pxd10qmar10.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

ý       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022

or

o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________

Commission File Number: 1-13245

PIONEER NATURAL RESOURCES COMPANY
 (Exact name of Registrant as specified in its charter)

Delaware
 
75-2702753
(State or other jurisdiction of
                     incorporation or organization)
 
      (I.R.S. Employer
         Identification No.)
     
5205 N. O'Connor Blvd., Suite 200, Irving, Texas
 
75039
(Address of principal executive offices)
 
       (Zip Code)

(972) 444-9001
(Registrant's telephone number, including area code)
 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý          No   o      
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.:

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   o      No   ý
 
Number of shares of Common Stock outstanding as of May 3, 2022
 
 
115,929,792
 


 
 
 

 

PIONEER NATURAL RESOURCES COMPANY

TABLE OF CONTENTS

     
     
   
Page
     
Cautionary Statement Concerning Forward-Looking Statements
 
 3
     
Definitions of Certain Terms and Conventions Used Herein
 
 4
 
PART I.   FINANCIAL INFORMATION
     
Item 1.        Financial Statements
   
     
Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021
 
 5
     
Consolidated Statements of Operations for the three months ended March 31, 2022 and 2009
 
 7
     
Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2022
 
 8
     
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2009
 
 9
     
Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2009
 
10
     
  Notes to Consolidated Financial Statements
 
11
     
Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations
 
34
     
Item 3.        Quantitative and Qualitative Disclosures About Market Risk
 
46
     
Item 4.        Controls and Procedures
 
49
 
 
PART II.   OTHER INFORMATION
     
Item 1.        Legal Proceedings
 
50
     
Item 1A.    Risk Factors
 
50
     
Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds
 
50
     
Item 6.        Exhibits
 
51
     
Signatures
 
52
     
Exhibit Index
 
53
 
2
 

 
 
 

 

PIONEER NATURAL RESOURCES COMPANY


Cautionary Statement Concerning Forward-Looking Statements
 
 
 
The information in this Quarterly Report on Form 10-Q (the "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate," or the negative of such terms and similar expressions as they relate to Pioneer Natural Resources Company ("Pioneer" or the "Company") are intended to identify forward-looking statements. 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, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control.
 
These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements (including joint venture agreements) with third parties on mutually acceptable terms, international operations and associated international political and economic instability, litigation, the costs and results of drilling and operations, access to and availability of drilling equipment and transportation, processing and refining facilities, Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the fin ancial strength of counterparties to Pioneer's credit facility and derivative contracts and the purchasers of Pioneer's oil, NGL and gas production, uncertainties about estimates of reserves and resource potential and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impact of climate change, and acts of war or terrorism. These and other risks are described in the Company's Annual Report on Form 10-K, this and other Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. See "Part I, Item 3. Quantitative and Qualitative Disclosures About Mar ket Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition, Markets and Regulations", "Part I, Item 1A. Risk Factors", “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof.  The Company undertakes no duty to publicly update these statements except as required by law.
 
3
 
 

 

PIONEER NATURAL RESOURCES COMPANY


Definitions of Certain Terms and Conventions Used Herein

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

"Bbl" means a standard barrel containing 42 United States gallons.
"Bcf" means one billion cubic feet.
"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 6.0 Mcf of gas to 1.0 Bbl of oil or natural gas liquid.
"BOEPD" means BOE per day.
"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.
"CBM" means coal bed methane.
"DD&A" means depletion, depreciation and amortization.
"GAAP" means accounting principles that are generally accepted in the United States of America.
"LIBOR" means London Interbank Offered Rate, which is a market rate of interest.
"MBbl" means one thousand Bbls.
"MBOE" means one thousand BOEs.
"Mcf" means one thousand cubic feet and is a measure of natural gas volume.
"MMBbl" means one million Bbls.
"MMBOE" means one million BOEs.
"MMBtu" means one million Btus.
"MMcf" means one million cubic feet.
"MMcfpd" means one million cubic feet per day.
"Mont Belvieu-posted-price" means the daily average natural gas liquids components as priced in Oil Price Information Service ("OPIS") in the table "U.S. and Canada LP - Gas Weekly Averages" at Mont Belvieu, Texas.
"NGL" means natural gas liquid.
"NYMEX" means the New York Mercantile Exchange.
"NYSE" means the New York Stock Exchange.
"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.
"Pioneer Southwest" means Pioneer Southwest Energy Partners L.P. and its subsidiaries.
"proved reserves" means the 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 geosciences and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons 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 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 is based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.
(v) Existing 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.
"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 ten percent discount rate.
"U.S." means United States.
"VPP" means volumetric production payment.
With respect to information on the working interest in wells, drilling locations and acreage, "net" wells, drilling locations and acres are determined by multiplying "gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.
Unless otherwise indicated, all currency amounts are expressed in U.S. dollars.
 
4
 
 

 


PART I. FINANCIAL INFORMATION

Item 1.          Financial Statements

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS
(in thousands)

 
 
 
 
March 31,
2010
 
December 31,
2009
 
 
 
 
(Unaudited)
 
 
 
ASSETS
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
$
 34,540 
 
$
 27,368 
 
Accounts receivable:
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $1,415 and $1,310 as of
 
 
 
 
 
 
 
 
March 31, 2022 and December 31, 2009, respectively
 
 260,688 
 
 
 330,711 
 
 
Due from affiliates
 
 593 
 
 
 1,037 
 
Income taxes receivable
 
 3,758 
 
 
 25,022 
 
Inventories
 
 120,750 
 
 
 139,177 
 
Prepaid expenses
 
 8,551 
 
 
 9,011 
 
Deferred income taxes
 
 - 
 
 
 26,857 
 
Other current assets:
 
 
 
 
 
 
 
Derivatives
 
 154,732 
 
 
 48,713 
 
 
Other, net of allowance for doubtful accounts of $2,137 and $5,689 as of
 
 
 
 
 
 
 
 
March 31, 2022 and December 31, 2009, respectively
 
 3,414 
 
 
 8,222 
 
 
 
Total current assets
 
 587,026 
 
 
 616,118 
Property, plant and equipment, at cost:
 
 
 
 
 
 
Oil and gas properties, using the successful efforts method of accounting:
 
 
 
 
 
 
 
Proved properties
 
 10,388,312 
 
 
 10,276,244 
 
 
Unproved properties
 
 269,029 
 
 
 236,660 
 
Accumulated depletion, depreciation and amortization
 
 (3,059,087)
 
 
 (2,946,048)
 
 
 
Total property, plant and equipment
 
 7,598,254 
 
 
 7,566,856 
Deferred income taxes
 
 491 
 
 
 387 
Goodwill
 
 308,831 
 
 
 309,259 
Other property and equipment, net
 
 188,504 
 
 
 154,830 
Other assets:
 
 
 
 
 
 
Derivatives
 
 118,318 
 
 
 43,631 
 
Other, net of allowance for doubtful accounts of $11,177 and $7,300  as of
 
 
 
 
 
 
 
March 31, 2022 and December 31, 2009, respectively
 
 171,231 
 
 
 176,184 
 
 
 
 
$
 8,972,655 
 
$
 8,867,265 


The financial information included as of March 31, 2022 has been prepared by management
without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.
 
