balance as of June 30, 2022 | 239,838 | | | 2 | | | 19,180 | | | (1,022) | | | 5,630 | | | 23,790 | |
| | | | | | | | | | | |
| Dividends declared ($8.57 per share) | — | | | — | | | — | | | — | | | (2,053) | | | (2,053) | |
| Convertible senior note conversions: | | | | | | | | | | | |
| Conversion premium | — | | | — | | | (319) | | | — | | | — | | | (319) | |
| Capped call proceeds | — | | | — | | | 45 | | | — | | | — | | | 45 | |
| Issuance fees and deferred taxes | — | | | — | | | (13) | | | — | | | — | | | (13) | |
| Employee stock purchases | 41 | | | — | | | (2) | | | 8 | | | — | | | 6 | |
| | | | | | | | | | | |
| Purchases of treasury stock | (2,338) | | | — | | | — | | | (511) | | | — | | | (511) | |
| Stock-based compensation: | | | | | | | | | | | |
| Vested compensation awards, net | 195 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | — | | | — | | | 20 | | | — | | | — | | | 20 | |
| Net income | — | | | — | | | — | | | — | | | 1,984 | | | 1,984 | |
| Balance as of September 30, 2022 | 237,736 | | | $ | 2 | | | $ | 18,911 | | | $ | (1,525) | | | $ | 5,561 | | | $ | 22,949 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares
Outstanding | | Common
Shares | | Additional
Paid-in
Capital | | Treasury
Shares | | Retained
Earnings | | Total Equity |
| (in thousands) | | | | | | | | | | |
| Balance as of December 31, 2022 | 236,036 | | | $ | 2 | | | $ | 18,779 | | | $ | (1,925) | | | $ | 5,685 | | | $ | 22,541 | |
| | | | | | | | | | | |
| Dividends declared ($5.58 per share) | — | | | — | | | — | | | — | | | (1,314) | | | (1,314) | |
| Convertible senior note conversions: | | | | | | | | | | | |
| Conversion premium | — | | | — | | | (138) | | | — | | | — | | | (138) | |
| Capped call proceeds | — | | | — | | | 31 | | | — | | | — | | | 31 | |
| Issuance fees and deferred taxes | — | | | — | | | (7) | | | — | | | — | | | (7) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Purchases of treasury shares | (2,499) | | | — | | | — | | | (520) | | | — | | | (520) | |
| | | | | | | | | | | |
| Share-based compensation: | | | | | | | | | | | |
| Vested compensation awards, net | 199 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | — | | | — | | | 23 | | | — | | | — | | | 23 | |
| Net income | — | | | — | | | — | | | — | | | 1,222 | | | 1,222 | |
| Balance as of March 31, 2023 | 233,736 | | | 2 | | | 18,688 | | | (2,445) | | | 5,593 | | | 21,838 | |
| Dividends declared ($3.34 per share) | — | | | — | | | — | | | — | | | (784) | | | (784) | |
| Convertible senior note conversions: | | | | | | | | | | | |
| Conversion premium | — | | | — | | | (77) | | | — | | | — | | | (77) | |
| Capped call proceeds | — | | | — | | | 27 | | | — | | | — | | | 27 | |
| Issuance fees and deferred taxes | — | | | — | | | (7) | | | — | | | — | | | (7) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Purchases of treasury shares | (602) | | | — | | | — | | | (126) | | | — | | | (126) | |
| | | | | | | | | | | |
| Share-based compensation: | | | | | | | | | | | |
| Vested compensation awards, net | 6 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | — | | | — | | | 27 | | | — | | | — | | | 27 | |
| Net income | — | | | — | | | — | | | — | | | 1,102 | | | 1,102 | |
| Balance as of June 30, 2023 | 233,140 | | | 2 | | | 18,658 | | | (2,571) | | | 5,911 | | | 22,000 | |
| | | | | | | | | | | |
| Dividends declared ($1.84 per share) | — | | | — | | | — | | | — | | | (429) | | | (429) | |
| Convertible senior note conversions: | | | | | | | | | | | |
| Conversion premium | — | | | — | | | (207) | | | — | | | — | | | (207) | |
| Capped call proceeds | — | | | — | | | 46 | | | — | | | — | | | 46 | |
| Issuance fees and deferred taxes | — | | | — | | | (10) | | | — | | | — | | | (10) | |
| | | | | | | | | | | |
| Employee stock purchases | 39 | | | — | | | (1) | | | 9 | | | — | | | 8 | |
| Purchases of treasury shares | (42) | | | — | | | — | | | (10) | | | — | | | (10) | |
| | | | | | | | | | | |
| Share-based compensation: | | | | | | | | | | | |
| Vested compensation awards, net | 172 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | — | | | — | | | 20 | | | — | | | — | | | 20 | |
| Net income | — | | | — | | | — | | | — | | | 1,301 | | | 1,301 | |
| Balance as of September 30, 2023 | 233,309 | | | $ | 2 | | | $ | 18,506 | | | $ | (2,572) | | | $ | 6,783 | | | $ | 22,719 | |
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 EQUITY (continued)
(in millions, except share data and dividends per share)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Shares
Outstanding | | Common
Shares | | Additional
Paid-in
Capital | | Treasury
Shares | | Retained
Earnings | | Total Equity |
| | (in thousands) | | | | | | | | | | |
| Balance as of December 31, 2021 | | 242,778 | | | $ | 2 | | | $ | 19,123 | | | $ | (248) | | | $ | 3,960 | | | $ | 22,837 | |
| | | | | | | | | | | | |
| Dividends declared ($3.78 per share) | | — | | | — | | | — | | | — | | | (922) | | | (922) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Exercise of long-term incentive stock options | | 6 | | | — | | | — | | | 1 | | | — | | | 1 | |
| | | | | | | | | | | | |
| Purchases of treasury shares | | (1,175) | | | — | | | — | | | (276) | | | — | | | (276) | |
| Share-based compensation: | | | | | | | | | | | | |
| Vested compensation awards, net | | 350 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | | — | | | — | | | 19 | | | — | | | — | | | 19 | |
| Net income | | — | | | — | | | — | | | — | | | 2,009 | | | 2,009 | |
| Balance as of March 31, 2022 | | 241,959 | | | 2 | | | 19,142 | | | (523) | | | 5,047 | | | 23,668 | |
| | | | | | | | | | | | |
| Dividends declared ($7.38 per share) | | — | | | — | | | — | | | — | | | (1,788) | | | (1,788) | |
| Convertible senior note conversions: | | | | | | | | | | | | |
| Conversion premium | | — | | | — | | | (2) | | | — | | | — | | | (2) | |
| Capped call proceeds | | — | | | — | | | 26 | | | — | | | — | | | 26 | |
| Issuance fees and deferred taxes | | — | | | — | | | (6) | | | — | | | — | | | (6) | |
| Purchases of treasury shares | | (2,126) | | | — | | | — | | | (499) | | | — | | | (499) | |
| Share-based compensation: | | | | | | | | | | | | |
| Vested compensation awards, net | | 5 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | | — | | | — | | | 20 | | | — | | | — | | | 20 | |
| Net income | | — | | | — | | | — | | | — | | | 2,371 | | | 2,371 | |
| Balance as of June 30, 2022 | | 239,838 | | | 2 | | | 19,180 | | | (1,022) | | | 5,630 | | | 23,790 | |
| | | | | | | | | | | | |
| Dividends declared ($8.57 per share) | | — | | | — | | | — | | | — | | | (2,053) | | | (2,053) | |
| Convertible senior note conversions: | | | | | | | | | | | | |
| Conversion premium | | — | | | — | | | (319) | | | — | | | — | | | (319) | |
| Capped call proceeds | | — | | | — | | | 45 | | | — | | | — | | | 45 | |
| Issuance fees and deferred taxes | | — | | | — | | | (13) | | | — | | | — | | | (13) | |
| Employee stock purchases | | 41 | | | — | | | (2) | | | 8 | | | — | | | 6 | |
| Purchases of treasury shares | | (2,338) | | | — | | | — | | | (511) | | | — | | | (511) | |
| Stock-based compensation: | | | | | | | | | | | | |
| Vested compensation awards, net | | 195 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | | — | | | — | | | 20 | | | — | | | — | | | 20 | |
| Net income | | — | | | — | | | — | | | — | | | 1,984 | | | 1,984 | |
| Balance as of September 30, 2022 | | 237,736 | | | $ | 2 | | | $ | 18,911 | | | $ | (1,525) | | | $ | 5,561 | | | $ | 22,949 | |
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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Shares
Outstanding | | Common
Stock | | Additional
Paid-in
Capital | | Treasury
Stock | | Retained
Earnings | | Total Equity |
| | (in thousands) | | | | | | | | | | |
| Balance as of December 31, 2020 | | 164,477 | | | $ | 2 | | | $ | 9,323 | | | $ | (1,234) | | | $ | 3,478 | | | $ | 11,569 | |
| | | | | | | | | | | | |
| Dividends declared ($0.56 per share) | | — | | | — | | | — | | | — | | | (122) | | | (122) | |
| Cumulative effect of accounting change on convertible senior notes: | | | | | | | | | | | | |
| Equity component | | — | | | — | | | (230) | | | — | | | 28 | | | (202) | |
| Deferred tax component | | — | | | — | | | 50 | | | — | | | (6) | | | 44 | |
| Exercise of long-term incentive stock options | | 55 | | | — | | | (2) | | | 8 | | | — | | | 6 | |
| | | | | | | | | | | | |
| Purchases of treasury stock | | (99) | | | — | | | — | | | (13) | | | — | | | (13) | |
| Shares issued or reissued for Parsley Energy, Inc. ("Parsley") acquisition | | 51,655 | | | — | | | 5,644 | | | 1,238 | | | — | | | 6,882 | |
| Stock-based compensation: | | | | | | | | | | | | |
| Vested compensation awards, net | | 623 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net loss | | — | | | — | | | 19 | | | — | | | — | | | 19 | |
| Compensation costs included in net loss associated with Parsley acquisition | | — | | | — | | | 33 | | | — | | | — | | | 33 | |
| Net loss | | — | | | — | | | — | | | — | | | (70) | | | (70) | |
| Balance as of March 31, 2021 | | 216,711 | | | 2 | | | 14,837 | | | (1) | | | 3,308 | | | 18,146 | |
| | | | | | | | | | | | |
| Dividends declared ($0.56 per share) | | — | | | — | | | — | | | — | | | (138) | | | (138) | |
| Purchases of treasury stock | | (2) | | | — | | | — | | | (1) | | | — | | | (1) | |
| Shares issued for Double Eagle III Midco 1 LLC ("DoublePoint") acquisition | | 27,187 | | | — | | | 4,234 | | | — | | | — | | | 4,234 | |
| Stock-based compensation: | | | | | | | | | | | | |
| Vested compensation awards, net | | 63 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | | — | | | — | | | 17 | | | — | | | — | | | 17 | |
| Net income | | — | | | — | | | — | | | — | | | 380 | | | 380 | |
| Balance as of June 30, 2021 | | 243,959 | | | 2 | | | 19,088 | | | (2) | | | 3,550 | | | 22,638 | |
| | | | | | | | | | | | |
| Dividends declared ($2.07 per share) | | — | | | — | | | — | | | — | | | (508) | | | (508) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Employee stock purchases | | 53 | | | — | | | (2) | | | 7 | | | — | | | 5 | |
| Purchases of treasury stock | | (34) | | | — | | | — | | | (5) | | | — | | | (5) | |
| Stock-based compensation costs: | | | | | | | | | | | | |
| Vested compensation awards, net | | 144 | | | — | | | — | | | — | | | — | | | — | |
| Compensation costs included in net income | | — | | | — | | | 18 | | | — | | | — | | | 18 | |
| Net income | | — | | | — | | | — | | | — | | | 1,045 | | | 1,045 | |
| Balance as of September 30, 2021 | | 244,122 | | | $ | 2 | | | $ | 19,104 | | | $ | — | | | $ | 4,087 | | | $ | 23,193 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended September 30, | | | |
| | | | | | 2023 | | 2022 | | | | | |
| Cash flows from operating activities: | | | | | | | | | | | | |
| Net income | | | | | $ | 3,625 | | | $ | 6,364 | | | | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | |
| Depletion, depreciation and amortization | | | | | 2,087 | | | 1,874 | | | | | | |
| Exploration expenses | | | | | 1 | | | 6 | | | | | | |
| Deferred income taxes | | | | | 341 | | | 1,248 | | | | | | |
| Gain on disposition of assets, net | | | | | (23) | | | (105) | | | | | | |
| Loss on early extinguishments of debt | | | | | — | | | 47 | | | | | | |
| Accretion of discount on asset retirement obligations | | | | | 12 | | | 12 | | | | | | |
| Interest expense | | | | | 8 | | | 7 | | | | | | |
| Derivative-related activity | | | | | 169 | | | (95) | | | | | | |
| Amortization of share-based compensation | | | | | 70 | | | 59 | | | | | | |
| Investment valuation adjustments | | | | | (4) | | | (17) | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Other | | | | | 112 | | | 69 | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Accounts receivable | | | | | 1 | | | (253) | | | | | | |
| | | | | | | | | | | | |
| Inventories | | | | | (73) | | | (55) | | | | | | |
| | | | | | | | | | | | |
| Other assets | | | | | 5 | | | (96) | | | | | | |
| Accounts payable | | | | | (126) | | | (260) | | | | | | |
| Interest payable | | | | | (17) | | | (32) | | | | | | |
| Income taxes payable | | | | | (20) | | | — | | | | | | |
| | | | | | | | | | | | |
| Other liabilities | | | | | (69) | | | (23) | | | | | | |
| Net cash provided by operating activities | | | | | 6,099 | | | 8,750 | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | |
| Proceeds from disposition of assets | | | | | 24 | | | 293 | | | | | | |
| Proceeds from short-term investments | | | | | — | | | 727 | | | | | | |
| Purchases of short-term investments, net | | | | | — | | | (1,020) | | | | | | |
| | | | | | | | | | | | |
| Additions to oil and gas properties | | | | | (3,436) | | | (2,806) | | | | | | |
| Additions to other assets and other property and equipment | | | | | (121) | | | (105) | | | | | | |
| Net cash used in investing activities | | | | | (3,533) | | | (2,911) | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Proceeds from issuance of debt, net of discount | | | | | 2,589 | | | — | | | | | | |
| Repayment of debt | | | | | (2,994) | | | (2,097) | | | | | | |
| Proceeds from capped call on convertible notes | | | | | 104 | | | 71 | | | | | | |
| Payments of other liabilities | | | | | (13) | | | (183) | | | | | | |
| Payments of financing fees | | | | | (7) | | | — | | | | | | |
| Purchases of treasury shares | | | | | (656) | | | (1,286) | | | | | | |
| Exercise of long-term incentive plan stock options and employee stock purchases | | | | | 8 | | | 7 | | | | | | |
| Dividends paid | | | | | (2,531) | | | (4,913) | | | | | | |
| Net cash used in financing activities | | | | | (3,500) | | | (8,401) | | | | | | |
| Net decrease in cash, cash equivalents and restricted cash | | | | | (934) | | | (2,562) | | | | | | |
| Cash, cash equivalents and restricted cash, beginning of period | | | | | 1,032 | | | 3,884 | | | | | | |
| Cash, cash equivalents and restricted cash, end of period | | | | | $ | 98 | | | $ | 1,322 | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
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) | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended September 30, |
| | | | | | 2022 | | 2021 | | |
| Cash flows from operating activities: | | | | | | | | | |
| Net income | | | | | $ | 6,364 | | | $ | 1,355 | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
| Depletion, depreciation and amortization | | | | | 1,874 | | | 1,825 | | | |
| | | | | | | | | |
| | | | | | | | | |
| Exploration expenses | | | | | 6 | | | 3 | | | |
| Deferred income taxes | | | | | 1,248 | | | 371 | | | |
| Gain on disposition of assets, net | | | | | (105) | | | (14) | | | |
| Loss on early extinguishment of debt, net | | | | | 47 | | | 2 | | | |
| Accretion of discount on asset retirement obligations | | | | | 12 | | | 5 | | | |
| Interest expense | | | | | 7 | | | 6 | | | |
| Derivative-related activity | | | | | (95) | | | 636 | | | |
| Amortization of stock-based compensation | | | | | 59 | | | 87 | | | |
| Investment valuation adjustments | | | | | (17) | | | (21) | | | |
| | | | | | | | | |
| | | | | | | | | |
| Other | | | | | 69 | | | 106 | | | |
| Changes in operating assets and liabilities, net of effects of acquisitions: | | | | | | | | | |
| Accounts receivable | | | | | (253) | | | (601) | | | |
| | | | | | | | | |
| Inventories | | | | | (55) | | | (93) | | | |
| Operating lease right-of-use assets | | | | | (12) | | | 81 | | | |
| Other assets | | | | | (84) | | | (57) | | | |
| Accounts payable | | | | | (260) | | | 515 | | | |
| Interest payable | | | | | (32) | | | (76) | | | |
| Income taxes payable | | | | | — | | | 25 | | | |
| Operating leases | | | | | 9 | | | (83) | | | |
| Other liabilities | | | | | (32) | | | (247) | | | |
| Net cash provided by operating activities | | | | | 8,750 | | | 3,825 | | | |
| Cash flows from investing activities: | | | | | | | | | |
| Proceeds from disposition of assets | | | | | 293 | | | 59 | | | |
| Proceeds from short-term investments | | | | | 727 | | | — | | | |
| Purchase of short-term investments, net | | | | | (1,020) | | | — | | | |
| Cash used in acquisitions, net of cash acquired | | | | | — | | | (826) | | | |
| Additions to oil and gas properties | | | | | (2,806) | | | (2,181) | | | |
| Additions to other assets and other property and equipment | | | | | (105) | | | (77) | | | |
| Net cash used in investing activities | | | | | (2,911) | | | (3,025) | | | |
| Cash flows from financing activities: | | | | | | | | | |
| Proceeds from issuance of senior notes, net of discount | | | | | — | | | 3,247 | | | |
| | | | | | | | | |
| | | | | | | | | |
| Borrowings under credit facility | | | | | — | | | 650 | | | |
| Repayment of credit facilities | | | | | — | | | (1,287) | | | |
| Repayment of long-term debt | | | | | (2,097) | | | (3,371) | | | |
| Proceeds from capped call on convertible notes | | | | | 71 | | | — | | | |
| Payments of other liabilities | | | | | (183) | | | (153) | | | |
| Payments of financing fees | | | | | — | | | (32) | | | |
| Purchases of treasury stock | | | | | (1,286) | | | (19) | | | |
| Exercise of long-term incentive plan stock options and employee stock purchases | | | | | 7 | | | 11 | | | |
| Dividends paid | | | | | (4,913) | | | (720) | | | |
| Net cash used in financing activities | | | | | (8,401) | | | (1,674) | | | |
| Net decrease in cash, cash equivalents and restricted cash | | | | | (2,562) | | | (874) | | | |
| Cash, cash equivalents and restricted cash, beginning of period | | | | | 3,884 | | | 1,501 | | | |
| Cash, cash equivalents and restricted cash, end of period | | | | | $ | 1,322 | | | $ | 627 | | | |
| | | | | | | | | |
| | | | | | | | | |
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
NOTENote 1. Organization and Nature of Operations
Pioneer is a Delaware corporation whose common stock isshares are listed and traded on the NYSE. The Company is a large independent oil and gas exploration and production company that explores for, develops and produces oil, NGLs and gas in the Midland Basin in West Texas.
Planned merger of the Company with Exxon Mobil Corporation. On October 10, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Exxon Mobil Corporation, a New Jersey corporation ("ExxonMobil"), and a subsidiary of ExxonMobil, pursuant to which, and subject to the terms and conditions thereof, the Company will survive as a wholly-owned subsidiary of ExxonMobil (the "Merger"). Under the terms of the Merger Agreement, each eligible share of the Company's common stock will be converted into the right to receive 2.3234 shares of ExxonMobil common stock (the "Exchange Ratio"). Completion of the Merger remains subject to certain conditions, including the approval of the Merger by the Company's stockholders, as well as certain governmental and regulatory approvals. The Merger is currently expected to close in the first half of 2024; however, no assurance can be given as to when, or if, the Merger will occur.
The Merger Agreement contains termination rights, subject to certain conditions, for each of the Company and ExxonMobil, including, among others: (i) if the consummation of the Merger does not occur on or before October 10, 2024 (the "End Date") or the extended End Date (April 10, 2025) and (ii) if the Company wishes to terminate the Merger Agreement to enter into a definitive agreement with respect to a superior proposal. Upon termination of the Merger Agreement by ExxonMobil under certain specified circumstances, including, among others, a material breach by the Company of its non-solicitation obligations or by the Company in order to enter into a definitive agreement with respect to a superior proposal, the Company would be required to pay ExxonMobil a termination fee of $1.8 billion.
The above description of the Merger Agreement and the transactions contemplated thereby, including certain referenced terms, is a summary of certain principal terms and conditions contained in the Merger Agreement.
NOTENote 2. Basis of Presentation
Presentation. In the opinion of management, the unaudited interim consolidated financial statements of the Company as of September 30, 20222023 and for the three and nine months ended September 30, 20222023 and 20212022 include all adjustments and accruals, consisting only of normal, recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods in conformity with GAAP. The operating results for the three and nine months ended September 30, 20222023 are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the SEC. These unaudited interim 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-K10-K for the year ended December 31, 2021.2022. Use of estimates in the preparation of financial statements. Preparation of the Company's consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Depletion of oil and gas properties is determined using estimates of proved oil and gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves, commodity price outlooks and estimates of development and production costs. Actual results could differ from the estimates and assumptions utilized.
NOTENote 3. AcquisitionDivestitures and Divestiture Activities
Acquisitions. The Company regularly seeks to acquire or trade for acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of future horizontal wells and provides superior returns on investment.
DoublePoint acquisition. On May 4, 2021, the Company acquired Double Eagle III Midco 1 LLC ("DoublePoint") pursuant to a definitive membership interest purchase agreement dated April 1, 2021 (the "DoublePoint Acquisition") in exchange for 27 million shares of Pioneer common stock and $1.0 billion of cash. The Pioneer stock consideration transferred had a fair value of $4.2 billion.
Parsley acquisition. On January 12, 2021, the Company acquired Parsley Energy, Inc., a Delaware corporation that previously traded on the NYSE under the symbol "PE" ("Parsley"), pursuant to the Agreement and Plan of Merger, dated as of October 20, 2020, among Pioneer, certain of its subsidiaries, Parsley and Parsley Energy, LLC (the "Parsley Acquisition").
As part of the Parsley Acquisition, each eligible share of Parsley Class A common stock and each membership interest unit of Parsley Energy, LLC were automatically converted into the right to receive 0.1252 (the "Exchange Ratio") shares of Pioneer common stock. As a result, the Company issued 52 million shares of Pioneer common stock upon the consummation of the Parsley Acquisition, representing total stock consideration transferred of $6.9 billion.
