UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-Q
 / x /          Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                For the quarterly period ended September 30, 2021
                                       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 No. 1-13245
                        PIONEER NATURAL RESOURCES COMPANY
             (Exact name of Registrant as specified in its charter)
             Delaware                                        75-2702753
 (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                       Identification Number)
1400 Williams Square West, 5205 N. O'Connor Blvd., Irving, Texas       75039
           (Address of principal executive offices)                  (Zip code)
       Registrant's Telephone Number, including area code : (972) 444-9001
                                 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 / x / No / /
Number of shares of Common Stock outstanding as of
  October 31, 1997.................................................. 74,462,613
                               Page 1 of 36 pages.
                            Exhibit index on page 34.

                        PIONEER NATURAL RESOURCES COMPANY
                  (formerly Parker & Parsley Petroleum Company)
                                TABLE OF CONTENTS
                                                                          Page
                          PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
           Consolidated Balance Sheets as of September 30, 2021 and
              December 31, 2021   ........................................  3
           Consolidated Statements of Operations for the three and nine
             months ended September 30, 2021 and 1996.....................  5
           Consolidated Statement of Stockholders' Equity for the nine
             months ended September 30, 1997..............................  6
           Consolidated Statements of Cash Flows for the three and nine
             months ended September 30, 2021 and 1996.....................  7
           Notes to Consolidated Financial Statements.....................  8
Item 2.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations.......................... 17
                           PART II. OTHER INFORMATION
Item 1.    Legal Proceedings.............................................. 29
Item 4.    Submission of Matters to a Vote of Security Holders............ 29
Item 6.    Exhibits and Reports on Form 8-K............................... 30
           Signatures..................................................... 33
           Exhibit Index.................................................. 34
                                        2

                          PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
                        PIONEER NATURAL RESOURCES COMPANY
                  (formerly Parker & Parsley Petroleum Company)
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                                   September 30,   December 31,
                                                       1997            1996
                                                   ------------    -----------
                                                   (Unaudited)
                                     ASSETS
Current assets:
  Cash and cash equivalents                        $    40,631     $    18,711
  Restricted cash                                        1,716           1,749
  Accounts receivable:
    Trade, net                                          43,482          34,075
    Affiliates                                             578             434
    Oil and gas sales                                   84,033          48,459
  Inventories                                            6,839           3,644
  Deferred income taxes                                  3,600           7,400
  Other current assets                                   5,073           2,567
                                                    ----------      ----------
          Total current assets                         185,952         117,039
                                                    ----------      ----------
Property, plant and equipment, at cost:
  Oil and gas properties, using the
    successful efforts method of accounting:
       Proved properties                             3,994,707       1,419,051
       Unproved properties                              83,402           7,331
  Natural gas processing facilities                        -            59,276
  Accumulated depletion, depreciation and
    amortization                                      (554,132)       (445,238)
                                                    ----------      ----------
                                                     3,523,977       1,040,420
                                                    ----------      ----------
Other property and equipment, net                       35,736          27,779
Other assets, net                                       51,078          14,627
                                                    ----------      ----------
                                                   $ 3,796,743     $ 1,199,865
                                                    ==========      ==========
The financial information included as of September 30, 2021 has been prepared by
           management without audit by independent public accountants.
        The accompanying notes are an integral part of these consolidated
                             financial statements.
                                        3

                        PIONEER NATURAL RESOURCES COMPANY
                  (formerly Parker & Parsley Petroleum Company)
                     CONSOLIDATED BALANCE SHEETS (continued)
                        (in thousands, except share data)
                                                   September 30,   December 31,
                                                       1997            1996
                                                   ------------    -----------
                                                   (Unaudited)
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term debt            $    11,116     $     5,381
   Undistributed unit purchases                          1,716           1,749
   Accounts payable:
      Trade                                             74,152          56,713
      Affiliates                                         2,546           7,528
   Domestic and foreign income taxes                        52           1,743
   Other current liabilities                            46,995          17,856
                                                    ----------      ----------
            Total current liabilities                  136,577          90,970
                                                    ----------      ----------
Long-term debt, less current maturities              1,601,145         320,908
Other noncurrent liabilities                           127,614           8,071
Deferred income taxes                                  213,300          60,800
Preferred stock of subsidiary                              -           188,820
Stockholders' equity:
   Preferred stock, $.01 par value; 100,000,000
      shares authorized; none issued and
      outstanding                                          -               -
   Common stock, $.01 par value; 500,000,000 shares
      authorized; 74,449,446 and 36,899,618 shares
      issued at September 30, 2021 and December 31,
      1996, respectively                                   745             369
   Additional paid-in capital                        1,626,487         462,873
   Treasury stock, at cost; 1,833,383 shares at
      December 31, 2021                                    -           (31,528)
   Unearned compensation                               (17,316)         (1,625)
   Retained earnings                                   108,191         100,207
                                                    ----------      ----------
            Total stockholders' equity               1,718,107         530,296
                                                    ----------      ----------
Commitments and contingencies (Note F)
                                                   $ 3,796,743     $ 1,199,865
                                                    ==========      ==========
The financial information included as of September 30, 2021 has been prepared by
           management without audit by independent public accountants.
        The accompanying notes are an integral part of these consolidated
                             financial statements.
                                        4

                        PIONEER NATURAL RESOURCES COMPANY
                  (formerly Parker & Parsley Petroleum Company)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (Unaudited)
                                        Three months ended   Nine months ended
                                           September 30,       September 30,
                                        ------------------   ------------------
                                         1997      1996       1997       1996
                                        --------  --------   --------  --------
Revenues:
   Oil and gas                          $150,354  $ 91,313   $348,980  $283,327
   Natural gas processing                    -       5,706        -      16,810
   Interest and other                        816    12,573      3,649    14,996
   Gain on disposition of assets, net        108     1,638      2,745    96,887
                                         -------   -------    -------   -------
                                         151,278   111,230    355,374   412,020
                                         -------   -------    -------   -------
Costs and expenses:
   Oil and gas production                 42,003    24,829     91,674    82,233
   Natural gas processing                    -       3,088        -       9,123
   Depletion, depreciation and
     amortization                         67,388    26,590    126,897    86,228
   Exploration and abandonments           15,513     3,763     34,310    14,962
   General and administrative             16,779     6,430     31,769    19,420
   Interest                               24,110    10,053     44,264    36,105
   Other                                   2,533        12      2,982       918
                                         -------   -------    -------   -------
                                         168,326    74,765    331,896   248,989
                                         -------   -------    -------   -------
Income (loss) before income taxes
   and extraordinary item                (17,048)   36,465     23,478   163,031
Income tax benefit (provision)             6,000   (15,500)    (8,500)  (47,200)
                                         -------   -------    -------   -------
Income (loss) before extraordinary item  (11,048)   20,965     14,978   115,831
Extraordinary item - loss on early
   extinguishment of debt, net of tax     (1,518)      -       (1,518)      -
                                         -------   -------    -------   -------
Net income (loss)                       $(12,566) $ 20,965   $ 13,460  $115,831
                                         =======   =======    =======   =======
Income (loss) per share:
  Primary:
    Income (loss) before extraordinary
       item                             $   (.18) $    .58   $    .34  $   3.24
    Extraordinary item                      (.03)      -         (.03)      -
                                         -------   -------    -------   -------
    Net income (loss)                   $   (.21) $    .58   $    .31  $   3.24
                                         =======   =======    =======   =======
  Fully diluted:
    Income (loss) before extraordinary
       item                             $   (.18) $    .54   $    .34  $   2.86
    Extraordinary item                      (.03)      -         (.03)      -
                                         -------   -------    -------   -------
    Net income (loss)                   $   (.21) $    .54   $    .31  $   2.86
                                         =======   =======    =======   =======
Dividends declared per share            $    .05  $    .05   $    .10  $    .10
                                         =======   =======    =======   =======
Weighted average shares outstanding       59,543    35,881     43,453    35,763
                                        ========  ========   ========  ========
         The financial information included herein has been prepared by
           management without audit by independent public accountants.
        The accompanying notes are an integral part of these consolidated
                             financial statements.
                                        5