5
 
 
 

 

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share data)



 
 
 
 
March 31,
2010
 
December 31,
2009
 
 
 
 
(Unaudited)
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
 
 
 
Accounts payable:
 
 
 
 
 
 
 
Trade
$
 246,276 
 
$
 221,359 
 
 
Due to affiliates
 
 13,530 
 
 
 32,224 
 
Interest payable
 
 33,695 
 
 
 47,009 
 
Income taxes payable
 
 15,875 
 
 
 17,411 
 
Deferred income taxes
 
 - 
 
 
 128 
 
Other current liabilities:
 
 
 
 
 
 
 
Derivatives
 
 90,753 
 
 
 116,015 
 
 
Deferred revenue
 
 78,816 
 
 
 90,215 
 
 
Other
 
 42,742 
 
 
 46,830 
 
 
 
Total current liabilities
 
 521,687 
 
 
 571,191 
 
 
 
 
 
 
 
 
 
Long-term debt
 
 2,647,604 
 
 
 2,761,011 
Derivatives
 
 76,819 
 
 
 133,645 
Deferred income taxes
 
 1,589,275 
 
 
 1,470,899 
Deferred revenue
 
 75,937 
 
 
 87,021 
Other liabilities
 
 177,705 
 
 
 200,467 
Stockholders' equity:
 
 
 
 
 
 
Common stock, $.01 par value; 500,000,000 shares authorized; 126,055,152 and
 
 
 
 
 
 
 
125,203,502 shares issued at March 31, 2022 and December 31, 2009, respectively
 
 1,260 
 
 
 1,252 
 
Additional paid-in capital
 
 2,997,656 
 
 
 2,981,450 
 
Treasury stock, at cost: 10,983,758 and 10,828,171 at March 31, 2022
 
 
 
 
 
 
 
and December 31, 2009, respectively
 
 (423,978)
 
 
 (415,211)
 
Retained earnings
 
 1,156,578 
 
 
 917,688 
 
Accumulated other comprehensive income - deferred hedge gains, net of tax
 
 39,450 
 
 
 51,009 
 
 
 
Total stockholders' equity attributable to common stockholders
 
 3,770,966 
 
 
 3,536,188 
 
Noncontrolling interests in consolidated subsidiaries
 
 112,662 
 
 
 106,843 
 
 
 
Total stockholders' equity
 
 3,883,628 
 
 
 3,643,031 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
$
 8,972,655 
 
$
 8,867,265 


The financial information included as of March 31, 2022 has been prepared by management
without audit by independent registered public accountants.

The accompanying notes are an integral part of these consolidated financial statements.
 
6
 
 

 

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

 
 
 
Three Months Ended
March 31,
 
 
 
2010 
 
2009 
Revenues and other income:
 
 
 
 
 
 
Oil and gas
$
 507,796 
 
$
 367,851 
 
Interest and other
 
 19,803 
 
 
 10,660 
 
Derivative gains, net
 
 265,476 
 
 
 99,863 
 
Gain (loss) on disposition of assets, net
 
 16,943 
 
 
 (115)
 
Hurricane activity, net
 
 7,410 
 
 
 (375)
 
 
 
 
 817,428 
 
 
 477,884 
 Costs and expenses:
 
 
 
 
 
 
Oil and gas production
 
 89,715 
 
 
 110,431 
 
Production and ad valorem taxes
 
 27,061 
 
 
 27,699 
 
Depletion, depreciation and  amortization
 
 150,768 
 
 
 188,144 
 
Impairment of oil and gas properties
 
 - 
 
 
 21,091 
 
Exploration and abandonments
 
 20,797 
 
 
 31,170 
 
General and administrative
 
 40,948 
 
 
 34,654 
 
Accretion of discount on asset retirement obligations
 
 2,960 
 
 
 2,752 
 
Interest
 
 47,523 
 
 
 41,138 
 
Other
 
 16,576 
 
 
 31,389 
 
 
 
 
 396,348 
 
 
 488,468 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before income taxes
 
 421,080 
 
 
 (10,584)
Income tax benefit (provision)
 
 (160,474)
 
 
 741 
Income (loss) from continuing operations
 
 260,606 
 
 
 (9,843)
Loss from discontinued operations, net of tax
 
 - 
 
 
 (970)
Net income (loss)
 
 260,606 
 
 
 (10,813)
 
Net income attributable to the noncontrolling interests
 
 (15,352)
 
 
 (3,793)
Net income (loss) attributable to common stockholders
$
 245,254 
 
$
 (14,606)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common stockholders
$
 2.09 
 
$
 (0.12)
 
Loss from discontinued operations attributable to common stockholders
 
 - 
 
 
 (0.01)
 
Net income (loss) attributable to common stockholders
$
 2.09 
 
$
 (0.13)
 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
Income (loss) from continuing operations attributable to common stockholders
$
 2.08 
 
$
 (0.12)
 
Loss from discontinued operations attributable to common stockholders
 
 - 
 
 
 (0.01)
 
Net income (loss) attributable to common stockholders
$
 2.08 
 
$
 (0.13)
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
Basic
 
 114,655 
 
 
 114,242 
 
Diluted
 
 115,462 
 
 
 114,242 
 
 
 
 
 
 
 
 
Dividends declared per share
$
 0.04 
 
$
 0.04 
 
 
 
 
 
 
 
 
Amounts attributable to common stockholders:
 
 
 
 
 
 
Income (loss) from continuing operations
$
 245,254 
 
$
 (13,636)
 
Loss from discontinued operations
 
 - 
 
 
 (970)
 
Net income (loss)
$
 245,254 
 
$
 (14,606)


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.
 