Both the Parsley Acquisition and the DoublePoint Acquisition were accounted for using the acquisition method under ASC Topic 805, Business Combinations, which requires all assets acquired and liabilities assumed to be recorded at fair value at the acquisition date.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Nonmonetary TransactionsDivestitures. The Company regularly reviews its asset base to identify nonstrategic assets, the disposition of which would increase capital resources available for other activities, create organizational and operational efficiencies and further the Company's objective of maintaining a strong balance sheet to ensure financial flexibility.
•The Company had no material asset divestitures during the three and nine months ended September 30, 2023.
•During the three and nine months ended September 30, 2022, the Company divested certain undeveloped acresacreage and producing wells in the Midland Basin for (i) cash proceeds of $39 million and $165 million, and (ii) ownership interests in certain Midland Basin undeveloped acres and producing wells valued at $8 million.respectively. The Company recorded a gain on these sales of $34 million and $110 million for the three and nine months ended
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
September 30, 2022, respectively, which is reflected in net gain on disposition of assets in the consolidated statements of operations.
•In February 2022, the Company completed the sale of its equity interest in certain gas gathering and processing systems in northern Martin County for cash proceeds of $125 million after normal closing adjustments (the "Martin County Gas Processing Divestiture"). The sale was treated as a recovery of investment from a partial sale of proved property resulting in no gain or loss being recognized.
•Nonmonetary transactions. In December 2021,During the nine months ended September 30, 2023, the Company's nonmonetary transactions included exchanges of both proved and unproved oil and gas properties in the Midland Basin with unaffiliated third parties. Certain of these transactions were determined to have commercial substance, which led to those transactions being accounted for at fair value, and resulted in the Company completed the sale of its assets in the Delaware Basin (the "Delaware Divestiture") to Continental Resources, Inc. ("Continental") for cash proceeds of $3.0 billion, after normal closing adjustments. The Company's Delaware Basin assets were acquired as part of the Parsley Acquisition.
•In October 2021, the Company completed the sale of 20,000 net acres in western Glasscock County to Laredo Petroleum, Inc. ("Laredo") in exchange for $137 million in cash and 960 thousand shares of Laredo's common stock representing total consideration transferred of $206 million, after normal closing adjustments.
•In March 2021, the Company sold its well services business torecording a third party for (i) net cash proceedsgain of $20 million and (ii) up to $4 million of additional cash proceeds to be earned through March 2024. The Company recorded a gain on the sale of $9 million, which is reflected in net gain on disposition of assets in the consolidated statements of operations.operations and $154 million of noncash investing activities for the nine months ended September 30, 2023. Nonmonetary transactions that did not have commercial substance were recorded at carryover basis.
NOTENote 4. Fair Value Measurements
The Company determines fair value based on the price that would be received from selling an asset or 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 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.
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, typically reflecting management's estimate of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including discounted cash flow models.
Assets and liabilities measured at fair value on a recurring basis.
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2023 |
| | Fair Value Measurements | | |
| | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | | Significant Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total |
| | (in millions) |
| Assets: | | | | | | | |
| | | | | | | |
| Investment in affiliate | $ | 176 | | | $ | — | | | $ | — | | | $ | 176 | |
| Deferred compensation plan assets | 62 | | | — | | | — | | | 62 | |
| Conversion option derivatives | — | | | 2 | | | — | | | 2 | |
| | | | | | | |
| $ | 238 | | | $ | 2 | | | $ | — | | | $ | 240 | |
| Liabilities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Marketing derivatives | $ | — | | | $ | — | | | $ | 310 | | | $ | 310 | |
| | | | | | | |
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
Assets | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
| | Fair Value Measurements | | |
| | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | | Significant Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total |
| | (in millions) |
| Assets: | | | | | | | |
| Investment in affiliate | $ | 172 | | | $ | — | | | $ | — | | | $ | 172 | |
| Deferred compensation plan assets | 65 | | | — | | | — | | | 65 | |
| Conversion option derivatives | — | | | 1 | | | — | | | 1 | |
| $ | 237 | | | $ | 1 | | | $ | — | | | $ | 238 | |
| Liabilities: | | | | | | | |
| Marketing derivatives | $ | — | | | $ | — | | | $ | 140 | | | $ | 140 | |
| | | | | | | |
Gains and liabilities measured at fair value on a recurring basis. Assetslosses recorded in the consolidated statements of operations related to assets and liabilities measured at fair value on a recurring basis are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2022 |
| | Fair Value Measurements | | |
| | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | | Significant Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total |
| | (in millions) |
| Assets: | | | | | | | |
| | | | | | | |
| Investment in affiliate | $ | 134 | | | $ | — | | | $ | — | | | $ | 134 | |
| Deferred compensation plan assets | 63 | | | — | | | — | | | 63 | |
| | | | | | | |
| Marketing derivatives | — | | | — | | | 81 | | | 81 | |
| $ | 197 | | | $ | — | | | $ | 81 | | | $ | 278 | |
| Liabilities: | | | | | | | |
| Commodity price derivatives (a) | $ | — | | | $ | 223 | | | $ | — | | | $ | 223 | |
| | | | | | | |
| Marketing derivatives | — | | | — | | | 82 | | | 82 | |
| $ | — | | | $ | 223 | | | $ | 82 | | | $ | 305 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 |
| | Fair Value Measurements | | |
| | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | | Significant Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total |
| | (in millions) |
| Assets: | | | | | | | |
| | | | | | | |
| Investment in affiliate | $ | 135 | | | $ | — | | | $ | — | | | $ | 135 | |
| Deferred compensation plan assets | 74 | | | — | | | — | | | 74 | |
| Short-term investment | 58 | | | — | | | — | | | 58 | |
| $ | 267 | | | $ | — | | | $ | — | | | $ | 267 | |
| Liabilities: | | | | | | | |
| Commodity price derivatives (a) | $ | — | | | $ | 486 | | | $ | — | | | $ | 486 | |
| Marketing derivatives | — | | | — | | | 77 | | | 77 | |
| $ | — | | | $ | 486 | | | $ | 77 | | | $ | 563 | |
______________________
(a)Includes $84 million and $328 million as of September 30, 2022 and December 31, 2021, respectively, of liabilities recorded in the fourth quarter of 2021 related to entering into equal and offsetting oil and gas commodity derivative trades that had the net effect of eliminating certain of the Company's 2022 derivative obligations. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
| (in millions) |
| Investment in affiliate valuation adjustment | $ | 40 | | | $ | (32) | | | $ | 4 | | | $ | (1) | | | |
| Deferred compensation plan asset valuation adjustment | $ | 3 | | | $ | (2) | | | $ | 2 | | | $ | (13) | | | |
| Derivative gain (loss), net: | | | | | | | | | |
| Marketing derivatives: | | | | | | | | | |
| Noncash derivative gain (loss), net | $ | (155) | | | $ | 99 | | | $ | (170) | | | $ | 75 | | | |
| Cash payments on settled derivatives | (21) | | | (18) | | | (52) | | | (47) | | | |
| Total marketing derivative gain (loss), net | (176) | | | 81 | | | (222) | | | 28 | | | |
| Conversion option derivatives: | | | | | | | | | |
| Noncash derivative gain (loss), net | 4 | | | (23) | | | 1 | | | — | | | |
| Cash receipts (payments) on settled derivatives, net | (18) | | | 17 | | | (14) | | | 17 | | | |
| Total conversion option derivative gain (loss), net | (14) | | | (6) | | | (13) | | | 17 | | | |
| Commodity derivatives: | | | | | | | | | |
| Noncash derivative gain, net | — | | | 59 | | | — | | | 20 | | | |
| Cash payments on settled derivatives, net | — | | | (121) | | | — | | | (252) | | | |
| Total commodity derivative loss, net | — | | | (62) | | | — | | | (232) | | | |
| $ | (190) | | | $ | 13 | | | $ | (235) | | | $ | (187) | | | |
| | | | | | | | | |
| | | | | | | | | |
Investment in affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of the Company's investment in ProPetro common stockshares is determined using Level 1 inputs based on observable prices on a major exchange.exchange and changes in fair value are recorded in net interest and other income (loss) in the consolidated statements of operations. See Note 11 and Note 1310 for additional information. Deferred compensation plan assets. The Company's deferred compensation plan assets include investments in equity and mutual fund securities that are actively traded on major exchanges. The fair value of these investments is determined using Level 1 inputs based on observable prices on major exchanges.
Short-term investment. In October 2021, the Company acquired 960 thousand shares of Laredo as partial consideration for its divestiture of certain acreageexchanges and changes in western Glasscock County to Laredo. The shares were treated as an investment in equity securities measured at fair value. The fair value of the Company's investmentare recorded in Laredo common stock was determined using Level 1 inputs based on observable prices on a major exchange, resultingnet interest and other income (loss) in the fair valueconsolidated statements of the Laredo shares being based onoperations.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
the trading value of the shares as of December 31, 2022. During the nine months ended September 30, 2022, the Company sold all 960 thousand shares of Laredo common stock. See Note 13 for additional information.Commodity price derivatives. The Company's commodity price derivatives primarily represent oil and gas swap contracts, collar contracts, collar contracts with short puts, option contracts and basis swap contracts. The asset and liability measurements for the Company's commodity price derivative contracts are determined using Level 2 inputs. The Company utilizes discounted cash flow and option-pricing models for valuing its commodity price derivatives.
The liability values attributable to the Company's commodity price 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.
Conversion option derivatives. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025 (the "Convertible Notes"). Certain holders of the Convertible Notes have exercised their conversion option during the nine months ended September 30, 2022. Peroptions per the terms of the notes indenture, thenotes' indenture. The Company elected to settle the conversions in cash, with settlement occurring 25 trading
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
days from the notice of conversion (the "Settlement Period"). The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as a derivative instrument not designated as a hedge. The change in fair value of the conversion option derivatives during the Settlement
PeriodsPeriod is primarily determined based on Level 2 inputs related to the daily volumetric weighted average prices
("VWAP") of the Company's common
stockshares during the Settlement Period.
Conversion option derivative assets and liabilities recorded in the consolidated balance sheets were less than $1 million as of September 30, 2022. See
Note 5, Note 7 and Note 176 for additional information.Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets. The Company's marketing derivatives reflect long-term marketing contracts with Occidental Energy Marketing, Inc. whereby the Company agreed to purchase and simultaneously sell, barrels of oil at an oil terminal in Midland, Texas.Texas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland oil price and the price the Company receives for the oil volumes sold is athe WASP that the non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges. The asset and liability measurements for the long-term marketing contracts are determined using both Level 2 and 3 inputs. The Company utilizes a discounted cash flow model for valuing the marketing derivatives.
The asset and liability values attributable to the Company's marketing derivatives that are determined based on Level 2 inputs 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) stated contractual rates. The Level 3 inputs attributable to the Company's marketing derivatives include the historical monthly differential between Brent oil prices and the corresponding WASP of the counterparty to the marketing derivatives ("WASP Differential Deduction") and, to a lesser extent, an estimated annual cost inflation rate. The average WASP Differential Deduction used in the fair value determination as of September 30, 2023 and December 31, 2022 and 2021 was $1.63$1.81 per barrel and $2.07$1.67 per barrel, respectively. The WASP Differential Deduction and the estimated annual cost inflation rate reflects management's best estimate of future results utilizing historical performance, but these estimates are not observable inputs by a market participant and contain a high degree of uncertainty. The Company experiences mark-to-market fluctuations in the fair value of its marketing derivatives based on changes in the WASP Differential Deduction if it deviates from historical levels. For example, a 10 percent increase or decrease in the WASP Differential Deduction would impact the fair value of the Company's marketing derivatives recorded by approximately $28$25 million as of September 30, 2022.2023.
Derivative financial instruments are presented in the Company's consolidated balance sheets as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2023 |
| 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) |
| Assets: | | | | | | |
| | | | | | | | |
| Conversion option derivatives | | Prepaids and other | | $ | 2 | | | $ | — | | | $ | 2 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Liabilities: | | | | | | |
| | | | | | | | |
| Marketing derivatives | | Derivatives - current | | $ | 158 | | | $ | — | | | $ | 158 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Marketing derivatives | | Derivatives - noncurrent | | $ | 152 | | | $ | — | | | $ | 152 | |
| | | | | | |
| | | | | | |
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
| 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) |
| Assets: | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Conversion option derivatives | | Prepaids and other | | $ | 1 | | | $ | — | | | $ | 1 | |
| Liabilities: | | | | | | |
| | | | | | | | |
| Marketing derivatives | | Derivatives - current | | $ | 44 | | | $ | — | | | $ | 44 | |
| | | | | | | | |
| Marketing derivatives | | Derivatives - noncurrent | | $ | 96 | | | $ | — | | | $ | 96 | |
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 fair value adjustments in certain circumstances. These assets and liabilities can include inventories, proved and unproved oil and gas properties, assets acquired and liabilities assumed in business combinations or through nonmonetary transactions, goodwill, asset retirement obligations and other long-lived assets.
Nonmonetary transactions. Oil and gas property nonmonetary transactions that have commercial substance are valued as of the transaction date based on income and market based approaches utilizing Level 3 inputs, including internally generated development and production profiles and price and cost assumptions. During the nine months ended September 30, 2023, the Company recorded a gain of $20 million to net gain on disposition of assets in the consolidated statements of operations associated with nonmonetary transactions. See Note 3 for additional information.
Other long-lived assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are written down to fair value when they are determinedconsidered to be impaired, the impairment charge is measured as the amount by which the carrying amount of the asset exceeds its estimated fair value determined using either a discounted future cash flow model or held for sale.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Company's impairment assessments of other long-lived assets during the nine months ended September 30, 2022
(Unaudited)
2023, the Company recorded $22 million of noncash impairment charges to other expense in the consolidated statements of operations. See Note 12 for additional information.Financial instruments not carried at fair value. Carrying values and fair values of financial instruments that are not carried at fair value in the consolidated balance sheets are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 | | As of December 31, 2021 |
| Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value |
| | (in millions) |
| Assets: | | | | | | | |
| Cash and cash equivalents (a) | $ | 1,316 | | | $ | 1,316 | | | $ | 3,847 | | | $ | 3,847 | |
| Restricted cash (a) (b) | $ | 6 | | | $ | 6 | | | $ | 37 | | | $ | 37 | |
| Short-term investments, net (c) | $ | 372 | | | $ | 372 | | | $ | — | | | $ | — | |
| Liabilities: | | | | | | | |
| Current portion of long-term debt: | | | | | | | |
| Convertible senior notes (d) | $ | 45 | | | $ | 99 | | | $ | — | | | $ | — | |
| Senior notes (d) | $ | 941 | | | $ | 914 | | | $ | 244 | | | $ | 247 | |
| Long-term debt: | | | | | | | |
| Convertible senior notes (d) | $ | 1,028 | | | $ | 2,267 | | | $ | 1,307 | | | $ | 2,359 | |
| Senior notes (d) | $ | 3,200 | | | $ | 2,641 | | | $ | 5,381 | | | $ | 5,390 | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2023 | | As of December 31, 2022 |
| Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value |
| | (in millions) |
| Assets: | | | | | | | |
| Cash and cash equivalents (a) | $ | 98 | | | $ | 98 | | | $ | 1,032 | | | $ | 1,032 | |
| | | | | | | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Current portion of debt: | | | | | | | |
| | | | | | | |
| Convertible senior notes (b) | $ | 44 | | | $ | 109 | | | $ | 29 | | | $ | 69 | |
| Senior notes (b) | $ | — | | | $ | — | | | $ | 750 | | | $ | 738 | |
| Long-term debt: | | | | | | | |
| Convertible senior notes (b) | $ | 582 | | | $ | 1,437 | | | $ | 925 | | | $ | 2,184 | |
| Senior notes (b) | $ | 4,298 | | | $ | 3,792 | | | $ | 3,200 | | | $ | 2,696 | |
| | | | | | | |
| | | | | | | |
______________________
(a)Fair value approximates carrying value due to the short-term nature of the instruments.
(b)Represents funds in escrow for use in future deficiency fee payments associated with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas (the "South Texas Divestiture"). Any remaining balance after the payment of the deficiency fees will revert to the Company on March 31, 2023. See Note 10 for additional information. (c)The carrying value as of September 30, 2022, represents commercial paper investments that 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. Commercial paper is included in cash and cash equivalents if it has maturity dates that are less than 90 days at the date of purchase; otherwise, investments are reflected in short-term investments in the consolidated balance sheets based on their maturity dates. Fair value for the Company's commercial paper investments is determined using Level 2 inputs.
(d)Fair value is determined using Level 2 inputs. The Company's senior notes are quoted, but not actively traded on major exchanges; therefore, fair value is based on periodic values as quoted on major exchanges. See Note 76 for additional information.The Company has other financial instruments consisting primarily of receivables, payables, prepaid expenses 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 business combinations, goodwill and asset retirement obligations.
NOTE 5. Derivative Financial Instruments
The Company's derivatives are accounted for as non-hedge derivatives and 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.
Oil production derivatives.The Company sells its oil production at the lease and the sales contracts governing such oil production are tied directly to, or are correlated with, WTI oil prices. As a result, the Company periodically enters into basis swap contracts to reduce basis risk between WTI index prices and Midland index prices at which the oil is sold.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Volumes per day associated with outstanding oil basis derivative contracts, as of September 30, 2022, and the weighted average oil price differential for those contracts are as follows:
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| | | | | | | 2022 |
| | | | | | | Fourth Quarter |
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Midland/WTI basis swap contracts: | | | | | | | |
Volume per day (Bbl) (a) | | | | | | | 26,000 | |
Price differential per Bbl | | | | | | | $ | 0.50 | |
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______________________
(a)The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells a portion of its Midland Basin oil and the WTI index price.
Additionally, as of September 30, 2022, the Company has outstanding oil derivative contracts for 3,000 Bbls per day of Brent/WTI basis swaps for January 2024 through December 2024. The basis swap contracts fix the basis differential between the WTI index price (the price at which the Company buys Midland Basin oil for transport to the Gulf Coast) and the Brent index price (the price at which a portion of the Midland Basin purchased oil is sold in the Gulf Coast market) at a weighted average differential of $4.33.
Gas production derivatives. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to NYMEX HH gas prices or regional index prices (e.g. WAHA, SoCal and Houston Ship Channel) where the gas is sold. To diversify the gas prices it receives to international market prices, the Company sells a portion of its gas production at a price correlated to the Dutch TTF index price. 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.
Volumes per day associated with outstanding gas derivative contracts, as of September 30, 2022, and the weighted average gas prices for those contracts are as follows:
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| | | | | | | 2022 | |
| | | | | | | Fourth Quarter | |
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Dutch TTF swap contracts: | | | | | | | | |
Volume per day (MMBtu) | | | | | | | 30,000 | | |
Price per MMBtu | | | | | | | $ | 7.80 | | |
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Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets.As of September 30, 2022, the Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell barrels of oil at an oil terminal in Midland, Texas.
In October 2019, the Company agreed to purchase and simultaneously sell 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026.
In April 2022, the Company agreed to purchase and simultaneously sell (i) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (ii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027.
The price the Company pays to purchase the oil volumes under the purchase contracts is based on a Midland WTI price and the price the Company receives for the oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges. See Note 4 for additional information.Conversion option derivatives. The Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Periods related to conversion options exercised by certain holders of the Convertible Notes. For the nine months ended September 30, 2022, the conversion options attributable to $285 million of the Company's carrying value of its Convertible Notes were exercised by the holders of the notes, of which $45 million of the carrying value remained in the Settlement Period as of September 30, 2022. See Note 4 and Note 7 for additional information.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Fair value. The fair value of derivative financial instruments not designated as hedging instruments are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2022 |
| 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) |
| Assets: | | | | | | |
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| Marketing derivatives | | Other assets - noncurrent | | $ | 81 | | | $ | — | | | $ | 81 | |
| Liabilities: | | | | | | |
| Commodity price derivatives | | Derivatives - current | | $ | 222 | | | $ | — | | | $ | 222 | |
| Marketing derivatives | | Derivatives - current | | $ | 82 | | | $ | — | | | $ | 82 | |
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| Commodity price derivatives | | Derivatives - noncurrent | | $ | 1 | | | $ | — | | | $ | 1 | |
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| As of December 31, 2021 |
| 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) |
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| Liabilities: | | | | | | |
| Commodity price derivatives | | Derivatives - current | | $ | 486 | | | $ | — | | | $ | 486 | |
| Marketing derivatives | | Derivatives - current | | $ | 52 | | | $ | — | | | $ | 52 | |
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| Marketing derivatives | | Derivatives - noncurrent | | $ | 25 | | | $ | — | | | $ | 25 | |
Fair value. Gains and losses recorded to net derivative gain (loss) in the consolidated statements of operations related to derivative financial instruments not designated as hedging instruments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | |
| (in millions) |
| Commodity price derivatives: | | | | | | | | | |
| Noncash derivative gain (loss), net | $ | 59 | | | $ | (10) | | | $ | 20 | | | $ | (639) | | | |
| Cash payments on settled derivatives, net (a) | (121) | | | (486) | | | (252) | | | (1,357) | | | |
| Total commodity derivative loss, net | (62) | | | (496) | | | (232) | | | (1,996) | | | |
| Marketing derivatives: | | | | | | | | | |
| Noncash derivative gain, net | 99 | | | 6 | | | 75 | | | 3 | | | |
| Cash payments on settled derivatives, net | (18) | | | (11) | | | (47) | | | (31) | | | |
| Total marketing derivative gain (loss), net | 81 | | | (5) | | | 28 | | | (28) | | | |
| Conversion option derivatives: | | | | | | | | | |
| Noncash derivative loss, net | (23) | | | — | | | — | | | — | | | |
| Cash receipts on settled derivatives, net | 17 | | | — | | | 17 | | | — | | | |
| Total conversion option derivative gain (loss), net | (6) | | | — | | | 17 | | | — | | | |
| Derivative gain (loss), net | $ | 13 | | | $ | (501) | | | $ | (187) | | | $ | (2,024) | | | |
_____________________(a)Excludes cash payments of $83 million and $244 million, during the three and nine months ended September 30, 2022, respectively, related to entering into equal and offsetting oil and gas commodity derivative trades in the fourth quarter of 2021, which had the net effect of eliminating certain of the Company's 2022 derivative obligations. Includes the early settlement of certain of the Company's commodity derivative contracts for cash payments of $13 million during the nine months ended September 30, 2021.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
The Company uses credithas other financial instruments consisting primarily of receivables, payables and other financial criteria to evaluate the credit standing of,current assets and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure theliabilities that approximate fair value due to the nature of its derivative instruments, associated credit risk is mitigated by the Company's credit risk policiesinstrument and procedures.their relatively short maturities.