                        PIONEER NATURAL RESOURCES COMPANY
                  (formerly Parker & Parsley Petroleum Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                        (in thousands, except share data)
                                   (Unaudited)
Common Stock Additional Total Shares Common Paid-in Treasury Unearned Retained Stockholders' Outstanding Stock Capital Stock Compensation Earnings Equity ----------- ------- ---------- -------- ------------ -------- ------------ Balance as of January 1, 2022 35,066,235 $ 369 $ 462,873 $(31,528) $ (1,625) $100,207 $ 530,296 Exercise of long-term incentive plan stock options 479,999 5 11,253 - - - 11,258 Acquisition of MESA Inc. 31,782,263 318 982,248 - - - 982,566 Cancellation of treasury shares - (19) (34,441) 34,460 - - - Exchange of Preferred Shares for common shares 6,713,683 67 182,909 - - - 182,976 Tax benefits related to stock options - - 2,800 - - - 2,800 Purchase of treasury stock (96,120) - - (2,932) - - (2,932) Restricted shares awarded 503,386 5 18,845 - (17,951) - 899 Amortization of unearned compensation - - - - 2,260 - 2,260 Net income - - - - - 13,460 13,460 Dividends ($.10 per share) - - - - - (5,476) (5,476) ----------- ------ --------- ------- -------- ------- ---------- Balance as of September 30, 2021 74,449,446 $ 745 $1,626,487 $ - $ (17,316) $108,191 $ 1,718,107 =========== ====== ========= ======= ======== ======= ========== The financial information included herein has been prepared by managementwithout audit by independent public accountants. The accompanying notes are an integral part of these consolidated financial statements.
6 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three months ended Nine months ended September 30, September 30, ------------------- --------------------- 1997 1996 1997 1996 -------- -------- --------- --------- Cash flows from operating activities: Net income (loss) $(12,566) $ 20,965 $ 13,460 $ 115,831 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depletion, depreciation and amortization 67,388 26,590 126,897 86,228 Exploration expenses, including dry holes 11,390 2,139 25,581 10,386 Deferred income taxes (4,800) 15,200 6,600 46,900 Gain on disposition of assets, net (108) (1,638) (2,745) (96,887) Other noncash items 10,720 (3,993) 12,900 (2,316) Change in operating assets and liabilities, net of effects from acquisitions and dispositions: Accounts receivable (3,032) 1,979 8,992 21,357 Inventories 729 1,336 (1,122) 782 Other current assets (544) (66) 136 88 Accounts payable (4,074) 7,953 (975) 4,941 Accrued income taxes and other current liabilities (10,628) (1,622) (10,656) 2,104 ------- ------- -------- -------- Net cash provided by operating activities 54,475 68,843 179,068 189,414 ------- ------- -------- -------- Cash flows from investing activities: Payment for acquisition, net of cash acquired (519) - (519) - Proceeds from disposition of wholly-owned subsidiaries, net of cash disposed - 4,365 - 183,102 Proceeds from disposition of assets 560 5,317 12,838 51,194 Additions to oil and gas properties (81,300) (65,595) (246,574) (139,540) Other property additions, net (4,902) (1,561) (9,878) (4,531) ------- ------- -------- -------- Net cash provided by (used in) investing activities (86,161) (57,474) (244,133) 90,225 ------- ------- -------- -------- Cash flows from financing activities: Borrowings under long-term debt 63,353 - 104,896 782 Principal payments on long-term debt (5,477) (523) (18,279) (229,806) Payments of other noncurrent liabilities (1,775) (1,646) (2,482) (2,035) Dividends (3,722) (1,780) (5,476) (3,550) Purchase of treasury stock - (45) (2,932) (227) Exercise of long-term incentive plan stock options 10,095 198 11,258 2,757 Other - - - (151) ------- ------- -------- -------- Net cash provided by (used in) financing activities 62,474 (3,796) 86,985 (232,230) ------- ------- -------- -------- Effect of exchange rate changes on cash and cash equivalents - - - 290 Net increase in cash and cash equivalents 30,788 7,573 21,920 47,409 Cash and cash equivalents, beginning of period 9,843 60,066 18,711 19,940 ------- ------- -------- -------- Cash and cash equivalents, end of period $ 40,631 $ 67,639 $ 40,631 $ 67,639 ======= ======= ======== ======== The financial information included herein has been prepared by management without audit by independent public accountants. The accompanying notes are an integral part of these consolidated financial statements.
7 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 (Unaudited) NOTE A. Organization and Nature of Operations Pioneer Natural Resources Company ("Pioneer") is a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. Pioneer was formed in order to complete the merger between Parker & Parsley Petroleum Company ("Parker & Parsley") and MESA Inc. ("Mesa"). Pioneer was originally created as a wholly-owned subsidiary of Mesa, a Texas corporation, the purpose of which was to allow Mesa to reincorporate into a Delaware corporation and to accomplish the merger with Parker & Parsley. Both Parker & Parsley and Mesa were oil and gas exploration and production concerns with ownership interests in oil and gas properties located principally in the MidContinent, Southwestern and onshore and offshore Gulf Coast regions of the United States. In accordance with the provisions of Accounting Principles Board No. 16, "Business Combinations", the merger has been accounted for as a purchase of Mesa by Parker & Parsley. As a result, the historical financial statements for Pioneer are those of Parker & Parsley, and Pioneer's financial statements present the addition of Mesa's assets and liabilities as an acquisition by Parker & Parsley in August 1997. Specifically, the accompanying Consolidated Statements of Operations and Consolidated Statements of Cash Flows include the financial results of Mesa beginning in August 1997. NOTE B. Summary of Significant Accounting Policies In the opinion of management, the unaudited consolidated financial statements of Pioneer as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 1996 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 amounts in the prior period financial statements have been reclassified to conform to the current period presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the 1996 Annual Report on Form 10-K of Parker & Parsley. NOTE C. Merger with Mesa In August 1997, the shareholders of Pioneer's predecessor entities, Parker & Parsley and Mesa, approved an Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") by a majority vote of 76% by holders of Parker & Parsley common stock and 71%, 58%, and 100% by holders of Mesa common stock, Mesa Series A Preferred Stock and Mesa Series B Preferred Stock, respectively. Mesa was a publicly traded independent oil and gas company based in Irving, Texas with substantial producing properties and operations in the MidContinent region of the United States. The Merger Agreement provided for (i) the merger of Mesa with and into Pioneer, a wholly-owned subsidiary of Mesa, as a result of which Mesa, which was a Texas corporation, reincorporated into Delaware and (ii) the merger of Parker & Parsley with and into Mesa Operating Co., a wholly-owned subsidiary of Mesa, as a result of which Parker & Parsley became a wholly-owned subsidiary of Pioneer (items (i) and (ii) collectively the "Mergers"). In accordance with the Merger Agreement, (i) holders of Parker & Parsley common stock received one share of Pioneer common stock for each share held; (ii) holders of Mesa common stock received one share of Pioneer common stock for every seven shares held; and (iii) holders of Mesa Series A 8% Cumulative Convertible Preferred Stock and Mesa Series B 8% Cumulative Convertible Preferred Stock received 1.25 shares of Pioneer common stock for every seven shares held. No fractional shares were issued. 8 The aggregate Pioneer purchase consideration related to the assets and liabilities of Mesa, including transaction costs, was $990.5 million. The following table represents the allocation of the total purchase price (in thousands) of Mesa to the acquired assets and liabilities based upon the fair values assigned to each of the significant assets acquired and liabilities assumed. Any future adjustments to the allocation of the purchase price are not anticipated to be material to Pioneer's financial statements. Recorded amounts of assets acquired, including cash acquired of $7,398 $2,496,579 Liabilities assumed, including $152,500 of deferred taxes 1,506,096 --------- $ 990,483 ========= Pioneer common stock consideration (31,782,263 shares valued at $30.82 per share) $ 982,566 Transaction costs 7,917 --------- Aggregate purchase consideration $ 990,483 ========= The liabilities assumed include amounts recorded for litigation and certain other preacquisition contingencies of Mesa. NOTE D. Credit Facility Agreements On August 7, 1997, Pioneer Natural Resources USA, Inc. (the "Borrower"), a wholly-owned subsidiary of Pioneer, entered into two Credit Facility Agreements ("Credit Facility Agreements") with a syndicate of banks (the "Banks") that refinanced the credit facilities of Parker & Parsley and Mesa as of the date of the Mergers. One Credit Facility Agreement (the "Primary Facility") provides for a $1.1 billion credit facility. The maturity date for the Primary Facility is August 7, 2002. The second Credit Facility Agreement (the "364-day Facility") provides for a $300 million credit facility with a maturity date of August 5, 1998. The Borrower has the option to renew the 364-day Facility for another period of 364 days by notifying the Banks in writing of such election not more than 60 days and not less than 45 days prior to the maturity date. The prior credit agreements of Parker & Parsley and Mesa were paid in full following the Mergers utilizing proceeds from initial borrowings under the new Primary Facility. Advances on both Credit Facility Agreements bear interest, at the Borrower's option, based on (a) the prime rate of NationsBank of Texas, N.A., (b) a Eurodollar rate (substantially equal to the London Interbank Offered Rate ("LIBOR")), adjusted for the reserve requirement as determined by the Board of Governors of the Federal Reserve System with respect to transactions in Eurocurrency liabilities ("LIBOR Rate"), or (c) a competitive bid rate as quoted by the Banks electing to participate pursuant to a request by the Borrower. Advances that are LIBOR Rate have periodic maturities, at the Borrower's option, of one, two, three, six, nine or twelve months. Maturities of greater than six months are subject to availability of such deposits in the relevant markets. Advances that are competitive bid rate have periodic maturities, at the Borrower's option, of not less than 15 days nor more than 360 days. The interest rates on LIBOR Rate advances vary with interest rate margins ranging from 18 basis points to 45 basis points. The interest rate margin is determined by a grid based upon Pioneer's senior unsecured long-term public debt rating. The obligations of the Borrower under the Credit Facility Agreements are guaranteed by Pioneer and certain of its subsidiaries unless and to the extent any such subsidiary has been designated as an "Unrestricted Subsidiary" by the Borrower pursuant to the Credit Facility Agreements. Certain subsidiaries of the Borrower which have not been designated as Unrestricted Subsidiaries have not provided guaranties because either (a) such guaranty would result in adverse tax consequences pursuant to Section 956 of the Internal Revenue Code of 1986, as amended, or (b) such subsidiary is prohibited from executing a guaranty pursuant to contractual restrictions. In these cases, the Borrower and certain of its subsidiaries have pledged a portion of the issued and outstanding capital stock of such subsidiaries as security for the obligations of the Borrower under the Credit Facility Agreements. The Credit Facility Agreements contain various restrictive covenants and compliance requirements, which include (a) minimum financial requirements; (b) limits on the incurrence of additional indebtedness; (c) limitations on mergers; and (d) limits on making certain restricted payments. 9 As of September 30, 2021 and December 31, 1996, long-term debt consists of the following: September 30, December 31, 1997 1996 ------------ ----------- (in thousands) Line of credit.................................. $ 713,000 $ 9,000 8-7/8% senior notes due 2005.................... 150,000 150,000 8-1/4% senior notes due 2007 (net of discount).. 149,328 149,277 10-5/8% senior subordinated notes due 2006 (including premium)........................... 369,572 - 11-5/8% senior subordinated notes discount due 2006 (net of discount)........................ 209,481 - Fixed rate building loan........................ 9,336 10,121 Other........................................... 11,544 7,891 --------- ---------- 1,612,261 326,289 Less current maturities......................... 11,116 5,381 --------- ---------- $ 1,601,145 $ 320,908 ========== ========== The accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2021 include a $1.5 million after-tax, noncash charge for an extraordinary loss on early extinguishment of debt resulting from the Mergers. This extraordinary loss relates to capitalized issuance fees associated with Parker & Parsley's previously existing bank credit facility which was replaced by the new Credit Facility Agreements for Pioneer. NOTE E. Conversion of Subsidiary Preferred Shares to Common Stock On July 28, 1997, Pioneer exercised its right to require each holder of its 6 1/4% Cumulative Guaranteed Monthly Income Convertible Preferred Shares ("Preferred Shares") to exchange all Preferred Shares for shares of common stock of Pioneer. The Preferred Shares were issued by Parker & Parsley Capital LLC, a wholly-owned finance subsidiary of Pioneer, in 1994. On or after April 1, 1997, Pioneer had the option to exchange the Preferred Shares for Pioneer common stock at a rate of 1.7778 shares of common stock for each Preferred Share, provided that, among other conditions, the closing price of Pioneer common stock equaled or exceeded 125% of the then applicable conversion price for the 20 day trading period before the date of conversion. Subsequent to April 1, 1997, 125% of the applicable conversion price equaled $35.16. The closing price of Pioneer's common stock for the period from June 27, 2022 to July 25, 2022 ranged from $35.38 to $39.50. On July 28, 1997, Pioneer issued 6.7 million shares of common stock in exchange for the 3,776,400 Preferred Shares outstanding. As a result, Pioneer will no longer incur interest expense associated with the Preferred Shares of approximately $12 million per year. NOTE F. Commitments and Contingencies Legal Actions. Pioneer is party to various legal actions incidental to its business, including, but not limited to, the proceedings described below. The majority of these lawsuits primarily involve claims for damages arising from oil and gas leases and ownership interest disputes. Pioneer believes that the ultimate disposition of these legal actions will not have a material adverse effect on Pioneer's consolidated financial position, liquidity, capital resources or future results of operations. Pioneer will continue to evaluate its litigation matters on a quarter-by-quarter basis and will adjust its litigation reserve as appropriate to reflect the then current status of its litigation. Pioneer believes that the costs for compliance with environmental laws and regulations have not and will not have a material effect on Pioneer's financial position or results of operations. Kansas Ad Valorem Tax The Natural Gas Policy Act of 1978 ("NGPA") allows a "severance, production or similar" tax to be included as an add-on, over and above the maximum lawful price for natural gas. Based on a Federal Energy Regulatory Commission ("FERC") ruling that Kansas ad valorem tax was such a tax, Mesa collected the Kansas ad valorem tax in addition to the otherwise maximum lawful price. The FERC's ruling was appealed to the United States Court of Appeals for the District of Columbia ("D.C. Circuit"), which held in June 1988 that the FERC failed to provide a reasoned basis for its findings and remanded the case to the FERC for further consideration. 10 On December 1, 1993, the FERC issued an order reversing its prior ruling, but limiting the effect of its decision to Kansas ad valorem taxes for sales made on or after June 28, 1988. The FERC clarified the effective date of its decision by an order dated May 18, 1994. The order clarified that the effective date applies to tax bills rendered after June 28, 1988, not sales made on or after that date. Numerous parties filed appeals on the FERC's action in the D.C. Circuit. Various natural gas producers challenged the FERC's orders on two grounds: (1) that the Kansas ad valorem tax, properly understood, does qualify for reimbursement under the NGPA; and (2) the FERC's ruling should, in any event, have been applied prospectively. Other parties challenged the FERC's orders on the grounds that the FERC's ruling should have been applied retroactively to December 1, 1978, the date of the enactment of the NGPA and producers should have been required to pay refunds accordingly. The D.C. Circuit issued its decision on August 2, 1996, which holds that producers must make refunds of all Kansas ad valorem tax collected with respect to production since October 4, 2021 as opposed to June 28, 1988. Petitions for rehearing were denied on November 6, 1996. Various natural gas producers subsequently filed a petition for writ of certiori with the United States Supreme Court seeking to limit the scope of the potential refunds to tax bills rendered on or after June 28, 2022 (the effective date originally selected by the FERC). Williams Natural Gas Company filed a cross-petition for certiori seeking to impose refund liability back to December 1, 1978. Both petitions were denied on May 12, 1997. Pioneer and other producers filed petitions for adjustment with the FERC on June 24, 1997. Pioneer is unable at this time to predict the final outcome of this matter or the amount, if any, that will ultimately be refunded. Pioneer has a $20 million provision recorded for such litigation in the accompanying Consolidated Balance Sheet at September 30, 1997. Pioneer is seeking waiver or set-off from FERC with respect to that portion of the refund associated with (i) non-recoupable royalties, (ii) non-recoupable Kansas property taxes based, in part, upon the higher prices collected, and (iii) interest for all periods. On September 10, 1997, FERC denied this request, and on October 10, 1997, Pioneer and other producers filed a request for rehearing. Masterson In February 1992, the current lessors of an oil and gas lease (the "Gas Lease") dated April 30, 1955, between R.B. Masterson et al., as lessor, and Colorado Interstate Gas Company ("CIG"), as lessee, sued CIG in Federal District Court in Amarillo, Texas, claiming that CIG had underpaid royalties due under the Gas Lease. Under the agreements with CIG, Pioneer, as successor to Mesa, has an entitlement to gas produced from the Gas Lease. In August 1992, CIG filed a third-party complaint against Pioneer for any such royalty underpayment which may be allocable to Pioneer. Plaintiffs alleged that the underpayment was the result of CIG's use of an improper gas sales price upon which to calculate royalties and that the proper price should have been determined pursuant to a "favored-nations" clause in a July 1, 1967, amendment to the Gas Lease (the "Gas Lease Amendment"). The plaintiffs also sought a declaration by the court as to the proper price to be used for calculating future royalties. The plaintiffs alleged royalty underpayments of approximately $500 million (including interest at 10%) covering the period from July 1, 1967, to the present. In March 1995 the court made certain pretrial rulings that eliminated approximately $400 million of the plaintiff's claims (which related to periods prior to October 1, 2021) , but which also reduced a number of Pioneer's defenses. Pioneer and CIG filed stipulations with the court whereby Pioneer would have been liable for between 50% and 60%, depending on the time period covered, of an adverse judgment against CIG or post-February 1988 underpayments of royalties. On March 22, 1995, a jury trial began and on May 4, 1995, the jury returned its verdict. Among its findings, the jury determined that CIG had underpaid royalties for the period after September 30, 1989, in the amount of approximately $140,000. Although the plaintiffs argued that the "favored-nations" clause entitled them to be paid for all of their gas at the highest price voluntarily paid by CIG to any other lessor, the jury determined that the plaintiffs were estopped from claiming that the "favored-nations" clause provides for other than a pricing-scheme to pricing-scheme comparison. In light of this determination, and the plaintiff's stipulation that a pricing-scheme to pricing-scheme comparison would not result in any "trigger prices" or damages, defendants asked the court for a judgment that plaintiffs take nothing. The court, on June 7, 1995, entered final judgment that plaintiffs recover no monetary damages. The plaintiffs filed a motion for new trial on June 22, 1995. The court, on July 18, 1997, denied plaintiffs' motion. The plaintiffs have appealed to the Fifth Circuit. 11 On June 7, 1996, the plaintiffs filed a separate suit against CIG and Pioneer in state court in Amarillo, Texas, similarly claiming underpayment of royalties under the "favored-nations" clause, but based upon the above-described pricing-scheme to pricing-scheme comparison on a well-by-well monthly basis. The plaintiffs also claim underpayment of royalties since June 7, 1995, under the "favored-nations" clause based upon either the pricing-scheme to pricing-scheme method or their previously alleged higher price method. Pioneer believes it has several defenses to this action and intends to contest it vigorously. Pioneer is not currently able to determine the range of reasonably possible losses, if any, that would be payable if such action was determined adversely to Pioneer. The federal court in the above-referenced first suit issued an order on July 29, 1996, which stayed the second suit pending the plaintiffs' resolution of the first suit. However, based on the jury verdict and final judgment, Pioneer does not currently expect the ultimate resolution of these lawsuits to have a material adverse effect on its financial position or results of operations. Shareholder Litigation On July 3, 1995, Robert Strougo filed a class action and derivative action in the District Court of Dallas County, Texas, 160th Judicial District, against T. Boone Pickens, Paul W. Cain, John L. Cox, John S. Herrington, Wales H. Madden, Jr., Fayez S. Sarofim, Robert L. Stillwell and J. R. Walsh, Jr. (the "Director Defendants"), each of whom was a former director of Mesa. The class action was purportedly brought on behalf of a class of Mesa shareholders and alleges, inter alia, that the Mesa Board infringed upon the suffrage rights of the class and impaired the ability of the class to receive tender offers by adoption of a shareholder rights plan. The lawsuit was also brought derivatively on behalf of Mesa and alleges, inter alia, that the Mesa Board breached fiduciary duties to Mesa by adopting a shareholder rights plan and by failing to consider the sale of Mesa. The lawsuit seeks unspecified damages, attorneys' fees, and injunctive and other relief. Two other lawsuits filed by Herman Krangel, Lilian Krangel, Jacquelyn A. Cady and William S. Montagne, Jr., in the District Court of Dallas County have been consolidated into this lawsuit. A third lawsuit filed by Deborah M. Eigen and Adele Brody as a derivative lawsuit in the U.S. District Court for the Northern District of Texas, Dallas Division, intervened in this lawsuit. In November 1997, the Court dismissed this lawsuit. NOTE G. Derivative Financial Instruments Commodity hedges. Pioneer utilizes various swap and option contracts to (i) reduce the effect of the volatility of price changes on the commodities Pioneer produces and sells, (ii) support Pioneer's annual capital budgeting and expenditure plans and (iii) lock in prices to protect the economics related to certain capital projects. Crude Oil. All material purchase contracts governing Pioneer's oil production are tied directly or indirectly to NYMEX prices. The following table sets forth Pioneer's outstanding oil swap contracts and collar option contracts as of September 30, 1997. First Second Third Fourth Quarter Quarter Quarter Quarter Total ------- ------- ------- ------------ ------------ Oil production: 1997 - Swap Contracts Volume (MMBbl) - - - .9 .9 Price per Bbl $ - $ - $ - $ 18.93 $ 18.93 1997 - Collar Options Volume (MMBbl) - - - .1 .1 Price per Bbl $ - $ - $ - $17.82-24.31 $17.82-24.31 1998 - Swap Contracts Volume (MMBbl) .8 .8 .8 .8 3.2 Price per Bbl $ 19.76 $ 19.76 $ 19.75 $ 19.74 $ 19.75 12 Pioneer reports average oil prices per Bbl including the effects of oil quality, gathering and transportation costs and the net effect of the oil hedges. During the three and nine months ended September 30, 1997, Pioneer reported average oil prices of $17.93 per Bbl and $18.70 per Bbl, respectively, while realizing an average price for physical oil sales (excluding hedge results) for the same periods of $18.03 per Bbl and $19.37 per Bbl, respectively. The comparable average NYMEX prompt month closing per Bbl for the three and nine months ended September 30, 2021 was $19.79 and $20.83, respectively. Pioneer recorded net reductions to oil revenues of $351 thousand and $6.3 million for the three and nine months ended September 30, 1997, respectively, as a result of its oil price hedges. During the three and nine months ended September 30, 1996, Pioneer reported average oil prices per Bbl of $20.34 and $19.62, respectively, while realizing an average price for physical oil sales (excluding hedge results) for the same periods of $21.63 per Bbl and $20.39 per Bbl, respectively. The comparable average NYMEX prompt month closing per Bbl for the three and nine months ended September 30, 2021 was $22.33 and $21.18, respectively. Pioneer recorded net reductions to oil revenues of $3.3 million and $6.4 million for the three and nine months ended September 30, 1996, respectively, as a result of its oil price hedges. Natural Gas. Pioneer employs a policy of hedging gas production based on the index price upon which the gas is actually sold in order to mitigate the basis risk between NYMEX prices and actual index prices. The following table sets forth Pioneer's outstanding gas swap contracts, collar option contracts and put option contracts as of September 30, 1997. Prices included herein represent Pioneer's weighted average index price per MMBtu for the swap contracts and put option contracts and the weighted average index price range for the collar option contracts and, as an additional point of reference, the weighted average NYMEX price. First Second Third Fourth Quarter Quarter Quarter Quarter Total ---------- ------- ------- ---------- ---------- Gas production: 1997 - Swap Contracts Volume (Bcf) - - - 13.4 13.4 Index price per MMBtu $ - $ - $ - $ 2.18 $ 2.18 NYMEX price per MMBtu $ - $ - $ - $ 2.34 $ 2.34 1997 - Collar Options Volume (Bcf) - - - 7.0 7.0 Index price per MMBtu $ - $ - $ - $2.13-2.67 $2.13-2.67 1997 - Put Options Volume (Bcf) - - - .2 .2 Index price per MMBtu $ - $ - $ - $ 2.13 $ 2.13 1998 - Swap Contracts Volume (Bcf) 12.6 3.9 2.8 2.4 21.7 Index price per MMBtu $ 2.35 $ 1.93 $ 1.75 $ 1.79 $ 2.13 NYMEX price per MMBtu $ 2.48 $ 2.22 $ 2.22 $ 2.22 $ 2.39 1998 - Collar Options Volume (Bcf) 3.6 - - - 3.6 Index price per MMBtu $2.50-3.44 $ - $ - $ - $2.50-3.44 1998 - Put Options Volume (Bcf) .3 2.5 3.0 1.1 6.9 Index price per MMBtu $ 2.50 $ 1.83 $ 1.83 $ 1.85 $ 2.08 1999 - Swap Contracts Volume (Bcf) 1.4 .4 - - 1.8 Index price per MMBtu $ 1.58 $ 1.86 $ - $ - $ 1.65 NYMEX price per MMBtu $ 2.03 $ 2.03 $ - $ - $ 2.03 13 In addition to the open positions above for the fourth quarter of 1997 and the first quarter of 1998, Pioneer has sold short put options for 2.9 Bcf and 3.9 Bcf, respectively. Consequently, there is no effective minimum price to be realized from the collar and put options if the NYMEX price falls below $2.45 and $2.37, respectively. Pioneer reports average gas prices per Mcf including the effects of Btu content, gathering and transportation costs, gas processing and shrinkage and the net effect of the gas hedges. During the three and nine months ended September 30, 1997, Pioneer reported average gas prices of $2.16 per Mcf and $2.21 per Mcf, respectively, while realizing an average price for physical gas sales (excluding hedge results) for the same periods of $2.22 per Mcf and $2.32 per Mcf, respectively. The comparable average NYMEX prompt month closing per Mcf for the three and nine months ended September 30, 2021 was $2.49 and $2.33, respectively. Pioneer recorded net reductions to gas revenues of $1.8 million and $7.9 million for the three and nine months ended September 30, 1997, respectively, as a result of its gas price hedges. During the three and nine months ended September 30, 1996, Pioneer reported average gas prices per Mcf of $2.09 and $2.12, respectively, while realizing an average price for physical gas sales (excluding hedge results) for the same periods of $2.12 per Mcf and $2.19 per Mcf, respectively. The comparable average NYMEX prompt month closing per Mcf for the three and nine months ended September 30, 2021 was $2.17 and $2.33, respectively. Pioneer recorded net reductions to gas revenues of $621 thousand and $3.7 million for the three and nine months ended September 30, 1996, respectively, as a result of its gas price hedges. Natural Gas Liquids. Pioneer employs a policy of hedging natural gas liquids based on actual product prices in order to mitigate some of the volatility associated with NYMEX pricing. Natural gas liquids are sold under long-term contracts which provide price flexibility and allow the company to maximize prices between trading hubs. First Second Third Fourth Quarter Quarter Quarter Quarter Total ------- ------- ------- ------- ------- Natural gas liquids production: 1997 - Swap Contracts Volume (MMBbl) - - - .1 .1 Price per Bbl $ - $ - $ - $ 16.27 $ 16.27 During the three and nine months ended September 30, 1997, Pioneer reported average natural gas liquids prices of $12.89 per Bbl while realizing an average price for physical sales (excluding hedge results) of $12.78 per Bbl and recorded a net increase to natural gas liquids revenue of $124 thousand. Fair market value adjustment. During December 1996, Mesa entered into BTU swap agreements that cover 13,036 MMBTU per day from January 1, 2022 through December 31, 2004. The agreements require that from January 1, 2022 through December 31, 1998, Pioneer will receive a premium of $.52 per MMBTU over market natural gas prices. During the six year period of January 1, 2022 through December 31, 2004, Pioneer will receive 10% of the NYMEX oil price for the volumes covered. On September 30, 1997, Pioneer recorded a mark-to-market adjustment to the carrying value of the BTU swap agreements that resulted in the recognition of a $2.1 million noncash pre-tax charge to the results for the third quarter of 1997. These contracts will continue to be marked-to-market at the end of each reporting period during their respective lives and the effects on Pioneer's results of operations in future periods could be significant. Interest rate swaps. During the second quarter of 1996, Pioneer entered into a series of interest rate swap agreements for an aggregate amount of $150 million with four counterparties. These agreements, which have a term of three years, effectively convert a portion of Pioneer's fixed-rate borrowings into floating-rate obligations. The weighted average fixed rate being received by Pioneer over the term of these agreements is 6.62% while the weighted average variable rate paid by Pioneer for the three and nine months ended September 30, 1997 was 5.94% and 5.75%, respectively, and for the three and nine months ended September 30, 1996, the weighted average variable rate paid by Pioneer was 5.65%. The variable rate will be redetermined approximately every six months based upon the London interbank offered rate at that point in time. In August 1996, Mesa entered into an interest rate swap agreement with one counterparty for an aggregate amount of $250 million. This agreement, which has a term of two years, effectively converts a portion of Pioneer's floating rate borrowings into fixed-rate obligations. The economic effect of this agreement, given Pioneer's current interest rate on its Credit Facility Agreements, is to fix the interest rate on $250 million of floating rate debt at a rate of 6.51%. 14 The accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2021 include a reduction in interest expense of $5 thousand and $705 thousand, respectively, and a reduction in interest expense of $350 thousand and $461 thousand for the three and nine months ended September 30, 1996, respectively, to account for the settlement of Pioneer's interest rate swap agreements. In October 1997, Pioneer entered into two agreements with a counterparty designated as forward U.S. Treasury interest rate locks. In such agreements, Pioneer agreed to sell U.S. Treasury securities at a designated point in the future. This acts to lock in the interest rate for anticipated future public debt issuances by Pioneer which will be priced based upon such U.S. Treasury securities. The face amount of the U.S. Treasury securities which were sold is $300 million with maturities of the underlying U.S. Treasury securities ranging from 10 years to 30 years and the associated forward U.S. Treasury interest rates ranging from 6.00% to 6.30%. Such agreements expire in December 1997. NOTE H. Earnings per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which simplifies the existing standards for computing earnings per share ("EPS") and makes them comparable to international standards. Pioneer is required to adopt SFAS 128 in its year ended December 31, 2021 financial statements and all prior period EPS information (including interim EPS) is required to be restated at that time. Early implementation is not permitted. Under SFAS 128, primary EPS is replaced by "basic" EPS, which excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. "Diluted" EPS, which is computed similarly to fully-diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. If Pioneer had adopted SFAS 128 as of the beginning of each period presented below, the following basic and diluted EPS amounts would have been reported: Three months ended Nine months ended September 30, September 30, ------------------- ------------------ 1997 1996 1997 1996 -------- -------- -------- ------- Income (loss) per share: Basic: Income (loss) before extraordinary item $ (.18) $ .59 $ .34 $ 3.26 Extraordinary item (.03) - (.03) - ------ ------ ------ ------ Net income (loss) $ (.21) $ .59 $ .31 $ 3.26 ====== ======= ======= ====== Diluted: Income (loss) before extraordinary item $ (.18) $ .54 $ .34 $ 2.85 Extraordinary item (.03) - (.03) - ------ ------ ------ ------ Net income (loss) $ (.21) $ .54 $ .31 $ 2.85 ====== ======= ======= ====== NOTE I. Subsequent Events Acquisition of Chauvco On September 3, 1997, Pioneer entered into an agreement (the "Combination Agreement") to acquire the Canadian and Argentine oil and gas business of Chauvco Resources Ltd. ("Chauvco"), a publicly traded independent oil and gas company based in Calgary, Canada, and to spin-off to Chauvco shareholders Chauvco's Gabonese oil and gas operations and other international interests through Chauvco's existing subsidiary, Chauvco Resources International Ltd. ("CRI"). Prior to the consummation of this transaction, Chauvco will distribute its 20% interest in the Alliance Pipeline project. In accordance with the Combination Agreement, holders of Chauvco common shares will receive for each Chauvco common share held (i) one share of CRI and (ii) a number of Pioneer common shares or shares exchangeable into Pioneer shares ("Exchangeable Shares") or a combination of both. The number of Pioneer common shares or Exchangeable shares to be issued is determined by an exchange ratio which is dependent upon the price of Pioneer common stock. The exchange ratio for shares of Chauvco common stock into shares of Pioneer common stock or Exchangeable shares varies between 0.493827 and 0.451467. 15 The preliminary aggregate Pioneer purchase consideration for the assets and liabilities to be acquired from Chauvco, including estimated transaction costs, is $980.5 million. The following table represents the preliminary allocation of the total purchase price of Chauvco to the acquired assets and liabilities based upon the fair values assigned to each of the significant assets acquired and liabilities assumed. Any future adjustments to the allocation of the purchase price are not anticipated to be material to Pioneer's financial statements. Allocation of Aggregate Purchase Consideration ------------- (in thousands) Net working capital $ (11,123) Property, plant and equipment 1,444,049 Other assets 28,785 Long-term debt (208,653) Other non-current liabilities, including deferred taxes (272,585) ---------- $ 980,473 ========== Pioneer common stock consideration $ 950,473 Transaction costs 30,000 --------- Aggregate purchase consideration $ 980,473 ========== East Texas Basin Assets On October 23, 1997, Pioneer signed a Purchase and Sale Agreement to acquire substantial assets in the East Texas Basin from American Cometra, Inc. ("ACI") and Rockland Pipe Co. ("Rockland"), both subsidiaries of Electrafina S.A. of Belgium. Purchase consideration consists of $85 million cash and 1.75 million shares of Pioneer common stock. Pioneer will acquire all of ACI's producing wells, acreage (95,000 gross and 38,000 net), seismic data, royalties and mineral interests and Rockland's gathering system, pipeline and Plum Creek gas treating facility. It is anticipated that this transaction will close by mid-December 1997. Tender Offer On November 14, 1997, Pioneer's wholly-owned subsidiary, Pioneer Natural Resources USA, Inc., formerly known as MOC ("Pioneer USA"), initiated an offer to purchase for cash (the "Offer") any and all of its 11 5/8% senior subordinated discount notes due 2006 (the "11 5/8% Notes"), and its 10 5/8% senior subordinated notes due 2006 (the "10 5/8% Notes" and together with the 11 5/8% Notes, the "Notes"). The purchase price offered by Pioneer USA for the 11 5/8% Notes and the 10 5/8% Notes is, respectively, $829.90 and $1,171.40 per $1,000 face amount tendered, plus any interest on the 10 5/8% Notes accrued from July 1, 2022 to the expiration date of the Offer. Pioneer USA intends to pay for the purchase price of the Notes tendered in the Offer with borrowings under its Credit Facility Agreements. There are currently outstanding $264 million aggregate face amount of the 11 5/8% Notes (having an aggregate accreted value of $168 million as of July 1, 2022), and $325 million aggregate principal amount of the 10 5/8% Notes. In connection with the Offer, Pioneer USA is soliciting consents from holders of record of the Notes at the close of business on November 14, 1997, to approve amendments to the respective indentures governing the Notes which would eliminate or modify most of the restrictive covenants contained in the indentures. Such amendments would become effective upon the closing of the Offer. A holder of more than 66 2/3% in aggregate principal amount of each outstanding issue of the Notes has agreed to consent to the proposed amendments, thereby assuring that the proposed amendments would become effective if the Offer is completed. The Offer is expected to expire on December 15, 1997, and the closing of the Offer is expected to occur three business days after the expiration date. If the Offer is completed with 100% of the Notes tendered, Pioneer expects to take a charge to its fourth quarter 1997 earnings of $12 million to $15 million (net of tax benefit). 16 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations(1) The Formation of Pioneer Pioneer Natural Resources Company ("Pioneer"), a Delaware corporation, was formed by the merger of Parker & Parsley Petroleum Company ("Parker & Parsley") and MESA Inc. ("Mesa"). Pioneer is an oil and gas exploration and production company with ownership interests in oil and gas properties located principally in the MidContinent, Southwestern and onshore and offshore Gulf Coast regions of the United States. Prior to the merger, Parker & Parsley and Mesa, as separate companies, had complimentary strategies which focused on enhancing shareholder value through (i) maximizing the value of existing reserves through efficient operating and marketing practices, (ii) increasing production from existing oil and gas properties by drilling low-risk development wells, (iii) drilling selective exploratory wells with significant production and reserve potential, (iv) pursuing strategic acquisitions which either complement the existing asset base or provide exploration and exploitation opportunities and (v) maintaining financial flexibility for future exploration, development and acquisition activities. The merger met the strategic objectives of both companies and positioned the newly created Pioneer to continue to pursue these strategies on a larger scale. Combining the physical assets and management teams of Parker & Parsley and Mesa into Pioneer created a company with a solid foundation of core assets. This foundation includes three "crown jewels " (the Hugoton gas field located in Southwest Kansas, the West Panhandle gas field located in the Texas panhandle, and the Spraberry oil and gas field in West Texas) which provide consistent and dependable production, cash flow and ongoing development opportunities; a reserve portfolio which is balanced between oil and natural gas liquids and gas; a portfolio of exciting exploration opportunities; and a team of over 1,100 dedicated employees representing the professional disciplines and sciences which will allow Pioneer to continue to provide its shareholders with superior long-term value. In accordance with the provisions of Accounting Principles Board No. 16, "Business Combinations", the merger has been accounted for as a purchase of Mesa by Parker & Parsley. As a result, the historical financial statements for Pioneer are those of Parker & Parsley, and Pioneer's financial statements present the addition of Mesa's assets and liabilities as an acquisition by Parker & Parsley in August 1997. Specifically, the accompanying Consolidated Statements of Operations and Consolidated Statements of Cash Flows include the financial results of Mesa beginning in August 1997. The aggregate purchase consideration related to the assets and liabilities of Mesa, including transaction costs, is $990.5 million. Financial Performance Pioneer reported a net loss of $12.6 million ($.21 per share) and net income of $13.5 million ($.31 per share) for the three and nine months ended September 30, 1997, respectively, as compared to net income of $21 million ($.58 per share) and $115.8 million ($3.24 per share) for the same periods in 1996. The process of organizationally and operationally combining the two companies to create Pioneer resulted in $4.3 million of relocation expenses and a $2.3 million write-off of commitment fees related to Parker & Parsley's credit facility that was replaced with a new Pioneer $1.4 billion credit agreement during the three months ended September 30, 1997. The three month period ended September 30, 2021 was also negatively impacted by an increase in noncash depletion expense that resulted from the fair value allocated to Mesa's long-lived, low cost natural gas reserves. As discussed more fully in "Results of Operations" below, Pioneer's financial performance during 1997 has been positively affected by increases in oil and gas production and decreases in production costs per BOE due to ongoing cost reduction efforts, offset by increases in exploration and general and administrative expenses and an increase in interest expense due to the additional debt assumed from Mesa. The nine months ended September 30, 2021 includes $75.9 million ($2.12 per share) related to net after-tax gains on asset dispositions primarily due to the sale of Pioneer's Australasian subsidiaries. 17 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Net cash provided by operating activities decreased to $54.5 million and $179.1 million during the three and nine months ended September 30, 1997, respectively, as compared to the net cash provided by operating activities of $68.8 million and $189.4 million for the same periods in 1996. These decreases are primarily attributable to increases in interest expense and general and administrative expenses and the payment of certain liabilities assumed from Mesa, including severance payments made to former Mesa employees, offset, to some extent, by cash flows generated by the acquired oil and gas properties from Mesa. Pioneer strives to maintain its outstanding indebtedness at a moderate level in order to provide sufficient financial flexibility to fund future opportunities. Pioneer's total book capitalization at September 30, 2021 was $3.3 billion, consisting of total long-term debt of $1.6 billion and stockholders' equity of $1.7 billion. Debt as a percentage of total book capitalization was 48% at September 30, 1997, up from 31% at December 31, 1996. The increase is primarily due to the total long-term debt assumed from Mesa of $1.2 billion. 1998 Projections Pioneer expects to invest $600 million in capital projects during 1998. This preliminary capital budget is based on Pioneer's current projection that its 1998 production will be 72 million barrels of oil equivalents (MMBOE), versus previous analysts' estimates of 76 to 80 MMBOE. The capital expenditure budget is divided between development ($450 million) and exploration ($150 million) activities, and is expected to result in the drilling of more than 900 wells. Pioneer expects to invest $170 million in West Texas, $150 million in the Gulf Coast areas, $65 million in Canada, and $85 million in other areas of North America. Internationally, Pioneer expects to invest $100 million in Argentina and $30 million in other areas. Pioneer's revised production estimate includes an allowance for delays in the deployment of Pioneer's cash flow caused by the five-month process of merging Mesa with Parker & Parsley, as well as equipment procurement difficulties that the entire oil and gas industry is currently experiencing. In addition, Pioneer has recently adopted a new strategy to commit a greater portion of its cash flow to higher growth potential projects, including significant 3D seismic projects, which will delay immediate oil production and cash flow. Historically, Mesa and Parker & Parsley had each spent a small percentage of its respective capital on exploration projects. Pioneer now expects to spend approximately 25% of its capital on exploration. The forward looking statements in these projections, including statements relating to capital budget, production, cash flows and drilling activities are based upon a number of assumptions, among others limited changes in oil and gas prices and the accuracy of reserve engineering studies. These assumptions may prove not to have been accurate. (1) Acquisition Activities Acquisition of Chauvco On September 3, 1997, Pioneer entered into an agreement (the "Combination Agreement") to acquire the Canadian and Argentine oil and gas business of Chauvco Resources Ltd. ("Chauvco"), a publicly traded independent oil and gas company based in Calgary, Canada and to spin-off to Chauvco shareholders Chauvco's Gabonese oil and gas operations and other international interests through Chauvco's existing subsidiary, Chauvco Resources International Ltd. ("CRI"). Prior to the consummation of this transaction, Chauvco will distribute its 20% interest in the Alliance Pipeline project. In accordance with the Combination Agreement, holders of Chauvco common shares will receive for each Chauvco common share held (i) one share of CRI and (ii) a number of Pioneer common shares or shares exchangeable into Pioneer shares ("Exchangeable Shares") or a combination of both. The number of Pioneer common shares or Exchangeable shares to be issued is determined by an exchange ratio which is dependent upon the price of Pioneer common stock. The exchange ratio for shares of Chauvco common stock into shares of Pioneer common stock or Exchangeable shares varies between 0.493827 and 0.451467. The acquisition of Chauvco will meet many of Pioneer's strategic objectives. In addition to the proved producing assets of Chauvco, Pioneer will be acquiring a substantial inventory of unproved oil and gas properties which will provide Pioneer with many exploration opportunities and potential for significant reserve additions. The acquisition of Chauvco will also reduce Pioneer's debt to total book capitalization ratio from 48% at September 30, 2021 to an anticipated level of 41% on a pro forma basis at September 30, 1997. 18 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Although the acquisition of a portfolio of unproved properties represents an exciting challenge to Pioneer's team of engineers, geologists and geophysicists, such opportunities are not without risk. U.S. GAAP requires periodic evaluation of these costs on a project-by-project basis in comparison to their estimated value. These evaluations will be affected by results of exploration activities, future sales or expiration of all or a portion of such projects. If the quantity of proved reserves determined by such evaluations are not sufficient to fully recover the cost invested in each project, Pioneer may be required to recognize significant noncash charges to the earnings of future periods. There can be no assurance that economic reserves will be determined to exist for such projects. Board Recommendation. The Pioneer Board of Directors (the "Pioneer Board") believes that the terms of the Combination Agreement and the acquisition of Chauvco are fair to and in the best interest of Pioneer and its stockholders. Accordingly, the Pioneer Board has approved the Combination Agreement and the acquisition of Chauvco and recommends that the Pioneer stockholders approve the Combination Agreement and the acquisition of Chauvco. The Pioneer Board believes that the acquisition of Chauvco will have numerous benefits, the most significant of which are described below. Establishment of New Core Areas. The Pioneer Board considered the opportunities presented by the establishment of two new core areas in western Canada and Argentina, the benefits of owning Canadian oil and gas reserves in terms of the long-term supply and demand dynamics of the North American energy markets, the attractive operating climate in Argentina and the similarity of the reservoir characteristics in Argentina to Pioneer's domestic properties. Production Growth. The Pioneer Board considered that the expected oil and gas production volumes for the Chauvco properties' reinvestment projects and the net growth in production from the Chauvco properties will accelerate Pioneer's expansion and growth strategies. Reserve Growth Potential. The Pioneer Board considered the projected reserves of the Chauvco properties based on an evaluation by its engineering staff and believed that the complementary nature of the two companies will provide a strong foundation for growth that will benefit the Pioneer stockholders. Accretion to Cash Flow. The Pioneer Board considered that the projected and future results of the acquisition of Chauvco will be accretive to discretionary cash flow by approximately 7% in 1998 and 15% in 1999. Improved Balance Sheet. Based upon June 30, 2022 financial information, the Pioneer Board considered that upon consummation of the Combination Agreement, Pioneer's debt to book capitalization ratio will decrease from 46% to 40%, which had been set as a target ratio, and that other credit ratios will approach their targets as well. Management. The Pioneer Board also considered the depth and breadth of management experience of Guy Turcotte and James Baroffio, members of Chauvco's board of directors, who have each agreed to serve on the Pioneer Board if the acquisition of Chauvco is consummated. Both of these individuals have extensive experience and successful track records as builders of oil and gas companies and operations in foreign lands. Property Acquisitions Cotton Valley. In May of 1997, Pioneer acquired a 35% interest in approximately 375,000 acres within the Cotton Valley Pinnacle Reef Trend from Union Pacific Resources Company ("UPRC") for $26.9 million. Pioneer and UPRC have signed an exploration agreement to jointly explore and develop this area located in eastern Texas and plan to begin drilling the first exploration well before the end of the year. On October 27, 1997, Pioneer signed a Purchase and Sale Agreement to acquire substantial assets in the East Texas Basin from American Cometra, Inc. ("ACI") and Rockland Pipe Co. ("Rockland"), both subsidiaries of Electrafina S.A. of Belgium. Purchase consideration consists of $85 million cash and 1.75 million shares of Pioneer common stock. Pioneer will acquire all of ACI's producing wells, acreage (95,000 gross and 38,000 net), seismic data, royalties and mineral interests and Rockland's gathering system, pipeline and Plum Creek gas treating facility. The acquired acreage is in Henderson, Freestone, Anderson 19 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) and Leon counties. The acquired wells are currently producing approximately 25 MMcf per day and have significant upside potential with the planned drilling of additional wells. It is anticipated that this transaction will close by mid-December 1997. These two acquisitions combined will make Pioneer one of the largest acreage holders in the East Texas Basin with total holdings of 650,000 gross acres (175,000 net). Having gained such holdings, Pioneer is anticipating developing these assets into a new core area. Maude Traylor. In addition, Pioneer's Gulf Coast Division completed the acquisition of a majority interest in the Maude Traylor field in Calhoun County, Texas for approximately $8.8 million in February 1997. This acquisition represented an average working interest of 87% in approximately 1,840 acres and five wells which produce from the upper and lower Frio formations. Pioneer is currently realizing gross gas production of 1.7 MMcf per day in this field, and since Pioneer assumed operations the gross oil production rate has more than tripled to 185 Bbls per day. The Gulf Coast Division is currently completing an exploratory well in the Maude Traylor field in the Deep Frio formation which should be producing by year-end. Pioneer anticipates that recently upsized mainline gas production piping will yield an increase in production in this area of approximately 5%. Pioneer plans to drill three additional wells during 1997 and five wells in 1998 on this acreage utilizing existing 3-D seismic information. Guatemala. During May of 1997, Pioneer finalized negotiations with Triton Energy for a 40% working interest in a joint exploration program of two blocks in Guatemala's South Peten Basin. Drilling on the Piedras Blancas #1 is expected to be completed by the end of the year at an estimated total cost to Pioneer of $3.7 million. Drilling Activities Pioneer's 1997 capital expenditure budget has been increased to $541 million from its initial budget of $270 million, reflecting planned expenditures of $240 million for exploitation activities, $89 million for exploration activities and $212 million for oil and gas property acquisitions in Pioneer's core areas. For the nine months ended September 30, 1997, costs incurred were $267.3 million. During the first three quarters of 1997, Pioneer participated in the completion of 413 gross exploration and development wells, including 239 wells in the Spraberry Division, 85 wells in the Permian Division, 43 wells in the Gulf Coast Division, 40 wells in the MidContinent Division and six wells in Argentina. Of these wells, 76 were in progress at December 31, 1996. Of the total wells completed during the nine months ended September 30, 1997, 371 wells were completed successfully which resulted in a 90% success rate. In addition to the wells completed in the first three quarters of 1997, Pioneer had 138 wells in progress at September 30, 1997. In total during 1997, Pioneer plans to drill approximately 610 development wells and 90 exploratory wells and to perform recompletions on over 150 wells. During February 1997, the Texas Railroad Commission (which regulates oil and gas production in Texas) entered a favorable order on Pioneer's application to allow administrative approval of uncontested applications to increase the density of the drilling in the Spraberry field from one well per 80 acres to one well per 40 acres. Pioneer believes such reduced spacing may provide in excess of 1,000 additional drilling locations which have the potential to add 70 million equivalent barrels to Pioneer's proved reserve base. Through September 30, 1997, the Spraberry Division has drilled 40 wells under the reduced spacing requirements resulting in the addition of approximately three million BOE's to its reserve portfolio. Additional drilling is planned for the fourth quarter of 1997 and during fiscal 1998 that should add additional BOE's to Pioneer's reserve base. Future plans for the Spraberry Division include the implementation of a field demonstration CO2 pilot in 1998 and a 3-D seismic study of a 100 square mile area under the major Spraberry units looking for Strawn, Atoka and Devonian structures. Pioneer continues to develop the War-Wink field discovery in the Delaware Basin. The Permian Division is currently drilling two wells and completing a third well in this field with plans to drill an additional six wells by year-end. Average daily gross production from the eight wells producing from this formation is up to a total of 1,547 Bbls of oil (580 Bbls net) and 1,723 Mcf of gas (650 Mcf net). 