7
 
 

 

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands, except dividends per share)
(Unaudited)





 
 
 
 
 
 
 
 
Stockholders' Equity Attributable To Common Stockholders
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
 
Common Stock
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interests
 
Total Stockholders' Equity
Balance as of December 31, 2021
 
 114,375 
 
$
 1,252 
 
$
 2,981,450 
 
$
 (415,211)
 
$
 917,688 
 
$
 51,009 
 
$
 106,843 
 
$
 3,643,031 
Dividends declared ($0.04 per share)
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 (4,736)
 
 
 - 
 
 
 - 
 
 
 (4,736)
Exercise of long-term incentive plan stock
  options
 
 110 
 
 
 - 
 
 
 - 
 
 
 4,211 
 
 
 (1,628)
 
 
 - 
 
 
 - 
 
 
 2,583 
Treasury stock purchases to satisfy employee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
tax withholding obligations
 
 (265)
 
 
 - 
 
 
 - 
 
 
 (12,978)
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 (12,978)
Tax benefit related to stock-based compensation
 
 - 
 
 
 - 
 
 
 6,705 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 6,705 
Compensation costs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested compensation awards, net
 
 851 
 
 
 8 
 
 
 (8)
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
Compensation costs included in net income
 
 - 
 
 
 - 
 
 
 9,509 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 253 
 
 
 9,762 
Cash contributions from noncontrolling interests
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 1,151 
 
 
 1,151 
Cash distributions to noncontrolling interests
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 (6,605)
 
 
 (6,605)
Net income
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 245,254 
 
 
 - 
 
 
 15,352 
 
 
 260,606 
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred hedging activity, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net hedge gains included in continuing
  operations
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 - 
 
 
 (11,559)
 
 
 (4,332)
 
 
 (15,891)
Balance as of March 31, 2022
 
 115,071 
 
$
 1,260 
 
$
 2,997,656 
 
$
 (423,978)
 
$
 1,156,578 
 
$
 39,450 
 
$
 112,662 
 
$
 3,883,628 


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.
 
8
 
 

 

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

 
 
 
 
 
 
 
Three Months Ended
March 31,
 
 
 
 
 
 
 
2010 
 
 
2009 
Cash flows from operating activities:
 
 
 
 
 
 
Net income (loss)
$
 260,606 
 
$
 (10,813)
 
 Adjustments to reconcile net income (loss) to net cash provided by
 
 
 
 
 
 
 
operating activities:
 
 
 
 
 
 
 
 
Depletion, depreciation and amortization
 
 150,768 
 
 
 188,144 
 
 
 
Impairment of oil and gas properties
 
 - 
 
 
 21,091 
 
 
 
Exploration expenses, including dry holes
 
 3,566 
 
 
 18,249 
 
 
 
Deferred income taxes
 
 158,456 
 
 
 (10,510)
 
 
 
(Gain) loss on disposition of assets, net
 
 (16,943)
 
 
 115 
 
 
 
Accretion of discount on asset retirement obligations
 
 2,960 
 
 
 2,752 
 
 
 
Discontinued operations
 
 - 
 
 
 4,373 
 
 
 
Interest expense
 
 7,408 
 
 
 6,609 
 
 
 
Derivative related activity
 
 (281,871)
 
 
 (111,285)
 
 
 
Amortization of stock-based compensation
 
 9,624 
 
 
 9,297 
 
 
 
Amortization of deferred revenue
 
 (22,483)
 
 
 (36,720)
 
 
 
Other noncash items
 
 (2,176)
 
 
 10,694 
 
Change in operating assets and liabilities
 
 
 
 
 
 
 
 
Accounts receivable, net
 
 48,080 
 
 
 42,221 
 
 
 
Income taxes receivable
 
 21,264 
 
 
 44,936 
 
 
 
Inventories
 
 17,429 
 
 
 (34,470)
 
 
 
Prepaid expenses
 
 435 
 
 
 1,960 
 
 
 
Other current assets
 
 1,226 
 
 
 26,057 
 
 
 
Accounts payable
 
 (34,296)
 
 
 (111,450)
 
 
 
Interest payable
 
 (13,314)
 
 
 (15,576)
 
 
 
Income taxes payable
 
 (1,536)
 
 
 8,541 
 
 
 
Other current liabilities
 
 (9,840)
 
 
 (29,794)
 
 
 
 
Net cash provided by operating activities
 
 299,363 
 
 
 24,421 
Cash flows from investing activities:
 
 
 
 
 
 
Proceeds from disposition of assets
 
 34,985 
 
 
 200 
 
Additions to oil and gas properties
 
 (156,529)
 
 
 (164,527)
 
Additions to other assets and other property and equipment, net
 
 (44,999)
 
 
 (6,736)
 
 
 
 
Net cash used in investing activities
 
 (166,543)
 
 
 (171,063)
Cash flows from financing activities:
 
 
 
 
 
 
Borrowings under long-term debt
 
 87,154 
 
 
 172,000 
 
Principal payments on long-term debt
 
 (206,264)
 
 
 (1,000)
 
Contributions from noncontrolling interests
 
 1,151 
 
 
 150 
 
Distributions to noncontrolling interests
 
 (6,605)
 
 
 (4,990)
 
Borrowings (payments) of other liabilities
 
 2,818 
 
 
 (335)
 
Exercise of long-term incentive plan stock options
 
 2,583 
 
 
 954 
 
Purchases of treasury stock
 
 (12,978)
 
 
 (20,119)
 
Excess tax (provisions) benefits from share-based payment arrangements
 
 6,705 
 
 
 (3,879)
 
Payment of financing fees
 
 (147)
 
 
 - 
 
Dividends paid
 
 (65)
 
 
 - 
 
 
 
 
Net cash provided by (used in) financing activities
 
 (125,648)
 
 
 142,781 
Net increase (decrease) in cash and cash equivalents
 
 7,172 
 
 
 (3,861)
Cash and cash equivalents, beginning of period
 
 27,368 
 
 
 48,337 
Cash and cash equivalents, end of period
$
 34,540 
 
$
 44,476 


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.
 
9
 
 

 

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(Unaudited)




 
 
 
 
Three Months Ended
March 31,
 
 
 
 
2010 
 
2009 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
 260,606 
 
$
 (10,813)
Other comprehensive loss:
 
 
 
 
 
 
Hedge fair value changes, net
 
 - 
 
 
 12,974 
 
Net hedge gains included in continuing operations
 
 (20,926)
 
 
 (39,168)
 
Income tax provision
 
 5,035 
 
 
 9,534 
 
 
Other comprehensive loss
 
 (15,891)
 
 
 (16,660)
Comprehensive income (loss)
 
 244,715 
 
 
 (27,473)
 
Comprehensive income attributable to noncontrolling interest
 
 (11,036)
 
 
 (1,788)
Comprehensive income (loss) attributable to common stockholders
$
 233,679 
 
$
 (29,261)


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.
 
10
 
 

 

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
 

NOTE A.           Organization and Nature of Operations

Pioneer Natural Resources Company ("Pioneer" or the "Company") is a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange.  The Company is a large independent oil and gas exploration and production company with continuing operations in the United States, South Africa and Tunisia.