NOTE 6.Note 5. Exploratory Well and Project 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 included in proved properties in the consolidated balance sheets. If the exploratory well or project is determined to be impaired, the impaired costs are recorded in exploration and abandonments expense in the consolidated statements of operations.
The changes in capitalized exploratory well and project costs are as follows:
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| | Nine Months Ended September 30, 2022 | | 2023 |
| | | | | |
| | (in millions) | | |
| Beginning capitalized exploratory well and project costs | $ | 632834 | | | | | |
| Additions to exploratory well and project costs pending the determination of proved reserves | 2,4573,047 | | | | | |
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| Reclassifications due to determination of proved reserves | (2,380)(2,678) | | | | | |
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| Ending capitalized exploratory well and project costs | $ | 7091,203 | | | | | |
Aging 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, are as follows:
| | | | As of September 30, 2022 | | As of December 31, 2021 | | | As of September 30, 2023 | | As of December 31, 2022 | |
| | | | (in millions, except well counts) | | |
| Capitalized exploratory well costs that have been suspended: | | | |
| | | | (in millions, except project counts) |
| One year or less | One year or less | $ | 709 | | | $ | 621 | | | One year or less | $ | 1,203 | | | $ | 834 | | |
| More than one year | More than one year | — | | | 11 | | | More than one year | — | | | — | | |
| | $ | 709 | | | $ | 632 | | | | $ | 1,203 | | | $ | 834 | | |
Number of projects with exploratory well costs that have been suspended for a period greater than one year (a) | Number of projects with exploratory well costs that have been suspended for a period greater than one year (a) | — | | | 3 | | | Number of projects with exploratory well costs that have been suspended for a period greater than one year (a) | — | | | — | | |
______________________
(a)Note 6. Debt and Interest Expense
The three exploratory wells that were suspended for a period greater than one yearcomponents of debt, including the effects of issuance costs and net discounts, are as of December 31, 2021 were completed during the first quarter of 2022.follows:
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| | As of September 30, 2023 | | As of December 31, 2022 |
| | (in millions) |
| Outstanding debt principal balances: | |
| | | |
| 0.550% senior notes due 2023 | $ | — | | | $ | 750 | |
| 0.250% convertible senior notes due 2025 | 629 | | | 962 | |
| 5.100% senior notes due 2026 | 1,100 | | | — | |
| 1.125% senior notes due 2026 | 750 | | | 750 | |
| 7.200% senior notes due 2028 | 241 | | | 241 | |
| 4.125% senior notes due 2028 | 138 | | | 138 | |
| 1.900% senior notes due 2030 | 1,100 | | | 1,100 | |
| 2.150% senior notes due 2031 | 1,000 | | | 1,000 | |
| 4,958 | | | 4,941 | |
| Issuance costs and discounts, net | (34) | | | (37) | |
| Total debt | 4,924 | | | 4,904 | |
| Less current portion of debt | 44 | | | 779 | |
| Long-term debt | $ | 4,880 | | | $ | 4,125 | |
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
NOTE 7. Long-term Debt and Interest Expense
The components of long-term debt, including the effects of issuance costs and net discounts, are as follows: | | | | | | | | | | | |
| | As of September 30, 2022 | | As of December 31, 2021 |
| | (in millions) |
| Outstanding debt principal balances: | |
| | | |
| 3.950% senior notes due 2022 | $ | — | | | $ | 244 | |
| 0.550% senior notes due 2023 | 750 | | | 750 | |
| 0.750% senior callable notes due 2024 | — | | | 750 | |
| 0.250% convertible senior notes due 2025 | 1,083 | | | 1,323 | |
| 1.125% senior notes due 2026 | 750 | | | 750 | |
| 4.450% senior notes due 2026 | — | | | 500 | |
| 5.625% senior notes due 2027 | 179 | | | 179 | |
| 7.200% senior notes due 2028 | 241 | | | 241 | |
| 4.125% senior notes due 2028 | 138 | | | 138 | |
| 1.900% senior notes due 2030 | 1,100 | | | 1,100 | |
| 2.150% senior notes due 2031 | 1,000 | | | 1,000 | |
| 5,241 | | | 6,975 | |
| Issuance costs and discounts, net | (27) | | | (43) | |
| Total debt | 5,214 | | | 6,932 | |
| Less current portion of long-term debt | 986 | | | 244 | |
| Long-term debt | $ | 4,228 | | | $ | 6,688 | |
Credit facility. The Company maintains a revolving corporate credit facility (the "Credit Facility") with a syndicate of financial institutions and has aggregate loan commitments of $2.0 billion. On May 26, 2023, Pioneer entered into the Second Amendment to Credit Agreement (the "Second Amendment") with Wells Fargo Bank, National Association, as administrative agent, and the other agents and lenders party thereto. The Second Amendment replaced the London interbank offered rate with a term secured overnight financing rate as the interest rate benchmark, with all other terms, conditions and covenants remaining substantially unchanged. The Credit Facility has a maturity date of January 12, 2026. As of September 30, 2022,2023, the Company had no outstanding borrowings under the Credit Facility. The Credit Facility requires the maintenance of a ratio of total debt to book capitalization, subject to certain adjustments, not to exceed 0.65 to 1.0. As of September 30, 2022,2023, the Company was in compliance with its debt covenants.
Senior notes. In September 2022,March 2023, the Company delivered an irrevocable noticeissued $1.1 billion of call to the holders of its outstanding 5.625%5.100% senior notes due 2027. The 5.625% senior notes due 2027, with a debt principal balance of $179 million, are recorded in the current portion of long-term debt in the consolidated balance sheets as of September 30, 2022 and were repaid in October 2022.that will mature March 29, 2026 (the "March 2023 Senior Notes Offering"). The Company fundedreceived proceeds, net of $7 million of issuance costs and discounts, of $1.1 billion. Interest on the repayment with cashnotes is payable semiannually on hand. See Note 17 for additional information. The Company's 3.950% senior notes, with a debt principal balance of $244 million, maturedMarch 29 and were repaid in July 2022. The Company funded the repayment with cash on hand.
In February 2022, the Company paid $1.3 billion to redeem its outstanding 0.750% Senior Notes due 2024 and 4.450% Senior Notes due 2026, having aggregate principal amounts of $750 million and $500 million, respectively. The Company recorded a $47 million loss on early extinguishment of debt to other expense associated with the early redemptions. See Note 14 for additional information.September 29.The Company's 0.550% senior notes, with a debt principal balance of $750 million, will maturematured and were repaid in May 2023. The 0.550% senior notes are recorded in2023 with proceeds from the current portion of long-term debt in the consolidated balance sheets as of September 30, 2022.March 2023 Senior Notes Offering.
The Company's senior notes are general unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company and are senior in right of payment to all existing and future subordinated indebtedness of the Company. The Company is a holding company that conducts all of its operations through subsidiaries; consequently, the senior notes are structurally subordinated to all obligations of its subsidiaries. Interest on the Company's senior notes is payable semiannually.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Convertible senior notes. The Convertible Notes bear a fixed interest rate of 0.250% per year, with interest payable semiannually on May 15 and November 15 of each year.15. The Convertible Notes will mature on May 15, 2025, unless earlier redeemed, repurchased or converted. The Convertible Notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.
TheAs of September 30, 2023, the Convertible Notes are convertible into shares of the Company's common stock at an adjusted conversion rate of 10.065410.7379 shares of the Company's common stockshares per $1,000 principal amount of the Convertible Notes (subject to further adjustment pursuant to the terms of the notes indenture, the "Conversion Rate"), which represents an adjusted conversion price of $99.35$93.13 per share (subject to adjustment pursuant to the terms of the notes indenture, the "Conversion Price"). Upon conversion, the Convertible Notes will be settled in cash, shares of the Company's common stockshares or a combination thereof, at the Company's election.
Holders of the Convertible Notes may convert their notes at their option prior to February 15, 2025 under the following circumstances:
•during the quarter following any quarter during which the last reported sales price of the Company's common stockshares for at least 20 of the last 30 consecutive trading days of such quarter exceeds 130 percent of the Conversion Price;
•during the five-business day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the product of the last reported sales price of the Company's common stockshares and the Conversion Rate;
•upon notice of redemption by the Company; or
•upon the occurrence of specified corporate events, including certain consolidations or mergers.
On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. TheCurrently, the Company may not redeem the Convertible Notes prior to May 20, 2023, and after such date, may redeem the Convertible Notes only if the last reported sale price of the Company's common stockshares has been at least 130 percent of the Conversion Price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the notice of redemption. The redemption price is equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.
In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions with certain financial institution counterparties (the "Capped Call"), the purpose of which was to reduce the potential dilution to the Company's common stockshares upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such converted notes, with such reduction and offset subject to a capped price. The Capped Call transactions have an adjusted strike price of $99.35 per share of common stock and an adjusted capped price of $141.38 per share of common stock. The net cost of $113 million incurred to purchase the Capped Call transactions was recorded as a reduction to additional paid-in capital in the consolidated balance sheets.
As of September 30, 2022, the Convertible Notes had an outstanding principal balance of $1.1 billion and unamortized issuance costs of $10 million. The effective annual interest rate of the Convertible Notes is 0.6 percent.
Interest expense recognized on the Convertible Notes is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) |
| Contractual coupon interest | $ | 1 | | | $ | 1 | | | $ | 2 | | | $ | 3 | |
| | | | | | | |
| Amortization of capitalized loan fees | 1 | | | 1 | | | 3 | | | 4 | |
| $ | 2 | | | $ | 2 | | | $ | 5 | | | $ | 7 | |
Convertible Note conversions.During the last 30 consecutive trading days of the fourth quarter of 2021 and the first, second and third quarters of 2022, the last reported sale price of the Company's common stock exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to become convertible at the option of the holders from January 1, 2022 through December 31, 2022.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
subject to a capped price. As of September 30, 2023, the Capped Call transactions have an adjusted strike price of $93.13 per share of common shares and an adjusted capped price of $132.53 per share of common shares.
As of September 30, 2023, the effective annual interest rate on the Convertible Notes is 0.6 percent after giving effect to deferred financing fees relating to the notes.
Convertible Note conversions.During the nine months ended Septemberlast 30 consecutive trading days subsequent to the third quarter of 2021 through the third quarter of 2023, the last reported sales price of the Company's common shares exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to be convertible at the option of the holders during the period from January 1, 2022 certainthrough December 31, 2023.
Certain holders of the Company's Convertible Notes exercised their conversion option resulting in the Company recognizing the following cash receiptspayments and cash paymentsreceipts associated with the conversions:
| | | | Nine Months Ended September 30, | | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (in millions) | | | (in millions) |
| Cash payments: | Cash payments: | | | | Cash payments: | |
| Principal repayments | Principal repayments | | $ | 240 | | | $ | — | | | Principal repayments | $ | 333 | | | $ | 240 | |
| Conversion premiums | Conversion premiums | | 321 | | | — | | | Conversion premiums | 422 | | | 321 | |
| Conversion option derivative payments, net | | Conversion option derivative payments, net | 14 | | | — | |
| Cash payments, net | Cash payments, net | | $ | 561 | | | $ | — | | | Cash payments, net | $ | 769 | | | $ | 561 | |
| | Cash receipts: | Cash receipts: | | | | Cash receipts: | | | |
| Capped Call proceeds | | Capped Call proceeds | $ | 104 | | | $ | 71 | |
| Conversion option derivative receipts, net | Conversion option derivative receipts, net | | $ | 17 | | | $ | — | | | Conversion option derivative receipts, net | — | | | 17 | |
| Capped Call proceeds | | 71 | | | — | | | |
| Cash receipts, net | Cash receipts, net | | $ | 88 | | | $ | — | | | Cash receipts, net | $ | 104 | | | $ | 88 | |
| |
The Company recorded the conversion premiums paid, Capped Call proceeds and $19 million of associated issuance fees and deferred taxes attributable to the principal amount of the Convertible Notes converted in additional paid-in-capital.
As of September 30, 2023 and December 31, 2022, the Company had received conversion notices related to $45$44 million and $29 million, respectively, of the principal amount of the Convertible Notes. These Convertible Notes remained in the Settlement Period and are recorded in the current portion of long-term debt in the consolidated balance sheets as of September 30, 2022.for each respective period. The current portion of Convertible Notes as of September 30, 2023 will be cash settled at the end of their respective Settlement Periods during the fourth quarter of 2022.2023.
NOTE 8.Note 7. Incentive Plans
Long-Term Incentive Plan. The Company's Amended and Restated 2006 Long-Term Incentive Plan ("LTIP") provides for the granting of various forms of awards, including stock options, stock appreciation rights, performance units, restricted stockshares and restricted stock units to directors, officers and employees of the Company.
In connection with the Parsley Acquisition, the Company assumed all rights and obligations under the Amended and Restated Parsley Energy, Inc. 2014 Long-Term Incentive Plan (the "2014 Parsley Plan") and the Jagged Peak Energy Inc. 2017 Long-Term Incentive Plan (the "Jagged Peak Plan") and together with the 2014 Parsley Plan, (the "Parsley Plans"). The awards outstanding under the Parsley Plans were assumed by the Company and were automatically converted into an award with the right to receive a number of shares of Pioneer common stock that is equal to the product of the number of shares of Parsley common stock subject to such award under the Parsley Plans as of the acquisition date and the Exchange Ratio (0.1252).
Shares available for future grant pursuant to awards under the LTIP are as follows:
| | | | | |
| As of September 30, 2022 |
Approved and authorized awards | 12,600,000 | |
2014 Parsley Plan awards available to the LTIP (a) | 879,575 | |
Awards issued under plan | (9,591,571) | |
| 3,888,004 | |
______________________
(a)Under New York Stock Exchange rules, the Company added the shares that were available under the 2014 Parsley Plan to the LTIP. These shares can only be used for grants to employees who were not employed or engaged by Pioneer or any of its subsidiaries immediately before the Parsley Acquisition and such awards may only be granted through May 22, 2024, the date that the 2014 Parsley Plan would have otherwise expired.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
Stock-basedShare-based compensation expense isfor (i) restricted stock awards and units expected to be settled in the Company's common shares ("Equity Awards"), (ii) restricted stock units expected to be settled in cash ("Liability Awards"), (iii) performance units ("Performance Awards") issued under the LTIP and (iv) shares issued under the Company's Employee Stock Purchase Plan ("ESPP") are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| | (in millions) |
| Restricted stock - equity awards | $ | 11 | | | $ | 11 | | | $ | 33 | | | $ | 32 | | | |
| Restricted stock - liability awards (a) | 6 | | | 3 | | | 17 | | | 12 | | | |
| Restricted stock and performance units - Parsley awards (b) | — | | | — | | | — | | | 33 | | | |
| | | | | | | | | |
| Performance unit awards | 8 | | | 6 | | | 24 | | | 20 | | | |
| Employee Stock Purchase Plan | 1 | | | 1 | | | 2 | | | 2 | | | |
| | | | | | | | | |
| $ | 26 | | | $ | 21 | | | $ | 76 | | | $ | 99 | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
| | (in millions) |
| Equity Awards (a) | $ | 13 | | | $ | 11 | | | $ | 42 | | | $ | 33 | | | |
| Liability Awards (b) | 5 | | | 6 | | | 11 | | | 17 | | | |
| | | | | | | | | |
| | | | | | | | | |
| Performance Awards (a) | 6 | | | 8 | | | 25 | | | 24 | | | |
| ESPP | 1 | | | 1 | | | 3 | | | 2 | | | |
| | | | | | | | | |
| $ | 25 | | | $ | 26 | | | $ | 81 | | | $ | 76 | | | |
| Capitalized share-based compensation expense | $ | 5 | | | $ | 5 | | | $ | 14 | | | $ | 14 | | | |
| | | | | | | | | |
______________________
(a)In February 2023, the Company changed the retirement eligibility provisions for 2023 share-based compensation awards issued to officers, which shortened the requisite service period over which the expense is recognized.
(b)Liability Awards are expected to be settled on their vesting date in cash. As of September 30, 20222023 and December 31, 2021,2022, accounts payable – due to affiliates included $3$2 million and $9$6 million, respectively, of liabilities attributable to Liability Awards.
(b)Represents the accelerated vesting of Parsley restricted stock equity awards and performance units upon completion of the Parsley Acquisition, which was recorded to other expense in the consolidated statements of operations.
As of September 30, 2022,2023, there is $114was $104 million of unrecognized stock-basedshare-based compensation expense related to unvested share-based compensation awards including $23of which $20 million is attributable to stock-based awards that are expected to be settled on their vesting date in cash, rather than in common stock.Liability Awards. The unrecognized compensation expense will be recognized on a straight-line basis over the remaining vestingrequisite service periods of the awards, which is a period of less than three years on a weighted average basis.
Per the change in control terms of award agreements, any Equity Awards, Liability Awards and Performance Awards that are outstanding immediately prior to the completion of a change in control event will become vested. Additionally, in accordance with the Merger Agreement, outstanding Performance Awards vest at their maximum payout percentage, which may impact future share-based compensation expense based upon the fair value of the awards as of the modification date.
Activity for restricted stock awards, performance unitsEquity Awards, Liability Awards, and stock optionsPerformance Awards is as follows:
| | | Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2023 |
| | Restricted Stock Equity Awards | | Restricted Stock Liability Awards | | Performance Units | | Stock Options | | Equity Awards | | Liability Awards | | Performance Awards (a) |
| | Beginning incentive compensation awards | 741,892 | | | | 182,278 | | | 304,686 | | | | 6,039 | | |
| Beginning awards | | Beginning awards | 481,293 | | | | 119,695 | | | 268,003 | | |
| Awards granted | Awards granted | 249,765 | | | | 49,748 | | | 114,066 | | | | — | | Awards granted | 279,615 | | | | 54,599 | | | 83,727 | | |
| Awards forfeited | Awards forfeited | (40,521) | | | | (9,098) | | | (6,226) | | | | — | | Awards forfeited | (10,685) | | | | (6,576) | | | (153) | | |
Awards vested (a)(b) | Awards vested (a)(b) | (455,408) | | | | (98,996) | | | (25,659) | | | | — | | Awards vested (a)(b) | (250,633) | | | | (64,860) | | | (6,183) | | |
| Options exercised | — | | | | — | | | — | | | | (6,039) | | |
| | Ending incentive compensation awards | 495,728 | | | | 123,932 | | | 386,867 | | | | — | | |
| Ending awards | | Ending awards | 499,590 | | | | 102,858 | | | 345,394 | | |
______________________
(a)Reflects the number of performance units initially granted assuming a target payout percentage. In accordance with the Merger Agreement, outstanding Performance Awards are expected to vest at their maximum payout percentage.
(b)Per the terms of award agreements and elections, the issuance of common stockshares may be deferred for certain restricted stock equity awardsEquity Awards that vest during the period.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
NOTE 9.Note 8. Asset Retirement Obligations
The Company's asset retirement obligations primarily relate to the future plugging and abandonment of wells and related facilities. Market risk premiums associated with asset retirement obligations are estimated to represent a component of the Company's credit-adjusted risk-free rate that is utilized in the calculations of asset retirement obligations.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
asset retirement obligations in other current liabilities and other liabilities, respectively, in the consolidated balance sheets and expenditures are included as cash used in operating activities in the consolidated statements of cash flows.Asset retirement obligations activity is as follows:
| | | | | | | | | |
| | Nine Months Ended September 30, 20222023 | | |
| | | | | |
| | (in millions) |
| Beginning asset retirement obligations | $ | 354477 | | | | | |
New wells placed on productionAdditions | 74 | | | | | |
| Changes in estimates | (1)(52) | | | | | |
| | | | | |
| Liabilities settled | (48)(50) | | | | | |
| Accretion of discount | 12 | | | | | |
| Ending asset retirement obligations | 324391 | | | | | |
| Less current portion of asset retirement obligations | (75)(107) | | | | | |
| Asset retirement obligations, long-term | $ | 249284 | | | | | |
The Company's wells and related facilities abandonment costs generally approximate their estimated asset retirement obligations. Incremental plugging and abandonment costs for individual wells and related facilities that exceed their estimated asset retirement obligation are recorded in exploration and abandonment expense in the consolidated statements of operations.
NOTE 10.Note 9. Commitments and Contingencies
Indemnifications. The Company has agreed to indemnify its directors and certain of its officers, employees and agents with respect to claims and damages arising from acts or omissions taken in such capacity, as well as with respect to certain litigation.
Legal actions. 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 records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated. Significant judgement is required in making these estimates and the Company's final liabilities may ultimately be materially different.
Environmental. Environmental expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Environmental expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will not qualify for capitalization are recorded when environmental assessment and/or remediation is probable and the costs can be reasonably estimated. Such liabilities are undiscounted unless the timing of cash payments for the liability is fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision until settlement or remediation occurs.
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, royalties and income taxes. Also associated
The Company may also be subject to retained liabilities with respect to certain divested assets by operation of law. Upon divesting its divestiture transactions,assets, the Company has issued and received guaranteesmay receive collateral or credit support for its exposure to facilitate the transfer of contractual obligations, such as firm transportation agreements or gathering and processing arrangements.liabilities. The Company does not recognize a liability ifestablishes reserves for the fair value of its guarantee obligation is immaterial andamount that exceeds the likelihood of making payments undercollateral or credit support received in the guarantee is remote.
South Texas Divestiture. In conjunction with the South Texas Divestiture, the Company transferred its long-term midstream agreements and associated minimum volume commitments ("MVC") to the buyer. However, the Company retainedevent that the obligation becomes likely to pay 100 percent of any deficiency fees associated with the MVC from January 2019 through July 2022. The buyer is required to reimburse the Company for 18 percent of the deficiency fees paid by the Company from January 2019 through July 2022; such reimbursement will be paid by the buyer in installments beginning in 2023 through 2025. The Company's estimated remaining deficiency fee obligation asCompany. For example, the Company is exposed to the risk that owners and/or operators of September 30, 2022 of $3 million is included in other current liabilities in the consolidated balance sheets. The corresponding estimated deficiency fee receivable from the buyer is included in current and noncurrent other assets in the consolidated balance sheets in the amounts of $44 million and $42 million, respectively, as of September 30, 2022. The Company has received credit support for the deficiency fee receivable of up to $100 million.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
purchased from the Company may become unable to satisfy plugging or abandonment obligations associated with those assets. In that event, due to operation of law, the Company may be required to assume all or part of the plugging or abandonment obligations for those assets. Although the Company may establish reserves for such liabilities, it could be required to pay additional amounts in the future and these amounts could be material.
The Company does not recognize a liability if the fair value of the obligation is immaterial or the likelihood of making payments is remote.