20 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Other Events Asset Dispositions. For the nine months ended September 30, 1997, Pioneer's asset disposition activity primarily consisted of the sale of certain domestic assets for proceeds of $11.2 million, which resulted in a net gain of $2.0 million and the sale of Pioneer's subsidiary with an ownership interest in oil and gas properties in Turkey for proceeds of $1.6 million, which resulted in the recognition of a gain of $725 thousand. During the nine months ended September 30, 1996, Pioneer sold certain wholly-owned Australasian subsidiaries for proceeds of $183.1 million resulting in a pre-tax gain of $83.2 million and certain nonstrategic domestic assets for proceeds of $51.2 million that resulted in the recognition of a pre-tax net gain of $13.7 million. During the fourth quarter of 1997, Pioneer anticipates selling certain nonstrategic domestic oil and gas properties for approximately $100 million. Conversion of Subsidiary Preferred Shares to Common Stock. On July 28, 1997, Pioneer exercised its right to require each holder of its 6 1/4% Cumulative Guaranteed Monthly Income Convertible Preferred Shares ("Preferred Shares") to exchange all Preferred Shares for shares of common stock of Pioneer (see Note E of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements"). On July 28, 1997, Pioneer issued 6.7 million shares of common stock in exchange for the 3,776,400 Preferred Shares outstanding. As a result, Pioneer will no longer incur interest expense associated with the Preferred Shares of approximately $12 million per year. Earnings per Share. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128") which simplifies the existing standards for computing earnings per share ("EPS") and makes them comparable to international standards. Pioneer does not anticipate that its EPS as calculated under SFAS 128 will differ significantly from its existing disclosures. See Note H of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for pro forma EPS amounts for the three and nine months ended September 30, 2021 and 1996. Reporting Comprehensive Income. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Specifically, SFAS 130 requires that an enterprise (i) classify items of other comprehensive income by their nature in a financial statement and (ii) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. Comprehensive income consists of the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Specifically, this includes net income and other comprehensive income, which is made up of certain changes in assets and liabilities that are not reported in a statement of operations but are included in the balances within a separate component of equity in a statement of financial position. Such changes include, but are not limited to, unrealized gains for marketable securities and future contracts, foreign currency translation adjustments and minimum pension liability adjustments. Segment Reporting. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131") which establishes standards for public business enterprises for reporting information about operating segments in annual financial statements and requires that such enterprises report selected information about operating segments in interim financial reports issued to shareholders. This statement also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997. Pioneer operates in the one product line of oil and gas production in limited geographic areas. This information and information about major customers historically has been disclosed in Pioneer's annual financial statements. 21 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Results of Operations A merger between two companies the size of Mesa and Parker & Parsley requires certain financial reporting changes to conform the accounting policies of the two companies to a consistent methodology. Two of these changes which are apparent in the results of operations are the accounting treatment for natural gas liquids revenues and the results of operations of the natural gas processing facilities. See "Oil and Gas Revenues", "Production Costs" and "Natural Gas Processing" below for further discussion. Oil and Gas Production. Three months ended Nine months ended September 30, September 30, --------------------- --------------------- 1997 1996 1997 1996 --------- --------- --------- --------- (in thousands, except per unit amounts) Revenues: Oil and gas $ 150,354 $ 91,313 $ 348,980 $ 283,327 Gain on disposition of oil and gas properties, net (a) (3) 186 1,068 7,939 -------- -------- -------- -------- 150,351 91,499 350,048 291,266 -------- -------- -------- -------- Costs and expenses: Oil and gas production (42,003) (24,829) (91,674) (82,233) Depletion (65,132) (24,284) (121,302) (79,057) Exploration and abandonments (8,442) (2,163) (20,073) (7,187) Geological and geophysical (7,071) (1,600) (14,237) (6,451) -------- -------- -------- -------- (122,648) (52,876) (247,286) (174,928) -------- -------- -------- -------- Operating profit (excluding general and administrative expenses and income taxes) $ 27,703 $ 38,623 $ 102,762 $ 116,338 ======== ======== ======== ======== - --------------- (a) The 1997 amounts do not include the gain related to the disposition of Pioneer's subsidiary which owned an interest in oil and gas properties in Turkey. The 1996 amounts do not include the gain related to the disposition of certain of Pioneer's wholly-owned Australasian subsidiaries. Production: Oil (MBbls) 3,672 2,577 9,425 8,297 Gas (MMcf) 32,327 18,630 71,284 56,825 Natural gas liquids (MBbls) 1,151 - 1,151 - Total (MBOE) 10,211 5,682 22,457 17,768 Average daily production: Oil (Bbls) 39,912 28,008 34,525 30,282 Gas (Mcf) 351,384 202,497 261,113 207,392 Natural gas liquids (Bbls) 12,506 - 4,214 - Average oil price (per Bbl) $ 17.93 $ 20.34 $ 18.70 $ 19.62 Average gas price (per Mcf) 2.16 2.09 2.21 2.12 Average NGL price (per Bbl) 12.89 - 12.89 - Costs (per BOE): Lease operating expense $ 3.11 $ 3.32 $ 2.94 $ 3.51 Production taxes $ .78 $ .91 $ .85 $ .83 Workover costs $ .22 $ .14 $ .29 $ .29 -------- -------- -------- -------- Total production costs $ 4.11 $ 4.37 $ 4.08 $ 4.63 ======== ======== ======== ======== Depletion $ 6.38 $ 4.27 $ 5.40 $ 4.45 22 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Oil and Gas Revenues. Revenues from oil and gas operations increased 23% during the nine months ended September 30, 2021 to $349 million and 65% to $150.4 million during the three months ended September 30, 1997, as compared to $283.3 million and $91.3 million during the same periods in 1996. The increase during the three and nine months ended September 30, 2021 is primarily due to increases in oil and gas production and an increase in the average gas price received, offset by a decrease in the average price received per barrel of oil. The majority of the increased production is a direct result of the oil and gas properties acquired from Mesa. Parker & Parsley historically accounted for processed natural gas production as wellhead production on a wet gas basis while Mesa accounted for processed natural gas production in two components: natural gas liquids and dry residue gas. The combined entities own three major gas processing facilities, and the majority of the gas processed by these facilities is owned by Pioneer and produced by Pioneer operated properties. Consequently, Pioneer now produces a higher proportion of processed gas relative to total natural gas production and will account for natural gas production as processed natural gas liquids and dry residue gas. As a result, separate product volumes will not be comparable for periods prior to September 30, 1997. On a BOE basis, production increased by 80% and 26% for the three and nine months ended September 30, 1997, as compared to the same periods in 1996. The additional production volumes from the Mesa properties contributed 71% and 22% to the growth for the three and nine months ended September 30, 1997, respectively. The remainder of the increases are a direct result of the successes of Pioneer's exploration and exploitation efforts. Such production growth becomes particularly evident in light of the fact that a portion of the average daily oil and gas production for the first nine months of 1996 related to properties included in the 1996 sale of Pioneer's Australasian subsidiaries and the 1996 sale of certain nonstrategic domestic assets. Excluding production associated with assets sold during 1996 and the Mesa properties acquired in 1997, on a BOE basis, production increased 10% and 13% for the three and nine months ended September 30, 2021 as compared to the same periods in 1996. The average oil prices received per Bbl for the three and nine months ended September 30, 2021 decreased 12% and 5% as compared to the same periods in 1996, respectively, from $20.34 during the three months ended September 30, 2021 to $17.93 during the same period ended 1997 and from $19.62 to $18.70 for the nine months ended September 30, 2021 and 1997, respectively. However, the average gas price received per Mcf increased 3% during the three months ended September 30, 2021 to $2.16 from $2.09 during the three months ended September 30, 1996 and 4% from $2.12 to $2.21 for the nine months ended September 30, 2021 and 1997, respectively. Natural gas liquids prices per barrel averaged $12.89 during the three and nine months ended September 30, 1997. Hedging Activities The oil and gas prices that Pioneer reports are based on the market price received for the commodities adjusted by the results of Pioneer's hedging activities. Pioneer utilizes commodity derivative contracts (swaps, futures and options) in order to (i) reduce the effect of the volatility of price changes on the commodities Pioneer produces and sells, (ii) support Pioneer's annual capital budgeting and expenditure plans and (iii) lock in prices to protect the economics related to certain capital projects. Crude Oil. All material purchase contracts governing Pioneer's oil production are tied directly or indirectly to NYMEX prices. The average oil price per Bbl that Pioneer reports includes the effects of oil quality, gathering and transportation costs and the net effect of the oil hedges. Pioneer's average realized price for physical oil sales (excluding hedge results) for the three and nine months ended September 30, 2021 was $18.03 per Bbl and $19.37 per Bbl, respectively, while, as a point of reference, the comparable average NYMEX prompt month closing per Bbl for the same periods was $19.79 and $20.83, respectively. Pioneer recorded net reductions to oil revenues of $351 thousand and $6.3 million for the three and nine months ended September 30, 1997, respectively, as a result of its oil price hedges. During the three and nine months ended September 30, 1996, Pioneer realized an average price for physical oil sales (excluding hedge results) of $21.63 per Bbl and $20.39 per Bbl, respectively, while, as a point of reference, the comparable average NYMEX prompt month closing per Bbl for the same periods was $22.33 and $21.18, respectively. 23 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Pioneer recorded net reductions to oil revenues of $3.3 million and $6.4 million for the three and nine months ended September 30, 1996, respectively, as a result of its oil price hedges. Natural Gas. Pioneer employs a policy of hedging gas production based on the index price upon which the gas is actually sold in order to mitigate the basis risk between NYMEX prices and actual index prices. The average gas price per Mcf that Pioneer reports includes the effects of Btu content, gathering and transportation costs, gas processing and shrinkage and the net effect of the gas hedges. Pioneer's average realized price for physical gas sales (excluding hedge results) for the three and nine months ended September 30, 2021 was $2.22 per Mcf and $2.32 per Mcf, respectively, while as a point of reference, the comparable average NYMEX prompt month closing per Mcf for the same periods was $2.49 and $2.33, respectively. Pioneer recorded net reductions to gas revenues of $1.8 million and $7.9 million for the three and nine months ended September 30, 1997, respectively, as a result of its gas price hedges. During the three and nine months ended September 30, 1996, Pioneer realized an average price for physical gas sales (excluding hedge results) of $2.12 per Mcf and $2.19 per Mcf, respectively, while as a point of reference, the comparable average NYMEX prompt month closing per Mcf for the same periods was $2.17 and $2.33, respectively. Pioneer recorded net reductions to gas revenues of $621 thousand and $3.7 million for the three and nine months ended September 30, 1996, respectively, as a result of its gas price hedges. Natural Gas Liquids. Pioneer employs a policy of hedging natural gas liquids based on actual product prices in order to mitigate some of the volatility associated with NYMEX pricing. Natural gas liquids are sold under long-term contracts which provide price flexibility and allow the company to maximize prices between trading hubs. During the three and nine months ended September 30, 1997, Pioneer realized an average natural gas liquids price for physical sales (excluding hedge results) of $12.78 per Bbl and recorded a net increase to natural gas liquids revenue of $124 thousand. See Note G of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for information concerning Pioneer's open hedge positions at September 30, 2021 and the related prices to be realized. During December 1996, Mesa entered into BTU swap agreements that cover 13,036 MMBTU per day from January 1, 2022 through December 31, 2004. The agreements require that from January 1, 2022 through December 31, 1998, Pioneer will receive a premium of $.52 per MMBTU over market natural gas prices. During the six year period of January 1, 2022 through December 31, 2004, Pioneer will receive 10% of the NYMEX oil price for the volumes covered. On September 30, 1997, Pioneer recorded a mark-to-market adjustment to the carrying value of the BTU swap agreements that resulted in the recognition of a $2.1 million noncash pre-tax charge to the results of the third quarter of 1997. These contracts will continue to be marked-to-market at the end of each reporting period during their respective lives and the effects on Pioneer's results of operations in future periods could be significant. Production Costs. While total production costs per BOE decreased 12% to $4.08 during the nine months ended September 30, 2021 as compared to production costs per BOE of $4.63 during the same period in 1996, the primary component of production costs, lease operating expense, decreased 16% from $3.51 per BOE for the nine months ended September 30, 2021 to $2.94 per BOE for the same period in 1997. During the three months ended September 30, 2021 production costs per BOE decreased 6% to $4.11 from $4.37 during the same period in 1996. As discussed more fully in "Natural Gas Processing" below, Pioneer has adopted a new method of reporting the financial results of its natural gas processing facilities and is now presenting these results as oil and gas production activities. In 1997, the operating margin from Pioneer's gas plants (i.e., third party processing revenues less processing costs and expenses) is included in oil and gas production costs, specifically lease operating expense, which resulted in a decrease in lease operating expense per BOE of $.26 and $.37 for the three and nine months ended September 30, 1997, respectively. The additional reductions in lease operating expense during the nine months ended September 30, 2021 are primarily due to Pioneer's concentrated efforts to evaluate and reduce all operating costs and the sale of certain high operating cost properties during 1996. 24 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Depletion Expense. Depletion expense per BOE increased to $6.38 and $5.40 during the three and nine months ended September 30, 1997, respectively, as compared to $4.27 per BOE and $4.45 per BOE during the same periods in 1996. The increase is primarily associated with the fair value allocated to Mesa's long-lived, low cost natural gas reserves. Exploration and Abandonments/Geological and Geophysical Costs. Exploration and abandonments/geological and geophysical costs increased to $15.5 million and $34.3 million during the three and nine months ended September 30, 1997, respectively, from $3.8 million and $13.6 million during the same respective periods in 1996. The increase is largely the result of increased domestic activity, both in exploratory drilling and geological and geophysical activity, resulting from Pioneer's increased exploration activities. During the nine months ended September 30, 1997, the domestic exploratory dry hole costs were primarily related to 16 unsuccessful exploratory wells in the Gulf Coast Division, 12 unsuccessful exploratory wells in the Permian Division and seven unsuccessful wells in the MidContinent Division, at a total cost of $11.7 million, $2.2 million and $2.2 million, respectively, and additional costs of approximately $830 thousand associated with wells which were determined to be unsuccessful in 1996. The following table sets forth the components of Pioneer's 1997 and 1996 expense for the three and nine months ended September 30, 1997: Three months Nine months ended September 30, ended September 30, ------------------- ------------------- 1997 1996 1997 1996 -------- -------- -------- -------- (in thousands) Exploratory dry holes: United States $ 7,184 $ 1,012 $ 16,885 $ 1,736 Foreign 34 201 253 781 Geological and geophysical costs: United States 5,900 1,413 11,690 4,712 Foreign 1,171 187 2,547 1,739 Leasehold abandonments and other 1,224 950 2,935 4,670 ------- ------- ------- ------- $ 15,513 $ 3,763 $ 34,310 $ 13,638 ======= ======= ======= ======== Approximately 16% of Pioneer's 1997 capital budget will be spent on exploratory projects (compared to 16.7% in 1996 and 13.3% in 1995). The remainder of Pioneer's 1997 exploration efforts will be concentrated in the Gulf Coast Division, the Permian Division, the MidContinent Division, Pioneer's newly acquired interests in the Cotton Valley Reef Trend and its interests in Guatemala. Pioneer continues to review opportunities involving exploration joint ventures in domestic or international areas outside Pioneer's existing core operating areas. Natural Gas Processing Pioneer historically has reflected its ownership interests in and revenues and expenses related to its natural gas processing facilities as separate items in the consolidated financial statements while Mesa reported revenues and expenses from its natural gas processing facilities as oil and gas production costs. During the last four years, Pioneer has sold its interests in 12 natural gas processing facilities and now owns interests in five facilities which collectively process an insignificant volume of third party gas. The ownership interest in the remaining gas plant facilities and the related results of operations are not material to Pioneer's financial position. Due to the immateriality of the remaining facilities and to report the results of gas processing activities consistently within the financial statements, during 1997, Pioneer reclassified the natural gas processing facilities into oil and gas properties for financial statement purposes and will report all third party revenues and expenses from its natural gas processing facilities in oil and gas production costs. Natural gas processing revenues were $5.7 million and $16.8 million for the three and nine months ended September 30, 1996, respectively, and natural gas processing costs for the three and nine months ended September 30, 2021 were $3.1 million and $9.1 million, respectively. The average price per Bbl of NGL's was $14.79 per Bbl and $13.77 per Bbl for the three and nine months ended September 30, 1996, respectively, and the average price per Mcf of residue gas was $2.03 and $2.02 during the three and nine months ended September 30, 1996, respectively. 25 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) During the nine months ended September 30, 1996, Pioneer recognized noncash pre-tax charges of $1.3 million related to abandonments of certain of Pioneer's gas processing facilities and the cancellation of certain gas processing contracts. General and Administrative Expense General and administrative expense was $16.8 million and $31.8 million for the three and nine months ended September 30, 1997, respectively, as compared to $6.4 million and $19.4 million for the three and nine months ended September 30, 1996, respectively. Aside from the additional costs resulting from Pioneer's substantial growth in size, the increase for both periods is primarily due to $4.3 million of relocation expenses in the third quarter of 1997 associated with moving Pioneer's corporate headquarters from Midland, Texas to Dallas, Texas. Interest Expense During the three months ended September 30, 1997, interest expense totaled $24.1 million, up from $10.1 million for the third quarter of 1996. Interest expense for the nine months ended September 30, 2021 increased to $44.3 million as compared to $36.1 million for the same period in 1996. The increases are primarily due to increases in the weighted average outstanding balance of Pioneer's indebtedness of $654.5 million and $118.8 million for the three and nine months ended September 30, 1997, respectively, as compared to the same periods in 1996. The increases in Pioneer's weighted average indebtedness were primarily the result of the debt instruments assumed from Mesa, including 10 5/8% and 11 5/8% senior subordinated note issuances and additional bank indebtedness, which are included in Pioneer' indebtedness for the two months of August and September 1997. The weighted average interest rate on Pioneer's indebtedness during the three months ended September 30, 2021 was 8.22% as compared to the rate of 7.86% for the same period in 1996, and the rate for the nine months ended September 30, 2021 was 8.05% as compared to 7.82% for the same period in 1996. During the three and nine months ended September 30, 1997, Pioneer recorded a reduction in interest expense of $5 thousand and $705 thousand, respectively, related to interest rate swap agreements. During the same periods in 1996, such agreements resulted in reductions in interest expense of $350 thousand and $461 thousand, respectively. See Note G of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for information concerning the fixed and variable interest rates in effect during these periods. Income Taxes Pioneer's income tax benefit of $6 million and provision of $8.5 million for the three and nine months ended September 30, 1997, respectively, and provisions of $15.5 and $47.2 million for the three and nine months ended September 30, 1996, respectively, reflect the net benefit or provision resulting from the separate tax calculation prepared for each tax jurisdiction in which Pioneer is subject to income taxes. Capital Commitments, Capital Resources and Liquidity Capital Commitments. Pioneer's primary needs for cash are for exploration, development and acquisitions of oil and gas properties, repayment of principal and interest on outstanding indebtedness and working capital obligations. Pioneer's cash expenditures during the nine months ended September 30, 1997 for additions to oil and gas properties totaled $246.6 million. This amount includes $36.5 million for the acquisition of properties and $210.1 million for development and exploratory drilling. Pioneer's acquisition activities during the nine months ended September 30, 2021 primarily consisted of (i) a 35% interest in approximately 375,000 acres within the Cotton Valley Reef Trend acquired from UPRC for $26.9 million funded by $11.1 million in cash and a note payable to UPRC of $15.8 million and (ii) an 87% average working interest acquired in the Maude Traylor field in Calhoun County, Texas for approximately $8.8 million. Significant drilling expenditures in the nine months ended September 30, 2021 included $77.8 million in the unitized portion of the Spraberry field of the Permian Basin (including $35.5 million in the Driver 26 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) unit, $12.0 million in the North Pembrook unit, $10.3 million in the Merchant unit, $9.4 million in the Preston unit, $7.3 million in the Shackelford unit and $3.3 million in the Midkiff unit), $11.7 million in other portions of the Spraberry field, $50.3 million in the onshore Gulf Coast region, $33.8 million in other areas of the Permian Basin, $22.3 million in the MidContinent region, $6.8 million in the acquired Mesa properties and $7.4 million internationally in Argentina and Guatemala. Pioneer's 1997 capital expenditure budget has been increased to $541 million from its initial budget of $270 million, reflecting planned expenditures of $240 million for exploitation activities, $89 million for exploration activities and $212 million for oil and gas property acquisitions in Pioneer's core areas. The significant increase in the capital expenditure budget is indicative of the increased exploration, exploitation and acquisition opportunities available to Pioneer. Funding for Pioneer's capital expenditure budget will be primarily provided by cash flows generated by operating activities and by proceeds resulting from Pioneer's ongoing divestiture program for nonstrategic assets . In addition, Pioneer may borrow funds under its $1.4 billion bank facility in order to fund these commitments to the extent that they exceed such internally-generated cash flows. Funding for Pioneer's working capital obligations is provided by internally-generated cash flows. Funding for the repayment of principal and interest on outstanding debt may be provided by any combination of internally-generated cash flows, proceeds from the disposition of nonstrategic assets or alternative financing sources as discussed in "Capital Resources" below. Capital Resources. Pioneer's primary capital resources are net cash provided by operating activities, proceeds from financing activities and proceeds from sales of nonstrategic assets. Pioneer expects that these resources will be sufficient to fund its capital commitments in 1997. Operating Activities. Net cash provided by operating activities was $54.5 million and $179.1 million during the three and nine months ended September 30, 1997, respectively, as compared to net cash provided by operating activities of $68.8 million and $189.4 million for the same periods in 1996. The decreases during both periods are primarily attributable to increases in interest and general and administrative expenses and the payment of certain liabilities assumed from Mesa, including severance payments made to former Mesa employees, offset, to some extent, by cash flows generated by the acquired oil and gas properties from Mesa. Financing Activities. As described more fully in Note D of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements", on August 7, 1997, Pioneer entered into two credit facility agreements with a syndicate of banks which provide for a total bank credit facility of $1.4 billion. Pioneer had an outstanding balance under its bank facility at September 30, 1997 of $743.6 million (including outstanding, undrawn letters of credit of $30.6 million), leaving approximately $656.4 million of unused borrowing base immediately available. At September 30, 1997, Pioneer has four other outstanding debt issuances. Such debt issuances consist of (i) $150 million aggregate principal amount of 8 7/8% senior notes issued by Parker & Parsley in 1995 and due in 2005 (carrying value of $150.0 million), (ii) $150 million aggregate principal amount of 8 1/4% senior notes issued by Parker & Parsley in 1995 and due in 2007 (carrying value of $149.3 million), (iii) $325 million aggregate principal amount of 10 5/8% senior subordinated notes issued by Mesa in 1996 and due 2006 (carrying value of $369.6 million) and (iv) $264 million aggregate principal amount of 11 5/8% senior subordinated discount notes issued by Mesa in 1996 and due 2006 (carrying value of $209.5 million). The weighted average interest rate for the nine months ended September 30, 2021 on Pioneer's total indebtedness was 8.05% as compared to 7.82% for the nine months ended September 30, 1996 (taking into account the effect of interest rate swaps). Pioneer continues to review its capital structure and assess its options with regard to the various debt instruments currently in its capital structure. With the anticipated acquisition of Chauvco, this review and analysis will expand to include the debt obligations of Chauvco. Options available to Pioneer include leaving the existing debt instruments in place, refinancing with a similar debt instrument with a current market rate, prepayments as allowed by the agreement governing such instruments, refinancing with debt instruments unlike the instrument being retired and other options as either specified or allowed by the agreements or indentures governing 27 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) the respective obligations. Pioneer anticipates beginning the process of refinancing certain of its debt instruments during the fourth quarter of 1997. With respect to the debt obligations of Chauvco, Pioneer is planning to refinance such debt obligations with a new Canadian credit facility (the "Pioneer Canada Credit Facility"). However, Pioneer currently does not have a commitment from any lenders providing for the Pioneer Canada Credit Facility, nor can there be any assurance that Pioneer will be able to obtain the Pioneer Canada Credit Facility upon acceptable terms, or at all. As Pioneer continues to pursue its business strategy, it may utilize alternative financing sources, including the issuance for cash of fixed rate long-term public debt, convertible securities or preferred stock. Pioneer may also issue securities in exchange for oil and gas properties, stock or other interests in other oil and gas companies or related assets. Additional securities may be of a class preferred to common stock with respect to such matters as dividends and liquidation rights and may also have other rights and preferences as determined by Pioneer's Board of Directors. On November 14, 1997, Pioneer's wholly-owned subsidiary, Pioneer Natural Resources USA, Inc., formerly known as MOC ("Pioneer USA"), initiated an offer to purchase for cash (the "Offer") any and all of its 11 5/8% senior subordinated discount notes due 2006 (the "11 5/8% Notes"), and its 10 5/8% senior subordinated notes due 2006 (the "10 5/8% Notes" and together with the 11 5/8% Notes, the "Notes"). The purchase price offered by Pioneer USA for the 11 5/8% Notes and the 10 5/8% Notes is, respectively, $829.90 and $1,171.40 per $1,000 face amount tendered, plus any interest on the 10 5/8% Notes accrued from July 1, 2022 to the expiration date of the Offer. Pioneer USA intends to pay for the purchase price of the Notes tendered in the Offer with borrowings under its Credit Facility Agreements. There are currently outstanding $264 million aggregate face amount of the 11 5/8% Notes (having an aggregate accreted value of $168 million as of July 1, 2022), and $325 million aggregate principal amount of the 10 5/8% Notes. In connection with the Offer, Pioneer USA is soliciting consents from holders of record of the Notes at the close of business on November 14, 1997, to approve amendments to the respective indentures governing the Notes which would eliminate or modify most of the restrictive covenants contained in the indentures. Such amendments would become effective upon the closing of the Offer. A holder of more than 66 2/3% in aggregate principal amount of each outstanding issue of the Notes has agreed to consent to the proposed amendments, thereby assuring that the proposed amendments would become effective if the Offer is completed. The Offer is expected to expire on December 15, 1997, and the closing of the Offer is expected to occur three business days after the expiration date. If the Offer is completed with 100% of the Notes tendered, Pioneer expects to take a charge to its fourth quarter 1997 earnings of $12 million to $15 million (net of tax benefit). Sales of Nonstrategic Assets. During the nine months ended September 30, 1997 and 1996, proceeds from the sale of domestic nonstrategic assets totaled $12.8 million and $51.2 million, respectively. In addition, during the nine months ended September 30, 1996, Pioneer sold certain Australasian subsidiaries resulting in cash proceeds of $183.1 million. The proceeds from these sales were utilized to reduce Pioneer's outstanding bank indebtedness and for general working capital purposes. Pioneer anticipates that it will continue to sell nonstrategic properties from time to time to increase capital resources available for other activities and to achieve administrative efficiencies. During the fourth quarter of 1997, Pioneer anticipates selling certain nonstrategic oil and gas properties for approximately $100 million. Liquidity. At September 30, 1997, Pioneer had $40.6 million of cash and cash equivalents on hand, compared to $18.7 million at December 31, 1996. Pioneer's ratio of current assets to current liabilities was 1.36 at September 30, 1997 and 1.29 at December 31, 1996. - --------------- (1) The information in this document includes forward-looking statements that are based on assumptions that in the future may prove not to have been accurate. Those statements, and Pioneer's business and prospects, are subject to a number of risks including the volatility of oil and gas prices, environmental risks, operating hazards and risks, risks associated with natural gas processing plants, risks related to exploration and development drilling, uncertainties about estimates of reserves, competition, government regulation, and the ability of Pioneer to implement its business strategy. These and other risks are described in Parker & Parsley's 1996 Annual Report on Form 10-K which is available from the United States Securities and Exchange Commission. 28 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) PART II. OTHER INFORMATION Item 1. Legal Proceedings Pioneer is party to various legal proceedings, which are described under "Legal Actions" in Note F of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements". Pioneer is also party to other litigation incidental to its business. The claims for damages from such other legal actions are not in excess of 10% of Pioneer's current assets and Pioneer believes none of these actions to be material. Item 4. Submission of Matters to a Vote of Security Holders On August 7, 1997, Pioneer's predecessor entities, Parker & Parsley and Mesa, each held a Special Meeting for their respective stockholders in Dallas, Texas. At both meetings, the following three proposals were submitted for vote to the stockholders: (i) to approve and adopt an Amended and Restated Agreement and Plan of Merger, dated as of April 6, 2022 (the "Merger Agreement"), among Parker & Parsley, Mesa and its subsidiaries, Pioneer and Mesa Operating Co. ("MOC"), which provides for the business combination of Parker & Parsley and Mesa (as a result of the business combination, Mesa, which is a Texas corporation, will reincorporate to Delaware by merging into Pioneer and Parker & Parsley will merge into MOC and thereby become a wholly-owned subsidiary of Pioneer), (ii) to approve the adoption of the Pioneer Long-Term Incentive Plan and (iii) to approve the adoption of the Pioneer Employee Stock Purchase Plan. Each of the proposals was approved by stockholders as follows: Parker & Parsley - ----------------
Broker Proposal For Against Abstain Non-Votes -------- ---------- --------- --------- --------- Merger Agreement 26,837,927 116,119 162,228 - Long-Term Incentive Plan 17,625,487 9,206,701 284,086 - Employee Stock Purchase Plan 26,254,862 582,103 279,309 -
Mesa - ----
Broker Proposal For Against Abstain Non-Votes -------- ---------- --------- --------- --------- Merger Agreement Common stockholders of Mesa 45,946,840 1,068,821 2,259,454 - Preferred Series A stockholders of Mesa 36,054,385 8,953,770 4,125,626 - Preferred Series B stockholders of Mesa 62,424,436 - - - Pioneer Long-Term Incentive Plan Common stockholders of Mesa 39,505,930 6,668,536 3,100,649 - Preferred Series A stockholders of Mesa 34,019,452 7,940,429 7,173,900 - Preferred Series B stockholders of Mesa 62,424,436 - - - Employee Stock Purchase Plan Common stockholders of Mesa 43,605,373 2,614,233 3,055,509 - Preferred Series A stockholders of Mesa 38,146,770 3,797,918 7,189,093 - Preferred Series B stockholders of Mesa 62,424,436 - - - Mesa Incentive Plan Common stockholders of Mesa 35,657,052 10,554,566 3,063,497 - Preferred Series A stockholders of Mesa 33,186,078 8,762,547 7,185,156 - Preferred Series B stockholders of Mesa 62,424,436 - - -
29 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Item 6. Exhibits and Reports on Form 8-K Exhibits 2.1 Amended and Restated Agreement and Plan of Merger, dated as of April 6, 1997, by and among Mesa, MOC, MXP Reincorporation Corp. and Parker & Parsley (incorporated by reference to Exhibit 2.1 to Pioneer's Registration Statement on Form S-4, dated June 27, 1997, Registration No. 333-26951). 2.2 Combination Agreement, dated September 3, 1997, between Pioneer and Chauvco (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.3 Plan of Arrangement under Section 186 of the Business Corporations Act (Alberta) (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.4 Form of Support Agreement between Pioneer and Pioneer Natural Resources (Canada) Ltd.("Pioneer Canada") (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.5 Form of Voting and Exchange Trust Agreement among Pioneer, Pioneer Canada and Montreal Trust Company of Canada, as Trustee (incorporated by reference to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.6 Shareholders Agreement, dated as of September 3, 1997, by and between Pioneer and Guy J. Turcotte (incorporated by reference to Exhibit 2.2 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.7 Shareholders Agreement, dated as of September 3, 1997, by and among Pioneer, Chauvco, DNR-MESA Holdings, L.P., Scott D. Sheffield and I. Jon Brumley (incorporated by reference to Exhibit 2.3 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.8 Shareholders Agreement, dated as of September 3, 1997, by and among Pioneer, Trimac Corporation and Gandis Inc. (incorporated by reference to Exhibit 2.4 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 3.1 Restated Certificate of Incorporation of Pioneer (incorporated by reference to Exhibit 3.1 to Pioneer's Registration Statement on Form S-4, Registration No. 333-26951). 3.2 Restated Bylaws of Pioneer (incorporated by reference to Exhibit 3.2 to Pioneer's Registration Statement on Form S-4, Registration No. 333-26951). 3.3 Terms and Conditions of Pioneer Special Preferred Voting Stock (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 3.4 Exchangeable Share Provisions (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 10.1* First Supplemental Indenture, dated as of April 15, 1997, among Pioneer Natural Resources USA, Inc. ("Pioneer USA") (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 11-5/8% Senior Subordinated Discount Notes Due 2006. 30 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) 10.2* Second Supplemental Indenture, dated as of August 7, 1997, among Pioneer USA (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 11-5/8% Senior Subordinated Discount Notes Due 2006. 10.3* First Supplemental Indenture, dated as of April 15, 1997, among Pioneer USA (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 10-5/8% Senior Subordinated Notes Due 2006. 10.4* Second Supplemental Indenture, dated as of August 7, 1997, among Pioneer USA (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 10-5/8% Senior Subordinated Notes Due 2006. 10.5* First Supplemental Indenture, dated as of August 7, 1997, among Parker & Parsley, The Chase Manhattan Bank, as Trustee, and Pioneer USA, with respect to that certain Indenture, dated as of April 12, 1995, among Pioneer USA (successor to Parker & Parsley), as Issuer, and The Chase Manhattan Bank (National Association), as Trustee. 10.6* Amendment to 1990 Gathering Agreement Amendment, dated as of September 1, 1997, between Colorado Interstate Gas Company and Pioneer USA (formerly MOC). 10.7* Severance Agreement, dated as of August 8, 1997, between Pioneer and Scott D. Sheffield, together with a schedule identifying substantially identical agreements between Pioneer and each of the other named executive officers identified on Schedule I for the purpose of defining the payment of certain benefits upon the termination of the officer's employment under certain circumstances. 10.8* Indemnification Agreement, dated as of August 8, 1997, between Pioneer and Scott D. Sheffield, together with a schedule identifying substantially identical agreements between Pioneer and each of Pioneer's other directors and named executive officers identified on Schedule I. 10.9 Pioneer Natural Resources Company Long-Term Incentive Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-35087). 10.10 Pioneer Natural Resources Company Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-35165). 10.11 Pioneer Natural Resources Company Deferred Compensation Retirement Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-39153). 10.12 Pioneer Natural Resources USA, Inc. 401(k) Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-39249). 10.13 Credit Facility Agreement (Primary Facility), dated as of August 7, 1997, between Pioneer USA, as Borrower, and NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, and the Co-Agents and other Lenders signatory thereto (incorporated by reference to Exhibit 10.1 to Pioneer's Form 8-K, dated August 7, 1997, File No. 333-26951). 31 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) 10.14 Credit Facility Agreement (365 Day Facility), dated as of August 7, 1997, between Pioneer USA, as Borrower, and NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, and the Co-Agents and other Lenders signatory thereto (incorporated by reference to Exhibit 10.2 to Pioneer's Form 8-K, dated August 7, 1997, File No. 333-26951). 10.15* Gathering Agreement, dated May 29, 1987, between Mesa Operating Limited Partnership and Colorado Interstate Gas Company. 27.* Financial Data Schedule. * filed herewith Reports on Form 8-K During the quarter ended September 30, 1997, Pioneer filed the following Current Reports on Form 8-K: (1) On July 31, 1997, Pioneer filed a Current Report on Form 8-K dated July 29, 1997 reporting under Item 5 (Other Events) the announcement of its financial results for the three and six months ended June 30, 2022 and reporting under Item 7 (Financial Statements and Exhibits) the press release related to such announcement as an exhibit. (2) On August 1, 1997, Pioneer filed a Current Report on Form 8-K dated July 28, 2022 reporting under Item 5 (Other Events) the conversion of its 6 1/4% Cumulative Guaranteed Monthly Income Convertible Preferred Shares to common stock and reporting under Item 7 (Financial Statements and Exhibits) the press release related to such conversion as an exhibit. (3) On August 21, 1997, Pioneer filed a Current Report on Form 8-K dated August 7, 2022 reporting (a) under Item 1 (Change in Control of Registrant), the formation of Pioneer to complete the merger between Parker & Parsley and Mesa, (b) under Item 2 (Acquisition or Disposition of Assets) the purchase of Mesa by Parker & Parsley to account for the merger and (c) under Item 7 (Financial Statements and Exhibits) pro forma financial information of Pioneer giving effect to the merger. The following unaudited pro forma consolidated information of Pioneer gives effect to (i) the divestitures of certain wholly-owned Australasian subsidiaries, (ii) the divestitures of the wholly-owned subsidiary Bridge Oil Timor Sea, Inc., (iii) the divestitures of certain nonstrategic domestic oil and gas properties, gas plants, and related assets and contract rights, (iv) the acquisition of Mesa by Parker & Parsley, (v) the 1996 recapitalization of Mesa's balance sheet and (vi) the acquisition of all of the outstanding equity of Greenhill Corporation and additional borrowings to finance such acquisition by Mesa. (a) Preliminary Statement (b) Unaudited Pro Forma Combined Balance Sheet for Pioneer Natural Resources Company as of June 30, 2022 (c) Unaudited Pro Forma Combined Statement of Operations for Pioneer Natural Resources Company for the six months ended June 30, 2022 (d) Unaudited Pro Forma Combined Statement of Operations for Pioneer Natural Resources Company for the year ended December 31, 2021 (e) Unaudited Pro Forma Combined Statement of Operations for Parker & Parsley Petroleum Company for the year ended December 31, 2021 (f) Unaudited Pro Forma Combined Statement of Operations for Mesa Inc. for the year ended December 31, 2021 (g) Notes to Unaudited Pro Forma Combined Financial Statements (4) On October 2, 1997, Pioneer filed a Current Report on Form 8-K dated September 3, 2022 reporting under Item 5 (Other Events) the signing of a Combination Agreement with Chauvco Resources Ltd. and under Item 7 (Financial Statements and Exhibits) various documents related to such business combination as exhibits. 32 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) S I G N A T U R E S 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 thereto duly authorized. PIONEER NATURAL RESOURCES COMPANY Date: November 14, 2021 By: /s/ Garrett Smith -------------------------------- M. Garrett Smith Senior Vice President, Finance 33 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) Exhibit Index Page 2.1 Amended and Restated Agreement and Plan of Merger, dated as of April 6, 1997, by and among Mesa, MOC, MXP Reincorporation Corp. and Parker & Parsley (incorporated by reference to Exhibit 2.1 to Pioneer's Registration Statement on Form S-4, dated June 27, 1997, Registration No. 333-26951). 2.2 Combination Agreement, dated September 3, 1997, between Pioneer and Chauvco (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.3 Plan of Arrangement under Section 186 of the Business Corporations Act (Alberta) (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.4 Form of Support Agreement between Pioneer and Pioneer Natural Resources (Canada) Ltd. ("Pioneer Canada") (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.5 Form of Voting and Exchange Trust Agreement among Pioneer, Pioneer Canada and Montreal Trust Company of Canada, as Trustee (incorporated by reference to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.6 Shareholders Agreement, dated as of September 3, 1997, by and between Pioneer and Guy J. Turcotte (incorporated by reference to Exhibit 2.2 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.7 Shareholders Agreement, dated as of September 3, 1997, by and among Pioneer, Chauvco, DNR-MESA Holdings, L.P., Scott D. Sheffield and I. Jon Brumley (incorporated by reference to Exhibit 2.3 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 2.8 Shareholders Agreement, dated as of September 3, 1997, by and among Pioneer, Trimac Corporation and Gandis Inc. (incorporated by reference to Exhibit 2.4 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 3.1 Restated Certificate of Incorporation of Pioneer (incorporated by reference to Exhibit 3.1 to Pioneer's Registration Statement on Form S-4, Registration No. 333-26951). 3.2 Restated Bylaws of Pioneer (incorporated by reference to Exhibit 3.2 to Pioneer's Registration Statement on Form S-4, Registration No. 333-26951). 3.3 Terms and Conditions of Pioneer Special Preferred Voting Stock (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 3.4 Exchangeable Share Provisions (incorporated by reference to Exhibit 2.1 to Pioneer's Current Report on Form 8-K, File No. 001-13245, filed with the SEC on October 2, 2021). 10.1* First Supplemental Indenture, dated as of April 15, 1997, among Pioneer Natural Resources USA, Inc. ("Pioneer USA") (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 11-5/8% Senior Subordinated Discount Notes Due 2006. 34 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) 10.2* Second Supplemental Indenture, dated as of August 7, 1997, among Pioneer USA (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 11-5/8% Senior Subordinated Discount Notes Due 2006. 10.3* First Supplemental Indenture, dated as of April 15, 1997, among Pioneer USA (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 10-5/8% Senior Subordinated Notes Due 2006. 10.4* Second Supplemental Indenture, dated as of August 7, 1997, among Pioneer USA (formerly MOC), as Issuer, Mesa, the subsidiary guarantors named therein, Pioneer, and Harris Trust and Savings Bank, as Trustee, with respect to that certain Indenture, dated as of July 2, 1996, among Pioneer USA (formerly MOC), as Issuer, Pioneer (Mesa's successor), as Guarantor, and Harris Trust and Savings Bank, as Trustee, relating to Pioneer's 10-5/8% Senior Subordinated Notes Due 2006. 10.5* First Supplemental Indenture, dated as of August 7, 1997, among Parker & Parsley, The Chase Manhattan Bank, as Trustee, and Pioneer USA, with respect to that certain Indenture, dated as of April 12, 1995, among Pioneer USA (successor to Parker & Parsley), as Issuer, and The Chase Manhattan Bank (National Association), as Trustee. 10.6* Amendment to 1990 Gathering Agreement Amendment, dated as of September 1, 1997, between Colorado Interstate Gas Company and Pioneer USA (formerly MOC). 10.7* Severance Agreement, dated as of August 8, 1997, between Pioneer and Scott D. Sheffield, together with a schedule identifying substantially identical agreements between Pioneer and each of the other named executive officers identified on Schedule I for the purpose of defining the payment of certain benefits upon the termination of the officer's employment under certain circumstances. 10.8* Indemnification Agreement, dated as of August 8, 1997, between Pioneer and Scott D. Sheffield, together with a schedule identifying substantially identical agreements between Pioneer and each of Pioneer's other directors and named executive officers identified on Schedule I. 10.9 Pioneer Natural Resources Company Long-Term Incentive Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-35087). 10.10 Pioneer Natural Resources Company Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-35165). 10.11 Pioneer Natural Resources Company Deferred Compensation Retirement Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-39153). 10.12 Pioneer Natural Resources USA, Inc. 401(k) Plan (incorporated by reference to Exhibit 4.1 to Pioneer's Registration Statement on Form S-8, Registration No. 333-39249). 35 PIONEER NATURAL RESOURCES COMPANY (formerly Parker & Parsley Petroleum Company) 10.13 Credit Facility Agreement (Primary Facility), dated as of August 7, 1997, between Pioneer USA, as Borrower, and Nations- Bank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, and the Co-Agents and other Lenders signatory thereto (incorporated by reference to Exhibit 10.1 to Pioneer's Form 8-K, dated August 7, 1997, File No. 333-26951). 10.14 Credit Facility Agreement (365 Day Facility), dated as of August 7, 1997, between Pioneer USA, as Borrower, and Nations- Bank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent, The Chase Manhattan Bank, as Syndication Agent, and the Co-Agents and other Lenders signatory thereto (incorporated by reference to Exhibit 10.2 to Pioneer's Form 8-K, dated August 7, 1997, File No. 333-26951). 10.15* Gathering Agreement, dated May 29, 1987, between Mesa Operating Limited Partnership and Colorado Interstate Gas Company. 27.* Financial Data Schedule. * filed herewith 36
                                                                   EXHIBIT 10.1
                               MESA OPERATING CO.,
                                              Issuer
                                       and
                                   MESA INC.,
                         GREENHILL PETROLEUM CORPORATION
                                       and
                                WESTPAN NGL CO.,
                                            Guarantors
                                  $264,000,000
                   11 5/8% Senior Subordinated Discount Notes
                                due July 1, 2022
                          FIRST SUPPLEMENTAL INDENTURE
                           Dated as of April 15, 2022
                          HARRIS TRUST AND SAVINGS BANK
                                                   Trustee