NOTE B.           Basis of Presentation

Presentation. In the opinion of management, the consolidated financial statements of the Company as of March 31, 2022 and for the three months ended March 31, 2022 and 2009 include all adjustments and accruals, consisting only of normal recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods.  These interim results are not necessarily indicative of results for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed or omitted in this Report pursuant to the rules and regulations of the SEC.  These consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

Discontinued operations. During June and August 2009, the Company sold substantially all of its Mississippi assets and shelf properties in the Gulf of Mexico, respectively. Accordingly, the Company has recast its accompanying consolidated statements of operations and cash flows for the three months ended March 31, 2022 to reflect the results of operations of both of these asset groups as discontinued operations, rather than as components of continuing operations.

Allowances for doubtful accounts.  As of March 31, 2022 and December 31, 2009, the Company's allowances for doubtful accounts totaled $14.7 million and $14.3 million, respectively. Changes in the Company’s allowance for doubtful accounts during the three months ended March 31, 2022 are summarized in the following table:

 
 
 
 
Three Months Ended
March 31, 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning allowance for doubtful accounts balance
$
 14,299 
 
Amount recorded in other expense for bad debt expense
 
 224 
 
Other net increases
 
 206 
 
 
 
 
 
 
Ending allowance for doubtful accounts balance
$
 14,729 

Inventories.  Inventories consisted of $187.0 million and $205.6 million of materials and supplies and $4.0 million and $3.2 million of commodities as of March 31, 2022 and December 31, 2009, respectively.  As of March 31, 2022 and December 31, 2009, the Company's materials and supplies inventory was net of $1.6 million and $5.2 million, respectively, of valuation reserve allowances. As of March 31, 2022 and December 31, 2009, the Company estimated that $70.2 million and $69.6 million, respectively, of its materials and supplies inventory would not be utilized within one year. Accordingly, those inventory values have been classified as other noncurrent assets in the accompanying consolidated balance sheets.
 
Derivatives and hedging. Changes in the fair values of derivative instruments are recognized as gains or losses in the earnings of the period in which they occur. Effective February 1, 2009, the Company discontinued hedge accounting on all of its then-existing hedge contracts. Changes in the fair value of effective cash flow hedges prior to the Company’s discontinuance of hedge accounting on February 1, 2022 were recorded as a component of accumulated other comprehensive income - deferred hedge gains, net of tax ("AOCI - Hedging"), in the stockholders' equity section of the accompanying consolidated balance sheets, and are being transferred to earnings during the same periods in which the hedged transactions are recognized in the Company 's earnings. Since February 1, 2009, the Company has recognized all changes in the fair values of its derivative contracts as gains or losses in the earnings of the periods in which they occur.
 
11
 
 
 

 
 
PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
The Company classifies the fair value amounts of derivative assets and liabilities executed under master netting arrangements as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by commodity and master netting counterparty. Net derivative asset values are determined, in part, by utilization of the derivative counterparties' credit-adjusted risk-free rate curves and net derivative liabilities are determined, in part, by utilization of the Company's and Pioneer Southwest Energy Partners L.P.’s ("Pioneer Southwest," a majority-owned and consolidated subsidiary) credit-adjusted risk-free rate curves. The credit-adjusted risk-free rates are based on an independent market-quoted credit default swap rate curve for the Company's or the counterparties' debt plus t he United States Treasury Bill yield curve as of March 31, 2010.  Pioneer Southwest’s credit-adjusted risk-free rate curve is based on independent market-quoted forward London Interbank Offered Rate ("LIBOR") curves plus 250 basis points, representing Pioneer Southwest’s estimated borrowing rate.
 
Goodwill. Goodwill is assessed for impairment whenever events or circumstances indicate that impairment of the carrying value of goodwill is likely, but no less often than annually. If the carrying value of goodwill is determined to be impaired, it is reduced for the impaired value with a corresponding charge to pretax earnings in the period in which it is determined to be impaired. During the third quarter of 2009, the Company performed its annual assessment of goodwill impairment and determined that there was no impairment. During March 2010, the Company sold a portion of its oil and gas properties in the Uinta/Piceance area for $8.2 million of net proceeds, including customary closing adjustments. Associated therewith, the Company reduced its goodwill attri butable to the Uinta/Piceance properties by $414 thousand.

Noncontrolling interest in consolidated subsidiaries. The Company owns a 0.1 percent general partner interest and a 61.9 percent limited partner interest in Pioneer Southwest. Pioneer Southwest owns interests in certain oil and gas properties previously owned by the Company in the Spraberry field in the Permian Basin of West Texas. The financial position, results of operations, and cash flows of Pioneer Southwest are consolidated with those of the Company.

In addition to Pioneer Southwest, the Company owns the majority interests in certain other subsidiaries with operations in the United States.  Noncontrolling interest in the net assets of consolidated subsidiaries totaled $112.7 million and $106.8 million as of March 31, 2022 and December 31, 2009, respectively.  The Company recorded net income attributable to the noncontrolling interests of $15.4 million for the three months ended March 31, 2010, (principally related to Pioneer Southwest) compared to $3.8 million for the three months ended March 31, 2009, respectively.

Stock-based compensation.  For stock-based compensation equity awards, compensation expense is being recognized in the Company's financial statements on a straight line basis over the awards' vesting periods based on their fair values on the dates of grant. The Company utilizes (i) the Black-Scholes option pricing model to measure the fair value of stock options, (ii) the prior day's closing stock price on the date of grant for the fair value of restricted stock awards, (iii) the Monte Carlo simulation method for the fair value of performance unit awards and (iv) a probabilistic forecasted fair value method for series B unit awards in the Company’s majority-owned drilling subsidiary, Sendero Drilling Company, LLC ("Sendero").

Stock-based compensation liability awards are awards that are expected to be settled wholly or partially in cash on their vesting dates, rather than in equity shares or units.  Stock-based liability awards are recorded as accounts payable - affiliates based on the vested portion of the fair value of the awards on the balance sheet date.  The fair values of liability awards are updated at each balance sheet date and changes in the periodic fair values of the vested portions of the awards are recorded as increases or decreases to compensation expense in the periods of change.  During February 2010, the Company issued 208,620 restricted stock awards to employees that represent liability awards.  As of March 31, 2010, accounts payable - affiliates includes $326 thousand of liabilities attribut able to the liability awards.

For the three months ended March 31, 2010, the Company recorded $9.8 million of stock-based compensation costs for all plans, as compared to $9.3 million for the same period of 2009.

In accordance with GAAP, the Company's issued shares, as reflected in the consolidated balance sheets at March 31, 2022 and December 31, 2009, do not include 846,312 and 979,493 common shares, respectively, associated with unvested stock-based compensation awards that have voting rights.
 