NOTE 11.Note 10. Related Party Transactions
In December 2018, the Company completed the sale of its pressure pumping assets to ProPetro in exchange for 16.6 million shares of ProPetro common stockshares and $110 million of cash that was received during the first quarter of 2019.cash. ProPetro is considered a related party as the shares received represent 1615 percent of ProPetro's outstanding common stock.shares. In addition to the sale of equipment and related facilities, the Company entered into a long-term agreement with ProPetro for it to provide pressure pumping and related services. In March 2022, theservices that ended on December 31, 2022. The Company amended its agreement with ProPetro. The amended agreement providescontinued to utilize ProPetro for updated performance standards, operating procedures and pricing. The agreement covers the Company's 2022 pressure pumping and related services requirements. The costsfor a portion of these2023, but has ceased the use of such services will be capitalized in oil and gas properties as incurred.of September 30, 2023.
Phillip A. Gobe, a nonemployee member of the Company's boardBoard of directors,Directors (the "Board"), was appointed by the board of directors of ProPetro to serve as its Executive Chairman in October 2019 and Chief Executive Officer in March 2020, and served as Chief Executive Officer and Chairman of the board of directors of ProPetro through August 31, 2021, at which point he continued as ProPetro's Executive Chairman. In March 2022, Mr. Gobe transitioned to non-executive Chairman of the board of directors of ProPetro. Mark S. Berg, the Company's Executive Vice President, Corporate Operations, serves as a member of the ProPetro board of directors under the Company's right to designate a director to the board of directors of ProPetro so long as the Company owns five percent or more of ProPetro's outstanding common stock.shares.
Based on the Company's ownership in ProPetro and representation on the ProPetro board of directors, ProPetro is considered an affiliate and deemedaffiliate.
Charges attributable to be a related party.
Transactions and balances with ProPetro for pressure pumping and related services were capitalized in oil and gas properties or charged to other expense as incurred. ProPetro pressure pumping related service charges are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) |
| Pressure pumping related services charges | $ | 90 | | | $ | 130 | | | $ | 298 | | | $ | 297 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
| (in millions) |
| Pressure pumping related service charges | $ | 19 | | | $ | 90 | | | $ | 104 | | | $ | 298 | | | |
| | | | | | | | | | | |
| |
| | | |
| As of September 30, 2022 | | As of December 31, 2021 |
| (in millions) |
| | | |
| Accounts payable - due to affiliate | $ | 74 | | | $ | 66 | |
The Company discloses ProPetro's summarized financial information on a one-quarter lag as it enables the Company to report its quarterly results independent from the timing of when ProPetro reports its results. Summarized financial information for ProPetro is as follows:
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| (in millions) |
| Revenue - service revenue | $ | 598 | | | $ | 378 | |
| Cost of services (exclusive of depreciation and amortization) | $ | 416 | | | $ | 286 | |
| Net loss | $ | (21) | | | $ | (29) | |
| | | | | | | | | | | |
| |
| | | |
| As of September 30, 2023 | | As of December 31, 2022 |
| (in millions) |
| | | |
| Accounts payable - due to affiliates | $ | 4 | | | $ | 44 | |
| | | |
NOTE 12.Note 11. Revenue Recognition
Disaggregated revenue from contracts with purchasers. Revenues on sales of oil, NGL,NGLs, gas and purchased oil gas and dieselgas are recognized when control of the product is transferred to the purchaser and payment can be reasonably assured. Sales prices for oil, NGL,NGLs and gas and diesel 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. Accordingly, the prices received by the Company for oil, NGL,NGLs and gas and diesel generally fluctuate similar to changes in the relevant market index prices.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
Disaggregated revenue from contracts with purchasers by product type is as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | |
| | | (in millions) | | (in millions) |
| Oil sales | Oil sales | $ | 3,069 | | | $ | 2,477 | | | $ | 9,594 | | | $ | 6,043 | | Oil sales | $ | 2,823 | | | $ | 3,069 | | | $ | 7,715 | | | $ | 9,594 | | |
| NGL sales | NGL sales | 569 | | | 515 | | | 1,783 | | | 1,135 | | NGL sales | 416 | | | 569 | | | 1,197 | | | 1,783 | | |
| Gas sales | Gas sales | 586 | | | 290 | | | 1,417 | | | 609 | | Gas sales | 221 | | | 586 | | | 691 | | | 1,417 | | |
| Total oil and gas revenues | Total oil and gas revenues | 4,224 | | | 3,282 | | | 12,794 | | | 7,787 | | Total oil and gas revenues | 3,460 | | | 4,224 | | | 9,603 | | | 12,794 | | |
| Sales of purchased oil | Sales of purchased oil | 1,805 | | | 1,642 | | | 6,356 | | | 4,422 | | Sales of purchased oil | 1,677 | | | 1,805 | | | 4,688 | | | 6,356 | | |
| Sales of purchased gas | Sales of purchased gas | 28 | | | 22 | | | 60 | | | 38 | | Sales of purchased gas | 4 | | | 28 | | | 7 | | | 60 | | |
| Sales of purchased diesel | — | | | 15 | | | — | | | 47 | | |
| | Total sales of purchased commodities | Total sales of purchased commodities | 1,833 | | | 1,679 | | | 6,416 | | | 4,507 | | Total sales of purchased commodities | 1,681 | | | 1,833 | | | 4,695 | | | 6,416 | | |
| | $ | 6,057 | | | $ | 4,961 | | | $ | 19,210 | | | $ | 12,294 | | | $ | 5,141 | | | $ | 6,057 | | | $ | 14,298 | | | $ | 19,210 | | |
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, NGL,NGLs, gas and sales of purchased oil gas and dieselgas may not be received for 30 to 60 days after the date the volumes are delivered, and as a result, the Company is required to estimate the amount of volumes 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. As of September 30, 20222023 and December 31, 2021,2022, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers is $1.8was $1.7 billion and $1.6$1.8 billion, respectively.
NOTE 13. Interest andNote 12. Other Income (Loss), NetExpense
The components of interest and other income (loss)expense are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| | (in millions) |
| Interest income | $ | 15 | | | $ | — | | | $ | 21 | | | $ | 1 | | | |
Investment in Laredo valuation adjustment (Note 4) | — | | | — | | | 17 | | | — | | | |
Investment in affiliate valuation adjustment (Note 4) | (32) | | | (8) | | | (1) | | | 21 | | | |
Deferred compensation plan income (loss), net (Note 4) | (2) | | | 3 | | | (9) | | | 11 | | | |
| Other | 7 | | | 7 | | | 29 | | | 9 | | | |
| $ | (12) | | | $ | 2 | | | $ | 57 | | | $ | 42 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
| (in millions) |
| Unoccupied facilities expense (a) | $ | 8 | | | $ | 8 | | | $ | 25 | | | $ | 27 | | | |
Impairment of long-lived assets (b) (Note 4) | — | | | — | | | 22 | | | — | | | |
| Idle equipment charges (c) | 1 | | | 5 | | | 3 | | | 19 | | | |
| Loss on early extinguishment of debt | — | | | — | | | — | | | 47 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| South Texas deficiency fee obligation, net (d) | — | | | (1) | | | — | | | (18) | | | |
| Other | 16 | | | 24 | | | 43 | | | 43 | | | |
| $ | 25 | | | $ | 36 | | | $ | 93 | | | $ | 118 | | | |
____________________
(a)Primarily represents facilities expense associated with certain offices acquired as part of business combinations that are no longer occupied by the Company.
(b)Impairment of long-lived assets represents the decrease in fair value of unoccupied field offices to their expected sales price or market value.
(c)Primarily represents idle field equipment and stacked drilling rig charges for the three and nine months ended September 30, 2023 and idle frac equipment fees and frac reservation fees for the three and nine months ended September 30, 2022.
(d)Represents changes to the Company's 2022 forecasted minimum volume commitment deficiency fee obligation and receivable associated with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20222023
(Unaudited)
NOTE 14. Other Expense
The components of other expense are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| (in millions) |
Loss on early extinguishment of debt, net (Note 7) | $ | — | | | $ | — | | | $ | 47 | | | $ | 2 | | | |
| Unoccupied facility expense (a) | 8 | | | 10 | | | 27 | | | 26 | | | |
| Idle frac equipment charges (b) | 5 | | | — | | | 19 | | | 5 | | | |
| Transportation commitment charges (c) | 3 | | | 5 | | | 8 | | | 15 | | | |
| Parsley Acquisition transaction costs (d) | — | | | 3 | | | — | | | 209 | | | |
| DoublePoint Acquisition transaction costs (e) | — | | | 5 | | | — | | | 32 | | | |
| Winter Storm Uri gas commitments (f) | — | | | — | | | — | | | 80 | | | |
| Vertical integration services (income) loss (g) | — | | | 2 | | | (5) | | | (4) | | | |
| South Texas deficiency fee obligation (h) | (1) | | | — | | | (18) | | | — | | | |
| Other | 21 | | | 9 | | | 40 | | | 19 | | | |
| $ | 36 | | | $ | 34 | | | $ | 118 | | | $ | 384 | | | |
____________________
(a)Primarily represents facilities expense associated with certain acquired Parsley offices that are no longer occupied by the Company.
(b)Includes idle frac equipment fees and frac reservation fees.
(c)Primarily represents firm transportation charges on excess pipeline capacity commitments.
(d)Represents costs associated with the Parsley Acquisition, which includes $90 million of employee-related costs and $119 million of transaction-related fees during the nine months ended September 30, 2021 and $3 million of transaction-related fees during the three months ended September 30, 2021. See Note 3 for additional information.(e)Represents transaction costs associated with the DoublePoint Acquisition. See Note 3 for additional information.(f)Represents costs related to the Company's fulfillment of certain firm gas commitments during Winter Storm Uri in February 2021.
(g)Represents net margins (attributable to third party working interest owners) that result from Company-provided vertically integrated services, which are ancillary to and supportive of the Company's oil and gas joint operating activities, and do not represent intercompany transactions. The components of the vertical integration services net margins are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) |
| Gross revenues | $ | 7 | | | $ | 9 | | | $ | 30 | | | $ | 32 | |
| Gross costs and expenses | $ | 7 | | | $ | 11 | | | $ | 25 | | | $ | 28 | |
(h)Represents a decrease of $17 million in the Company's 2022 forecasted MVC deficiency fee obligation associated with the South Texas Divestiture and a $1 million increase in the associated 2022 forecasted MVC deficiency fee receivable. See Note 10 for additional information.NOTE 15.13. Income Taxes
Enactment of the Inflation Reduction Act of 2022. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 ("the IRA"(the "IRA"). The IRA,, which includes, among other tax provisions, imposesthings, a 15 percent corporate alternative minimum tax based(the "CAMT"). Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income effectiveof "applicable corporations" for tax years beginning after December 31, 2022. The CAMT generally treats a corporation as an "applicable corporation" in any taxable year in which the "average annual adjusted financial statement income" of the corporation and certain of its subsidiaries and affiliates for a three-taxable-year period ending prior to such taxable year exceeds $1 billion. The Company will continue to monitor and assess any impacts of the IRA on the Company's current year tax provision and the Company's consolidated financial statements.
The IRA also establishes a one percent excise tax on stockshare repurchases made by publicly traded U.S. corporations,corporations. The excise tax is effective for stockany share repurchases after December 31, 2022. The IRA did not impactDuring the Company's current year tax provision ornine months ended September 30, 2023, the Company's consolidated financial statements. The Company is evaluating the accounting and disclosure implications ofrecorded $6 million related to the IRA excise tax payable on its future filings.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
share repurchases.Income tax provisionprovisions and effective tax raterates are as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| | (in millions) | | (in millions, except tax rates) |
| Current tax provision | Current tax provision | $ | (308) | | | $ | (11) | | | $ | (471) | | | $ | (29) | | Current tax provision | $ | 248 | | | $ | 308 | | | $ | 665 | | | $ | 471 | |
| Deferred tax provision | Deferred tax provision | (202) | | | (280) | | | (1,248) | | | (371) | | Deferred tax provision | 118 | | | 202 | | | 341 | | | 1,248 | |
| Income tax provision | Income tax provision | $ | (510) | | | $ | (291) | | | $ | (1,719) | | | $ | (400) | | Income tax provision | $ | 366 | | | $ | 510 | | | $ | 1,006 | | | $ | 1,719 | |
| Effective tax rate | Effective tax rate | 20 | % | | 22 | % | | 21 | % | | 23 | % | Effective tax rate | 22 | % | | 20 | % | | 22 | % | | 21 | % |
The Company evaluates and updates its annual effective income tax rate on an interim basis based on current and forecasted earnings and enacted tax laws. The mix and timing of the Company's actual earnings compared to annual projections can cause interim effective tax rate fluctuations. The Company's interim effective tax rate could differfor the three and nine months ended September 30, 2023 and the three months ended September 30, 2022 differed from the U.S. statutory rate of 21 percent primarily due to forecasted state income taxes. The Company settled its state unrecognized tax benefits ("UTBs") during the three and nine months ended September 30, 2022 resulting in lower forecasted 2022 state income taxes.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Internal Revenue Service has closed examinations of the 2020 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 2013. As of September 30, 2022,2023, there are no proposed adjustments had been proposed in any jurisdiction that would have a significantmaterial effect on the Company's liquidity, future results of operations or financial position.
Uncertain tax positions. The Company had state UTBs for tax years 2013 and 2015 through 2018 resulting from research and experimental expenditures related to horizontal drilling and completion innovations. In July 2022, the Company and the state taxing authorities effectively settled the uncertain tax position for all years. AsTable of ContentsPIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022, the Company no longer has any UTBs.2023
(Unaudited)
NOTE 16.Note 14. Net Income Per Share and Stockholders'Shareholders' Equity
Net income per share. The components of basic and diluted net income per share attributable to common stockholdersshareholders are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| | (in millions) |
| Net income attributable to common stockholders | $ | 1,984 | | | $ | 1,045 | | | $ | 6,364 | | | $ | 1,355 | | | |
| Participating share-based earnings (a) | (4) | | | (3) | | | (11) | | | (4) | | | |
| Basic net income attributable to common stockholders | 1,980 | | | 1,042 | | | 6,353 | | | 1,351 | | | |
| | | | | | | | | |
| Adjustment to after-tax interest expense to reflect the dilutive impact attributable to Convertible Notes | 1 | | | 2 | | | 5 | | | 5 | | | |
| Diluted net income attributable to common stockholders | $ | 1,981 | | | $ | 1,044 | | | $ | 6,358 | | | $ | 1,356 | | | |
| | | | | | | | | |
| Basic weighted average shares outstanding | 239 | | | 244 | | | 241 | | | 230 | | | |
| Contingently issuable stock-based compensation | — | | | 1 | | | — | | | — | | | |
| Convertible Notes (b) | 11 | | | 12 | | | 12 | | | 12 | | | |
| Diluted weighted average shares outstanding | 250 | | | 257 | | | 253 | | | 242 | | | |
| | | | | | | | | |
| Net income per share attributable to common stockholders: | | | | | | | | | |
| Basic | $ | 8.29 | | | $ | 4.27 | | | $ | 26.36 | | | $ | 5.88 | | | |
| Diluted | $ | 7.93 | | | $ | 4.07 | | | $ | 25.11 | | | $ | 5.60 | | | |
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
| | (in millions, except per share data) |
| Net income attributable to common shareholders | $ | 1,301 | | | $ | 1,984 | | | $ | 3,625 | | | $ | 6,364 | | | |
| Participating share-based earnings (a) | (3) | | | (4) | | | (5) | | | (11) | | | |
| Basic net income attributable to common shareholders | 1,298 | | | 1,980 | | | 3,620 | | | 6,353 | | | |
| | | | | | | | | |
| Adjustment to after-tax interest expense to reflect the dilutive impact attributable to Convertible Notes | 1 | | | 1 | | | 3 | | | 5 | | | |
| Diluted net income attributable to common shareholders | $ | 1,299 | | | $ | 1,981 | | | $ | 3,623 | | | $ | 6,358 | | | |
| | | | | | | | | |
| Basic weighted average shares outstanding | 233 | | | 239 | | | 234 | | | 241 | | | |
| | | | | | | | | |
| Convertible Notes (b) | 7 | | | 11 | | | 8 | | | 12 | | | |
| Diluted weighted average shares outstanding | 240 | | | 250 | | | 242 | | | 253 | | | |
| | | | | | | | | |
| Net income per share attributable to common shareholders: | | | | | | | | | |
| Basic | $ | 5.56 | | | $ | 8.29 | | | $ | 15.47 | | | $ | 26.36 | | | |
| Diluted | $ | 5.41 | | | $ | 7.93 | | | $ | 14.96 | | | $ | 25.11 | | | |
______________________
(a)Unvested restricted stock awardsEquity Awards and Liability Awards represent participating securities because they participate in non-forfeitable dividends with the common equity owners of the Company. Participating share-based earnings represent the distributed and undistributed earnings of the Company attributable to the participating securities. Unvested restricted stock awardsEquity Awards and Liability Awards do not participate in undistributed net losses as they are not contractually obligated to do so. The dilutive effect of the reallocation of participating share-based earnings to diluted net income attributable to common stockholdersshareholders was negligible.
(b)Diluted weighted average common shares outstanding includes the dilutive effect had the Company's Convertible Notes been converted as of the beginning of the three and nine months ended September 30, 2023 and 2022, respectively. If converted by the holder, the Company may settle in cash, shares of the Company's common stockshares or a combination thereof, at the Company's election. See Note 76 for additional information. Stockholders'Shareholders' equity. The Company's return of capital strategies include apayments of base and variable dividend policydividends and a stockshare repurchase program. The Company's board of directors,Board, at its sole discretion, may change its dividend policypractices and/or the Company's stockshare repurchase program based on the Company's outlook for commodity prices, liquidity, debt levels, capital resources, quarterly operating cash flows or other factors.factors, including terms outlined in the Merger Agreement. Dividends declared by the board of directorsBoard and stockshares repurchased during the period are presented in the Company's consolidated statements of equity as dividends declared and purchases of treasury stock,shares, respectively. Dividends paid and stockshares repurchased during the period are presented as cash used in financing activities in the Company's consolidated statements of cash flows. Dividends that are declared and have not been paid, if any, are included in other current liabilities in the consolidated balance sheets. Stock repurchased as part of a stock repurchase programShares repurchases are included as treasury stockshares in the consolidated balance sheets.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
Dividends. Base and variable dividends declared by the board of directors for the three and nine months ended September 30, 2022 and 2021Board are as follows:
| | | | Base | | Variable | | Total | | Total |
| | | (per share) | | (per share) | | (per share) | | (in millions) |
| 2023: | | 2023: | |
| First quarter | | First quarter | $ | 1.10 | | | $ | 4.48 | | | $ | 5.58 | | | $ | 1,314 | |
| Second quarter | | Second quarter | 1.25 | | | 2.09 | | | 3.34 | | | 784 | |
| Third quarter | | Third quarter | 1.25 | | | 0.59 | | | 1.84 | | | 429 | |
| | Base | | Variable | | Total | | Total | |
| | (per share) | | (per share) | | (per share) | | (in millions) | | $ | 3.60 | | | $ | 7.16 | | | $ | 10.76 | | | $ | 2,527 | |
| 2022: | 2022: | | 2022: | | | | | | | |
| First quarter | First quarter | $ | 0.78 | | | $ | 3.00 | | | $ | 3.78 | | | $ | 922 | | First quarter | $ | 0.78 | | | $ | 3.00 | | | $ | 3.78 | | | $ | 922 | |
| Second quarter | Second quarter | 0.78 | | | 6.60 | | | 7.38 | | | 1,788 | | Second quarter | 0.78 | | | 6.60 | | | 7.38 | | | 1,788 | |
| Third quarter | Third quarter | 1.10 | | | 7.47 | | | 8.57 | | | 2,053 | | Third quarter | 1.10 | | | 7.47 | | | 8.57 | | | 2,053 | |
| | | $ | 2.66 | | | $ | 17.07 | | | $ | 19.73 | | | $ | 4,763 | | | $ | 2.66 | | | $ | 17.07 | | | $ | 19.73 | | | $ | 4,763 | |
| 2021: | | | | | | | | |
| First quarter | $ | 0.56 | | | $ | — | | | $ | 0.56 | | | $ | 122 | | |
| Second quarter | 0.56 | | | — | | | 0.56 | | | 138 | | |
| Third quarter | 0.56 | | | 1.51 | | | 2.07 | | | 508 | | |
| | | $ | 1.68 | | | $ | 1.51 | | | $ | 3.19 | | | $ | 768 | | |
|
The Company can provide no assurance that dividends will be authorized or declared in the future or as to the amount of any future dividends. The Merger Agreement provides certain restrictions on future base and variable dividend declarations, including the Company no longer paying a variable dividend after distributing the variable dividend attributable to fourth quarter 2023 results.
See
Note 1715 for additional information.StockShare repurchase programprograms. In February 2022,April 2023, the Company's board of directorsBoard authorized a $4 billion common stock repurchase program. This authorization replaced the previously authorized $2 billion common stockshare repurchase program that had $841 million remaining in the program before being replaced withto replace the $4 billion common stockshare repurchase program. Under this stockprogram authorized in February 2022. As was the case with the previous shares repurchase program,programs, the Company may repurchase shares in accordance with applicable securities laws or pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Act of 1934, which would permit the Company to repurchase shares at times that may otherwise be prohibited under the Company's insider trading policy.
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Expenditures to acquire shares under the stockshare repurchase program are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | |
| (in millions) |
| Shares repurchased (a) | $ | 500 | | | $ | — | | | $ | 1,249 | | | $ | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
| (in millions) |
| Shares repurchased (a) | $ | — | | | $ | 500 | | | $ | 624 | | | $ | 1,249 | | | |
______________________
(a)During the three and nine months ended September 30, 2022,2023, the Company repurchased no shares and 3.0 million shares, respectively, under the share repurchase program, as compared to 2.3 million and 5.5 million shares were repurchased under the stock repurchase program, respectively. No shares were repurchased under the stock repurchase program during the three andsame periods in 2022, respectively. Expenditures for share repurchases during the nine months ended September 30, 2021.2023 exclude the one percent excise tax on all share repurchases after December 31, 2022.
AsWith limited exceptions, the Merger Agreement precludes the Company from future repurchases or acquisition of September 30, 2022, $2.8 billion remained available for use to repurchasethe Company's common shares, including repurchases under the Company's common stockshare repurchase program.
NOTE 17.Note 15. Subsequent Events
Dividends. On October 27, 2022,November 2, 2023, the board of directorsBoard declared a quarterly base dividend of $1.10$1.25 per share and a quarterly variable dividend of $4.61$1.95 per share on the Company's outstanding common stock,shares, payable December 15, 202222, 2023 to shareholders of record at the close of business on November 30, 2022.
Share repurchases. In October 2022, pursuant to a Rule 10b5-1 plan, the Company repurchased 138,889 shares for $32 million under its stock repurchase program.