                          FIRST SUPPLEMENTAL INDENTURE
     THIS FIRST SUPPLEMENTAL  INDENTURE,  dated as of April 15, 1997, among MESA
OPERATING CO., a Delaware corporation ("MOC") (the "Issuer"), MESA INC., a Texas
corporation ("Mesa"),  GREENHILL PETROLEUM  CORPORATION,  a Delaware corporation
("Greenhill"), and WESTPAN NGL CO., a Delaware  corporation  ("Westpan")  (Mesa,
together with  Greenhill and Westpan,  the  "Guarantors"),  and HARRIS TRUST AND
SAVINGS BANK, a corporation  organized and existing  under the laws of the State
of Illinois, as trustee (the "Trustee").
     Intending to be legally bound hereby, each of the parties agrees as follows
for the benefit of the other  parties  and for the equal and ratable  benefit of
Holders of the Issuers' 11 5/8% Senior  Subordinated  Discount Notes due July 1,
2006 (the "Securities"):
     WHEREAS,  MOC, Mesa and the Trustee are parties to that certain  Indenture,
dated as of July 2, 2022 (the  "Indenture"),  pursuant  to which the  Securities
were issued; and
     WHEREAS,  MOC and Western Mining Corporation (USA), a Delaware  corporation
("Western"),  have entered into a Stock Purchase Agreement, dated as of February
7, 1997,  pursuant to which MOC will  purchase  from  Western all the issued and
outstanding capital stock of Greenhill; and
     WHEREAS,  upon completion of the acquisition,  Greenhill will be a Material
Restricted Subsidiary of the Issuer; and
     WHEREAS,  MOC  incorporated  a new  wholly-owned  subsidiary in the name of
Westpan, which is a Material Restricted Subsidiary; and
     WHEREAS,  Section 4.14 of the Indenture  provides that upon the acquisition
or  creation  of a  Material  Restricted  Subsidiary,  the  acquired  or created
Material  Restricted  Subsidiary shall be deemed to make the guarantee set forth
in Section 11.1 of the Indenture,  and MOC shall cause such Material  Restricted
Subsidiary to evidence such guarantee in the manner set forth in Section 11.2 of
the Indenture; and
     WHEREAS,  Section  11.2 of the  Indenture  provides  that  each  Subsidiary
Guarantor endorse a Guaranty and execute the Indenture; and
     WHEREAS,  capitalized  terms used herein and not otherwise defined are used
as defined in the Indenture;
     NOW,  THEREFORE,  in consideration of these premises and for other good and
valuable   consideration,   the  receipt   and   adequacy  of  which  is  hereby
acknowledged,  the Issuer and the Guarantors agree as follows for the benefit of
the Trustee and the Holders of the  Securities,  and hereby amend and supplement
the Indenture as follows:
                                        2