12

 
 

 

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
The following table summarizes all Pioneer equity and liability stock-based awards, lapses and forfeitures that occurred during the three months ended March 31, 2010:

 
Restricted Stock
Awards
 
Performance
Units
 
Stock Options
 
 
 
 
 
 
Awards (a)
 678,977 
 
 74,482 
 
 116,120 
Lapsed restrictions
 756,890 
 
 137,659 
 
 - 
Exercises
 - 
 
 - 
 
 109,595 
Forfeitures
 27,600 
 
 - 
 
 1,066 
______
(a)  
Restricted stock awards include 208,620 of liability awards.

Subsidiary issuances of unit-based compensation.  During the three months ended March 31, 2010, Pioneer Natural Resources GP LLC (the “General Partner”), the general partner of Pioneer Southwest, awarded phantom units to certain members of management of the General Partner under Pioneer Southwest’s long-term incentive plan (the "Phantom Units").  The Phantom Units entitle the recipients to 35,118 common units of Pioneer Southwest after a three-year vesting period.  Associated therewith, Pioneer Southwest and the Company recorded $22 thousand of compensation expense during the three months ended March 31, 2010.  During the three months ended March 31, 2010, Sendero entered into Restricted Unit Agreements with two key emplo yees, relating to series B units in Sendero.  The series B unit awards vest over a five-year period and do not earn equity rights unless certain defined performance conditions are achieved by Sendero.  Associated therewith, the Company recorded $184 thousand of compensation expense during the three months ended March 31, 2010.

As of March 31, 2010, there was $79.1 million of unrecognized compensation expense related to unvested share- and unit-based compensation plan awards, including $11.4 million attributable to liability awards. This compensation will be recognized over the remaining vesting periods of the awards, which on a weighted average basis is a period of less than three years.

New accounting pronouncements. During February 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-09, "Subsequent Events (Topic 855)". ASU No. 2010-09 amends Accounting Standards Codification ("ASC") Topic 855 to include the definition of "SEC filer" and alleviate the obligation of SEC filers to disclose the date through which subsequent events have been evaluated. ASU No. 2010-09 became effective during February 2010.  See Note S for the Company's disclosures of subsequent events.

Fair value measurements and disclosures. During January 2010, the FASB issued ASU No. 2010-06, "Fair Value Measurements and Disclosures (Topic 820)".  ASU No. 2010-06 amends ASC Topic 820 to (i) require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers, (ii) require separate disclosure of purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3), (iii) clarify the level of disaggregation for fair value measurements of assets and liabilities and (iv) clarify disclosures about inputs and valuation techniques used to measure fair values for both recurring and nonrecurring fair value me asurements.  ASU No. 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2021 and for interim periods within those fiscal years.  The Company adopted the provisions of ASU No. 2010-06 on January 1, 2010.  See Note D for the Company's disclosures about fair value measurements.

NOTE C.           Exploratory Well Costs

The Company capitalizes exploratory well costs until a determination is made that the well has either found proved reserves or that it is impaired. The capitalized exploratory well costs are presented in proved properties in the consolidated balance sheets. If the exploratory well is determined to be impaired, the well costs are charged to exploration and abandonments expense.
 
13

 
 

 
 
PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
 
The following table reflects the Company's capitalized exploratory well activity during the three months ended March 31, 2010:

 
 
 
 
Three Months
Ended
March 31, 2022
 
 
 
 
 
 
 
 
 
 
Beginning capitalized exploratory well costs
$
 127,574 
 
Additions to exploratory well costs pending the
 
 
 
 
determination of proved reserves
 
 38,122 
 
Reclassification due to determination of proved reserves
 
 (28,245)
 
Exploratory well costs charged to exploration expense
 
 130 
 
 
 
 
 
 
Ending capitalized exploratory well costs
$
 137,581 

The following table provides an aging, as of March 31, 2022 and December 31, 2021 of capitalized exploratory well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year, based on the date drilling was completed:

 
 
 
March 31, 2022
 
December 31, 2021
 
 
 
 
(in thousands, except well counts)
 
 
 
 
 
 
 
 
 
 
Capitalized exploratory well costs that have been suspended:
 
 
 
 
 
 
 
One year or less
$
 22,848 
 
$
 21,634 
 
 
More than one year
 
 114,733 
 
 
 105,940 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 137,581 
 
$
 127,574 
 
 
 
 
 
 
 
 
 
 
Number of projects with exploratory well costs that have
 
 
 
 
 
 
 
been suspended for a period greater than one year
 
 8 
 
 
 8 
 

The following table provides an aging of capitalized costs of exploration projects that have been suspended for more than one year as of March 31, 2010:

 
 
Total
 
2010 
 
2009 
 
2008 
 
2007 
 
2006 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Cosmopolitan Unit
$
 75,219 
 
$
 8,305 
 
$
 8,253 
 
$
 6,344 
 
$
 51,488 
 
$
 829 
   Other
 
 5,918 
 
 
 294 
 
 
 797 
 
 
 4,827 
 
 
 - 
 
 
 - 
Tunisia
 
 33,596 
 
 
 194 
 
 
 466 
 
 
 29,006 
 
 
 (15)
 
 
 3,945 
 
Total
$
 114,733 
 
$
 8,793 
 
$
 9,516 
 
$
 40,177 
 
$
 51,473 
 
$
 4,774 
 
Cosmopolitan Unit. The Company owns a 100 percent working interest in, and is the operator of, the Cosmopolitan Unit in the Cook Inlet of Alaska. During 2007, the Company drilled the Hansen #1A L1 well, a lateral sidetrack from an existing wellbore, to appraise the resource potential of the unit. The initial unstimulated production test results were encouraging. As a result, the Company began project permitting and facilities planning during 2008. During 2009, the Company continued progress on engineering studies and commenced a workover of the Hansen #1A-L1 well.  During the three months ended March 31, 2010, the Company completed the Hansen #1A-L1 workover, fracture-stimulated the well and began flow testing the well.  During 2010, the Company plans to evalu ate the production flow rate information from the Hansen #1A-L1 well, progress project permitting and develop plans for a second well to further delineate the extent of the unit's resource potential.
 
14
 
 
 

 
 
PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
Tunisia - Cherouq. The Company has $17.8 million of suspended well costs recorded for the Hayatt #1 well in the Company’s Cherouq production concession area, which is operated by the Company. The Hayatt #1 well began drilling in April 2008 to test several targeted formations. Mechanical failures were encountered during the testing of the well that did not allow completion of the formation assessments. The Company has project personnel at appropriate levels committed to and actively participating in analyzing seismic and other data to determine the optimal plan forward for completing the well, which may utilize the existing wellbore or a new wellbore adjacent to the existing well. The Company expects to finalize its Hayatt #1 plans during 2010 or early 2011 and execute well completion plans during 2011.
 