Senior notes. In September 2022, the Company delivered an irrevocable notice of call to the holders of its outstanding 5.625% senior notes due 2027. In October 2022, the Company paid $189 million (inclusive of accrued and unpaid interest) with cash on hand to extinguish the debt that had a carrying value of $192 million. The Company expects to record a $9 million net gain on early extinguishment of debt to other expense in the consolidated statements of operations.
Convertible Note conversions. In October 2022, the Company settled certain conversion options that were exercised by the holders of the Company's Convertible Notes prior to September 30, 2022. The Company settled the conversion options in cash, resulting in total cash payments of $26 million, of which $11 million was a repayment of the Convertible Notes principal balance. In addition, certain holders of the Company's Convertible Notes exercised their conversion option in October 2022 attributable to $23 million of the Convertible Notes' principal balance. Associated with the conversions, the Company has received Capped Call proceeds of $14 million. See Note 7 for additional information.2023.
PIONEER NATURAL RESOURCES COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
DoublePoint Acquisition and Parsley Acquisition
The Company regularly seeks to acquire or trade for acreage that complements its operations, provides exploration and development opportunities, increases the lateral lengthPlanned Merger of future horizontal wells and provides superior returns on investment.
In May 2021, the Company completed the DoublePoint Acquisition in exchange for 27 million shares of Pioneer common stock and $1.0 billion of cash. The Pioneer stock consideration transferred had a fair value of $4.2 billion.with ExxonMobil
In January 2021,On October 10, 2023, the Company completedentered into a Merger Agreement with ExxonMobil, pursuant to which, and subject to the Parsley Acquisition in exchange for 52 million shares of Pioneer common stock. The Pioneer stock consideration transferred had a fair value of $6.9 billion.
Delaware Divestitureterms and Glasscock Divestiture
The Company regularly reviews its asset base to identify nonstrategic assets, the disposition of which would increase capital resources available for other activities, create organizational and operational efficiencies and further the Company's objective of maintaining a strong balance sheet to ensure financial flexibility.
In December 2021,conditions thereof, the Company completedwill survive as a wholly-owned subsidiary of ExxonMobil. Under the Delaware Divestiture to Continental for cash proceeds of $3.1 billion. The Company's Delaware Basin assets were acquired as partterms of the Parsley Acquisition.
In October 2021, the Company completed the sale of 20,000 net acres in western Glasscock County to Laredo in exchange for $137 million in cash and 960 thousand shares of Laredo's common stock representing total consideration transferred of $206 million.
Financial and Operating Performance
The Company's financial and operating performance for the three months ended September 30, 2022 included the following highlights:
•Net income attributable to common stockholders for the three months ended September 30, 2022 was $2.0 billion ($7.93 per diluted share), as compared to net income of $1.0 billion ($4.07 per diluted share) for the same period in 2021. The primary components of the increase in earnings attributable to common stockholders include:
•a $942 million increase in oil and gas revenues, primarily due to a 32 percent increase in average realized commodity prices per BOE as a result of higher commodity prices in 2022 due to the continued recovery in oil, NGL and gas demand, low worldwide inventory levels, OPEC supplies being below agreed quotas and the impact to global oil and gas supplies resulting from sanctions against Russia related to their invasion of Ukraine, partially offset by a three percent decrease in daily sales volumes due to the reduced production associated with the assets divested as part of the Delaware Divestiture in December 2021; and
•a $514 million decrease in derivative losses, primarily due to a reduction in the Company's commodity derivative positions and an increase in noncash marketing derivative gains;
partially offset by:
•a $320 million increase in production costs, including taxes, primarily attributable to increases in (i) lease operating expenses primarily due to inflationary pressures on power, fuel and labor costs, (ii) workover activity and (iii) production taxes, ad valorem taxes and gathering processing and transportation costs that are directly related to the increase in commodity prices, partially offset by a decrease in costs as a result of the Delaware Divestiture; and
•a $219 million increase in income taxes, primarily due to the increase in earnings in 2022 compared to 2021.
•During the three months ended September 30, 2022, average daily sales volumes decreased on a BOE basis by three percent to 656,582 BOEPD, as compared to 675,793 BOEPD during the same period in 2021, primarily due to the reduced production associated with the assets divested as partMerger Agreement, each eligible share of the Company's Delaware Divestiture, partially offsetcommon stock will be converted into the right to receive 2.3234 shares of ExxonMobil common stock. Completion of the Merger remains subject to certain conditions, including the approval of the Merger by the Company's successful horizontal drilling program.shareholders, as well as certain governmental and regulatory approvals. The Merger is currently expected to close in the first half of 2024; however, no assurance can be given as to when, or if, the Merger will occur.
•Average oil and NGL prices per Bbl and average gas prices per Mcf increasedSee Note 1 of Notes to $94.23, $38.09 and $7.58, respectively, during the three months ended September 30, 2022, as compared to $69.24, $35.66 and $4.05, respectively,Consolidated Financial Statements included in "Item 1. Financial Statements" for the same period in 2021.
•Net cash provided by operating activities increased during the three months ended September 30, 2022 to $3.0 billion, as compared to $2.0 billion for the same period in 2021. The increase in net cash provided by operating activities during the
PIONEER NATURAL RESOURCES COMPANY
three months ended September 30, 2022, as compared to the same period in 2021, is primarily due to (i) the aforementioned increase in oil and gas revenues as a result of higher commodity prices and (ii) a decrease in cash used in derivative activities, partially offset by (i) an increase in income taxes, (ii) an increase in production costs, including production and ad valorem taxes and (iii) a reduction in cash flow associated with the assets divested as part of the Delaware Divestiture.
•During the three months ended September 30, 2022, the Company paid a base dividend of $263 million, or $1.10 per share, and a variable dividend of $1.8 billion, or $7.47 per share, as compared to a base dividend of $137 million, or $0.56 per share, and a variable dividend of $370 million, or $1.51 per share for the same period in 2021.
•During the three months ended September 30, 2022, the Company repurchased 2.3 million shares for $500 million under the Company's stock repurchase program. The Company did not repurchase any shares under a stock repurchase program during the three months ended September 30, 2021.
•As of September 30, 2022 and December 31, 2021, the Company's net debt to book capitalization was 15 percent and 12 percent, respectively.
additional information.
Oil and Gas Industry Considerations
The COVID-19 pandemic resulted in a severe worldwide economic downturn, significantly disrupting theSupply and demand for oil throughout the world and created significant volatility, uncertainty and turmoil in the oil and gas industry. The decrease in demand for oil, combined with excess supply of oil and related products, resulted in oil prices declining significantly beginning in late February 2020. Since mid-2020, oil prices have improved, with demand steadily increasing despite the uncertainties surrounding the COVID-19 variants that have continued to inhibit a full global demand recovery. In addition, worldwide oil inventories are, from a historical perspective, very low and concerns exist with the ability of OPEC and other oil producing nations to meet forecasted oil demand growth in 2023, with many OPEC countries not able to produce at their OPEC agreed upon quota levels due to their lack of capital investments overremains volatile. Over the past few years, inglobal oil inventories have consistently been lower than historical levels due to reduced capital investments being directed towards developing incremental oil supplies. Furthermore, sanctions andSanctions, import bans and price caps on Russia have beenRussian oil and petroleum products were implemented by various countries in response to the war in Ukraine, further impacting global oil supply. Most recently, the conflict between Israel and Hamas militants has stoked fears of oil supply instability in the Middle East. From an economic perspective, the continued increase in interest rates to contend with significant cost inflation has resulted in a slowing global economy and the potential for a global recession. Further, recent data from China points to a fragile economy as key indicators, such as consumer spending weakened and youth-unemployment hit record highs. China remains the world's second largest economy and represents a key component of oil demand. These uncertainties led OPEC to reduce its oil demand outlook, which led to multiple cuts to its production quotas. As a result of oil and gas supply constraints, there have been significant increases in European energy costs, which have resulted in inflationary pressures throughout Europe, increasing prospects of recession in many countries throughout the continent. During October 2022, OPEC announced a 2 MMBOPD production cut starting in November 2022 related to these concerns and the uncertainty surrounding the global economy and future oil demand. However, as a result of current global supply and demand imbalances, oil and gas prices remain strong withuncertainties, average NYMEX oil and NYMEX gas prices for the three and nine months ended September 30, 2022 being $91.562023 were $82.24 and $77.41 per Bbl and $8.20$2.54 and $2.69 per Mcf, respectively, as compared to $70.56$91.56 and $98.09 per Bbl and $4.02$8.20 and $6.64 per Mcf, respectively, for the same periodperiods in 2021. In addition, the ongoing pandemic, combined with the Russia/Ukraine conflict, has resulted in global supply chain disruptions, which has led to significant cost inflation. Specifically, the Company's 2022 capital program is being impacted by higher than expected inflation in steel, diesel and chemical prices, among other items.2022.
Global oil price levels and general inflationary pressures will ultimately depend on various factors that are beyond the Company's control, such as (i) the effectiveness of responses to combat the COVID-19 virus and their impact on domestic and worldwide demand, (ii) the ability of OPEC and other oil producing nations to manage the global oil supply, (iii)(ii) the impact of sanctions and import bans on production from Russia, (iii) the impact on oil supplies from the Middle East should the Israel/Hamas conflict expand regionally, (iv) the timing and supply impact of any Iranian or Venezuelan sanction relief on their ability to export oil, (v) additional actions by businesses and governments in response to the pandemic, (vi) the global supply chain constraints associated with manufacturing and distribution delays, (vii)(vi) oilfield serviceservices demand, and cost inflation, (viii)(vii) political stability of oil consuming countries and (ix) increasing expectations(viii) the possibility that the world may be heading into a global recession. The Company continues to assess and monitor the impact of these factors and consequences on the Company and its operations.
Financial and Operating Performance
The Company's financial and operating performance for the three months ended September 30, 2023 included the following highlights:
•Net income attributable to common shareholders for the three months ended September 30, 2023 was $1.3 billion ($5.41 per diluted share), as compared to net income of $2.0 billion ($7.93 per diluted share) for the same period in 2022. The primary components of the decrease in earnings attributable to common shareholders include:
•a $764 million decrease in oil and gas revenues, primarily due to a 25 percent decrease in average realized commodity prices per BOE in 2023 due to the aforementioned volatility in worldwide oil, NGL and gas demand, partially offset by an 10 percent increase in daily sales volumes due to the Company's successful Spraberry/Wolfcamp horizontal drilling program; and
•a $203 million decrease in derivative results, primarily due to noncash valuation adjustments related to the Company's marketing derivatives;
partially offset by:
•a $154 million increase in the net sales of purchased commodities, primarily attributable to oil that was purchased and in transit via pipeline to the Gulf Coast or in Gulf Coast storage being sold in the following month at higher oil prices; and
•a $144 million decrease in income taxes, primarily due to the decrease in earnings in 2023 compared to 2022.
PIONEER NATURAL RESOURCES COMPANY
Fourth Quarter 2022 Outlook
Based on current estimates,•During the Company expects the following operating and financial results for the fourth quarter of 2022:
| | | | | |
| Three Months Ending December 31, 2022 |
| Guidance |
| ($ in millions, except per BOE amounts) |
Averagethree months ended September 30, 2023, average daily production (MBOE) | 655 - 680 |
Average daily oil production (MBbls) | 346.5 - 361.5 |
Production costs per BOE | $12.00 - $13.50 |
DD&A per BOE | $10.50 - $12.00 |
Exploration and abandonments expense | $10 - $20 |
General and administrative expense | $75 - $85 |
Accretion of discount on asset retirement obligations | $3 - $6 |
Interest expense | $28 - $33 |
Other expense | $20 - $40 |
Cash flow impact from firm transportation (a) | $(85) - $(45) |
Current income tax provision | $10 - $30 |
Effective tax rate | 22% - 27% |
_____________________
(a)The cash flow impact from firm transportation is primarily based on (i) the forecasted differential between Midland WTI oil prices and Brent oil prices less the costs to transport purchased oil from the areas of the Company's production to the Gulf Coast and (ii) oil price fluctuations between the time the Company purchases the oil from its areas of operation and when the oil is delivered and sold to Gulf Coast refineries or exported to international markets. To the extent that the Company's Gulf Coast sales of purchased oil does not cover the purchase price and associated firm transport costs, the Company's results of operations will reflect the negative cash flow impact attributable to the shortfall.
Operations and Drilling Highlights
Average daily oil, NGL and gas sales volumes are as follows:
| | | | | |
| Nine Months Ended September 30, 2022 |
Oil (Bbls) | 352,421 | |
NGL (Bbls) | 158,529 | |
Gas (Mcf) | 809,076 | |
Total (BOE) | 645,796 | |
The Company's liquids production was 79 percent of total production,increased on a BOE basis forby 10 percent to 721,479 BOEPD, as compared to 656,582 BOEPD during the ninesame period in 2022.
•Average oil and NGL prices per Bbl and average gas prices per Mcf decreased to $81.33, $24.79 and $2.48, respectively, during the three months ended September 30, 2022.
Costs incurred are2023, as follows:
| | | | | |
| Nine Months Ended September 30, 2022 |
| ( in millions)compared to $94.23, $38.09 and $7.58, respectively, during the same period in 2022. |
Proved property acquisition costs | $ | 3 | |
Unproved property acquisitions (a) | 54 | |
Exploration/extension costs | 2,325 | |
Development costs | 418 | |
Asset retirement obligations | 6 | |
| $ | 2,806 | |
_____________________
(a)•Includes DoublePoint Acquisition measurementNet cash provided by operating activities decreased during the three months ended September 30, 2023 to $2.1 billion, as compared to $3.0 billion for the same period adjustments that resulted in a $21 million2022. The decrease in unproved property acquisition costs incurred.net cash provided by operating activities during the three months ended September 30, 2023, as compared to the same period in 2022, is primarily due to the aforementioned decrease in oil and gas revenues.
PIONEER NATURAL RESOURCES COMPANY
•During the three months ended September 30, 2023, the Company declared a base and variable dividend of $1.25 per share and $0.59 per share, respectively, resulting in total dividends of $429 million, as compared to a base and variable dividend of $1.10 per share and $7.47 per share, respectively, and total dividends of $2.1 billion during the same period in 2022.Development•During the three months ended September 30, 2023, the Company did not repurchase any shares under the Company's share repurchase program, as compared to repurchases of 2.3 million shares for $500 million during the same period in 2022.
•As of September 30, 2023 and exploration/extension drilling activity is as follows:December 31, 2022, the Company's net debt to book capitalization was 18 percent and 15 percent, respectively.
| | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Development | | Exploration/Extension |
| Beginning wells in progress | 26 | | | 270 | |
| Wells spud | 21 | | | 361 | |
| | | |
| Successful wells | (28) | | | (378) | |
| | | |
| Ending wells in progress | 19 | | | 253 | |
| | | |
| | | |
| | | |
Drilling Highlights
As of September 30, 2022,2023, the Company's drilling and completions program included operating 2220 drilling rigs and six frac fleets in the Midland Basin. The Company will continue to evaluate its drilling and completions program with future activity levels assessed regularly.
Pioneer is the largest acreage holder in the Spraberry/Wolfcamp field in the Midland Basin of West Texas. In the southern portion of the Spraberry/Wolfcamp field, the Company has a joint venture ("JV") with Sinochem Petroleum USA LLC, a U.S. subsidiary of the Sinochem Group. During the nine months ended September 30, 2022,2023, the Company successfully completed 324309 horizontal wells and seven vertical wells in the northernnon-JV portion of the Midland Basin and 7538 horizontal wells in the southernJV portion of the Midland Basin. In the northernnon-JV portion of the Midland Basin, 5038 percent of the horizontal wells placed on production were Spraberry interval wells, 2631 percent were Wolfcamp B and Dinterval wells, 28 percent were Wolfcamp A interval wells and the remaining 24three percent were Wolfcamp AD interval wells. In the southern JV portion of the Midland Basin, all of the wells placed on production were Wolfcamp A or B interval wells.
Development and exploration/extension drilling activity is as follows:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2023 |
| Development | | Exploration/Extension | | Total |
| Beginning wells in progress | 11 | | | 292 | | | 303 | |
| Wells spud | 16 | | | 365 | | | 381 | |
| | | | | |
| Successful wells | (10) | | | (337) | | | (347) | |
| | | | | |
| Ending wells in progress | 17 | | | 320 | | | 337 | |
| | | | | |
| | | | | |
| | | | | |
Costs incurred are as follows:
| | | | | |
| Nine Months Ended September 30, 2023 |
| ( in millions) |
| Proved property acquisition costs (a) | $ | 175 | |
| Unproved property acquisitions (a) | 108 | |
| Exploration/extension costs | 2,940 | |
| Development costs | 546 | |
| Asset retirement obligations | (42) | |
| $ | 3,727 | |
_____________________
(a)Includes $154 million of noncash acquisition costs related to nonmonetary transactions in which the Company exchanged both proved and unproved oil and gas properties in the Midland Basin with unaffiliated third parties. See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
PIONEER NATURAL RESOURCES COMPANY
Results of Operations
Oil and gas revenues. The Company's oil and gas revenues are derived from sales of oil, NGL and gas production. Increases or decreases in the Company's revenues, profitability and future production are highly dependent on commodity prices. Prices are market driven and future prices will fluctuate due to supply and demand factors, availability of transportation, seasonality, geopolitical developments and economic factors, among other items.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
| (in millions) | | (in millions) |
| Oil and gas revenues | $ | 4,224 | | | $ | 3,282 | | | $ | 942 | | | $ | 12,794 | | | $ | 7,787 | | | $ | 5,007 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | | |
| | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change | | | |
| (in millions, except volumes) | | | | | | |
| Oil and gas revenues | $ | 3,460 | | | $ | 4,224 | | | $ | (764) | | | $ | 9,603 | | | $ | 12,794 | | | $ | (3,191) | | | | | | | |
| Average daily sales volumes: | | | | | | | | | | | | | | | | | |
| Oil (Bbls) | 377,304 | | | 354,043 | | | 7 | % | | 369,289 | | | 352,421 | | | 5 | % | | | | | | |
| NGLs (Bbls) | 182,219 | | | 162,372 | | | 12 | % | | 176,988 | | | 158,529 | | | 12 | % | | | | | | |
| Gas (Mcf) | 971,736 | | | 841,005 | | | 16 | % | | 948,437 | | | 809,076 | | | 17 | % | | | | | | |
| Total (BOE) | 721,479 | | | 656,582 | | | 10 | % | | 704,350 | | | 645,796 | | | 9 | % | | | | | | |
| | | | | | | | | | | | | | | | | |
| Liquids percentage of total production | 78 | % | | 79 | % | | (1) | % | | 78 | % | | 79 | % | | (1) | % | | | | | | |
Average daily sales volumes are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | |
| | 2022 | | 2021 | | % Change | | 2022 | | 2021 | | % Change | | |
| Oil (Bbls) | 354,043 | | | 388,829 | | | (9 | %) | | 352,421 | | | 344,692 | | | 2 | % | | | | | |
| NGLs (Bbls) | 162,372 | | | 156,873 | | | 4 | % | | 158,529 | | | 136,749 | | | 16 | % | | | | | |
| Gas (Mcf) | 841,005 | | | 780,547 | | | 8 | % | | 809,076 | | | 674,186 | | | 20 | % | | | | | |
| Total (BOE) | 656,582 | | | 675,793 | | | (3 | %) | | 645,796 | | | 593,805 | | | 9 | % | | | | | |
Average daily BOE sales volumes decreased for the three months ended September 30, 2022, as compared to the same period in 2021, primarily due to the reduced production associated with the assets divested as part of the Company's Delaware Divestiture in December 2021, which had a higher oil production ratio than the Company's Midland Basin assets, partially offset by the Company's successful Spraberry/Wolfcamp horizontal drilling program. Average daily BOE sales volumes increased for the three and nine months ended September 30, 2022,2023, as compared to the same periodperiods in 2021,2022, primarily due to the Company's successful Spraberry/Wolfcamp horizontal drilling program and incremental production added from the DoublePoint Acquisition in May 2021, partially offset by the reduced production associated with the assets divested in the Company's Delaware Divestiture in December 2021.
PIONEER NATURAL RESOURCES COMPANY
program.The oil, NGL and gas prices reported by the Company are based on the market prices received for each commodity. Commodity prices for the three and nine months ended September 30, 2022,2023, as compared to the same respective periods in 2021, increased2022, decreased due to the continued recoveryaforementioned volatility in worldwide oil, NGL and gas demand, low worldwide inventory levels, OPEC supplies being below agreed quotas and the impact to global oil and gas supplies resulting from sanctions against Russia related to their invasion of Ukraine.demand. The average prices are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | |
| | 2022 | | 2021 | | % Change | | | 2022 | | 2021 | | % Change | | |
| Oil per Bbl | $ | 94.23 | | | $ | 69.24 | | | 36 | % | | | $ | 99.72 | | | $ | 64.22 | | | 55 | % | | | | | |
| NGLs per Bbl | $ | 38.09 | | | $ | 35.66 | | | 7 | % | | | $ | 41.20 | | | $ | 30.41 | | | 35 | % | | | | | |
| Gas per Mcf | $ | 7.58 | | | $ | 4.05 | | | 87 | % | | | $ | 6.41 | | | $ | 3.31 | | | 94 | % | | | | | |
| Total per BOE | $ | 69.93 | | | $ | 52.79 | | | 32 | % | | | $ | 72.57 | | | $ | 48.04 | | | 51 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | |
| | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | | |
| Oil price per Bbl | $ | 81.33 | | | $ | 94.23 | | | (14 | %) | | | $ | 76.53 | | | $ | 99.72 | | | (23 | %) | | | | | | |
| NGL price per Bbl | $ | 24.79 | | | $ | 38.09 | | | (35 | %) | | | $ | 24.77 | | | $ | 41.20 | | | (40 | %) | | | | | | |
| Gas price per Mcf | $ | 2.48 | | | $ | 7.58 | | | (67 | %) | | | $ | 2.67 | | | $ | 6.41 | | | (58 | %) | | | | | | |
| Price per BOE | $ | 52.13 | | | $ | 69.93 | | | (25 | %) | | | $ | 49.94 | | | $ | 72.57 | | | (31 | %) | | | | | | |
Net effect from sales of purchased commodities. The Company enters into pipeline capacity commitments in order to secure available oil, NGLsNGL and gas transportation capacity from the Company's areas of production and to secure diesel supply from the Gulf CoastCoast. The Company also enters into purchase commitments to secure sand supply for the Company's operations in the Midland Basin. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments. The Company periodically sells diesel and sand to unaffiliated third parties in the Permian Basin if it has supply in excess of its operational needs. Revenues and expenses from these transactions are generally presented on a gross basis in sales of purchased commodities and purchased commodities expense in the accompanying consolidated statements of operations as the Company acts as a principal in the transaction by assuming both the risks and rewards of ownership, including credit risk, of the commodities purchased and the responsibility to deliver the commodities sold. In conjunction with the Company's downstream sales, the Company also enters into pipeline capacity and storage commitments in order to secure available oil NGL and gas transportation capacity from the Company's areas of production to downstream sales points and storage capacity at downstream sales points. The transportation and storage costs associated with these transactions are included in purchased commodities expense.