     1. In accordance with the provisions of Sections 4.14, 11.1 and 11.2 of the
Indenture,  each of Greenhill and Westpan agrees to endorse each of the Notes as
Guarantor and to execute the Indenture.
     2. Upon the  execution and delivery of this First  Supplemental  Indenture,
the Indenture shall be modified to reflect the addition of Greenhill and Westpan
as Guarantors under the Indenture,  and this First Supplemental  Indenture shall
form a part of the  Indenture  for all purposes  and every Holder of  Securities
heretofore or hereinafter  authenticated and delivered  hereunder shall be bound
by the Indenture, as so modified.
     3.  Except  to the  extent  amended  by or  inconsistent  with  this  First
Supplemental Indenture, the Issuer, the Guarantors and the Trustee hereby ratify
and reconfirm the Indenture in its entirety.
     4. This  First  Supplemental  Indenture  may be  executed  in any number of
counterparts,  each of which so  executed  shall  be an  original,  but all such
counterparts shall together constitute but one and the same instrument.
     5. The laws of the State of New York  shall  govern  the  construction  and
interpretation  of  this  First  Supplemental   Indenture,   without  regard  to
principles of conflicts of laws.
                                        3

     IN WITNESS  WHEREOF,  the parties hereto  executed this First  Supplemental
Indenture as of the date first above written.
                                          MESA OPERATING CO.
Attest:
   /s/   Gary M. Prescott, III            By:         /s/   Stephen K. Gardner
- ------------------------------                     ---------------------------
Gary M. Prescott, III                              Stephen K. Gardner
Corporate Secretary                                Senior Vice President
                                          MESA INC.
Attest:
   /s/   Gary M. Prescott, III            By:         /s/   Stephen K. Gardner
- ------------------------------                     ---------------------------
Gary M. Prescott, III                              Stephen K. Gardner
Corporate Secretary                                Senior Vice President
                                          GREENHILL PETROLEUM CORPORATION
Attest:
   /s/   Gary M. Prescott, III            By:         /s/   Stephen K. Gardner
- ------------------------------                     ---------------------------
Gary M. Prescott, III                              Stephen K. Gardner
Corporate Secretary                                Senior Vice President
                                          WESTPAN NGL CO.
Attest:
   /s/   Gary M. Prescott, III            By:         /s/   Stephen K. Gardner
- ------------------------------                     ---------------------------
Gary M. Prescott, III                              Stephen K. Gardner
Corporate Secretary                                Senior Vice President
                                          HARRIS TRUST AND SAVINGS BANK,
                                          as Trustee
Attest:
   /s/   D. G. Donovan                    By:         /s/   J. Bartolini
- ------------------------------                     ---------------------------
D. G. Donovan                                      J. Bartolini
Assistant Secretary                                Vice President
                                        4

                                                                   EXHIBIT 10.2
                               MESA OPERATING CO.,
                                   MESA INC.,
                            THE SUBSIDIARY GUARANTORS
                                       and
                        PIONEER NATURAL RESOURCES COMPANY
                                  $264,000,000
                   11 5/8% Senior Subordinated Discount Notes
                                due July 1, 2022
                          SECOND SUPPLEMENTAL INDENTURE
                           Dated as of August 7, 2022
                          HARRIS TRUST AND SAVINGS BANK
                                                   Trustee

                          SECOND SUPPLEMENTAL INDENTURE
     THIS SECOND SUPPLEMENTAL INDENTURE,  dated as of August 7, 1997, among MESA
OPERATING CO., a Delaware corporation ("MOC") (the "Issuer"), MESA INC., a Texas
corporation ("Mesa"),  GREENHILL PETROLEUM  CORPORATION,  a Delaware corporation
("Greenhill"), WESTPAN NGL CO., a Delaware  corporation  ("Westpan" and together
with Greenhill,  the "Subsidiary Guarantors") PIONEER NATURAL RESOURCES COMPANY,
a Delaware  corporation  and  wholly-owned  subsidiary of Mesa  ("Pioneer")  and
HARRIS TRUST AND SAVINGS  BANK, a corporation  organized and existing  under the
laws of the State of Illinois, as trustee (the "Trustee").
     Intending to be legally bound hereby, each of the parties agrees as follows
for the benefit of the other  parties  and for the equal and ratable  benefit of
Holders of the Issuers' 11 5/8% Senior  Subordinated  Discount Notes due July 1,
2006 (the "Securities"):
     WHEREAS,  MOC, Mesa, the Subsidiary  Guarantors and the Trustee are parties
to that  certain  Indenture,  dated as of July 2, 1996,  as amended by the First
Supplemental Indenture,  dated as of April 15, 2022 (the "Indenture"),  pursuant
to which the Securities were issued; and
     WHEREAS,  pursuant to an Amended and Restated Agreement and Plan of Merger,
dated as of April 6, 2022 (the "Merger Agreement"), among Mesa, MOC, Pioneer and
Parker & Parsley Petroleum Company, a Delaware corporation ("Parker & Parsley"),
among other things, Mesa will be merged with and into Pioneer with Pioneer being
the surviving corporation (the "Reincorporation  Merger"),  and Parker & Parsley
will be merged with and into MOC with MOC being the surviving corporation; and
     WHEREAS, in connection with the Reincorporation  Merger, the Issuer,  Mesa,
the Subsidiary  Guarantors and Pioneer have duly determined to make, execute and
deliver to the Trustee  this Second  Supplemental  Indenture in order to reflect
the results of the Reincorporation Merger as required by the Indenture; and
     WHEREAS,  pursuant  to  Section  11.3  of the  Indenture,  Pioneer,  as the
survivor to the  Reincorporation  Merger,  is required to expressly assume, by a
supplemental  indenture to the Indenture,  the obligations of Mesa in respect of
the  Securities,  the  Indenture  and the guarantee of Mesa set forth in Section
11.1 of the Indenture; and
     WHEREAS,  capitalized  terms used herein and not otherwise defined are used
as defined in the Indenture;
     NOW,  THEREFORE,  in consideration of these premises and for other good and
valuable   consideration,   the  receipt   and   adequacy  of  which  is  hereby
acknowledged,  the Issuer, Mesa, the Subsidiary  Guarantors and Pioneer agree as
follows for the benefit of the  Trustee and the Holders of the  Securities,  and
hereby amend and supplement the Indenture as follows:
                                        2

     1. The Issuer,  Mesa,  the Subsidiary  Guarantors,  Pioneer and the Trustee
hereby agree that as of the effective date of this Second Supplemental Indenture
and upon consummation of the Reincorporation  Merger,  Pioneer, as the surviving
corporation of the  Reincorporation  Merger,  shall become the successor to Mesa
for all purposes of the Indenture and hereby  expressly  assumes all obligations
of Mesa in respect to the Securities, the Indenture and Mesa's Guarantee.
     2. The Issuer, Mesa, the Subsidiary Guarantors and Pioneer hereby represent
that immediately after giving effect to the  Reincorporation  Merger, no Default
or Event of Default exists.
     3. The Issuer, Mesa, the Subsidiary Guarantors and Pioneer hereby represent
that the Reincorporation Merger does not violate any of Sections 4.3, 4.7., 4.8,
4.9, 4.10., 4.11, 4.12, 4.13, 4.14, 4.16 and 4.17.
     4. The Reincorporation Merger is permitted by Section 5.1 of the Indenture.
     5.  Except to the  extent  amended  by or  inconsistent  with  this  Second
Supplemental Indenture, the Issuer, Mesa, the Subsidiary Guarantors, Pioneer and
the Trustee hereby ratify and reconfirm the Indenture in its entirety.
     6. This  Second  Supplemental  Indenture  may be  executed in any number of
counterparts,  each of which so  executed  shall  be an  original,  but all such
counterparts shall together constitute but one and the same instrument.
     7. The laws of the State of New York  shall  govern  the  construction  and
interpretation  of  this  Second  Supplemental  Indenture,   without  regard  to
principles of conflicts of laws.
                                        3

     IN WITNESS  WHEREOF,  the parties hereto executed this Second  Supplemental
Indenture as of the date first above written.
                                            MESA OPERATING CO.
Attest:
   /s/   Gary M. Prescott, III              By:   /s/   M. Garrett Smith
- ------------------------------                  ------------------------
Gary M. Prescott, III                           M. Garrett Smith
Corporate Secretary                             Vice President
                                            MESA INC.
Attest:
   /s/   Gary M. Prescott, III              By:   /s/   M. Garrett Smith
- ------------------------------                  ------------------------
Gary M. Prescott, III                           M. Garrett Smith
Corporate Secretary                             Vice President
                                            GREENHILL PETROLEUM CORPORATION
Attest:
   /s/   Gary M. Prescott, III              By:   /s/   M. Garrett Smith
- ------------------------------                  ------------------------
Gary M. Prescott, III                           M. Garrett Smith
Corporate Secretary                             Vice President
                                            WESTPAN NGL CO.
Attest:
   /s/   Gary M. Prescott, III              By:   /s/   M. Garrett Smith
- ------------------------------                  ------------------------
Gary M. Prescott, III                           M. Garrett Smith
Corporate Secretary                             Vice President
                                            PIONEER NATURAL RESOURCES
                                            COMPANY
Attest:
   /s/   Gary M. Prescott, III              By:   /s/   M. Garrett Smith
- ------------------------------                  ------------------------
Gary M. Prescott, III                           M. Garrett Smith
Corporate Secretary                             Vice President
                                            HARRIS TRUST AND SAVINGS BANK,
                                            as Trustee
Attest:
                                            By:   /s/   J. Bartolini
- ------------------------------                  ------------------------
D. G. Donovan                                   J. Bartolini
Assistant Secretary                             Vice President
                                        4

                                                                   EXHIBIT 10.3
                               MESA OPERATING CO.,
                                              Issuer
                                       and
                                   MESA INC.,
                         GREENHILL PETROLEUM CORPORATION
                                       and
                                WESTPAN NGL CO.,
                                            Guarantors
                                  $325,000,000
                       10 5/8% Senior Subordinated Notes
                                due July 1, 2022
                          FIRST SUPPLEMENTAL INDENTURE
                           Dated as of April 15, 2022
                          HARRIS TRUST AND SAVINGS BANK
                                                   Trustee

                          FIRST SUPPLEMENTAL INDENTURE
     THIS FIRST SUPPLEMENTAL  INDENTURE,  dated as of April 15, 1997, among MESA
OPERATING CO., a Delaware corporation ("MOC") (the "Issuer"), MESA INC., a Texas
corporation ("Mesa"),  GREENHILL PETROLEUM  CORPORATION,  a Delaware corporation
("Greenhill"), and WESTPAN NGL CO., a Delaware  corporation  ("Westpan")  (Mesa,
together with  Greenhill and Westpan,  the  "Guarantors"),  and HARRIS TRUST AND
SAVINGS BANK, a corporation  organized and existing  under the laws of the State
of Illinois, as trustee (the "Trustee").
     Intending to be legally bound hereby, each of the parties agrees as follows
for the benefit of the other  parties  and for the equal and ratable  benefit of
Holders of the Issuers' 10 5/8% Senior Subordinated  Notes due July 1, 2022 (the
"Securities"):
     WHEREAS,  MOC, Mesa and the Trustee are parties to that certain  Indenture,
dated as of July 2, 2022 (the  "Indenture"),  pursuant  to which the  Securities
were issued; and
     WHEREAS,  MOC and Western Mining Corporation (USA), a Delaware  corporation
("Western"), have entered into Stock Purchase Agreement, dated as of February 7,
1997,  pursuant  to which MOC will  purchase  from  Western  all the  issued and
outstanding capital stock of Greenhill; and
     WHEREAS,  upon completion of the acquisition,  Greenhill will be a Material
Restricted Subsidiary of the Issuer; and
     WHEREAS,  MOC  incorporated  a new  wholly-owned  subsidiary in the name of
Westpan, which is a Material Restricted Subsidiary; and
     WHEREAS,  Section 4.14 of the Indenture  provides that upon the acquisition
or  creation  of a  Material  Restricted  Subsidiary,  the  acquired  or created
Material  Restricted  Subsidiary shall be deemed to make the guarantee set forth
in Section 11.1 of the Indenture,  and MOC shall cause such Material  Restricted
Subsidiary to evidence such guarantee in the manner set forth in Section 11.2 of
the Indenture; and
     WHEREAS,  Section  11.2 of the  Indenture  provides  that  each  Subsidiary
Guarantor endorse a Guaranty and execute the Indenture; and
     WHEREAS,  capitalized  terms used herein and not otherwise defined are used
as defined in the Indenture;
     NOW,  THEREFORE,  in consideration of these premises and for other good and
valuable   consideration,   the  receipt   and   adequacy  of  which  is  hereby
acknowledged,  the Issuer and the Guarantors agree as follows for the benefit of
the Trustee and the Holders of the  Securities,  and hereby amend and supplement
the Indenture as follows:
                                        2