Tunisia - Borj El Khadra. The Company has $7.7 million of suspended well costs attributable to the Nahkil #1 and Abir #1 wells in the Borj El Khadra exploration permit area, which is operated by a third-party. The Nahkil #1 well encountered oil-bearing sands and the Abir #1 well encountered gas-bearing sands. The Company does not record proved reserves associated with discoveries in exploration permit areas until a production concession is granted. The third-party operator and the Company have project personnel at appropriate levels committed to and actively participating in infrastructure planning and assessment of the permit area.  During the first quarter of 2010, a $13.8 million 3-D seismic program was initiated and plans include the drilling of an additional exploration well in the permit area during 2010.  Additionally, project personnel are evaluating the feasibility of using production handling facilities on a nearby production concession to transport Abir #1 production to sales markets.
 
Tunisia - Anaguid. The Company has $8.1 million of suspended well costs attributable to the Durra #1 well on the Anaguid exploration permit. Project personnel at appropriate levels are committed to and actively participating in the assessment of the Durra #1 well and the Anaguid exploration permit area.  During April 2010, the Company and other project participants formally submitted a plan of development for the conversion of the Durra #1 discovery into a concession agreement. Development activities are being formulated to commence production and drilling activities if the plan of development is approved.

NOTE D.          Disclosures About Fair Value Measurements

In accordance with GAAP, fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are classified into two categories: observable inputs and unobservable inputs. 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. These two types of inputs are further prioritized into the following fair value input hierarchy:
 
 
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.

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.
 
15

 
 

 

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)

The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2010, for each of the fair value hierarchy levels:

 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
 
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Fair Value at March 31, 2022
 
 
 
(in thousands)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Trading securities
$
 268 
 
$
 106 
 
$
 - 
 
$
 374 
 
Commodity derivatives
 
 - 
 
 
 258,684 
 
 
 3,962 
 
 
 262,646 
 
Interest rate derivatives
 
 - 
 
 
 10,404 
 
 
 - 
 
 
 10,404 
 
Deferred compensation plan assets
 
 29,854 
 
 
 - 
 
 
 - 
 
 
 29,854 
 
Notes receivable
 
 - 
 
 
 - 
 
 
 1,529 
 
 
 1,529 
 
 
Total assets
$
 30,122 
 
$
 269,194 
 
$
 5,491 
 
$
 304,807 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
 - 
 
$
 144,449 
 
$
 5,285 
 
$
 149,734 
 
Interest rate derivatives
 
 - 
 
 
 17,838 
 
 
 - 
 
 
 17,838 
 
Pioneer credit facility
 
 - 
 
 
 141,638 
 
 
 - 
 
 
 141,638 
 
Pioneer Southwest credit facility
 
 - 
 
 
 64,142 
 
 
 - 
 
 
 64,142 
 
5.875% senior notes due 2016
 
 447,416 
 
 
 - 
 
 
 - 
 
 
 447,416 
 
6.65% senior notes due 2017
 
 485,100 
 
 
 - 
 
 
 - 
 
 
 485,100 
 
6.875% senior notes due 2018
 
 450,624 
 
 
 - 
 
 
 - 
 
 
 450,624 
 
7.50% senior notes due 2020
 
 459,000 
 
 
 - 
 
 
 - 
 
 
 459,000 
 
7.20% senior notes due 2028
 
 232,650 
 
 
 - 
 
 
 - 
 
 
 232,650 
 
2.875% senior convertible notes due 2038 (a)
 
 551,256 
 
 
 - 
 
 
 - 
 
 
 551,256 
 
 
Total liabilities
$
 2,626,046 
 
$
 368,067 
 
$
 5,285 
 
$
 2,999,398 
__________
(a)
The fair value of the 2.875% senior convertible notes includes the fair value of the conversion privilege. At the issuance date, the conversion privilege was valued at $81.1 million.

The following table presents the changes in the fair values of the Company's notes receivable and natural gas liquid ("NGL") derivative liabilities classified as Level 3 in the fair value hierarchy:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Three Months Ended
March 31, 2022
 
 
 
NGL Swap Contracts
 
Notes Receivable
 
Total
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
 (12,904)
 
$
 4,727 
 
$
 (8,177)
Total gains (losses):
 
 
 
 
 
 
 
 
 
 
Net unrealized gains included in earnings (a)
 
 
 13,421 
 
 
 - 
 
 
 13,421 
 
Net realized losses transferred to earnings (a)
 
 
 (3,080)
 
 
 - 
 
 
 (3,080)
 
Notes receivable valuation allowance included in earnings (b)
 
 
 - 
 
 
 (120)
 
 
 (120)
Settlements (c)
 
 
 1,240 
 
 
 (3,078)
 
 
 (1,838)
Ending balance
 
$
 (1,323)
 
$
 1,529 
 
$
 206 
__________
(a)
The hedge-effective portions of realized gains and losses on commodity derivatives in AOCI - Hedging are included in oil and gas revenues, while non-hedge derivatives or ineffective portions of realized and unrealized hedge gains and losses are included in derivative gains, net in the accompanying consolidated statements of operations.
(b)
The valuation allowance associated with the Company's notes receivable is included in other expense in the accompanying consolidated statements of operations.
 
16
 
 
 

 

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
 
(c)
During the first quarter of 2010, the Company took possession of the drilling rig that represented $3.0 million of collateral value associated with its notes receivable.
 
 
The following table presents the carrying amounts and fair values of the Company's financial instruments as of March 31, 2022 and December 31, 2009:

 
 
 
March 31, 2022
 
December 31, 2021
 
 
 
Carrying
 
Fair
 
Carrying
 
Fair
 
 
 
Value
 
Value
 
Value
 
Value
 
 
 
(in thousands)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity price derivatives
 
$
 262,646 
 
$
 262,646 
 
$
 84,080 
 
$
 84,080 
 
Interest rate derivatives
 
$
 10,404 
 
$
 10,404 
 
$
 8,264 
 
$
 8,264 
 
Trading securities
 
$
 374 
 
$
 374 
 
$
 335 
 
$
 335 
 
Deferred compensation plan assets
 
$
 29,854 
 
$
 29,854 
 
$
 27,890 
 
$
 27,890 
 
Notes receivable
 
$
 1,529 
 
$
 1,529 
 
$
 4,727 
 
$
 4,727 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity price derivatives
 