The net effect of third party purchases andfrom sales of purchased commodities is as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change | |
| | (in millions) | | | | (in millions) | |
| Sales of purchased commodities | Sales of purchased commodities | $ | 1,833 | | | $ | 1,679 | | | $ | 154 | | | $ | 6,416 | | | $ | 4,507 | | | $ | 1,909 | | | Sales of purchased commodities | $ | 1,681 | | | $ | 1,833 | | | $ | (152) | | | $ | 4,695 | | | $ | 6,416 | | | $ | (1,721) | | |
| Purchased commodities | 1,968 | | | 1,762 | | | 206 | | | 6,502 | | | 4,644 | | | 1,858 | | | |
| Purchased commodities expense | | Purchased commodities expense | 1,662 | | | 1,968 | | | (306) | | | 4,789 | | | 6,502 | | | (1,713) | | |
| | $ | (135) | | | $ | (83) | | | $ | (52) | | | $ | (86) | | | $ | (137) | | | $ | 51 | | | | $ | 19 | | | $ | (135) | | | $ | 154 | | | $ | (94) | | | $ | (86) | | | $ | (8) | | |
PIONEER NATURAL RESOURCES COMPANY
The change in the net effect from sales of purchased commodities for the three months ended September 30, 2022,2023, as compared to the same period in 2021,2022, is primarily dueattributable to decreases in oil prices, which resulted in oilthat was purchased and in transit via pipeline to the Gulf Coast or in Gulf Coast storage being sold in the following month at lowerhigher oil prices. The change in net sales of purchased commodities for the nine months ended September 30, 2022, as compared to the same period in 2021, is primarily due to improved margins on the Company's downstream Gulf Coast refinery and export oil sales.
Firm transportation payments on excess pipeline capacity are included in other expense in the accompanying consolidated statements of operations. See Note 1412 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Interest and other income (loss), net.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | |
| (in millions) | | |
| Interest and other income (loss), net | $ | (12) | | | $ | 2 | | | $ | (14) | | | | $ | 57 | | | $ | 42 | | | $ | 15 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | |
| 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | |
| (in millions) | | |
| Interest and other income (loss), net | $ | 52 | | | $ | (12) | | | $ | 64 | | | | $ | 59 | | | $ | 57 | | | $ | 2 | | | |
The change in net interest and other income (loss) for the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is primarily due to (i) changes in the fair value of the Company's investment in affiliate resulting in noncash gains of $40 million and $4 million, during the three and nine months ended September 30, 2023, respectively, as compared to noncash losses of $32 million and $1 million respectively, as compared to a noncash loss of $8 million and a noncash gain offor the same periods in 2022, respectively.
PIONEER NATURAL RESOURCES COMPANY
$21 million, respectively, (ii) interest income of $15 million and $21 million, respectively, as compared to zero and $1 million, respectively, and (iii) a noncash gain on the Company's short-term investment in Laredo of $17 million during the nine months ended September 30, 2022.
See Note 4 and Note 13 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.information on changes in fair value related to the Company's investment in affiliate. Derivative gain (loss), net.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | |
| (in millions) | |
| Commodity price derivatives: | | | | | | | | | | | | | |
| Noncash derivative gain (loss), net | $ | 59 | | | $ | (10) | | | $ | 69 | | | | $ | 20 | | | $ | (639) | | | $ | 659 | | |
| Cash payments on settled derivatives, net (a) | (121) | | | (486) | | | 365 | | | | (252) | | | (1,357) | | | 1,105 | | |
| Total commodity derivative loss, net | (62) | | | (496) | | | 434 | | | | (232) | | | (1,996) | | | 1,764 | | |
| Marketing derivatives: | | | | | | | | | | | | | |
| Noncash derivative gain, net | 99 | | | 6 | | | 93 | | | | 75 | | | 3 | | | 72 | | |
| Cash payments on settled derivatives, net | (18) | | | (11) | | | (7) | | | | (47) | | | (31) | | | (16) | | |
| Total marketing derivative gain (loss), net | 81 | | | (5) | | | 86 | | | | 28 | | | (28) | | | 56 | | |
| Conversion option derivatives: | | | | | | | | | | | | | |
| Noncash derivative loss, net | (23) | | | — | | | (23) | | | | — | | | — | | | — | | |
| Cash receipts on settled derivatives, net | 17 | | | — | | | 17 | | | | 17 | | | — | | | 17 | | |
| Total conversion option derivative gain (loss), net | (6) | | | — | | | (6) | | | | 17 | | | — | | | 17 | | |
| Derivative gain (loss), net | $ | 13 | | | $ | (501) | | | $ | 514 | | | | $ | (187) | | | $ | (2,024) | | | $ | 1,837 | | |
Commodity price derivatives. The Company primarily utilizes derivative contracts to reduce the effect of price volatility on the commodities the Company produces and sells or consumes. The relative price impact for the Company's commodity price derivatives are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
| | | |
| Net Cash Payments | | Price Impact | | Net Cash Payments | | Price Impact |
| (in millions) | | | | | (in millions) | | | |
| Oil derivative payments (a) | $ | (2) | | | $ | (0.07) | | per Bbl | | $ | (5) | | | $ | (0.05) | | per Bbl |
| | | | | | | | | |
| Gas derivative payments, net (a) | (119) | | | $ | (1.53) | | per Mcf | | (247) | | | $ | (1.12) | | per Mcf |
| $ | (121) | | | | | | $ | (252) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 |
| Net cash payments | | Price impact | | Net cash payments | | Price impact |
| (in millions) | | | | | (in millions) | | | |
| Oil derivative payments (b) | $ | (427) | | | $ | (11.96) | | per Bbl | | $ | (1,270) | | | $ | (13.48) | | per Bbl |
| | | | | | | | | |
| Gas derivative payments | (59) | | | $ | (0.82) | | per Mcf | | (74) | | | $ | (0.41) | | per Mcf |
| $ | (486) | | | | | | $ | (1,344) | | | | |
_____________________
(a)Excludes cash payments of $83 million and $244 million during the three and nine months ended September 30, 2022, respectively, related to entering into equal and offsetting oil and gas commodity derivative trades in the fourth quarter of 2021, that had the net effect of eliminating certain of the Company's 2022 derivative obligations.
(b)Excludes the effect from early settlement of certain of the Company's commodity derivative contracts, which resulted in cash payments of $13 million for the nine months ended September 30, 2021.
PIONEER NATURAL RESOURCES COMPANY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | |
| 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | |
| (in millions) | |
| Marketing derivatives: | | | | | | | | | | | | | |
| Noncash derivative gain (loss), net | $ | (155) | | | $ | 99 | | | $ | (254) | | | | $ | (170) | | | $ | 75 | | | $ | (245) | | |
| Cash payments on settled derivatives | (21) | | | (18) | | | (3) | | | | (52) | | | (47) | | | (5) | | |
| Total marketing derivative gain (loss), net | (176) | | | 81 | | | (257) | | | | (222) | | | 28 | | | (250) | | |
| Conversion option derivatives: | | | | | | | | | | | | | |
| Noncash derivative gain (loss), net | 4 | | | (23) | | | 27 | | | | 1 | | | — | | | 1 | | |
| Cash receipts (payments) on settled derivatives, net | (18) | | | 17 | | | (35) | | | | (14) | | | 17 | | | (31) | | |
| Total conversion option derivative gain (loss), net | (14) | | | (6) | | | (8) | | | | (13) | | | 17 | | | (30) | | |
| Commodity derivatives: | | | | | | | | | | | | | |
| Noncash derivative gain, net | — | | | 59 | | | (59) | | | | — | | | 20 | | | (20) | | |
| Cash payments on settled derivatives, net | — | | | (121) | | | 121 | | | | — | | | (252) | | | 252 | | |
| Total commodity derivative loss, net | — | | | (62) | | | 62 | | | | — | | | (232) | | | 232 | | |
| Derivative gain (loss), net | $ | (190) | | | $ | 13 | | | $ | (203) | | | | $ | (235) | | | $ | (187) | | | $ | (48) | | |
Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets. In April 2022,As of September 30, 2023, the Company entered into twoCompany's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell, at an oil terminal in Midland, Texas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (ii)(iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027 at an oil terminal in Midland, Texas.2027.
The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland WTI price and the price the Company receives for the oil volumes sold is athe WASP that a non-affiliated counterparty receives for selling
PIONEER NATURAL RESOURCES COMPANY
oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges.
Conversion option derivatives. The Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Periods related to conversion options exercised by certainCertain holders of the Company's Convertible Notes.Notes have exercised their conversion options per the terms of the notes' indenture. The Company elected to settle the conversions in cash at the end of the Settlement Period. The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as a derivative instrument not designated as a hedge. The Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Period.
The Company's open derivative contracts are subject to continuing market risk. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" and Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Gain on disposition of assets, net.
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| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | |
| (in millions) | | |
| Gain on disposition of assets, net | $ | 35 | | | $ | 1 | | | $ | 34 | | | | $ | 105 | | | $ | 14 | | | $ | 91 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | |
| 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | | | |
| (in millions) | | | | |
| Gain on disposition of assets, net | $ | 1 | | | $ | 35 | | | $ | (34) | | | | $ | 23 | | | $ | 105 | | | $ | (82) | | | | | |
The changeNet gain on disposition of assets for the nine months ended September 30, 2023 primarily represents nonmonetary transactions in netwhich the Company exchanged both proved and unproved oil and gas properties in the Midland Basin with unaffiliated third parties resulting in the Company recording a gain of $20 million.
Net gain on disposition of assets for the three and nine months ended September 30, 2022 as compared to the same periods in 2021, was primarily due torepresents the divestment of certain undeveloped acresacreage and producing wells in the Midland Basin for cash proceeds of $39 million and $165 million, respectively, resulting in a gain on the salesdivestitures of $34 million and $110 million, respectively, as compared to a $9 million gain associated with the sale of the Company's well services business for the nine months ended September 30, 2021.respectively.
See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Oil and gas production costs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | |
| (in millions) | |
| Oil and gas production costs | $ | 562 | | | $ | 323 | | | $ | 239 | | | | $ | 1,457 | | | $ | 890 | | | $ | 567 | | |
Total production costs per BOE are as follows:
| | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| | | 2022 | | 2021 | | % Change | | | 2022 | | 2021 | | % Change | | | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | |
| | | (in millions, except per BOE) | |
| Oil and gas production costs | | Oil and gas production costs | $ | 564 | | | $ | 562 | | | $ | 2 | | | | $ | 1,506 | | | $ | 1,457 | | | $ | 49 | | |
| Production costs per BOE: | | Production costs per BOE: | | | | |
| Lease operating expense (a) | Lease operating expense (a) | $ | 4.33 | | | $ | 2.49 | | | 74 | % | | | $ | 3.85 | | | $ | 2.95 | | | 31 | % | | Lease operating expense (a) | $ | 4.49 | | | $ | 4.33 | | | 4 | % | | | $ | 4.21 | | | $ | 3.85 | | | 9 | % | |
| Gathering, processing and transportation expense (b) | Gathering, processing and transportation expense (b) | 4.91 | | | 3.15 | | | 56 | % | | | 4.44 | | | 2.95 | | | 51 | % | | Gathering, processing and transportation expense (b) | 3.47 | | | 4.91 | | | (29 | %) | | | 3.13 | | | 4.44 | | | (30 | %) | |
| Workover costs (a) | Workover costs (a) | 1.12 | | | 0.56 | | | 100 | % | | | 0.98 | | | 0.46 | | | 113 | % | | Workover costs (a) | 1.10 | | | 1.12 | | | (2 | %) | | | 1.11 | | | 0.98 | | | 13 | % | |
| Net natural gas plant income (c) | Net natural gas plant income (c) | (1.05) | | | (1.02) | | | 3 | % | | | (1.00) | | | (0.87) | | | 15 | % | | Net natural gas plant income (c) | (0.56) | | | (1.05) | | | (47 | %) | | | (0.62) | | | (1.00) | | | (38 | %) | |
| | $ | 9.31 | | | $ | 5.18 | | | 80 | % | | | $ | 8.27 | | | $ | 5.49 | | | 51 | % | | | $ | 8.50 | | | $ | 9.31 | | | (9 | %) | | | $ | 7.83 | | | $ | 8.27 | | | (5 | %) | |
____________________
(a)Lease operating expense and workover costs represent the components of oil and gas production costs over which the Company has management control.
PIONEER NATURAL RESOURCES COMPANY
(b)Gathering, processing and transportation expense represents the costs to (i) gather, process, transport and fractionate the Company's gas and NGLs to a point of sale and, to a lesser extent, (ii) gather and transport certain of the Company's oil production to a point of sale.
(c)Net natural gas plant income represents the earnings from the Company's ownership share of gas processing facilities that gather and process the Company's and third party gas.
PIONEER NATURAL RESOURCES COMPANY
The change in the Company's production costs per BOE during the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is due to the following:
•Lease operating expense per BOE increased during the three and nine months ended September 30, 2022, as compared to the same periods in 2021, primarily due to higher electricity rates and inflationary pressures on power, fuelchemicals and labormaintenance costs;
•Gathering, processing and transportation expense per BOE increased during the three and nine months ended September 30, 2022, as compared to the same periods in 2021,decreased primarily due to increaseda reduction in gas processing costs as a result of (i) an increasea decline in gas and NGL prices, attributablewhich are used to thevalue contractual volumes retained by the gas processor as payment for their services and (ii) an increase in gas processing plant electricity costs, which the processor passes through to each gas producer;services;
•Workover costs per BOE increased for three andthe nine months ended September 30, 2022, as compared to the same periods in 2021,2023 increased primarily due to an increase in workover activity as a result of improved commodity prices being realized in 2022, which increased the economic benefit of repairing certain of the Company's oil and gas wells;inflationary pressures on oilfield services; and
•Net natural gas plant income per BOE increased during the three and nine months ended September 30, 2022, as compared to the same periods in 2021,decreased primarily due to improveddecreases in gas and NGL prices, partially offset by the loss of net natural gas plant income associated with the Company's Martin County Gas Processing Divestiture in February 2022.prices.
Production and ad valorem taxes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | |
| (in millions) | |
| Production and ad valorem taxes | $ | 260 | | | $ | 179 | | | $ | 81 | | | | $ | 755 | | | $ | 445 | | | $ | 310 | | |
Production and ad valorem taxes per BOE are as follows:
| | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| | | 2022 | | 2021 | | % Change | | | 2022 | | 2021 | | % Change | | | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | |
| | | (in millions, except per BOE) | |
| Production and ad valorem taxes | | Production and ad valorem taxes | $ | 205 | | | $ | 260 | | | $ | (55) | | | | $ | 598 | | | $ | 755 | | | $ | (157) | | |
| Production and ad valorem taxes per BOE: | | Production and ad valorem taxes per BOE: | | | | |
| Production taxes per BOE | Production taxes per BOE | $ | 3.33 | | | $ | 2.53 | | | 32 | % | | | $ | 3.44 | | | $ | 2.25 | | | 53 | % | | Production taxes per BOE | $ | 2.34 | | | $ | 3.33 | | | (30 | %) | | | $ | 2.29 | | | $ | 3.44 | | | (33 | %) | |
| Ad valorem taxes per BOE | Ad valorem taxes per BOE | 0.98 | | | 0.38 | | | 158 | % | | | 0.84 | | | 0.50 | | | 68 | % | | Ad valorem taxes per BOE | 0.74 | | | 0.98 | | | (24 | %) | | | 0.82 | | | 0.84 | | | (2 | %) | |
| | $ | 4.31 | | | $ | 2.91 | | | 48 | % | | | $ | 4.28 | | | $ | 2.75 | | | 56 | % | | | $ | 3.08 | | | $ | 4.31 | | | (29 | %) | | | $ | 3.11 | | | $ | 4.28 | | | (27 | %) | |
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 change in production taxes per BOE for the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is due to the aforementioned increasedecrease in oil, NGL and gas commodity prices. The change in ad valorem taxes per BOE for the three and nine months ended September 30, 2022,2023, as compared to the same periodsperiod in 2021, is primarily due to an increase2022, reflects the quarterly changes in prior year commodity prices that are used to determine currentestimated full year ad valorem taxes.
Depletion, depreciation and amortization expense.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | |
| (in millions) | |
| Depletion, depreciation and amortization | $ | 641 | | | $ | 704 | | | $ | (63) | | | | $ | 1,874 | | | $ | 1,825 | | | $ | 49 | | |
PIONEER NATURAL RESOURCES COMPANY
Total DD&A expense per BOE is as follows:
| | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| | | 2022 | | 2021 | | % Change | | | 2022 | | 2021 | | % Change | | | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | |
| | | (in millions, except per BOE) | |
| Depletion, depreciation and amortization | | Depletion, depreciation and amortization | $ | 728 | | | $ | 641 | | | $ | 87 | | | | $ | 2,087 | | | $ | 1,874 | | | $ | 213 | | |
| Total DD&A expense per BOE: | | Total DD&A expense per BOE: | | | | |
| DD&A per BOE | DD&A per BOE | $ | 10.61 | | | $ | 11.32 | | | (6 | %) | | | $ | 10.63 | | | $ | 11.26 | | | (6 | %) | | DD&A per BOE | $ | 10.97 | | | $ | 10.61 | | | 3 | % | | | $ | 10.85 | | | $ | 10.63 | | | 2 | % | |
| Depletion expense per BOE | Depletion expense per BOE | $ | 10.43 | | | $ | 11.13 | | | (6 | %) | | | $ | 10.44 | | | $ | 10.95 | | | (5 | %) | | Depletion expense per BOE | $ | 10.81 | | | $ | 10.43 | | | 4 | % | | | $ | 10.67 | | | $ | 10.44 | | | 2 | % | |
The change in DD&A and depletion expense per BOE for the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is primarily due to additionsa result of proved reserves attributable to the aforementioned successful Spraberry/Wolfcamp drilling programinflationary pressures increasing well costs and improvedlower commodity prices (which has the effect of extendingreducing the economic life of certain producing wells).wells, which resulted in a reduction to total proved reserves due to pricing revisions.
Exploration and abandonments expense.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | |
| | 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | | |
| (in millions) | | | |
| Geological and geophysical | $ | 8 | | | $ | 10 | | | $ | (2) | | | | $ | 26 | | | $ | 36 | | | $ | (10) | | | | |
| | | | | | | | | | | | | | | |
| Leasehold abandonments and other | — | | | — | | | — | | | | 6 | | | 4 | | | 2 | | | | |
| $ | 8 | | | $ | 10 | | | $ | (2) | | | | $ | 32 | | | $ | 40 | | | $ | (8) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | |
| | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | | |
| (in millions) | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Exploration and abandonments | $ | 18 | | | $ | 8 | | | $ | 10 | | | | $ | 56 | | | $ | 32 | | | $ | 24 | | | | |
PIONEER NATURAL RESOURCES COMPANY
The change in geologicalexploration and geophysical costsabandonments expense for the three and nine months ended September 30, 2022,2023, as compared to the same periodperiods in 2021,2022, is primarily duerelated to the relicensing ofplugging and abandonment costs exceeding their estimated abandonment liability on certain Parsley seismic datavertical wells in connection with the Parsley Acquisition during 2021.
The change in leasehold abandonments costs for the nine months ended September 30, 2022, as compared to the same period in 2021, is primarily due to the abandonment of certain unproved properties during 2022 that the Company no longer planned to drill before the leases expired.2023.
During the nine months ended September 30, 20222023 and 2021,2022, the Company drilled and evaluated 337 and 378 exploratory/extension wells, respectively, with 100 percent successfully completed as discoveries.
See Note 65 and Note 8 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. General and administrative expense.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | | | | | | |
| (in millions) | | | |
| Cash general and administrative expense | $ | 80 | | | $ | 59 | | | $ | 21 | | | | $ | 225 | | | $ | 179 | | | $ | 46 | | | | | | | | |
| Noncash general and administrative expense | 10 | | | 13 | | | (3) | | | | 27 | | | 37 | | | (10) | | | | | | | | |
| $ | 90 | | | $ | 72 | | | $ | 18 | | | | $ | 252 | | | $ | 216 | | | $ | 36 | | | | | | | | |
Total general and administrative expense per BOE is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | | |
| | 2022 | | 2021 | | % Change | | | 2022 | | 2021 | | % Change | | | | | | | | |
| Cash general and administrative expense | $ | 1.32 | | | $ | 0.95 | | | 39 | % | | | $ | 1.28 | | | $ | 1.10 | | | 16 | % | | | | | | | | |
| Noncash general and administrative expense | 0.17 | | | 0.21 | | | (19 | %) | | | 0.15 | | | 0.23 | | | (35 | %) | | | | | | | | |
| $ | 1.49 | | | $ | 1.16 | | | 28 | % | | | $ | 1.43 | | | $ | 1.33 | | | 8 | % | | | | | | | | |
PIONEER NATURAL RESOURCES COMPANY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | | |
| | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | | | | | | | |
| (in millions, except per BOE) | | | | | | | | |
| Cash general and administrative expense | $ | 73 | | | $ | 80 | | | $ | (7) | | | | $ | 213 | | | $ | 225 | | | $ | (12) | | | | | | | | | |
| Noncash general and administrative expense | 14 | | | 10 | | | 4 | | | | 46 | | | 27 | | | 19 | | | | | | | | | |
| $ | 87 | | | $ | 90 | | | $ | (3) | | | | $ | 259 | | | $ | 252 | | | $ | 7 | | | | | | | | | |
| General and administrative expense per BOE: | | | | | | | | | | | | | | | | | | | | |
| Cash general and administrative expense | $ | 1.11 | | | $ | 1.32 | | | (16 | %) | | | $ | 1.11 | | | $ | 1.28 | | | (13 | %) | | | | | | | | |
| Noncash general and administrative expense | 0.21 | | | 0.17 | | | 24 | % | | | 0.24 | | | 0.15 | | | 60 | % | | | | | | | | |
| $ | 1.32 | | | $ | 1.49 | | | (11 | %) | | | $ | 1.35 | | | $ | 1.43 | | | (6 | %) | | | | | | | | |
The change in cash general and administrative expense per BOE for the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is primarily due to (i) the aforementioned 10 percent and nine percent increase in daily sales volumes, respectively, due to the Company's successful Spraberry/Wolfcamp horizontal drilling program and (ii) $10 million and $20 million, respectively, of charitable contributions to various Ukraine humanitarian aid organizations in 2022 in response to the Russia/Ukraine conflict, and (ii) incremental general and administrative costs associated with an increasepartially offset by increases in headcount due to the Parsley Acquisition and DoublePoint Acquisition.labor costs. The change in noncash general and administrative expense per BOE for the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is primarily due to a change to the retirement eligibility provisions for 2023 share-based compensation awards issued to officers, which shortened the requisite service period over which expense is recognized, and changes in the market value of investments underlying the Company's deferred compensation obligation as a result of mark-to-market valuation changes attributable toobligation.