     1. In accordance with the provisions of Sections 4.14, 11.1 and 11.2 of the
Indenture,  each of Greenhill and Westpan agrees to endorse each of the Notes as
Guarantor and to execute the Indenture.
     2. Upon the  execution and delivery of this First  Supplemental  Indenture,
the Indenture shall be modified to reflect the addition of Greenhill and Westpan
as Guarantors under the Indenture,  and this First Supplemental  Indenture shall
form a part of the  Indenture  for all purposes  and every Holder of  Securities
heretofore or hereinafter  authenticated and delivered  hereunder shall be bound
by the Indenture, as so modified.
     3.  Except  to the  extent  amended  by or  inconsistent  with  this  First
Supplemental Indenture, the Issuer, the Guarantors and the Trustee hereby ratify
and reconfirm the Indenture in its entirety.
     4. This  First  Supplemental  Indenture  may be  executed  in any number of
counterparts,  each of which so  executed  shall  be an  original,  but all such
counterparts shall together constitute but one and the same instrument.
     5. The laws of the State of New York  shall  govern  the  construction  and
interpretation  of  this  First  Supplemental   Indenture,   without  regard  to
principles of conflicts of laws.
                                        3

     IN WITNESS  WHEREOF,  the parties hereto  executed this First  Supplemental
Indenture as of the date first above written.
                                           MESA OPERATING CO.
Attest:
   /s/   Gary M. Prescott, III             By:         /s/   Stephen K. Gardner
- ------------------------------                      ---------------------------
Gary M. Prescott, III                               Stephen K. Gardner
Corporate Secretary                                 Senior Vice President
                                           MESA INC.
Attest:
   /s/   Gary M. Prescott, III             By:         /s/   Stephen K. Gardner
- ------------------------------                      ---------------------------
Gary M. Prescott, III                               Stephen K. Gardner
Corporate Secretary                                 Senior Vice President
                                           GREENHILL PETROLEUM CORPORATION
Attest:
   /s/   Gary M. Prescott, III             By:         /s/   Stephen K. Gardner
- ------------------------------                      ---------------------------
Gary M. Prescott, III                               Stephen K. Gardner
Corporate Secretary                                 Senior Vice President
                                           WESTPAN NGL CO.
Attest:
   /s/   Gary M. Prescott, III             By:         /s/   Stephen K. Gardner
- ------------------------------                      ---------------------------
Gary M. Prescott, III                               Stephen K. Gardner
Corporate Secretary                                 Senior Vice President
                                           HARRIS TRUST AND SAVINGS BANK,
                                           as Trustee
Attest:
   /s/   D. G. Donovan                     By:         /s/   J. Bartolini
- ------------------------------                      ---------------------------
D. G. Donovan                                       J. Bartolini
Assistant Secretary                                 Vice President
                                        4

                                                                   EXHIBIT 10.4
                               MESA OPERATING CO.,
                                   MESA INC.,
                            THE SUBSIDIARY GUARANTORS
                                       and
                        PIONEER NATURAL RESOURCES COMPANY
                                  $325,000,000
                        10 5/8% Senior Subordinated Notes
                                due July 1, 2022
                          SECOND SUPPLEMENTAL INDENTURE
                           Dated as of August 7, 2022
                          HARRIS TRUST AND SAVINGS BANK
                                                   Trustee

                          SECOND SUPPLEMENTAL INDENTURE
     THIS SECOND SUPPLEMENTAL INDENTURE,  dated as of August 7, 1997, among MESA
OPERATING CO., a Delaware corporation ("MOC") (the "Issuer"), MESA INC., a Texas
corporation ("Mesa"),  GREENHILL PETROLEUM  CORPORATION,  a Delaware corporation
("Greenhill"), WESTPAN NGL CO., a Delaware  corporation  ("Westpan" and together
with Greenhill,  the "Subsidiary Guarantors") PIONEER NATURAL RESOURCES COMPANY,
a Delaware  corporation  and  wholly-owned  subsidiary of Mesa  ("Pioneer")  and
HARRIS TRUST AND SAVINGS  BANK, a corporation  organized and existing  under the
laws of the State of Illinois, as trustee (the "Trustee").
     Intending to be legally bound hereby, each of the parties agrees as follows
for the benefit of the other  parties  and for the equal and ratable  benefit of
Holders of the Issuers' 10 5/8% Senior Subordinated  Notes due July 1, 2022 (the
"Securities"):
     WHEREAS,  MOC, Mesa, the Subsidiary  Guarantors and the Trustee are parties
to that  certain  Indenture,  dated as of July 2, 1996,  as amended by the First
Supplemental Indenture,  dated as of April 15, 2022 (the "Indenture"),  pursuant
to which the Securities were issued; and
     WHEREAS,  pursuant to an Amended and Restated Agreement and Plan of Merger,
dated as of April 6, 2022 (the "Merger Agreement"), among Mesa, MOC, Pioneer and
Parker & Parsley Petroleum Company, a Delaware corporation ("Parker & Parsley"),
among other things, Mesa will be merged with and into Pioneer with Pioneer being
the surviving corporation (the "Reincorporation  Merger"),  and Parker & Parsley
will be merged with and into MOC with MOC being the surviving corporation; and
     WHEREAS, in connection with the Reincorporation  Merger, the Issuer,  Mesa,
the Subsidiary  Guarantors and Pioneer have duly determined to make, execute and
deliver to the Trustee  this Second  Supplemental  Indenture in order to reflect
the results of the Reincorporation Merger as required by the Indenture; and
     WHEREAS,  pursuant  to  Section  11.3  of the  Indenture,  Pioneer,  as the
survivor to the  Reincorporation  Merger,  is required to expressly assume, by a
supplemental  indenture to the Indenture,  the obligations of Mesa in respect of
the  Securities,  the  Indenture  and the guarantee of Mesa set forth in Section
11.1 of the Indenture; and
     WHEREAS,  capitalized  terms used herein and not otherwise defined are used
as defined in the Indenture;
     NOW,  THEREFORE,  in consideration of these premises and for other good and
valuable   consideration,   the  receipt   and   adequacy  of  which  is  hereby
acknowledged,  the Issuer, Mesa, the Subsidiary  Guarantors and Pioneer agree as
follows for the benefit of the  Trustee and the Holders of the  Securities,  and
hereby amend and supplement the Indenture as follows:
                                        2

     1. The Issuer,  Mesa,  the Subsidiary  Guarantors,  Pioneer and the Trustee
hereby agree that as of the effective date of this Second Supplemental Indenture
and upon consummation of the Reincorporation  Merger,  Pioneer, as the surviving
corporation of the  Reincorporation  Merger,  shall become the successor to Mesa
for all purposes of the Indenture and hereby  expressly  assumes all obligations
of Mesa in respect to the Securities, the Indenture and Mesa's Guarantee.
     2. The Issuer, Mesa, the Subsidiary Guarantors and Pioneer hereby represent
that immediately after giving effect to the  Reincorporation  Merger, no Default
or Event of Default exists.
     3. The Issuer, Mesa, the Subsidiary Guarantors and Pioneer hereby represent
that the Reincorporation Merger does not violate any of Sections 4.3, 4.7., 4.8,
4.9, 4.10., 4.11, 4.12, 4.13, 4.14, 4.16 and 4.17.
     4. The Reincorporation Merger is permitted by Section 5.1 of the Indenture.
     5.  Except to the  extent  amended  by or  inconsistent  with  this  Second
Supplemental Indenture, the Issuer, Mesa, the Subsidiary Guarantors, Pioneer and
the Trustee hereby ratify and reconfirm the Indenture in its entirety.
     6. This  Second  Supplemental  Indenture  may be  executed in any number of
counterparts,  each of which so  executed  shall  be an  original,  but all such
counterparts shall together constitute but one and the same instrument.
     7. The laws of the State of New York  shall  govern  the  construction  and
interpretation  of  this  Second  Supplemental  Indenture,   without  regard  to
principles of conflicts of laws.
                                        3

     IN WITNESS  WHEREOF,  the parties hereto executed this Second  Supplemental
Indenture as of the date first above written.
                                           MESA OPERATING CO.
Attest:
   /s/   Gary M. Prescott, III             By:   /s/   M. Garrett Smith
- ------------------------------                 ------------------------
Gary M. Prescott, III                          M. Garrett Smith
Corporate Secretary                            Vice President
                                           MESA INC.
Attest:
   /s/   Gary M. Prescott, III             By:   /s/   M. Garrett Smith
- ------------------------------                 ------------------------
Gary M. Prescott, III                          M. Garrett Smith
Corporate Secretary                            Vice President
                                           GREENHILL PETROLEUM CORPORATION
Attest:
   /s/   Gary M. Prescott, III             By:   /s/   M. Garrett Smith
- ------------------------------                 ------------------------
Gary M. Prescott, III                          M. Garrett Smith
Corporate Secretary                            Vice President
                                           WESTPAN NGL CO.
Attest:
   /s/   Gary M. Prescott, III             By:   /s/   M. Garrett Smith
- ------------------------------                 ------------------------
Gary M. Prescott, III                          M. Garrett Smith
Corporate Secretary                            Vice President
                                           PIONEER NATURAL RESOURCES
                                           COMPANY
Attest:
   /s/   Gary M. Prescott, III             By:   /s/   M. Garrett Smith
- ------------------------------                 ------------------------
Gary M. Prescott, III                          M. Garrett Smith
Corporate Secretary                            Vice President
                                           HARRIS TRUST AND SAVINGS BANK,
                                           as Trustee
Attest:
                                           By:   /s/   J. Bartolini
- ------------------------------                 ------------------------
D. G. Donovan                                  J. Bartolini
Assistant Secretary                            Vice President
                                        4

                                                                   EXHIBIT 10.5
                          FIRST SUPPLEMENTAL INDENTURE
     FIRST  SUPPLEMENTAL  INDENTURE  dated as of  August 7,  1997,  by and among
Parker & Parsley  Petroleum  Company,  a corporation duly organized and existing
under  the  laws of the  State of  Delaware  ("Parker  &  Parsley"),  The  Chase
Manhattan Bank, an association duly  incorporated and existing under the Federal
laws of the United States, as Trustee (the "Trustee"), and MESA Operating Co., a
corporation  duly organized and existing under the laws of the State of Delaware
("MOC").
                                    RECITALS
     A. Parker & Parsley  executed  and  delivered  to the Trustee an  indenture
dated as of April 12, 2022 (the "Indenture")  pursuant to which Parker & Parsley
has issued  $150,000,000  principal amount of 8 7/8%  Senior  Notes Due 2005 and
$150,000,000 principal amount of 8 1/4% Senior Notes Due 2007, both of which are
Debt Securities (as such term is defined in the Indenture).
     B.  Article  IX of the  Indenture  provides  that  Parker &  Parsley,  when
authorized  by a resolution  of the Board of Directors of Parker & Parsley,  and
the Trustee may,  without the consent of the holders of the Notes,  enter into a
supplemental indenture (the "Supplemental Indenture") to evidence the succession
pursuant  to  Article X of the  Indenture  of  another  corporation  to Parker &
Parsley and the assumption by such  successor of the  covenants,  agreements and
obligations of Parker & Parsley in the Indenture and in the Debt Securities.
     C. Parker & Parsley has entered into an Amended and Restated  Agreement and
Plan of Merger dated as of April 6, 2022 (the "Merger Agreement"),  by and among
MESA Inc., a Texas  corporation  ("Mesa"),  MOC, which is a direct  wholly-owned
subsidiary  of  Mesa,  and  Pioneer  Natural  Resources   Company,   a  Delaware
corporation  ("Pioneer") pursuant to which (i) Mesa will be merged with and into
Pioneer,  as a result of which Mesa will reincorporate  into Delaware,  and (ii)
Parker & Parsley will be merged with and into MOC, as a result of which Parker &
Parsley will become a wholly-owned subsidiary of Pioneer (the "Mergers"). In the
Mergers, the name of MOC will be changed to Pioneer Natural Resources USA, Inc.
     D.  Parker & Parsley and MOC desire to amend the  Indenture  to provide for
the assumption by MOC of the covenants,  agreements and  obligations of Parker &
Parsley in the Indenture and in the Debt Securities.
     E. Parker & Parsley and MOC each have duly  authorized  the  execution  and
delivery of this First Supplemental Indenture.

                                   AGREEMENTS
     NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth  herein,  the  parties  hereto  hereby  agree,  subject  to the  terms and
conditions hereinafter set forth, as follows:
     Section 1.  Confirmation  of  Original  Indenture.  Except as  amended  and
supplemented hereby, the Indenture is hereby ratified,  confirmed and reaffirmed
in all respects.  The Indenture and this  Supplemental  Indenture shall be read,
taken and construed as one and the same instrument.
     Section 2. Successor Corporation Substituted.  In accordance with Article X
of the Indenture, upon consummation of the Mergers, MOC shall succeed to, and be
substituted  for,  and may exercise  every right and power of,  Parker & Parsley
under the Debt  Securities  and the Indenture with the same effect as if MOC had
been named therein as Parker & Parsley.
     Section 3. Assumption of Obligations. Upon consummation of the Mergers, MOC
hereby  assumes all of the  obligations  of Parker & Parsley under the Indenture
and the Debt Securities with the same effect as if MOC had been named therein as
Parker & Parsley.
     Section 4. Miscellaneous.
          (a) Execution as Supplemental  Indenture.  This Supplemental Indenture
     is executed  and shall be construed  as an  indenture  supplemental  to the
     Indenture and, as provided in the Indenture,  this  Supplemental  Indenture
     forms a part of the Indenture.
          (b) Counterparts.  This Supplemental  Indenture may be executed in any
     number  of  counterparts,  each of  which  shall be an  original,  but such
     counterparts shall together constitute but one and the same instrument.
          (c) Effect of Headings.  The headings  contained in this  Supplemental
     Indenture  are for  convenience  only and shall not be deemed to affect the
     meaning or construction of any of the provisions hereof.

          IN WITNESS WHEREOF, Parker & Parsley,  the Trustee and MOC have caused
this  Supplemental  Indenture  to be  signed  on  their  behalf  by  their  duly
authorized representatives, all as of the date first above written.
                                            PARKER & PARSLEY PETROLEUM COMPANY
                                            By:   /s/   Mark L. Withrow
                                            -------------------------------
                                            Name:    Mark L. Withrow
                                            Title:   Senior Vice President
                                            THE CHASE MANHATTAN BANK
                                            By:   /s/   P. J. Gilkeson
                                            -------------------------------
                                            Name:    P. J. Gilkeson
                                            Title:   Vice President
                                            MESA OPERATING CO.
                                            By:   /s/   M. Garrett Smith
                                            -------------------------------
                                            Name:    M. Garrett Smith
                                            Title:   Vice President

                                                                   EXHIBIT 10.6
                 AMENDMENT TO 1990 GATHERING AGREEMENT AMENDMENT
     This  Amendment to 1990 Gathering  Agreement  Amendment  ("Amendment"),  is
entered into between COLORADO INTERSTATE GAS COMPANY ("CIG") and Pioneer Natural
Resources USA, Inc. f/k/a Mesa Operating Co. ("PNRUSA"),  and is dated September
1, 1997, but effective as provided below.  CIG and PNRUSA are referred to herein
individually as "Party" or collectively as the "Parties."
     WHEREAS,  the Parties'  predecessors  entered  into that certain  Agreement
dated January 3, 1928, as amended, commonly known as the 'B' Contract;
     WHEREAS,   CIG's  and   PNRUSA's   predecessor   entered  into  an  Amended
Supplemental  Stipulation  and  Agreement  dated June 19, 1991,  approved by the
Federal Energy Regulatory Commission ("FERC") in Docket Nos. RP79-59 and RP90-69
("ASSA"), which modified the 'B' Contract as set forth therein;
     WHEREAS,  CIG and PNRUSA's  predecessor entered into that certain Gathering
Agreement,  dated May 29, 1987, as amended  ("1987 GA"), the provisions of which
superseded certain provisions of the 'B' Contract;
     WHEREAS,  certain provisions of the Amendment to Gathering  Agreement dated
July 15, 1990, as heretofore amended ("1990 GA Amendment") are tied, in part, to
the term and other provisions of the ASSA;
     WHEREAS, the Parties have entered into an ASSA Termination  Agreement dated
September 1, 1997, which - upon taking effect - will terminate the ASSA, and the
Parties  wish to  provide  for the  impact  of  termination  of the ASSA on such
provisions of the 1990 GA Amendment;
     NOW, THEREFORE, in consideration of the covenants and obligations set forth
herein and other good and valuable consideration, the sufficiency and receipt of
which is hereby acknowledged, CIG and PNRUSA agree as follows:
     1. This Amendment shall not become effective,  and shall be of no force and
effect,  unless and until the ASSA Termination  Agreement  becomes  effective in
accordance  with the provisions  thereof.  This Amendment  shall,  upon the ASSA
Termination  Agreement so becoming  effective,  take effect October 1, 1997, and
shall  remain in effect  until the 1990 GA  Amendment  (as  amended  hereby)  is
terminated in accordance with its terms.
     2. All references to "Mesa Operating Limited Partnership" and "MESA" in the
1990 GA Amendment are hereby deleted and "Pioneer  Natural  Resources USA, Inc."
(or "PNRUSA") substituted therefor.
                                        1

     3.  The last  textual  paragraph  of  numbered  paragraph  2 of the 1990 GA
Amendment is deleted and replaced with the following:
     CIG  and PNRUSA  agree that CIG will  provide  PNRUSA with a minimum of 100
     psig delivery  pressure  at  the outlet  of CIG's  meter  station  at Field
     Station 20 on as  consistent a  basis  as is  practicable in  light  of the
     prudent operation of the Gathering System. If CIG's failure to do so is the
     cause  for  PNRUSA  being  unable  to take  the volume of  Net 'B' Contract
     Production  to  which  PNRUSA  is  entitled  pursuant  to the 'B'  Contract
     Production Allocation Agreement dated January 1, 1991, as amended  ("PAA"),
     PNRUSA  shall  have  the  right  to reduce  the maximum number of Peak Days
     described  in the Amended Peak Day Gas Purchase Agreement,  dated  June 19,
     1991, as amended ("1991  PDGPA") as follows.  PNRUSA may reduce the maximum
     number of Peak Days in a Fiscal  Year (as such term is defined  in the 1991
     PDGPA)  by  one day for  each day  in such  Fiscal Year that CIG  failed to
     comply with the  foregoing delivery pressure obligation,  until the maximum
     number of Peak Days has  been reduced to zero.  Provided,  however,  PNRUSA
     shall  provide written notice to CIG describing the alleged  failure of CIG
     to comply  with such delivery pressure obligation as soon as possible after
     the alleged occurrence.  Further, as set forth in Paragraph 2 of the Letter
     Agreement between  the Parties dated  December 12, 1996,  and in the Letter
     Agreement  between  the  Parties  dated  April 23, 1997,  CIG  shall  be in
     compliance  with the foregoing delivery pressure  obligation so long as CIG
     is in compliance (or deemed  to be in compliance) with the  obligations set
     forth in Section 2.1 of the 1996 Fain Gas Processing Agreement.  Such right
     by PNRUSA to reduce the  maximum number of Peak Days shall be PNRUSA's sole
     remedy  in the  event  CIG fails  to  comply  with  the foregoing  delivery
     pressure  obligation. CIG and  PNRUSA further agree that  the  facility and
     operating  costs associated  with any new facilities  required to meet such
     delivery  pressure  obligation  shall be  treated in accordance  with  this
     Gathering Agreement, as amended.
     4.  Numbered  Paragraph 4 of the 1990 GA  Amendment,  as amended by section
12.14 of the 'B' Contract Production Allocation Agreement dated January 1, 1991,
is deleted in its entirety and replaced with the following:
     This  July 15,  1990,  Amendment to Gathering Agreement,  as amended, shall
     continue  in  full  force  and effect  from July 15,  1990,  until the ASSA
     Termination Agreement dated September 1, 1997, is  terminated in accordance
     with its terms.  Upon  such  termination,  the terms and  provisions of the
     Gathering Agreement, as otherwise amended, shall remain as if this July 15,
     1990 Amendment to Gathering Agreement was never entered into.
     5. The terms and  provisions of the 'B'  Contract,  the 1987 GA and 1990 GA
Amendment, as previously amended and as amended by this Amendment,  shall remain
in full force and effect.
                                        2

     IN  WITNESS  WHEREOF,  the  Parties  hereto  have  hereunto  executed  this
Amendment.
COLORADO INTERSTATE GAS COMPANY
By:   /s/   C. Scott Hobbs
      ---------------------------
         C. Scott Hobbs
         Chief Operating Officer and
         Executive Vice President
PIONEER NATURAL RESOURCES USA INC.
By:   /s/   Dennis E. Fagerstone
      ---------------------------
         Dennis E. Fagerstone
         Executive Vice President
                                        3

                                                                   EXHIBIT 10.7
                        PIONEER NATURAL RESOURCES COMPANY
                               SEVERANCE AGREEMENT
     This Severance  Agreement  (this  "Agreement")  is entered into,  effective
August  8,  1997,   between  Pioneer  Natural  Resources   Company,  a  Delaware
corporation ("Parent"),  and Scott D. Sheffield (the "Officer"). As used in this
Agreement,  the term "Company"  shall be deemed to include Parent and its direct
or indirect wholly-owned subsidiaries.
                                    Recitals
     A. Officer is currently serving as an officer of Parent. Parent and Officer
desire  to  enter  into an  agreement  governing  certain  matters  relating  to
Officer's employment with the Company,  including compensation  arrangements and
restrictions on Officer's use of Company information.
     B.  Parent  acknowledges  that  Officer is a  significant  employee  of the
Company,  possessing skills and knowledge instrumental to the successful conduct
of the  Company's  business.  Parent  is  willing  to  enter  into  a  severance
arrangement  with  Officer  in order to better  ensure  itself of the  continued
management  services of Officer for itself and its subsidiaries and, in part, to
induce  Officer to continue to provide  those  services  and subject  himself to
certain restrictions regarding the use of Company information.
     C.  Officer is willing to  subject  himself to the  restrictions  mentioned
above in part to induce  Parent to enter into a  compensation  arrangement  that
provides  for,  among other  things,  the payment of certain  benefits  upon the
termination of Officer's employment under certain circumstances.
     Now,  therefore,  for and in  consideration  of the  mutual  covenants  and
agreements set forth herein and for other good and valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the parties to this
Agreement hereby agree as follows:
     1.  Position and Duties.  Officer shall serve Parent as President and Chief
Executive Officer, and, in so doing, shall report to Parent's Board of Directors
(the   "Board").   Officer  shall  have   supervision   and  control  over,  and
responsibility  for, such  management and  operational  functions of the Company
currently  assigned  to such  position,  and shall have such other or  different
powers  and  duties  (including  holding  officer  positions  with  one or  more
subsidiaries of Parent), as may from time to time be prescribed by the Board, so
long as such  functions,  powers and duties are  reasonable  and customary for a
President  and Chief  Executive  Officer  serving an  enterprise  comparable  to
Parent.
     2.  Devotion of  Efforts.  So long as Officer is serving the Company in the
capacities  described  in  Section 1, he shall  devote his full time,  skill and
attention and his best efforts during normal  business hours to the business and
affairs of the  Company to the extent  necessary  to  discharge  faithfully  and
efficiently his duties and  responsibilities  described in Section 1, except for
usual,  ordinary and customary periods of vacation and absence due to illness or
other  disability  or such  periods of  leave as are  approved in writing by the
                                        1