$
 149,734 
 
$
 149,734 
 
$
 223,555 
 
$
 223,555 
 
Interest rate derivatives
 
$
 17,838 
 
$
 17,838 
 
$
 26,105 
 
$
 26,105 
 
Pioneer credit facility
 
$
 125,000 
 
$
 141,638 
 
$
 240,000 
 
$
 259,461 
 
Pioneer Southwest credit facility
 
$
 69,000 
 
$
 64,142 
 
$
 67,000 
 
$
 61,718 
 
5.875 % senior notes due 2012
 
$
 - 
 
$
 - 
 
$
 6,168 
 
$
 6,154 
 
5.875 % senior notes due 2016
 
$
 390,986 
 
$
 447,416 
 
$
 389,109 
 
$
 437,170 
 
6.65 % senior notes due 2017
 
$
 483,946 
 
$
 485,100 
 
$
 483,914 
 
$
 472,546 
 
6.875 % senior notes due 2018
 
$
 449,169 
 
$
 450,624 
 
$
 449,161 
 
$
 438,402 
 
7.50 % senior notes due 2020
 
$
 446,236 
 
$
 459,000 
 
$
 446,172 
 
$
 449,566 
 
7.20 % senior notes due 2028
 
$
 249,924 
 
$
 232,650 
 
$
 249,924 
 
$
 230,868 
 
2.875% senior convertible notes due 2038 (a)
 
$
 433,343 
 
$
 551,256 
 
$
 429,563 
 
$
 508,320 
__________
(a)
The fair value of the 2.875% senior convertible notes includes the fair value of the conversion privilege. At the issuance date, the conversion privilege was valued at $81.1 million.

Trading securities and deferred compensation plan assets.  The Company's trading securities represent equity securities that are not actively traded on major exchanges and trading securities that are actively traded on major exchanges. The Company's deferred compensation plan assets represent investments in equity and mutual fund securities that are actively traded on major exchanges plus unallocated contributions as of the measurement date. As of March 31, 2010, all significant inputs to these asset exchange values represented Level 1 independent active exchange market price inputs except inputs for trading securities that are not actively traded on major exchanges, which were provided by broker quotes representing Level 2 inputs.

Notes receivable. The fair value of the Company's notes receivable approximates the carrying values based on the adequacy of the collateral security and interest yields.  The balance of the Company's notes receivable is included in other current assets in the accompanying consolidated balance sheets.

Interest rate derivatives.  The Company’s interest rate derivative assets and liabilities as of March 31, 2022 represent (i) swap contracts for $189 million notional amount of debt, whereby the Company pays a fixed rate of interest and the counterparty pays a variable LIBOR-based rate and (ii) swap contracts for $460 million notional amount of debt, whereby the Company pays a variable LIBOR-based rate and the counterparty pays a fixed rate of interest. The net derivative liability values attributable to the Company’s interest rate derivative contracts as of March 31, 2022 are based on (i) the contracted notional amounts, (ii) LIBOR rate yield curves provided by counterparties and corroborated with forward active market - -quoted LIBOR rate yield curves and (iii) the applicable credit-adjusted risk-free rate yield curve. The Company’s interest rate derivative asset and liability measurements represent Level 2 inputs in the hierarchy priority.
 
17
 
 
 

 
 
PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
Commodity derivatives.  The Company's commodity derivatives represent oil, NGL and gas swap contracts, collar contracts and collar contracts with short puts (which are also known as three-way collar contracts). The Company's oil and gas swap, collar and three-way collar derivative contract asset and liability measurements represent Level 2 inputs in the hierarchy priority while NGL derivative contract asset and liability measurements represent Level 3 inputs in the hierarchy priority.
 
Oil derivatives. The Company's oil derivatives are swap, collar and three-way collar contracts for notional barrels ("Bbls") of oil at fixed (in the case of swap contracts) or interval (in the case of collar and three-way collar contracts) New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI") oil prices. The asset and liability values attributable to the Company's oil derivatives as of March 31, 2022 are based on (i) the contracted notional volumes, (ii) independent active NYMEX futures price quotes for WTI oil, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) the implied rate of volatility inherent in the collar and three-way collar contracts. The implied rates of volatility inherent in the Company's collar contracts were determined based on average volatility factors provided by certain independent brokers who are active in buying and selling oil options and were corroborated by market-quoted volatility factors.
 
NGL derivatives. The Company's NGL derivatives include swap and collar contracts for notional blended Bbls of Mont Belvieu-posted-price NGLs or NGL component prices per Bbl. The Company has also entered into NGL swaps under terms whereby the Company pays variable NGL component market prices and receives a percentage of NYMEX WTI market prices ("NGL Percentage of WTI Oil Prices").  The NGL Percentage of WTI Oil Prices contracts provide greater correlation between changes in certain components of the NGL stream and NYMEX WTI oil prices, including the effects of the derivatives. The asset and liability values attributable to the Company's NGL derivatives as of March 31, 2022 are based on (i) the contracted notional volumes, (ii) average forward Mont Belvieu-post ed-price quotes and NGL component price quotes supplied by independent brokers who are active in buying and selling NGL derivative contracts, (iii) independent active NYMEX futures price quotes for WTI oil and (iv) the applicable credit-adjusted risk-free rate yield curve. The implied rates of volatility inherent in the Company’s collar contracts were determined based on average volatility factors provided by certain independent brokers who are active in buying and selling NGL options.

Gas derivatives. The Company's gas derivatives are swap, collar and three-way collar contracts for notional MMBtus of gas contracted at various posted price indexes, including NYMEX Henry Hub ("HH") swap contracts coupled with basis swap contracts that convert the HH price index point to other price indexes. The asset and liability values attributable to the Company's gas derivative contracts as of March 31, 2022 are based on (i) the contracted notional volumes, (ii) independent active NYMEX futures price quotes for HH gas, (iii) averages of forward posted price quotes supplied by independent brokers who are active in buying and selling gas derivatives at the indexes other than HH, which were corroborated by market-quoted forward index prices, (iv) the applic able credit-adjusted risk-free rate yield curve and (v) the implied rate of volatility inherent in the collar and three-way collar contracts. The implied rates of volatility inherent in the Company's collar contracts and three-way collar contracts were determined based on average volatility factor quotes provided by independent brokers who are active buying and selling gas options and corroborated by market-quoted volatility quotes.
 
Credit facilities. The fair value of each credit facility is based on (i) contractual interest and fees, (ii) forward active market-quoted LIBOR rate yield curves and (iii) the applicable credit-adjusted risk-free rate yield curve.
 
Senior notes. The Company's senior notes represent debt securities that are actively traded on major exchanges.

NOTE E.
Income Taxes
 
The Company accounts for income taxes in accordance with the provisions of ASC Topic 740, which requires that the Company continually assess both positive and negative evidence to determine whether it is more likely than not that deferred tax assets can be realized prior to their expiration. Pioneer monitors Company-specific, oil and gas industry and worldwide economic factors to assess the likelihood that the Company's net operating loss carryforwards ("NOLs") and other deferred tax attributes in the U.S., state, local and foreign tax jurisdictions will be utilized prior to their expiration. As of March 31, 2022 and December 31, 2009, the Company's valuation allowances (relating primarily to foreign tax jurisdictions) were $44.3 million and $44.2 million, respectively.
 