In accordance with the Company's deferred compensation plan assets.
Interest expense.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | | | | | | | |
| (in millions) | | | | |
| Cash interest expense | $ | 28 | | | $ | 38 | | | $ | (10) | | | | $ | 93 | | | $ | 116 | | | $ | (23) | | | | | | | | | |
| Noncash interest expense | 2 | | | 3 | | | (1) | | | | 7 | | | 6 | | | 1 | | | | | | | | | |
| $ | 30 | | | $ | 41 | | | $ | (11) | | | | $ | 100 | | | $ | 122 | | | $ | (22) | | | | | | | | | |
The change in cash interestMerger Agreement, outstanding Performance Awards vest at their maximum payout percentage, which may impact future general and administrative expense forbased upon the three and nine months ended September 30, 2022, as compared to the same periods in 2021, is primarily due to (i) the early extinguishmentfair value of the Company's 0.750% Senior Notes due 2024 andawards as of the 4.450% Senior Notes due 2026 during February 2022, having aggregate principal amounts of $750 million and $500 million, respectively, and (ii)modification date. Additionally, the repayment of its 3.950% Senior Notes due 2022 that maturedCompany will pay the 2023 annual employee bonus at the maximum payout percentage in July 2022, partially offset by the issuance in May 2021 of $750 million of 0.550% Senior Notes dueDecember 2023.
The weighted average cash interest rate on the Company's indebtedness for the nine months ended September 30, 2022 decreased to 1.7 percent, as compared to 1.9 percent for the same period in 2021.
See Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. OtherInterest expense.
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| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | | |
| 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | | | | | | | |
| (in millions) | | | | |
| Other expense | $ | 36 | | | $ | 34 | | | $ | 2 | | | | $ | 118 | | | $ | 384 | | | $ | (266) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | | |
| 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | | | | | | | |
| (in millions) | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Interest expense | $ | 44 | | | $ | 30 | | | $ | 14 | | | | $ | 114 | | | $ | 100 | | | $ | 14 | | | | | | | | | |
The change in otherinterest expense for the three and nine months ended September 30, 2022,2023, as compared to the same periodperiods in 2021,2022, is primarily a result of (i) the issuance of 5.100% senior notes due to $241 million2026 in March 2023, (ii) the repayment of transaction costs related to the Parsley Acquisition and DoublePoint Acquisition and $80 million of costs related to covering firm gas commitmentsCompany's 3.950% senior notes due to Winter Storm Uri during 2021, partially offset by $47 million2022 that matured in losses attributable toJuly 2022, (iii) the early extinguishment of the Company's 0.750% Senior Notes5.625% senior notes due 20242027 during October 2022, (iv) the repayment of the Company's 0.550% senior notes that matured in May 2023 and 4.450% Senior Notes due 2026(v) borrowings under the Company's Credit Facility during February 2022.2023.
PIONEER NATURAL RESOURCES COMPANY
The weighted average cash interest rate on the Company's indebtedness for the three and nine months ended September 30, 2023 is 2.7 percent and 2.4 percent, respectively, as compared to 1.6 percent and 1.5 percent for the same periods in 2022, respectively.
See
Note 146 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.Other expense.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | | | | | | | |
| 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | | | | | | | | |
| (in millions) | | | | |
| Other expense | $ | 25 | | | $ | 36 | | | $ | (11) | | | | $ | 93 | | | $ | 118 | | | $ | (25) | | | | | | | | | |
The change in other expense for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, is primarily due to the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
| (in millions) |
| Impairment of long-lived assets (a) | $ | — | | | $ | — | | | $ | — | | | $ | 22 | | | $ | — | | | $ | 22 | |
| Idle equipment charges (b) | $ | 1 | | | $ | 5 | | | $ | (4) | | | $ | 3 | | | $ | 19 | | | $ | (16) | |
South Texas deficiency fee obligation (c) | $ | — | | | $ | (1) | | | $ | 1 | | | $ | — | | | $ | (18) | | | $ | 18 | |
| Loss on early extinguishment of debt | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 47 | | | $ | (47) | |
____________________
(a)Impairment of long-lived assets represents the decrease in fair value of unoccupied field offices to their expected sales price or market value.
(b)Primarily represents idle field equipment and stacked drilling rig charges for the three and nine months ended September 30, 2023 and idle frac equipment fees and frac reservation fees for the three and nine months ended September 30, 2022.
(c)Represents changes to the Company's 2022 forecasted minimum volume commitment deficiency fee obligation and receivable associated with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas.
See Note 4 and Note 12 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Income tax provision.
| | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | Change | | | 2022 | | 2021 | | Change | | | 2023 | | 2022 | | Change | | | 2023 | | 2022 | | Change | |
| | (in millions) | | | (in millions, except tax rates) | |
| Income tax provision | Income tax provision | $ | (510) | | | $ | (291) | | | $ | (219) | | | | $ | (1,719) | | | $ | (400) | | | $ | (1,319) | | | Income tax provision | $ | 366 | | | $ | 510 | | | $ | (144) | | | | $ | 1,006 | | | $ | 1,719 | | | $ | (713) | | |
| Effective tax rate | Effective tax rate | 20 | % | | 22 | % | | (2 | %) | | | 21 | % | | 23 | % | | (2 | %) | | Effective tax rate | 22 | % | | 20 | % | | 2 | % | | | 22 | % | | 21 | % | | 1 | % | |
The change in income tax provision for the three and nine months ended September 30, 2022,2023, as compared to the same periods in 2021,2022, is primarily due to an increasea decrease of $1.2 billion$827 million and $6.3$3.5 billion, respectively, in income before income taxes. The Company evaluates and updates its annual effective income tax rate on an interim basis based on current and forecasted earnings and enacted tax laws. The mix and timing of the Company's actual earnings compared to annual projections can cause interim
PIONEER NATURAL RESOURCES COMPANY
effective tax rate fluctuations. The Company's interim effective tax rate could differfor the three and nine months ended September 30, 2023 and three months ended September 30, 2022 differed from the U.S. statutory rate of 21 percent primarily due to forecasted state income taxes. The Company settled its state unrecognized tax benefits during the three and nine months ended September 30, 2022 resulting in lower forecasted 2022 state income taxes.
Based on the Company's forecasted earnings, the Company currently expects that its available tax attributes will not be sufficient to offset taxable U.S. federal income in 2022. As a result, the Company has made $425 million of quarterly estimated U.S. federal cash payments in 2022. Forecasted cash taxes are expected to be paid from operating cash flows and cash on hand.
On August 16, 2022, President Biden signed into law the IRA. The IRA, which includes among other tax provisions, imposesthings, the CAMT. Under the CAMT, a 15 percent corporate alternative minimum tax basedwill be imposed on certain adjusted financial statement income of "applicable corporations," which is effective for tax years beginning after December 31, 2022. The CAMT generally treats a corporation as an "applicable corporation" in any taxable year in which the "average annual adjusted financial statement income" of the corporation and certain of its subsidiaries and affiliates for a three-taxable-year period ending prior to such taxable year exceeds $1 billion. The
PIONEER NATURAL RESOURCES COMPANY
Company will continue to monitor and assess any impacts of the IRA also establishes a one percent excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases after December 31, 2022. The IRA did not impact the Company's current year tax provision orand the Company's consolidated financial statements but the new provisions could impact future periods.statements.
See Note 1513 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Liquidity and Capital Resources
Liquidity. The Company's primary sources of short-term liquidity are (i) cash and cash equivalents, (ii) net cash provided by operating activities, (iii) sales of investments, (iv) unused borrowing capacity under its Credit Facility, (v) issuances of debt or equity securities and (vi) other sources, such as sales of nonstrategic assets.
The Company's short-term and long-term liquidity requirements consist primarily of (i) capital expenditures, (ii) acquisitions of oil and gas properties, (iii) payments of contractual obligations, including debt maturities, (iv) dividends, and share repurchases, (v) income taxes and (vi) working capital obligations. Funding for these requirements may be provided by any combination of the Company's sources of liquidity. Although the Company expects that its sources of funding will be adequate to fund its 20222023 liquidity requirements, no assurance can be given that such funding sources will be adequate to meet the Company's future needs.
The Company expects to incur a number of non-recurring costs associated with entering into the Merger Agreement including, among others, fees and expenses of financial advisors and other advisors and representatives, certain employment-related costs relating to employees of the Company and filing fees due in connection with required regulatory filings. Some of these costs have already been incurred or may be incurred regardless of whether the Merger is completed. In addition, the Merger Agreement precludes the Company from, among others, (i) creating, incurring, assuming, refinancing or otherwise becoming liable with respect to any indebtedness for borrowed money or guarantees thereof, with the exception of certain short-term borrowings (including borrowings under the Company's Credit Facility), (ii) granting, awarding or issuing equity securities, with the exception of share-based compensation issued during the normal course of business, (iii) selling, leasing, transferring or disposing of assets and (iv) share repurchases.
20222023 revised capital budget. TheIn response to improved well performance, which allows for reduced activity, and improved pricing on certain well costs, the Company's capital budget for 20222023 was revised during the second quarter from an original expected range of $3.3$4.45 billion to $3.6$4.75 billion to an expected rangerange of $3.6$4.375 billion to $3.8$4.475 billion due to inflationary impactsof development related to steel, diesel and chemical prices. The Company's capital, budget for 2022 consists ofwhich includes drilling and completion related activities, including additionaland the construction of tank batteries, and saltwater disposal facilities and $85water infrastructure. The Company reduced its originally expected range of $150 million to $200 million for exploration, environmental and other capital, principally related to drilling four Barnett/Woodford formation wells in the Midland Basin, additional testing of the Company's enhanced oil recovery project and adding electric power infrastructure for water infrastructurefuture drilling, completions and vehicles.production operations, to $150 million. The 20222023 capital budget excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative expense, corporate facilities, information technology and corporate facilities.vehicles.
The 20222023 capital budget is expected to be funded from operating cash flow and, if necessary, from cash and cash equivalents on hand or borrowings under the Company's Credit Facility.
Capital resources. As of September 30, 2022,2023, the Company had no outstanding borrowings under its Credit Facility, leaving $2.0 billion of unused borrowing capacity. The Credit Facility requires the maintenance of a ratio of total debt to book capitalization, subject to certain adjustments, not to exceed 0.65 to 1.0. The Company was in compliance with all of its debt covenants as of September 30, 2022.2023. The Company also had unrestricted cash on hand of $1.3 billion$98 million as of September 30, 2022.2023.
Sources and uses of cash during the nine months ended September 30, 2022,2023, as compared to the same period in 2021,2022, are as follows:
| | | Nine Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | Change | | | 2023 | | 2022 | | Change | |
| | (in millions) | | | (in millions) | |
| Net cash provided by operating activities | Net cash provided by operating activities | $ | 8,750 | | | $ | 3,825 | | | $ | 4,925 | | | Net cash provided by operating activities | $ | 6,099 | | | $ | 8,750 | | | $ | (2,651) | | |
| Net cash used in investing activities | Net cash used in investing activities | $ | (2,911) | | | $ | (3,025) | | | $ | (114) | | | Net cash used in investing activities | $ | (3,533) | | | $ | (2,911) | | | $ | 622 | | |
| Net cash used in financing activities | Net cash used in financing activities | $ | (8,401) | | | $ | (1,674) | | | $ | 6,727 | | | Net cash used in financing activities | $ | (3,500) | | | $ | (8,401) | | | $ | (4,901) | | |
|
Operating activities. The change in net cash flow provided by operating activities forduring the nine months ended September 30, 2022,2023, as compared to the same period in 2021,2022, is primarily due to (i) an increasea decrease in oil and gas revenues, as a result of highera 31 percent decrease in average realized commodity prices per BOE in 2023 due to the aforementioned volatility in
PIONEER NATURAL RESOURCES COMPANY
worldwide oil, NGL and gas demand and (ii) an increase in the current income tax provision, partially offset by a nine percent increase in daily sales volumes attributabledue to the Company's successful Spraberry/Wolfcamp horizontal drilling program and incremental sales volumes from the DoublePoint Acquisition and (ii) a decrease in cash used in derivative
PIONEER NATURAL RESOURCES COMPANY
activities, partially offset by (i) an increase in income taxes, (ii) an increase in production costs, including production and ad valorem taxes and (iii) a reduction in cash flow associated with the assets divested as part of the Delaware Divestiture.program.
Investing activities. The decrease in net cash flow used inCompany's significant investing activities for the nine months ended September 30, 2023 and 2022 are as comparedfollows:
•2023: The Company (i) used $3.4 billion for additions to the same period in 2021, was primarily dueoil and gas properties, (ii) used $121 million for additions to (i) $943other assets and other property, plant and equipment and (iii) received $24 million of net cash used in the DoublePoint Acquisition in 2021, (ii) an increase in proceeds from the disposition of assets of $234assets.
•2022: The Company (i) used $2.8 billion for additions to oil and gas properties, (ii) purchased commercial paper for $1.0 billion, (iii) received $652 million and (iii)in proceeds from the maturity of commercial paper investments of $652and $75 million andin proceeds from the sale of the Company's short-term investment in Laredo Petroleum, Inc. common stockshares, (iv) received $293 million in proceeds from the disposition of $75assets and (v) used $105 million partially offset by (i) the Company's purchase of commercial paper for $1.0 billion, net of $5 million of discounts, (ii) an increase in additions to oilother assets and gas properties of $625 millionother property, plant and (iii) $117 million of cash acquired in the Parsley Acquisition in 2021.equipment.
Financing activities. The Company's significant financing activities forduring the nine months ended September 30, 20222023 and 20212022 are as follows:
•2023: The Company (i) paid dividends of $2.5 billion, (ii) borrowed and repaid $1.5 billion on its Credit Facility, (iii) received $1.1 billion in proceeds from the March 2023 Senior Notes Offering, (iv) paid $755 million to settle exercised conversion options related to the Company's Convertible Notes, (v) repaid $750 million associated with the maturity of its 0.550% senior notes due in May 2023, (vi) repurchased $656 million of its common shares and (vii) received $104 million in Capped Call proceeds related to the aforementioned exercised conversion options.
•2022: The Company (i) paid dividends of $4.9 billion, (ii) redeemed $1.3 billion of its outstanding 0.750% Senior Notessenior notes due 2024 and 4.450% Senior Notessenior notes due 2026, having aggregate principal amounts of $750 million and $500 million, respectively, (iii) repurchased $1.3 billion of its common stock,shares, (iv) paid $561 million to settle exercised conversion options related to the Company's Convertible Notes, (v) repaid $244 million associated with the maturity of its 3.950% senior notes due in July 2022, (vi) paid $183 million of other liabilities and (vii) received $71 million in Capped Call proceeds related to the aforementioned exercised conversion options.
•2021: The Company (i) received proceeds from the May 2021 issuance of 0.550% senior notes due May 2023 ("May 2021 Senior Notes Offering"), net of $4 million of issuance costs and discounts, of $746 million, (ii) received proceeds from the January 2021 issuance of 0.750% senior callable notes due January 2024, 1.125% senior notes due January 2026 and 2.150% senior notes due January 2031 ("January 2021 Senior Notes Offering"), net of $24 million of issuance costs and discounts, of $2.5 billion, (iii) borrowed and repaid $650 million on the Company's Credit Facility, (iv) repaid the Parsley and DoublePoint credit facilities, which had outstanding balances of $397 million and $240 million, respectively, (v) repaid $140 million associated with the maturity of its 3.450% senior notes due in January 2021, (vi) used proceeds from the May 2021 Senior Notes Offering to pay $731 million to redeem DoublePoint's 7.750% senior notes due 2025, (vii) used proceeds from the January 2021 Senior Notes Offering to pay $1.6 billion to redeem Parsley's 5.250% senior notes due 2025, Parsley's 5.375% senior notes due 2025 and Jagged Peak's 5.875% senior notes due 2026, (viii) paid $852 million to purchase a portion of Parsley's 5.625% senior notes due 2027 and Parsley's 4.125% senior notes due 2028 pursuant to a cash tender offer, (ix) paid $153 million of other liabilities and (x) paid dividends of $720 million.
Dividends/distributions.Dividends. During the the nine months ended September 30, 2022,2023, the Company paiddeclared base dividends of $794$844 million, or $3.28$3.60 per common share, compared to $350$642 million, or $1.67$2.66 per common share, during the nine months ended September 30, 2021.same period in 2022.
InPrior to April 2023, the Company had a variable dividend strategy, in addition to its base dividend program, the Company has a variable dividend strategy whereby the Company payspaid a quarterly variable dividend of up to 75 percent of the prior quarter's free cash flow remaining after its base dividend. In April 2023, the Company modified its variable dividend strategy to return 75 percent of the prior quarter's free cash flow inclusive of its base dividend and share repurchases (the "Company Dividend Policy"). In October 2023, per the terms of the Merger Agreement, the Company has modified its variable dividend calculation to return 75 percent and 50 percent of the variable amount that would have been calculated per the Company Dividend Policy from free cash flow generated during the third and fourth quarter of 2023, respectively. The Company will no longer pay a variable dividend after distributing the variable dividend attributable to free cash flow generated during the fourth quarter of 2023, per the terms under the Merger Agreement. Free cash flow is a non-GAAP financial measure. As used by the Company, free cash flow is defined as net cash provided by operating activities, adjusted for changes in operating assets and liabilities, less capital expenditures. The Company believes this non-GAAP measure is a financial indicator of the Company's ability to internally fund acquisitions, debt maturities, dividends and share repurchases after capital expenditures. Capital expenditures exclude acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative expenses, information technology capital investments, vehicles and additions to corporate facilities. During the nine months ended September 30, 2022,2023, the Company paiddeclared variable dividends of $1.7 billion, or $7.16 per share, compared to $4.1 billion, or $17.07 per common share, compared to $370 million, or $1.51 per common share, during the nine months ended September 30, 2021.same period in 2022.
On October 27, 2022,November 2, 2023, the board of directors of the CompanyBoard declared a quarterly base dividend of $1.10$1.25 per share and a quarterly variable dividend of $4.61$1.95 per share for shareholders of record on November 30, 2022,2023, with a payment date of December 15, 2022.22, 2023. Future base and variable dividends are at the discretion of the Company's board of directors,Board, and, if declared, the board of directorsBoard may change the dividend amount based on the Company's outlook for commodity prices, liquidity, debt levels, capital resources, free cash flow or other factors.factors, including terms outlined in the Merger Agreement. The Company can provide no assurance that dividends will be authorized or declared in the future or as to the amount of any future dividends. Any futureThe quarterly variable dividends,dividend to be paid during the first quarter of 2024, if declared and paid, will fluctuate based on the Company's fourth quarter of 2023 free cash flow, which will depend on a number of factors beyond the Company's control, including commodity prices.
PIONEER NATURAL RESOURCES COMPANY
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 September 30, 2022,2023, the material off-balance sheet arrangements and transactions that the Company had entered into included (i) firm purchase, transportation, storage and fractionation commitments, (ii) open purchase commitments and (iii) 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 (a) derivative contracts that are sensitive to future changes in commodity prices or the Company's share price, or interest rates, (b) gathering, processing and transportation commitments on uncertain volumes of future throughput and (c) indemnification obligations following certain 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, royalties and income taxes. AlsoThe Company may also be subject to retained liabilities with respect to certain divested assets by operation of law. Upon divesting its assets, the Company may receive collateral or credit support for its exposure to such liabilities. The Company establishes reserves for the amount that exceeds the collateral or credit support received in the event that the obligation becomes likely to be paid by the Company. For example, the Company is exposed to the risk that owners and/or operators of assets purchased from the Company may become unable to satisfy plugging or abandonment obligations associated with its divestiture transactions,those assets. In that event, due to operation of law, the Company has issuedmay be required to assume all or part of the plugging or abandonment obligations for those assets. Although the Company may establish reserves for such liabilities, it could be required to pay additional amounts in the future and received guarantees to facilitate the transfer of contractual obligations, such as firm transportation agreements or gathering and processing arrangements.these amounts could be material. The Company does not recognize a liability if the fair value of the obligation is immaterial or the likelihood of making payments under these guarantees is remote.
Other than the off-balance sheet arrangements described above, the Company has no transactions, arrangements or other relationships with unconsolidated entities or other persons 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 and additional firm purchase, transportation, storage and fractionation arrangements, in order to support the Company's business plans. See Note 109 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Convertible senior notes. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025. The Convertible Notes bear a fixed interest rate of 0.250% per year, with interest payable semiannually on May 15 and November 15 of each year.15. The Convertible Notes will mature on May 15, 2025, unless earlier redeemed, repurchased or converted. The Convertible Notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.
The Convertible Notes are convertible into shares of the Company's common stockshares at an adjusted conversion rate of 10.0654 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes (subject to further adjustment pursuant to the terms of the notes indenture), which represents an adjusted conversion price of $99.35 per share (subject to further adjustment pursuant to the terms of the notes indenture) as of September 30, 2022. As a result of the quarterly base and variable dividends declared through September 30, 2022, the Conversion Rate increased from the initial rate of 9.1098 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes and theadjusted Conversion Price decreased from $109.77.Price. Future declarations of quarterly base and variable dividends in excess of $0.55 per common share will cause further adjustments to the Conversion Rate and the Conversion Price pursuant to the terms of the notes indenture. Upon conversion, the Convertible Notes maywill be settled in cash, shares of the Company's common stockshares or a combination thereof, at the Company's election.
Holders of the Convertible Notes may convert their notes at their option prior to February 15, 2025 under the following circumstances:
•during the quarter following any quarter during which the last reported sales price of the Company's common stock for at least 20 of the last 30 consecutive trading days of such quarter exceeds 130 percent of the Conversion Price;
•during the five-day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the product of the last reported sales price of the Company's common stock and the Conversion Rate;
•upon notice of redemption by the Company; or
•upon the occurrence of specified corporate events, including certain consolidations or mergers.
On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. The Company may not redeem the Convertible Notes prior to May 20, 2023, and after such date, may redeem the Convertible Notes only if the last reported sale price of the Company's common stock has been at least 130 percent of the Conversion Price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the notice of redemption. The redemption price is equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.