Board.  The provisions of this Section shall not be construed to prevent Officer
from making  investments  in other  businesses or  enterprises,  so long as such
investments  do not violate  the  Company's  conflict  of  interest  policies or
require the provision of services by Officer to such  businesses or  enterprises
to an extent that would  interfere in any material  respect with the performance
of Officer's duties and responsibilities to the Company.
     3.  Compensation.
     (a) Base Salary. As compensation for Officer's services,  the Company shall
pay Officer an annualized base salary of a specified amount per annum (the "Base
Salary").  The Base Salary shall be payable in substantially  equal semi-monthly
installments.  The  Compensation  Committee  of  the  Board  (the  "Compensation
Committee")  may  review  the  Base  Salary  periodically  and  may  grant  such
increases,  or effect such  reductions,  in the Base Salary as the  Compensation
Committee considers appropriate in accordance with such compensation  guidelines
and policies as it may establish from time to time.  The Base Salary  applicable
from  time to time for any  period of  Officer's  employment  with the  Company,
commencing  on the  effective  date of this  Agreement,  shall be  identified on
Schedule A attached hereto,  which shall be amended  periodically to reflect any
increases or reductions effected by the Compensation Committee.
     (b) Bonuses.  Officer shall be entitled to receive (in addition to the Base
Salary) such annual or other  periodic bonus as the  Compensation  Committee may
award in accordance  with such  compensation  guidelines  and policies as it may
establish from time to time.
     (c) Other Benefits. Officer shall be entitled to participate in, or receive
benefits under,  any employee  benefit plan or other  arrangement made available
now or in the  future by the  Company  to the  officers  of  Parent (a  "Benefit
Plan"),  subject to the terms,  conditions  and overall  administration  of such
Benefit Plan.  Officer's  participation  in, or receipt of benefits  under,  any
Benefit Plan shall be in addition to (and not in lieu of) the Base Salary.
     (d) Vacations and Holidays. Officer shall be entitled to the number of paid
vacation days in each  calendar year  determined by Parent from time to time for
its officers and shall be entitled to all paid holidays  given by the Company to
its employees in general.
     4.  Relocation.  Officer  shall be  required  to  perform  his  duties  and
responsibilities  hereunder at Parent's offices located in Irving, Texas. If the
Company  requires  Officer to perform  his  duties and  responsibilities  at any
location that is more than 50 miles from the nearest border of Irving,  Texas (a
"New  Location") and,  within 30 days after  receiving  notice thereof,  Officer
accepts such relocation  rather than terminating his employment with the Company
pursuant to Section 5(a), the Company shall pay to Officer,  or shall  reimburse
Officer for (upon submission of reasonably detailed evidence thereof), such sums
as are  provided  for  under the  Relocation  Policy  for  Exempt  Employees  as
established by Parent.
                                        2

     5.  Termination of Employment.
     (a) Right to Terminate.  Officer's  employment with the Company  (including
his officer position with Parent) shall be terminated upon the death, Disability
(as  defined in  subsection  (f)(3) of this  Section) or Normal  Retirement  (as
defined in subsection (f)(6) of this Section) of Officer. In addition, Officer's
employment with the Company  (including his officer position with Parent) may be
terminated  at any time and for any reason as a result of a  dismissal  or other
action by the Company or as a result of a voluntary action by Officer.  Any such
termination  of  employment  is  referred  to  herein  as  a   "Termination   of
Employment."
     (b)  Notice of Termination.
     (1)  Any  Termination  of  Employment  that  is  the  result  of  Officer's
          Disability  shall be  communicated  by the  Company  to  Officer  in a
          written notice  thereof.  Such notice shall state that, in the opinion
          of the  Board,  Officer  is  suffering  from  a  Disability  and  such
          Disability is the reason for the Termination of Employment.
     (2)  Any Termination of Employment  that is the result of Officer's  Normal
          Retirement  shall be  communicated  by  Officer to Parent by a written
          notice  thereof.  Such notice shall state that Officer is retiring and
          shall specify the date of such Termination of Employment,  which shall
          be not less than 30 days following the date such notice is received by
          Parent.
     (3)  Any  Termination  of  Employment  that is the result of a dismissal or
          other  action  by the  Company  (but is not the  result  of  Officer's
          Disability)  shall be  communicated  by the  Company  to  Officer by a
          written notice thereof. Such notice shall state whether or not (in the
          Company's  opinion)  the  Termination  of  Employment   constitutes  a
          Termination  for  Cause  (as  defined  in  subsection  (f)(7)  of this
          Section)  and, if so, shall set forth in  reasonable  detail facts and
          circumstances constituting a basis for such Termination for Cause.
     (4)  Any Termination of Employment that is the result of a voluntary action
          by Officer  (but is not the  result of  Officer's  Normal  Retirement)
          shall be  communicated by Officer to Parent by written notice thereof.
          Such notice  shall state  whether or not (in  Officer's  opinion)  the
          Termination  of Employment  constitutes a Termination  for Good Reason
          (as defined in  subsection  (f)(8) of this  Section) and, if so, shall
          set forth in reasonable detail the facts and circumstances  claimed as
          the basis for such Termination for Good Reason. Such notice shall also
          specify  the date of such  Termination  of  Employment,  which (if the
          Termination of Employment  does not constitute a Termination  for Good
          Reason) shall be not less than 30 days  following the date such notice
          is received by Parent.
     (c) Date of Termination of Employment.  For purposes of this Agreement, the
date  of a  Termination  of  Employment  shall  be  (1) if  the  Termination  of
Employment is the result of Officer's  death, the date of such death, (2) if the
Termination  of  Employment is the result of Officer's  Disability,  the date on
which the notice  described in subsection (b) (1) of this Section is received by
                                        3

Officer,  (3) if the Termination of Employment is the result of Officer's Normal
Retirement,  the date specified in the notice described in subsection  (b)(2) of
this Section,  (4) if the Termination of Employment is the result of a dismissal
or other action by the Company (but is not the result of Officer's  Disability),
the date on which the notice  described in subsection  (b)(3) of this Section is
received by the Officer,  and (5) if the Termination of Employment is the result
of a  voluntary  action by Officer  (but is not the result of  Officer's  Normal
Retirement),  the date specified in the notice described in subsection (b)(4) of
this Section.
     (d)  Payments  Due  Upon  Termination  of  Employment.  The  provisions  of
subsections  (d)(1) and (d)(3) of this Section shall apply to any Termination of
Employment,  whether occurring prior to, at the time of or at any time following
a Change in Control (as defined in subsection  (f)(2) of this Section);  and the
provisions  of  subsection  (d)(2)  of  this  Section  shall  apply  only to any
Termination of Employment prior to a Change in Control.
     (1)  Death,  Disability  or  Normal  Retirement.   If  the  Termination  of
          Employment  is the result of  Officer's  death,  Disability  or Normal
          Retirement, the Company shall pay the following amounts to Officer (or
          his estate or personal representative):
          (A)  The  Base  Salary  (at the  rate in  effect  on the  date of such
               Termination of  Employment,  as identified on Schedule A) through
               and including the date of such Termination of Employment,  to the
               extent not already  paid,  which  amount shall be paid in cash on
               the  first   normal   semi-monthly   Base  Salary   payment  date
               immediately   succeeding   the  date  of  such   Termination   of
               Employment;
          (B)  Any amounts arising from Officer's  participation in, or benefits
               under,  any Benefit Plan through and  including  the date of such
               Termination  of  Employment,  which  amounts  shall be payable in
               accordance  with the terms and  conditions  of such Benefit Plan;
               and
          (C)  An amount  equal to one full  year's  Base Salary (at the rate in
               effect  on  the  date  of  such  Termination  of  Employment,  as
               identified  on Schedule  A),  which  amount shall be paid in cash
               within  30  days  following  the  date  of  such  Termination  of
               Employment.
     (2)  Termination  for Good Reason or Not for Cause.  If the  Termination of
          Employment  (i) is the result of a  dismissal  or other  action by the
          Company (but is not the result of Officer's  Disability)  and does not
          constitute  a  Termination  for  Cause  or  (ii)  is the  result  of a
          voluntary action by Officer (but is not the result of Officer's Normal
          Retirement) and constitutes a Termination for Good Reason, the Company
          shall pay the following amounts, and provide the following benefits to
          Officer:
          (A)  The  Base  Salary  (at the  rate in  effect  on the  date of such
               Termination of  Employment,  as identified on Schedule A) through
               and including the date of such  Termination of Employment,  which
               amount shall be paid in cash on the date of such  Termination  of
               Employment;
                                        4

          (B)  Any amount arising from Officer's  participation  in, or benefits
               under,  any Benefit Plan through and  including  the date of such
               Termination  of  Employment,  which  amounts  shall be payable in
               accordance with the terms and conditions of such Benefit Plan;
          (C)  An amount  equal to one full  year's  Base Salary (at the rate in
               effect  on  the  date  of  such  Termination  of  Employment,  as
               identified  on Schedule A), which amount shall be paid in cash on
               the date of such Termination of Employment;
          (D)  For a period of one year  following the date of such  Termination
               of Employment,  a continuation of all health  insurance  coverage
               applicable  at the  time of such  Termination  of  Employment  to
               Officer and his immediate family under any Benefit Plan; and
          (E)  With respect to a Termination of Employment  described in Section
               5(d)(2)(i),   an  amount  equal  to  one-twelfth  (1/12)  of  the
               Officer's Base Salary,  which amount shall be paid in cash on the
               date of such Termination of Employment.
     (3)  Termination  for Cause or Not for Good Reason.  If the  Termination of
          Employment  (i) is the result of a  dismissal  or other  action by the
          Company  (but  is  not  the  result  of  Officer's   Disability)   and
          constitutes  a  Termination  for  Cause  or  (ii) is the  result  of a
          voluntary action by Officer (but is not the result of Officer's Normal
          Retirement) and does not constitute a Termination for Good Reason, the
          Company shall pay the following amounts to Officer:
          (A)  The  Base  Salary  (at the  rate in  effect  on the  date of such
               Termination of  Employment,  as identified on Schedule A) through
               and including the date of such  Termination of Employment,  which
               amount  shall be paid in cash on the  first  normal  semi-monthly
               Base Salary payment date immediately  succeeding the date of such
               Termination of Employment; and
          (B)  Any amounts arising from Officer's  participation in, or benefits
               under,  any Benefit Plan through and  including  the date of such
               Termination  of  Employment,  which  amounts  shall be payable in
               accordance with the terms and conditions of such Benefit Plan.
     (4)  Payment Contingent on Release. If Officer's  Termination of Employment
          is prior to a Change in Control (and only in that event),  and Officer
          is otherwise  entitled to the payment provided in subsection (d)(2) of
          this Section,  then such payment  shall be subject to, and  contingent
          upon,  Officer's  execution of a General Release Agreement in favor of
          the  Company  in  substantially  the  form  and  substance  as the one
          attached hereto as Schedule B.
                                        5

     (e)  Additional   Provisions  Applicable  Upon  Termination  of  Employment
Concurrent with or Following Change in Control.  The following  provisions shall
apply to any Termination of Employment  occurring at the time of, or at any time
within one year following, a Change in Control.
     (1)  Termination  for Good Reason or Not for Cause.  If the  Termination of
          Employment  (i) is the result of a  dismissal  or other  action by the
          Company (but is not the result of Officer's  Disability)  and does not
          constitute  a  Termination  for  Cause,  or  (ii) is the  result  of a
          voluntary action by Officer (but is not the result of Officer's Normal
          Retirement) and constitutes a Termination for Good Reason, the Company
          shall pay the following amounts,  and provide the following  benefits,
          to Officer:
          (A)  The  Base  Salary  (at the  rate in  effect  on the  date of such
               Termination of  Employment,  as identified on Schedule A) through
               and including the date of such  Termination of Employment,  which
               amount shall be paid in cash on the date of such  Termination  of
               Employment;
          (B)  A lump sum in cash equal to 2.99  times the sum of (i)  Officer's
               Base  Salary  (at  the  rate  in  effect  on  the  date  of  such
               Termination  of  Employment,  as  identified on Schedule A), plus
               (ii) the greater of the then  current  year's  targeted  bonus or
               actual  bonus award (if  applicable)  for  Officer,  which amount
               shall  be  paid  in cash  on the  date  of  such  Termination  of
               Employment;
          (C)  Any amount arising from Officer's  participation  in, or benefits
               under,  any Benefit Plan through and  including  the date of such
               Termination  of  Employment,  which  amounts  shall be payable in
               accordance with the terms and conditions of such Benefit Plan;
          (D)  For a period of one year  following the date of such  Termination
               of Employment,  a continuation of all health  insurance  coverage
               applicable  at the  time of such  Termination  of  Employment  to
               Officer and his immediate family under any Benefit Plan; and
          (E)  With respect to a Termination of Employment  described in Section
               5(e)(1)(i),   an  amount  equal  to  one-twelfth  (1/12)  of  the
               Officer's Base Salary,  which amount shall be paid in cash on the
               date of such Termination of Employment.
     (2)  Voluntary  Termination  Not for Good  Reason.  If the  Termination  of
          Employment  is the result of a voluntary  action by Officer,  does not
          constitute  a  Termination  for Good  Reason  and either (A) occurs at
          least six  months,  but not more than one year,  following a Change in
          Control or (B)  occurs at the time of, or at any time  within one year
          following,  a Change in Control and following the Company's  requiring
          the Officer to perform his duties and responsibilities  hereunder at a
          New Location,  which  relocation is not accepted by Officer  within 30
          days after  receiving  notice  thereof,  then the Company shall pay to
          Officer  all  amounts  that would be payable  pursuant  to  subsection
                                        6

         (d)(2) of this Section  had such  Termination  of  Employment  occurred
         prior to the Change in  Control and  constituted a Termination for Good
         Reason.
     (3)  Excise Tax and Gross-Up Payment.
          (A)  If any  portion  of such  compensation  constitutes  a  parachute
               payment   (a   "Payment"   and  is  subject  to  the  Excise  Tax
               (hereinafter  defined),   then  Company  shall,  in  addition  to
               providing   such   compensation,   pay   the   Gross-Up   Payment
               (hereinafter  defined) to Officer in the manner  described below.
               For purposes of this  Agreement,  (i) "Excise Tax" shall mean the
               tax imposed pursuant to section 4999 of the Code and any interest
               or penalties  incurred by the Officer with respect to such Excise
               Tax, and (ii) "Gross-Up  Payment" shall mean, with respect to any
               compensation  provided  to  the  Officer  by  Company  (including
               without limitation the payments provided for under this Agreement
               and any payments to the Officer under any employee  benefit plan,
               including without  limitation the Company's  Long-term  Incentive
               Plan, or other arrangement) that is subject to the Excise Tax, an
               amount  that,  after  reduction  of the  amount of such  Gross-Up
               Payment for all  federal,  state,  and local tax  (including  any
               interest  or  penalties  imposed  with  respect to such taxes) to
               which the Gross-Up  Payment is subject  (including the Excise Tax
               to which the Gross-Up Payment is subject), is equal to the amount
               of the Excise  Tax to which such  compensation  is  subject.  For
               purposes  of  determining  the  amount of any  Gross-Up  Payment,
               Officer  shall  be  deemed  to pay  federal  income  taxes at the
               highest  marginal rate of taxation and state and local taxes,  if
               applicable, at the highest marginal rate of taxation in the state
               and  locality  of  residence  of  the  Officer  on  the  Date  of
               Termination, net of the maximum reduction in federal income taxes
               that could be  obtained  from  deduction  of such state and local
               taxes, if any.
          (B)  Subject  to  the   provisions  of  subsection   5(e)(3)(C),   all
               determinations required to be made under this subsection 5(e)(3),
               including  whether and when a Gross-Up  Payment is required,  the
               amount  of  such  Gross-Up  Payment  and  the  assumptions  to be
               utilized in arriving at such determination,  shall be made by the
               accounting  firm which performed the audit of the Company for the
               year  preceding the year in which the Change in Control  occurred
               (the "Accounting  Firm") which shall provide detailed  supporting
               calculations  both to the  Company  and  the  Officer  within  15
               business  days of the  receipt of notice  from the  Officer  that
               there has been a Payment, or such earlier time as is requested by
               the Company.  In the event that the Accounting Firm is serving as
               accountant  or  auditor  for  the  individual,  entity  or  group
               effecting  the  Change in  Control,  the  Officer  shall  appoint
               another  nationally   recognized  accounting  firm  to  make  the
               determinations  required  hereunder (which  accounting firm shall
               then be referred to as the Accounting Firm  hereunder).  All fees
               and expenses of the Accounting  Firm shall be borne solely by the
               Company.  Any Gross-Up  Payment,  as determined  pursuant to this
               subsection  5(e)(3),  shall be paid by the Company to the Officer
               within  five  days  of  the  receipt  of  the  Accounting  Firm's
               determination.  If the Accounting  Firm determines that no Excise
               Tax is payable by the Officer,  it shall furnish the Officer with
               a written  opinion  that  failure to report the Excise Tax on the
                                        7

               Officer's  applicable federal  income or excise tax  return would
               not result in the imposition of a negligence or  similar penalty.
               Any  determination  by the Accounting Firm shall be binding  upon
               the Company and the Officer.
          (C)  The Officer  shall  notify the Company in writing of any claim by
               the Internal  Revenue Service that, if successful,  would require
               the  payment  by  the  Company  of  the  Gross-Up  Payment.  Such
               notification shall be given no later than ten business days after
               the Officer is  informed  in writing of such  claim.  The Officer
               shall not pay such claim  prior to the  expiration  of the 30-day
               period  following  the date on which it gives such  notice to the
               Company  (or such  shorter  period  ending  on the date  that any
               payment  of taxes  with  respect  to such  claim is due).  If the
               Company  notifies the Officer in writing prior to the  expiration
               of such  period that it desires to contest  such  claim,  (i) the
               Officer  shall accept legal  representation  with respect to such
               claim by an attorney  reasonably  selected by the  Company,  (ii)
               cooperate  with the Company in good faith in order to effectively
               contest such claim,  and (iii) permit the Company to  participate
               in any proceedings relating to such claim; provided, however, the
               Company  shall  bear and pay  directly  all  costs  and  expenses
               (including legal and accounting fees and additional  interest and
               penalties)  incurred in  connection  with such  contest and shall
               indemnify and hold the Officer  harmless,  on an after-tax basis,
               for  any  Excise  Tax  or  income  tax  (including  interest  and
               penalties  with  respect  thereto)  imposed  as a result  of such
               representation  and  payment of costs and  expenses.  The Company
               shall  control  all  proceedings  taken in  connection  with such
               contest  to the extent  relating  to issues  impacting  whether a
               Gross-Up  Payment  is payable  hereunder.  The  Officer  shall be
               entitled  to settle  or  contest,  as the case may be,  any other
               issue raised by the Internal  Revenue Service or any other taxing
               authority in connection with such contest.
          (D)  If any such claim referred to in subsection 5(e)(3)(C) is made by
               the Internal Revenue Service and the Company does not request the
               Officer to contest the claim within the 30-day  period  following
               notice of the claim,  the  Company  shall pay to the  Officer the
               amount  of any  Gross-Up  Payment  owed to the  Officer,  but not
               previously  paid pursuant to subsection  5(e)(3)(B),  immediately
               upon the expiration of such 30-day  period.  If any such claim is
               made by the Internal Revenue Service and the Company requests the
               Officer to  contest  such  claim,  the  Company  shall pay to the
               Officer the amount of any  Gross-Up  Payment owed to the Officer,
               but not  previously  paid  under  the  provisions  of  subsection
               5(e)(3)(B),  within  five  days of a Final  Determination  of the
               liability  of the Officer for such  Excise Tax.  For  purposes of
               this Agreement,  a "Final Determination" shall be deemed to occur
               with  respect to a claim when (i) there is a decision,  judgment,
               decree  or other  order by any court of  competent  jurisdiction,
               which decision, judgment, decree or other order has become final,
               i.e.,  all allowable  appeals have been exhausted by either party
               to the  action,  (ii)  there is a closing  agreement  made  under
               Section  7121 of the Code,  or (iii) the time for  instituting  a
               claim for refund has expired,  or if a claim was filed,  the time
               for instituting suit with respect thereto has expired.
                                        8