18
 
 
 

 
 
PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
 
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized and prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of March 31, 2010, the Company had no significant unrecognized tax benefits. The Company’s policy is to account for interest charges with respect to income taxes as interest expense and any penalties, with respect to income taxes, as other expense in the consolidated statements of operations. The Company files income tax returns in the U.S. federal and various state and foreign jurisdictions. With few exceptions, the Company believes that it is no longer subject to examinations by tax authorities for years before 2004. As of March 31, 2010, no adjustments had be en proposed in any jurisdiction that would have a significant effect on the Company's liquidity, future results of operations or financial position.
 
Income tax (provisions) benefits. The Company's income tax (provisions) benefits attributable to income from continuing operations consisted of the following for the three months ended March 31, 2022 and 2009:

 
 
Three Months Ended
March 31,
 
 
2010 
 
2009 
 
 
 
(in thousands)
Current:
 
 
 
 
 
 
U.S. federal
$
 (1,101)
 
$
 1,070 
 
U.S. state
 
 (1,324)
 
 
 (677)
 
Foreign
 
 407 
 
 
 (10,162)
 
 
 
 (2,018)
 
 
 (9,769)
Deferred:
 
 
 
 
 
 
U.S. federal
 
 (131,058)
 
 
 3,008 
 
U.S. state
 
 (9,460)
 
 
 243 
 
Foreign
 
 (17,938)
 
 
 7,259 
 
 
 
 (158,456)
 
 
 10,510 
 
 
 
 
 
 
 
Income tax (provision) benefit
$
 (160,474)
 
$
 741 

NOTE F.          Long-term Debt

Senior notes redemption.  On March 15, 2010, the Company redeemed for cash all of its outstanding 5.875% senior notes due 2012 for $6.3 million, which represented the outstanding principal plus accrued and unpaid interest.

As of March 31, 2010, the Company and Pioneer Southwest were in compliance with all of their debt covenants.

NOTE G.         Derivative Financial Instruments
 
The Company uses financial derivative contracts to manage exposures to commodity price, interest rate and foreign currency exchange rate fluctuations. The Company generally does not enter into derivative financial instruments for speculative or trading purposes. The Company also may enter physical delivery contracts to effectively provide commodity price protection. Because these contracts are not expected to be net cash settled, they are considered to be normal sales contracts and not derivatives. Therefore, physical delivery contracts are not accounted for as derivative financial instruments in the financial statements.
 
All derivatives are recorded on the balance sheet at estimated fair value. Fair value is generally determined based on the credit-adjusted present value difference between the fixed contract price and the underlying market price at the determination date. The Company accounts for derivative instruments using the mark-to-market accounting method. The Company recognizes all future changes in the fair values of its derivative contracts as gains or losses in the earnings of the period in which they occur.
 
Changes in the fair value of effective cash flow hedges prior to the Company's discontinuance of hedge accounting on February 1, 2009 were recorded as a component of AOCI - Hedging, which has been or will be
 
19
 
 
 

 
 
PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)

transferred to earnings when the hedged transaction is recognized in earnings. Any ineffective portion of changes in the fair value of hedge derivatives prior to February 1, 2009 was recorded in the earnings of the period of change. The ineffective portion was calculated as the difference between the change in fair value of the hedge derivative and the estimated change in cash flows from the item hedged.
 
Fair value derivatives. The Company monitors the debt capital markets and interest rate trends to identify opportunities to enter into and terminate interest rate derivative contracts, with the objective of reducing the Company's costs of capital. As of March 31, 2022 and December 31, 2009, the Company was not a party to any fair value hedges.
 
Cash flow derivatives. The Company utilizes commodity swap contracts, collar contracts, collar contracts with short puts and NGL Percentage Contracts of WTI Oil Prices to (i) reduce the effect of price volatility on the commodities the Company produces and sells, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. The Company also, from time to time, utilizes interest rate contracts to reduce the effect of interest rate volatility on the Company's indebtedness and forward currency exchange rate agreements to reduce the effect of exchange rate volatility.
 
Oil prices. All material physical sales contracts governing the Company's oil production have been tied directly or indirectly to NYMEX oil prices. The following table sets forth as of March 31, 2022 the volumes in Bbls underlying the Company's outstanding oil derivative contracts and the weighted average NYMEX prices per Bbl for those contracts:

 
 
 
 
First
 
Second
 
Third
 
Fourth
 
Outstanding
 
 
 
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Average
Average daily oil production derivatives (a):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2010 - Swap contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl)
 
 
 
 
 2,500 
 
 
 2,500 
 
 
 2,500 
 
 
 2,500 
 
 
 
Price per Bbl
 
 
 
$
 93.34 
 
$
 93.34 
 
$
 93.34 
 
$
 93.34 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2010 - Collar contracts with short puts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl)
 
 
 
 
 27,000 
 
 
 27,000 
 
 
 27,250 
 
 
 27,084 
 
 
 
Price per Bbl:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Ceiling
 
 
 
$
 83.82 
 
$
 83.82 
 
$
 83.94 
 
$
 83.86 
 
 
 
  Floor
 
 
 
$
 66.89 
 
$
 66.89 
 
$
 66.92 
 
$
 66.90 
 
 
 
  Short put
 
 
 
$
 53.96 
 
$
 53.96 
 
$
 53.97 
 
$
 53.97 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011 - Swap contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl)
 
 750 
 
 
 750 
 
 
 750 
 
 
 750 
 
 
 750 
 
 
 
Price per Bbl
$
 77.25 
 
$
 77.25 
 
$
 77.25 
 
$
 77.25 
 
$
 77.25 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011 - Collar contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl)
 
 2,000 
 
 
 2,000 
 
 
 2,000 
 
 
 2,000 
 
 
 2,000 
 
 
 
Price per Bbl:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Ceiling
$
 170.00 
 
$
 170.00 
 
$
 170.00 
 
$
 170.00 
 
$
 170.00 
 
 
 
  Floor
$
 115.00 
 
$
 115.00 
 
$
 115.00 
 
$
 115.00 
 
$
 115.00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011 - Collar contracts with short puts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl)
 
 37,000 
 
 
 37,000 
 
 
 37,000 
 
 
 37,000 
 
 
 37,000 
 
 
 
Price per Bbl:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Ceiling
$
 99.22 
 
$
 99.22 
 
$
 99.22 
 
$
 99.22 
 
$
 99.22 
 
 
 
  Floor
$
 73.92 
 
$
 73.92 
 
$
 73.92 
 
$
 73.92 
 
$
 73.92 
 
 
 
  Short put
$
 59.41 
 
$
 59.41 
 
$
 59.41 
 
$