PIONEER NATURAL RESOURCES COMPANY
During the last 30 consecutive trading days ofsubsequent to the third quarter of 2022,2021 through the third quarter of 2023, the last reported sales prices of the Company's common stockshares exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to becomebe convertible at the option of the holders during the three month period endingfrom January 1, 2022 through December 31, 2022.2023. During the nine months ended September 30, 2022, certain holders2023, the Company made total cash payments of $769 million (inclusive of settled conversion option derivatives) related to the settlement of exercised conversion options on its Convertible Notes. As of September 30, 2023, $629 million of the Convertible Notes exercised their conversion option resultingprinciple balance is outstanding, of which $44 million of principal remains in the Company redeeming $240 millionSettlement Period and will be cash settled during the fourth quarter of the outstanding principal amount of the Convertible Notes for total cash payments of $544 million. The Company reserves its right under the notes indenture to elect to settle the Convertible Notes in cash, shares of the Company's common stock or a combination of cash and common stock.2023. See Note 7 and Note 176 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Contractual obligations. The Company's contractual obligations include long-term debt, leases (primarily related to contracted drilling rigs, office facilities and other equipment), capital funding obligations, derivative obligations, firm transportation, storage and fractionation commitments, minimum annual gathering, processing and transportation commitments and other liabilities, (including retained obligations associated with divestitures and postretirement benefit obligations).including liabilities as a result of the Merger. Other joint owners in the properties operated by the Company could incur portions of the costs represented by these commitments.
Firm commitments. The Company has short-term and long-term firm purchase, gathering, processing, transportation, fractionation and storage commitments representing take-or-pay agreements, which include contractual commitments (i) to purchase sand, water and diesel for use in the Company's drilling and completion operations, (ii) with midstream service companies and pipeline carriers for future gathering, processing, transportation, fractionation and storage and (iii) with oilfield
PIONEER NATURAL RESOURCES COMPANY
services companies that provide drilling and pressure pumping services. The Company does not expect to be able to fulfill all of its short-term and long-term firm transportation volume obligations from projected production of available reserves; consequently, the Company plans to purchase third party volumes to satisfy its firm transportation commitments if it is economic to do so; otherwise, it will pay demand fees for any commitment shortfalls. The Company also has open purchase commitments for inventories, materials and other property and equipment ordered, but not received, as of September 30, 2022.2023.
Debt. As of September 30, 2023, the Company's outstanding debt is comprised of senior notes and convertible senior notes. The senior notes and convertible senior notes issued by the Company rank equally, but are structurally subordinated to all obligations of the Company's subsidiaries. See Note 106 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. Operating leases. The Company's short-term and long-term lease obligations primarily relate to equipment, office facilities, drilling rigs and storage tanks.
Derivative obligations. The Company's commodity, marketing and conversion option derivatives are periodically measured and recorded at fair value and continue to be subject to market and/or credit risk. As of September 30, 2022,2023, these contracts represented net liabilities of $224 million, which includes $84 million of obligations related to entering into equal and offsetting oil and gas commodity derivative trades during the fourth quarter of 2021 that had the net effect of eliminating future market risk related to certain of its 2022 derivatives.$308 million. The ultimate liquidation value of the Company's commodity pricemarketing derivatives will be dependent upon actual future commodity prices, which may differ materially from the inputs used to determine the derivatives' fair values as of September 30, 2022.2023. The ultimate liquidation of the Company's conversion option derivatives will be dependent on the Company's daily volumetric weighted average share price during the Settlement Period. See Note 4 and Note 5 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. Other liabilities. The Company's other liabilities represent current and noncurrent other liabilities that are primarily comprised of litigation and environmental contingencies, asset retirement obligations, a finance lease for the corporate headquarters office building, deferred compensation retirement plan obligations and other obligations for which neither the ultimate settlement amounts nor their timings can be precisely determined in advance. See Note 8 and Note 9 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
PIONEER NATURAL RESOURCES COMPANY
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company's financial position is routinely subject to a variety of risks, including market risks associated with changes in commodity prices, changes in the Company's share price, which impacts the settlement value of convertible notes where holders have exercised their conversion option, interest rate movements on outstanding debt and credit risks. The following quantitative and qualitative information is provided about financial instruments to which the Company was a party as of September 30, 2022,2023, and from which the Company may incur future gains or losses from changes in commodity prices, or interest rates.the Company's share price. The Company does not enter into any financial instruments, including derivatives, for speculative or trading purposes.
Interest rate risk. As of September 30, 2022, the Company had no variable rate debt outstanding under the Credit Facility and, consequently, no related exposure to interest rate risk. As of September 30, 2022, the Company had $5.2 billion of fixed rate long-term debt outstanding with a weighted average cash interest rate of 1.7 percent. Although changes in interest rates may affect the fair value of the Company's fixed rate long-term debt, any changes would not expose the Company to the risk of earnings or cash flow losses. The Company has no interest rate derivative instruments outstanding; however, it may enter into derivative instruments in the future to mitigate interest rate risk. See Note 4 and Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.Commodity price risk. The Company's primary market risk exposure is related to the price it receives from the sale of its oil, NGL and gas production. Realized pricing is volatile and is determined by market prices that fluctuate with changes in supply and demand for these products throughout the world. The price the Company receives for its production depends on many factors outside of the control of the Company, including differences in commodity pricing at the point of sale versus market index prices. Reducing theThe Company's exposure to price volatility helps secureimpacts the funds available to be used in its capital program and to fundfor general working capital needs, debt obligations dividends and share repurchases,dividends, among other uses. The Company mitigates its commodity price risk by (i) maintaining financial flexibility with a strong balance sheet (ii) using derivative financial instruments and (iii) sales of purchased oil and gas.
Commodity price derivatives. The Company primarily utilizes derivative contracts to reduce the effect of price volatility on the commodities the Company produces and sells or consumes. The Company's decision on the quantity and price at which it executes commodity derivative contracts, if it so chooses, is based in part on its view of current and future market conditions. The Company may choose not to enter into derivative positions for expected production if the commodity price forecast for certain time periods is deemed to be unfavorable. Additionally, the Company may choose to liquidate existing derivative positions prior to the expiration of their contractual maturity in order to monetize gain positions or minimize loss positions if it is anticipated that the commodity price forecast is expected to improve. Proceeds, if any, can be used for the purpose of funding the Company's capital program, general working capital needs, debt obligations, dividends and share repurchases, among other uses. While derivative positions limit the downside risk of adverse price movements, they also limit future revenues from upward price movements.
The fair value of the Company's open commodity derivative instruments is a liability of $223 million as of September 30, 2022. Utilizing actual commodity derivative contractual volumes as of September 30, 2022, a hypothetical 10 percent increase or decrease in the underlying forward prices used to calculate the fair value of the commodity derivative instruments would impact the Company's commodity derivatives recorded by approximately $17 million as of September 30, 2022. See Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a description of the Company's open derivative positions and additional information.commodities.Sales of purchased commodities. The Company enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production and to secure diesel supply from the Gulf Coast. The Company also enters into purchase commitments to secure sand supply for the Company's operations in the Midland Basin. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments. The Company also enters into pipeline capacity commitmentsperiodically sells diesel and sand to secure diesel supply from the Gulf Coast to the Company's operationsunaffiliated third parties in the Midland Basin. The Company periodically enters into separate sales transactions with third parties related to diesel volumes that exceed the Company'sPermian Basin if it has supply in excess of its operational needs.
Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets. As of September 30, 2022,2023, the Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell, barrels of oil at an oil terminal in Midland, Texas.
In October 2019, the Company agreed to purchase and simultaneously sellTexas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026.
In April 2022, the Company agreed to purchase and simultaneously sell (i)2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (ii)(iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027.
PIONEER NATURAL RESOURCES COMPANY
The price the Company pays to purchase the oil volumes under the purchase contracts is based on a Midland WTI price and the price the Company receives for the oil volumes sold is athe WASP that a non-affiliated counterparty receives for selling
PIONEER NATURAL RESOURCES COMPANY
oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges.
The Company could experience mark-to-market fluctuations in the fair value of its marketing derivatives based on changes in (i) the differential between Midland WTI and Brent oil prices and (ii) the WASP Differential Deduction if it deviates from historical levels. For example, a 10 percent increase or decrease in the differential between Midland WTI and Brent oil prices would impact the fair value of the Company's marketing derivatives recorded by approximately $32 million and a 10 percent increase or decrease in the WASP Differential Deduction would impact the fair value of the Company's marketing derivatives recorded by approximately $28$25 million as of September 30, 2022.2023. See Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a description of the Company's open derivative positions and additional information. Conversion option derivatives. Company share price riskThe Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Periods related to conversion options exercised by certain. When holders of the Company's Convertible Notes. TheNotes exercise their conversion option, derivatives arethe Company is subject to market risks related to the changechanges in the Company's share price that occursoccur during the 25 trading daySettlement Period. In addition, as a result of the Merger Agreement, changes in ExxonMobil's share price could impact the Company's share price during the Settlement Period. See Note4,Note 54 and Note 76 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a descriptionadditional information.Interest rate risk. As of September 30, 2023, the Company's openCompany had no variable rate debt outstanding under the Credit Facility and $5 billion of fixed rate debt outstanding. The Company has no interest rate derivative positionsinstruments outstanding. See Note 4 and Note 6 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Credit risk. The Company's primary concentration of credit risks are associated with the collection of receivables resulting from the sale of oil and gas production and purchased oil and gas,commodities, and the risk of a counterparty's failure to meet its obligations under derivative contracts with the Company.
The Company's commodities are sold to various purchasers who must be prequalified under the Company's credit risk policies and procedures. The Company monitors exposure to counterparties primarily by reviewing credit ratings, financial criteria and payment history. Where appropriate, the Company obtains assurances of payment, such as a guarantee by the parent company of the counterparty, a letter of credit or other credit support. Historically, the Company's credit losses on commodity receivables have not been material.
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.
The Company has entered into International Swap Dealers Association Master Agreements ("ISDA Agreements") with each of its commodity derivative counterparties. The terms of the ISDA Agreements provide the Company and the counterparties with right of set off upon the occurrence of defined acts of default by either the Company or a counterparty to a derivative contract, whereby the party not in default may set off all derivative liabilities owed to the defaulting party against all derivative asset receivables from the defaulting party. See Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.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 to 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 September 30, 20222023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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.
On May 18, 2023, the Company received a Notice of Violation and Opportunity to Confer from the Environmental Protection Agency ("EPA") alleging violations of the Clean Air Act at certain of its operated locations. The Company is
PIONEER NATURAL RESOURCES COMPANY
engaged in discussions with the EPA regarding a resolution of the alleged violations. The Company does not believe that the resolution of this matter will have a material adverse impact on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future results of operations, but the resolution of the matter may result in penalties that exceed $300,000.
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-Kfor the year ended December 31, 2021,2022, under the headings "Part I, Item 1. Business – Competition," "Part I. Item 1. Business - Regulation," "Part I, Item 1A. Risk Factors," "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" should be carefully considered, as such risks could materially affect the Company's business, financial condition or future results. There hasExcept as disclosed below, there have been no material changechanges in the Company's risk factors that were described in the Company's 2021 2022 Annual Report on Form 10-K.10-K. The following risk factors relate to the Merger with ExxonMobil: Because the Exchange Ratio is fixed and the market price of ExxonMobil common stock has fluctuated and will continue to fluctuate, the Company's shareholders cannot be sure of the value of the consideration they will receive in the Merger, if completed.
If the Merger is completed, each eligible share of the Company's common stock outstanding immediately prior to the Merger will automatically be converted into the right to receive 2.3234 shares of ExxonMobil common stock, with cash to be paid in lieu of fractional shares. Because the Exchange Ratio is fixed, the value of the Merger consideration will depend on the market price of ExxonMobil common stock at the time the Merger is completed. Prior to completion of the Merger, the market price of ExxonMobil common stock is also expected to impact the market price of the Company's common stock. The value of ExxonMobil common stock has fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate. Accordingly, the Company's shareholders will not know or be able to determine the market value of the Merger consideration they would receive upon completion of the Merger. Share price changes may result from a variety of factors, including, among others, general market and economic conditions, commodity prices, changes in ExxonMobil's and the Company's respective businesses, operations and prospects, market assessments of the likelihood that the Merger will be completed and the timing of the Merger and regulatory considerations. Many of these factors are beyond ExxonMobil's and the Company's control.
Completion of the Merger is subject to certain conditions and if these conditions are not satisfied or waived, the Merger will not be completed.
The completion of the Merger is subject to satisfaction or waiver of certain customary mutual closing conditions, including (i) the adoption of the Merger Agreement by the Company's shareholders, (ii) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (in ExxonMobil's case, without the imposition of any Burdensome Condition (as defined below)), (iii) the absence of any injunction or other order issued by a court of competent jurisdiction or applicable law or legal prohibition prohibiting or making illegal the consummation of the Merger (or, in ExxonMobil's case, imposing a Burdensome Condition), (iv) the effectiveness of the Registration Statement on Form S-4 to be filed by ExxonMobil pursuant to which the shares of ExxonMobil common stock to be issued in connection with the Merger will be registered with the SEC, and the absence of any stop order suspending such effectiveness or proceeding for the purpose of suspending such effectiveness being pending before or threatened by the SEC, and (v) approval for listing on the NYSE of the shares of ExxonMobil common stock to be issued in connection with the Merger. The obligation of each party to consummate the Merger is also conditioned upon (i) the other party having performed in all material respects its obligations under the Merger Agreement, (ii) the other party's representations and warranties in the Merger Agreement being true and correct (subject to certain materiality qualifiers) and (iii) the other party having not experienced a material adverse effect. "Burdensome Condition" means a material adverse effect on the business, financial condition or results of operations of ExxonMobil, the Company and their respective subsidiaries, taken as a whole (for this purpose ExxonMobil, the Company and their respective subsidiaries, taken as a whole, being deemed a consolidated group of entities of the size and scale of a hypothetical company that is equivalent in size to the Company and its subsidiaries).
There can be no assurance that the conditions to the closing of the Merger will be satisfied or waived or that the Merger will be completed.
The Company's business relationships may be subject to disruption due to uncertainty associated with the Merger.
Parties with which the Company does business may experience uncertainty associated with the Merger, including with respect to current or future business relationships with ExxonMobil, Pioneer or the combined business. The Company's business relationships may be subject to disruption as parties with which ExxonMobil or the Company does business may
PIONEER NATURAL RESOURCES COMPANY
attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than ExxonMobil, Pioneer or the combined business. These disruptions could have an adverse effect on the businesses, financial condition, results of operations or prospects of the combined business, including an adverse effect on ExxonMobil's ability to realize the anticipated benefits of the Merger. The risk, and adverse effect, of such disruptions could be exacerbated by a delay in completion of the Merger or termination of the Merger Agreement.
The Merger Agreement limits the Company's ability to pursue alternatives to the Merger and may discourage other companies from trying to acquire the Company for greater consideration than what ExxonMobil has agreed to pay pursuant to the Merger Agreement.
The Merger Agreement contains provisions that make it more difficult for the Company to sell its business to a party other than ExxonMobil. These provisions include a general prohibition on the Company soliciting any acquisition proposal or offer for a competing transaction. Further, subject to certain exceptions, the Board will not withdraw or modify in a manner adverse to ExxonMobil the recommendation of the Board in favor of the approval and adoption of the Merger Agreement, and ExxonMobil generally has a right to match any competing acquisition proposals that may be made. Notwithstanding the foregoing, at any time prior to the approval and adoption of the Merger Agreement by the Company's shareholders, the Board is permitted to withdraw or modify in a manner adverse to ExxonMobil the recommendation of the Board in favor of the approval and adoption of the Merger Agreement in certain circumstances if it determines in good faith that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties to the Company's shareholders under applicable law. The Merger Agreement does not require that the Company submit the approval and adoption of the Merger Agreement to a vote of the Company's shareholders if the Board changes its recommendation in favor of the approval and adoption of the Merger Agreement in a manner adverse to ExxonMobil and terminates the Merger Agreement in order to enter into an alternative acquisition agreement with respect to a competing transaction in accordance with the terms of the Merger Agreement. In certain circumstances, upon termination of the Merger Agreement by ExxonMobil, the Company will be required to pay a termination fee of $1.8 billion to ExxonMobil, including if the Company terminates the Merger Agreement prior to obtaining Pioneer shareholder approval in order to enter into an alternative acquisition agreement with respect to a competing transaction in accordance with the terms of the Merger Agreement.
While both the Company and ExxonMobil believe these provisions and agreements are reasonable and customary and are not preclusive of other offers, the restrictions, including the added expense of the $1.8 billion termination fee that may become payable by the Company to ExxonMobil in certain circumstances, might discourage a third party that has an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher per-share value than the consideration payable in the Merger pursuant to the Merger Agreement.
Failure to complete the Merger could negatively impact the share price and the future business and financial results of the Company.
If the Merger is not completed for any reason, including as a result of the Company's shareholders failing to approve the Merger or any other condition not being satisfied or waived, the ongoing businesses of the Company may be adversely affected, and without realizing any of the benefits of having completed the Merger, the Company would be subject to a number of risks, including the following:
•the Company may experience negative reactions from the financial markets, including negative impacts on its stock price;
•the Company may experience negative reactions from its customers, regulators and employees;
•the Company will be required to pay certain costs relating to the Merger, whether or not the Merger is completed;
•the Merger Agreement places certain restrictions on the conduct of the Company's businesses prior to completion of the Merger, and such restrictions, the waiver of which are subject to the written consent of ExxonMobil (in certain cases, not to be unreasonably withheld, conditioned or delayed), and subject to certain exceptions and qualifications, may prevent the Company from taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger that the Company would have made, taken or pursued if these restrictions were not in place; and
•matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by the Company's management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to the Company as an independent company. In the event of a termination of the Merger Agreement under certain circumstances specified in the Merger Agreement, the Company may be required to pay a termination fee of $1.8 billion to ExxonMobil.
PIONEER NATURAL RESOURCES COMPANY
There can be no assurance that the risks described above will not materialize. If any of those risks materialize, they may materially and adversely affect the Company's businesses, financial condition, financial results, ratings, bond prices and/or share price.
In addition, the Company could be subject to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against the Company to perform its obligations under the Merger Agreement. If the Merger is not completed, these risks may materialize and may adversely affect the Company's businesses, financial condition, financial results, ratings, share prices and/or bond prices.
Potential litigation against the Company could result in substantial costs, an injunction preventing the completion of the Merger and/or a judgment resulting in the payment of damages.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if such a lawsuit is unsuccessful, defending against these claims can result in substantial costs.
Shareholders of the Company may file lawsuits against ExxonMobil, Pioneer and/or the directors and officers of either company in connection with the Merger. These lawsuits could prevent or delay the completion of the Merger and result in significant costs to the Company, including any costs associated with the indemnification of directors and officers. There can be no assurance that any of the defendants will be successful in the outcome of any potential lawsuits.
The Company will incur significant transaction and Merger-related costs in connection with the Merger.
The Company expects to incur a number of non-recurring costs associated with the Merger and combining the operations of the two companies. The significant, non-recurring costs associated with the Merger include, among others, fees and expenses of financial advisors and other advisors and representatives, certain employment-related costs relating to employees of the Company, filing fees due in connection with filings required under the HSR Act and filing fees and printing and mailing costs for a proxy statement/prospectus. Some of these costs have already been incurred or may be incurred regardless of whether the Merger is completed, including a portion of the fees and expenses of financial advisors and other advisors and representatives and filing fees for a proxy statement/prospectus.
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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, AND USE OF PROCEEDS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Purchases of the Company's common stockshares are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 |
| 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 (b) |
| July 1-31, 2022 | | 1,174,893 | | | $ | 213.03 | | | 1,173,579 | | | $ | 3,000,393,311 | |
| August 1-31, 2022 | | 46,404 | | | $ | 242.00 | | | — | | | $ | 3,000,393,311 | |
| September 1-30, 2022 | | 1,116,243 | | | $ | 223.85 | | | 1,115,935 | | | $ | 2,750,602,745 | |
| | 2,337,540 | | | | | 2,289,514 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2023 |
| 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 (b) |
| July 1-31, 2023 | | 268 | | | $ | 208.12 | | | — | | | $ | 3,875,575,094 | |
| August 1-31, 2023 | | 41,047 | | | $ | 237.29 | | | — | | | $ | 3,875,575,094 | |
| September 1-30, 2023 | | 207 | | | $ | 236.00 | | | — | | | $ | 3,875,575,094 | |
| | 41,522 | | | | | — | | | |
__________________
(a)Includes shares purchasedwithheld from employees in order for employees to satisfy income tax withholding payments related to share-based awards that vested during the period.
(b)In February 2022,April 2023, the Company's board of directorsBoard authorized a $4 billion common stock repurchase program. This authorization replaced the previously authorized $2 billion common stockshare repurchase program that had $841 million remaining into replace the program before being replaced with theprior $4 billion common stockshare repurchase program.program authorized in February 2022. The stockshare repurchase program has no time limit and may be modified, suspended or terminated at any time by the boardBoard. With limited exceptions, the Merger Agreement precludes the Company from future repurchases or acquisition of directors.the Company's common shares, including repurchases under the Company's share repurchase program.
PIONEER NATURAL RESOURCES COMPANY
ITEM 5.OTHER INFORMATION
The Company was not informed by any of its directors or officers of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408, during the three months ended September 30, 2023.
PIONEER NATURAL RESOURCES COMPANY
ITEM 6. EXHIBITS
| | | | | | | | | | |
Exhibit
Number | | | | Description |
| | | | |
10.1 (a)2.1* | | | | Ninth Amendment to theAgreement and Plan of Merger, dated as of October 10, 2023, by and among Pioneer Natural Resources USA, Inc. 401(k)Company, Exxon Mobil Corporation and Matching Plan (Amended and Restated Effective as of January 1, 2020), dated August 10, 2022.SPQR, LLC (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on October 11, 2023). |
| | | | |
| 31.1 (a) | | | | |
| | | | |
| 31.2 (a) | | | | |
| | | | |
| 32.1 (b) | | | | |
| | | | |
| 32.2 (b) | | | | |
| | | | |
| 101.INS (a) | | | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| | | | |
| 101.SCH (a) | | | | Inline XBRL Taxonomy Extension Schema Document. |
| | | | |
| 101.CAL (a) | | | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| | | | |
| 101.DEF (a) | | | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| | | | |
| 101.LAB (a) | | | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| | | | |
| 101.PRE (a) | | | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| | | | |
| 104 | | | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
____________________
(a)Filed herewith.
| | | | | |
| (a) | Filed herewith. |
| (b) | Furnished herewith. |
| |
| * | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the SEC a copy of any omitted schedule upon request. |
* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the SEC a copy of any omitted schedule upon request.
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 |
| | | | |
October 28, 2022November 2, 2023 | | By: | | /s/ Neal H. Shah |
| | | | Neal H. Shah |
| | | | SeniorExecutive Vice President and Chief Financial Officer |
| | | | |
October 28, 2022November 2, 2023 | | By: | | /s/ Christopher L. Washburn |
| | | | Christopher L. Washburn |
| | | | Vice President and Chief Accounting Officer |