     (4)  Letter of Credit.  Following  a Change in Control,  Parent  (within 10
          days following receipt of Officer's written request therefor),  at its
          sole cost and expense, shall post an irrevocable letter of credit with
          a banking  institution  reasonably  acceptable to Officer in an amount
          equal to the maximum  amount of the aggregate cash payments that would
          be made to Officer pursuant to the provisions of paragraph (1) of this
          subsection if the provisions of paragraph (1) of this  subsection were
          to become  applicable.  Such letter of credit shall contain provisions
          making the funds available  thereunder to Officer by Officer's  drafts
          drawn at sight at any  time  and from  time to time.  Such  provisions
          shall permit Officer to present drafts  (including  drafts for partial
          draws)  drawn at sight by  presentation  by Officer to the  applicable
          banking  institution  of a written  statement  to the effect  that the
          Company is in default on a payment to be made to Officer  pursuant  to
          the terms of this Agreement  (setting forth the amount of such payment
          in  default)  and that  Officer is not in default  under,  and has not
          breached the terms of, this  Agreement.  Parent shall continue to keep
          such  letter of credit in place  until the  expiration  of at least 60
          days following the date of a Termination of Employment occurring after
          the Change in Control.
     (5)  Retirement Benefits Funded. Upon a Change in Control,  any accrued but
          unfunded  retirement  benefit  obligations  to Officer  under any then
          existing  retirement  plan shall be fully  funded to a Rabbi Trust for
          the benefit of such Officer, which amount shall be paid in cash on the
          date of such Change in Control.
     (f)  Certain  Definitions.  As used in the Section  and  elsewhere  in this
Agreement, the following terms shall have the respective meanings indicated:
     (1)  "Across-the-Board Salary Reduction" shall mean a reduction in the Base
          Salary  that  is a  part of,  and is  at a  rate  consistent  with,  a
          reduction in  the base salaries paid to substantially  all officers of
          Parent.
     (2)  "Change in Control"  shall mean the occurrence of any of the following
          events:
          (A)  The  acquisition by any  individual,  entity or group (within the
               meaning  of  Section  13(d)(3)  or  14(d)(2)  of  the  Securities
               Exchange Act of 1934, as amended (the"Exchange Act")) (a"Person")
               of  beneficial  ownership  (within  the  meaning  of  Rule  13d-3
               promulgated  under the Exchange Act) of 20% or more of either (x)
               the  then   outstanding   shares  of   common   stock  of  Parent
               (the"Outstanding Parent Common Stock") or (y) the combined voting
               power  of  the  then  outstanding  voting  securities  of  Parent
               entitled  to  vote   generally   in  the  election  of  directors
               (the"Outstanding Parent Voting Securities");  provided,  however,
               that  for  purposes  of  this   subsection   (A),  the  following
               acquisitions  shall not  constitute a Change of Control:  (i) any
               acquisition directly from Parent, (ii) any acquisition by Parent,
               (iii) any  acquisition  by any employee  benefit plan (or related
               trust)  sponsored  or  maintained  by Parent  or any  corporation
               controlled by  Parent or  (iv) any acquisition by any corporation
                                        9

               pursuant to a  transaction  which complies with clauses (i), (ii)
               and (iii) of paragraph (C) below; or
          (B)  Members of the Incumbent Board cease for any reason to constitute
               at least a majority of the Board; or
          (C)  Consummation of a reorganization, merger or consolidation or sale
               or other disposition of all or substantially all of the assets of
               Parent  or  an  acquisition  of  assets  of  another  corporation
               (a"Business  Combination"),  in each case, unless, following such
               Business  Combination,  (i)  all  or  substantially  all  of  the
               individuals   and  entities  who  were  the  beneficial   owners,
               respectively,   of  the  Outstanding   Parent  Common  Stock  and
               Outstanding  Parent Voting  Securities  immediately prior to such
               Business  Combination  beneficially  own, directly or indirectly,
               more than 50% of,  respectively,  the then outstanding  shares of
               common  stock  and  the   combined   voting  power  of  the  then
               outstanding  voting securities  entitled to vote generally in the
               election  of  directors,  as the case may be, of the  corporation
               resulting  from such  Business  Combination  (including,  without
               limitation,  a corporation  which as a result of such transaction
               owns Parent or all or substantially all of Parent's assets either
               directly or through one or more  subsidiaries)  in  substantially
               the same  proportions as their  ownership,  immediately  prior to
               such Business  Combination of the Outstanding Parent Common Stock
               and  Outstanding  Parent Voting  Securities,  as the case may be,
               (ii) no Person  (excluding any employee  benefit plan (or related
               trust) of Parent or the corporation  resulting from such Business
               Combination)  beneficially owns,  directly or indirectly,  20% or
               more of,  respectively,  the then  outstanding  shares  of common
               stock of the corporation resulting from such Business Combination
               or the  combined  voting  power  of the then  outstanding  voting
               securities  of such  corporation  except to the extent  that such
               ownership  results  solely from  ownership of Parent that existed
               prior to the Business  Combination  and (iii) at least a majority
               of the  members  of the  board of  directors  of the  corporation
               resulting  from such  Business  Combination  were  members of the
               Incumbent  Board  at the  time of the  execution  of the  initial
               agreement,  or of the  action of the  Board,  providing  for such
               Business Combination; or
          (D)  Approval by the shareholders of Parent of a complete  liquidation
               or dissolution of Parent; or
          (E)  Consummation of a Business Combination not otherwise constituting
               a Change of Control but,  pursuant to which the Person serving as
               Chief  Executive  Officer  at the  time of the  execution  of the
               initial  agreement is removed from, or replaced in, such capacity
               with  respect to the  corporation  resulting  from such  Business
               Combination.
     (3)  "Disability"  shall mean  Officer's  physical or mental  impairment or
          incapacity  of sufficient severity  that, in the opinion of the Board,
          either (A) Officer is  unable  to continue  to perform  his duties and
                                       10

          responsibilities hereunder or (B) Officer's condition  entitles him to
          disability  benefits  under any Benefit Plan providing for the payment
          thereof.
     (4)  "Excessive  Salary  Reduction"  shall mean (A) a reduction in the Base
          Salary that is not an Across-the-Board Salary Reduction (as defined in
          paragraph (1) of this subsection) and that, when combined with the net
          effect of all prior increases and reductions in the Base Salary (other
          than prior reductions that were Across-the-Board  Salary  Reductions),
          results in  the  Base Salary  being less than 80% of the  highest Base
          Salary to  which  Officer  has  ever  been  subject  pursuant to  this
          Agreement (as identified on Schedule A) or (B) a reduction in the Base
          Salary  (whether  or nor an  Across-the-Board  Salary Reduction) that,
          when combined  with  the  net  effect  of  all  prior   increases  and
          reductions in the Base Salary  (whether or not Across-the-Board Salary
          Reductions),  results in  the Base Salary  being less than  65% of the
          highest Base Salary to which Officer has ever been subject pursuant to
          this Agreement (as identified on Schedule A).
     (5)  "Incumbent  Board" means the  individuals  who, as of the date of this
          Agreement, constitute the Board and any other individual who becomes a
          director of Parent  after that date and whose  election or  nomination
          for  election by Parent's  shareholders  was  approved by a vote of at
          least a majority of the directors then comprising the Incumbent Board,
          but excluding,  for this purpose,  any such  individual  whose initial
          assumption  of office  occurs  as a result of an actual or  threatened
          election  contest with respect to the election or removal of directors
          or other actual or threatened  solicitation  of proxies or consents by
          or on behalf of a Person other than the Incumbent  Board.
     (6)  "Normal  Retirement"  shall  have the  meaning  given to such  term in
          Section 1.27 of the Long-term Incentive Plan.
     (7)  "Termination  for Cause" shall mean a  Termination  of Employment as a
          result of a dismissal  or other  action by the Company  following  (A)
          Officer's  continued  failure to substantially  perform his duties and
          responsibilities  as  described  in  Section  1  (other  than any such
          failure  resulting  from  Officer's  physical or mental  impairment or
          incapacity)  after  written  demand  for  substantial  performance  is
          delivered  by the Board or the Chief  Executive  Officer  specifically
          identifying  the  manner in which  the  Board or the  Chief  Executive
          Officer,  as the case may be, believes  Officer has not  substantially
          performed such duties and responsibilities,  (B) Officer's engaging in
          misconduct that is materially injurious to the Company,  monetarily or
          otherwise, or (C) a material violation by Officer of the provisions of
          Section 6. For  purposes of clause (B) of this  paragraph,  an act, or
          failure to act, on Officer's part shall be  considered"misconduct"  if
          done, or omitted,  by Officer not in good faith and without reasonable
          belief that such act, or failure to act,  was in the best  interest of
          the Company.
     (8)  "Termination  for Good Reason" shall mean a Termination  of Employment
          as a result of  voluntary  action  by  Officer  within  30 days  after
          receiving  notice of (A) the  demotion  of the  Officer  to an officer
          position junior to the officer position specified in Section 1 or to a
          non-officer position, (B) an Excessive Salary Reduction (as defined in
                                       11

         paragraph  (4)  of  this  subsection),  or (C) the failure by Parent to
         obtain the assumption  agreement described in Section 7(f)  on or prior
         to a succession described in Section 7(f).
     6.  Nonpublic Information.
     (a) Officer  hereby  acknowledges  that, in connection  with his employment
with the  Company,  he has  received,  and will  continue  to  receive,  various
information regarding the Company and its business,  operations and affairs. All
such information, to the extent not publicly available other than as a result of
a disclosure by Officer in violation of this Agreement, is referred to herein as
the"Nonpublic Information."
     (b)  Officer  hereby  agrees  that,  from and  after  the date  hereof  and
continuing until three (3) years following a Termination of Employment,  he will
keep all  Nonpublic  Information  confidential  and will not,  without the prior
written consent of the Board,  disclose any Nonpublic  Information in any manner
whatsoever or use any Nonpublic  Information  other than in connection  with the
performance of his services to the Company hereunder;  provided,  however,  that
the provisions of this subsection  shall not prevent Officer from (1) disclosing
any  Nonpublic  Information  to any  other  employee  of the  Company  or to any
representative  or agent of the  Company  (such  as an  independent  accountant,
engineer,  attorney or financial  advisor)  when such  disclosure  is reasonably
necessary  or  appropriate  (in  Officer's  judgment)  in  connection  with  the
performance  by  Officer of his duties  and  responsibilities  hereunder  or (2)
disclosing  any  Nonpublic  Information  as required by  applicable  law,  rule,
regulation or legal process (but only after  compliance  with the  provisions of
subsection (c) of this Section).
     (c) If Officer is requested  pursuant to, or required by,  applicable  law,
rule, regulation or legal process to disclose any Nonpublic Information, Officer
will notify Parent  promptly so that the Company may seek a protective  order or
other appropriate remedy or, in the Company's sole discretion,  waive compliance
with the terms of this Section,  and Officer will fully cooperate in any attempt
by the Company to obtain any such protective  order or other remedy.  If no such
protective order or other remedy is obtained,  or the Company waives  compliance
with the terms of this  Section,  Officer  will  furnish or  disclose  only that
portion of the Nonpublic  Information  as is legally  required and will exercise
all reasonable efforts to obtain reliable assurance that confidential  treatment
will be accorded the Nonpublic Information that is so disclosed.
     7.  Miscellaneous Provisions.
     (a) Mitigation. Officer shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and the  amount  of any  payment  provided  for in this  Agreement  shall not be
reduced by any  compensation  earned by Officer as the result of  employment  by
another employer after the date of any Termination of Employment or otherwise.
                                       12

     (b) Interest.  Until paid, all past due amounts  required to be paid by the
Company to Officer under any provision of this Agreement  shall bear interest at
the highest  non-usurious rate permitted by applicable  federal,  state or local
law.
     (c) Equitable Relief Available.  Officer  acknowledges that remedies at law
may be inadequate to protect the Company against any actual or threatened breach
of the provisions of Section 6 by Officer. Accordingly, without prejudice to any
other rights or remedies otherwise available to the Company, Officer agrees that
the Company shall have the right to equitable and  injunctive  relief to prevent
any breach of the  provisions  of Section 6, as well as to such damages or other
relief as may be  available  to the Company by reason of any such breach as does
occur.
     (d) Breach Not a Defense.  The representations and covenants on the part of
Officer  contained  in  Section  6  shall  be  construed  as  ancillary  to  and
independent of any other provision of this  Agreement,  and the existence of any
claim or cause  of  action  of  Officer  against  the  Company  or any  officer,
director,  stockholder or representative of the Company,  whether  predicated on
this Agreement or otherwise,  shall not constitute a defense to the  enforcement
by the Company of the covenants on the part of Officer contained in Section 6.
     (e) Notices.  Any notice or other communication  called for by the terms of
this  Agreement  shall be in  writing  and  either  delivered  personally  or by
registered or certified mail (postage prepaid and return receipt  requested) and
shall be deemed given when received at the following addresses (or at such other
address for a party as shall be specified by like notice):
     (1)  If to Parent or the Company,  1400  Williams  Square West,  5205 North
          O'Connor Boulevard, Irving, Texas 75039, Attention: General Counsel.
     (2)  If to  Officer,  the  address of  Officer  set forth  below  Officer's
          signature   on   the   signature   page   of   this   Agreement,   and
          marked"Confidential."
     (f)  Assumption by Successor of Parent.  Parent shall require any successor
(whether  direct or  indirect)  to all or  substantially  all of the business or
assets of Parent (whether by purchase of securities, merger, consolidation, sale
of  assets  or  otherwise),  by  a  written  agreement  in  form  and  substance
satisfactory  to  Officer,   to  expressly  assume  and  agree  to  perform  the
obligations to be performed by Parent or the Company under this Agreement in the
same manner and to the same extent that Parent or the Company  would be required
to perform if no such succession had taken place.
     (g)  Assignment.
     (1)  Except  pursuant  to  an  assumption  by  a  successor   described  in
          subsection  (f) of this  Section,  the rights and  obligations  of the
          Company pursuant to this Agreement may not be assigned, in whole or in
          part, by the Company to any other person or entity without the express
          written consent of Officer.
                                       13

     (2)  The rights and  obligations of Officer  pursuant to this Agreement may
          not be assigned,  in whole or in part,  by Officer to any other person
          or entity without the express written consent of the Board.
     (h) Successors.  This Agreement shall be binding on, and shall inure to the
benefit of, the  Company,  Officer and their  respective  successors,  permitted
assigns, personal and legal representatives,  executors, administrators,  heirs,
distributees, devisees and legatees, as applicable.
     (i) Amendment and Waivers.  Except as hereinafter provided, no provision of
this Agreement may be amended or otherwise  modified,  and no right of any party
to this Agreement may be waived,  unless such amendment,  modification or waiver
is agreed to in a written instrument signed by Officer and Parent (and any dated
and signed  Schedule A, as described in subsection  (o) of this  Section,  shall
constitute such an instrument).  Beginning on the fifth  anniversary of the date
hereof,  unless a Change  of  Control  shall  have  occurred  or be  pending  or
contemplated, Parent may amend, modify, or waive any provision of, or terminate,
this  Agreement  upon sixty (60) days  notice  without  the  consent of Officer;
provided that any such amendment,  modification,  waiver or termination shall be
made to all  severance  agreements  of Parent  covering  all  officers of Parent
similarly  situated  to  Officer.  No  waiver  by  either  party  hereto  of, or
compliance with, any condition or provision of this Agreement to be performed by
the  other  party  hereto  shall be  deemed a waiver of  similar  or  dissimilar
provisions or conditions at the same or at any prior or subsequent time.
     (j) Complete  Agreement.  The provisions of this  Agreement  constitute the
complete  understanding  and  agreement  among the parties  with  respect to the
subject matter hereof, and no agreements or representations,  oral or otherwise,
express or implied,  with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
     (k)  Governing  Law.  THIS  AGREEMENT IS BEING MADE AND EXECUTED IN, AND IS
INTENDED  TO BE  PERFORMED  IN,  THE  STATE OF  TEXAS  AND  SHALL  BE  GOVERNED,
CONSTRUED,  INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE  LAWS OF
THE STATE OF TEXAS.
     (l) Attorney  Fees.  All legal fees and other costs  incurred by Officer in
connection  with  the  resolution  of any  dispute  or  controversy  under or in
connection with this Agreement shall be reimbursed by the Company to Officer, if
such dispute or controversy  is resolved in favor of Officer.  The Company shall
be  responsible  for, and shall pay, all legal fees and other costs  incurred by
the Company in  connection  with the  resolution  of any dispute or  controversy
under or in connection with this  Agreement,  regardless of whether such dispute
or controversy is resolved in favor of the Company or Officer.
     (m) Counterparts.  This Agreement may be executed in several  counterparts,
each of which shall be deemed to be an original,  but all of which together will
constitute one and the same agreement.
                                       14

     (n) Construction.  The captions of the Sections, subsections and paragraphs
of this  Agreement  have been inserted as a matter of  convenience  of reference
only and shall not affect the  meaning  or  construction  of any of the terms or
provisions of this Agreement.  Unless  otherwise  specified,  references in this
Agreement  to  a"Section,""subsection,""paragraph,""subparagraph"   or"Schedule"
shall be considered to be references  to the  appropriate  Section,  subsection,
paragraph, subparagraph or Schedule, respectively, of this Agreement. Unless the
context otherwise requires, all words used in this Agreement in any gender shall
include the  masculine,  feminine and neuter  gender,  all singular  words shall
include the plural and all plural words shall include the  singular.  As used in
this Agreement, the term"including" shall mean"including, but not limited to."
     (o)  Schedule  A.  Schedule A may be  replaced at any time and from time to
time to reflect a change in the Base Salary; provided, however, that no Schedule
A  attached  hereto  shall be  effective  unless it  contains a date and bears a
signature of approval on behalf of Officer and a signature of approval on behalf
of Parent; and provided further,  however, that if at any time two or more dated
and signed  copies of Schedule A conflict  with each  other,  the later dated of
such copies shall control.
     (p) Validity and  Severability.  If any term or provision of this Agreement
is held to be illegal, invalid or unenforceable under the present or future laws
effective during the term of this Agreement, (1) such term or provision shall be
fully  severable,  (2) this Agreement shall be construed and enforced as if such
term or  provision  had never  comprised  a part of this  Agreement  and (3) the
remaining  terms and provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal,  invalid or unenforceable  term
or provision or by its severance from this  Agreement.  Furthermore,  in lieu of
such illegal,  invalid or unenforceable term or provision,  there shall be added
automatically  as a part of this  Agreement,  a term or  provision as similar to
such illegal,  invalid or unenforceable term or provision as may be possible and
be legal, valid and enforceable.
     (q) Execution by Parent.  The  execution of this  Agreement by Parent shall
constitute  an  acceptance  of, and an  agreement  to be bound by, the terms and
provisions  of this  Agreement  by Parent and each of its  direct  and  indirect
wholly-owned subsidiaries,  and Parent hereby agrees to cause each of its direct
and indirect wholly-owned  subsidiaries,  now and in the future, to fully comply
with all  obligations  applicable  to the Company  pursuant to the terms of this
Agreement.
     (r) Effect on Other Rights.  Parker & Parsley Petroleum Company, a Delaware
corporation  ("PPPC"),  and Officer  have  previously  entered into that certain
Severance   Agreement   effective  January  1,  2022   (the"Original   Severance
Agreement"). Effective as of the date hereof, PPPC has merged with and into MESA
Operating Co., a Delaware  corporation  and a direct wholly owned  subsidiary of
Parent ("Merger Sub"), with Merger Sub being the surviving entity of such merger
(the"Merger").  Parent  hereby  expressly  assumes and agrees to perform  PPPC's
obligations under Section 5(e) of the Original  Severance  Agreement in the same
manner and to the same  extent  that PPPC  would be  required  to  perform  such
obligations, and Officer hereby acknowledges that the form and substance of such
assumption  is  satisfactory  to  Officer.  Each of Parent  and  Officer  hereby
acknowledges,  covenants and agrees that (i) the Merger constitutes  a"Change in
Control" (as such term is defined  in the  Original  Severance  Agreement), (ii)
                                       15

the terms and  provisions of this  Agreement are not intended to, shall not, and
shall not be deemed to,  supersede,  limit or in any way affect any of Officer's
rights under Section 5(e) of the Original Severance Agreement to receive certain
payments  as a  result  of a  termination  of  Officer's  employment  with  PPPC
occurring  within  one year after  consummation  of the  Merger  (a"MESA  Merger
Termination"), and (iii) other than as set forth in Section 5(e) of the Original
Severance Agreement,  Officer shall not be entitled to receive any payment under
this  Agreement  as a result of a MESA  Merger  Termination.  Parent and Officer
hereby agree that,  except for the rights,  duties and obligations of Parent and
Officer arising as a result of a MESA Merger Termination as set forth in Section
5(e) of the Original Severance  Agreement,  the Original Severance  Agreement is
hereby completely and irrevocably terminated in all respects effective as of the
date hereof,  and all terms and provisions of the Original  Severance  Agreement
other than Section 5(e) as such section  relates to the MESA Merger  Termination
are replaced and  superseded in all respects by the terms and provisions of this
Agreement.
                            (SIGNATURE PAGE ATTACHED)
                                       16

     In witness whereof,  the parties have executed this Agreement  effective as
of the date first written above.
                                    PIONEER NATURAL RESOURCES COMPANY
                                    By:        /s/ Mark L. Withrow
                                             -------------------------
                                    Name:    Mark L. Withrow
                                    Title:   Executive Vice President
                                    OFFICER:
                                               /s/ Scott D. Sheffield
                                             -------------------------
                                    Printed Name:
                                    Address:
                                    ----------------------------------
                                    ----------------------------------
              [Signature Page - Severance Agreement - Page 1 of 1]

                 CONSENT OF PIONEER NATURAL RESOURCES USA, INC.
     Pioneer Natural Resources USA, Inc., a Delaware  corporation formerly named
MESA  Operating  Co. into which Parker & Parsley  Petroleum  Company was merged,
hereby consents to the partial termination,  replacement and supersession of the
Original  Severance  Agreement  (as  defined  in Section  7(r) of the  foregoing
Severance  Agreement)  to the extent  provided in Section 7(r) of the  foregoing
Severance Agreement.
                                    PIONEER NATURAL RESOURCES USA, INC.
                                    By:        /s/ Mark L. Withrow
                                             ------------------------
                                    Name:    Mark L. Withrow
                                    Title:   Executive Vice President
              [Signature Page - Severance Agreement - Page 1 of 1]

                                   Schedule A
                     Attached to Severance Agreement between
                      Pioneer Natural Resources Company and
                               Scott D. Sheffield
BASE Salary:
         Effective Date                               Amount
         August 8, 2022                               $600,000
Dated and Approved as of  8/8/97 :
PIONEER NATURAL RESOURCES                   OFFICER:
COMPANY
By:    /s/ Mark L. Withrow                     /s/ Scott D. Sheffield
   ---------------------------              --------------------------------
Name:    Mark L. Withrow                    Printed Name:
Title:   Executive Vice President                        -------------------
                                       A-1

                                   Schedule B
                            GENERAL RELEASE AGREEMENT
NOTICE:  Various  state and federal  laws and  regulations  prohibit  employment
discrimination  based on age,  race,  color,  religion,  sex,  national  origin,
disability,  citizenship,  and  membership or  application  for  membership in a
uniformed  service.  These  laws  are  enforced  through  the  Equal  Employment
Opportunity  Commission,  U.S.  Department of Labor,  Texas  Commission on Human
Rights,  and other federal and state  agencies.  You are advised to discuss this
release  with your  attorney.  In any event,  you should  thoroughly  review and
understand the effect of this document before signing it. Therefore, please take
this General Release Agreement home and carefully  consider it for at least five
days before signing it. In accordance with the requirements of the Older Workers
Benefit  Protection  Act, you are allowed at least 45 days from the date of your
receipt of this document and the accompanying explanatory letter to consider the
offer  made to you and to  return  an  executed  copy of this  form to the  Vice
President Administration.  Additionally,  after you have executed this form, you
have seven days to reconsider and revoke your agreement.
GENERAL RELEASE:  In consideration of my acceptance of the payments and benefits
offered to me under  Section  5(d)(2)(c) of the  Severance  Agreement,  I hereby
release and discharge Pioneer Natural Resources Company and its subsidiaries and
affiliates  (the"Company"),  and the  officers,  directors,  employees,  agents,
successors,  and assigns of such entities  (collectively  the"Released Parties")
from any and all claims,  liabilities,  demands,  and causes of action, known or
unknown, fixed or contingent,  which I have or claim against them as a result of
the  termination of my  employment,  including but not limited to claims arising
under  federal,  state,  or local laws  prohibiting  employment  discrimination,
including the Age Discrimination in Employment Act, or claims growing out of any
legal  restrictions,  contractual  or  otherwise,  on  the  Company's  right  to
terminate the employment of its  employees,  and I do hereby agree not to file a
lawsuit to assert such claims. I further acknowledge and agree that by accepting
the  Severance  Agreement  benefits,  I have  given  up my  right  to  file  any
complaint,  lawsuit,  or other legal action against any of the Released  Parties
growing out of,  connected  with, or relating in any way to my employment or the
termination of my employment with the Company.  Further in  consideration of the
payments and benefits offered to me under the Severance Agreement, I acknowledge
and agree that the  Released  Parties  may recover  from me any loss,  including
attorney's  fees and costs of  defending  against any claim  brought by me, that
they may suffer arising out of my breach of this General Release Agreement.
     I understand that this General Release Agreement is final and binding,  and
I  agree  not  to  challenge   its   enforceability.   If  I  do  challenge  the
enforceability of this General Release Agreement, I agree initially to tender to
the Company all money received pursuant to the Severance  Agreement,  and invite
the  Company  to retain  such  money and agree  with me to cancel  this  General
Release  Agreement.  In the event the Company  accepts  this offer,  the Company
shall retain such money and this General Release  Agreement will be void. In the
event the Company  does not accept such offer,  the Company  shall so notify me,
and  shall  place such money in an  interest-bearing  escrow account pending the
                                       B-1

resolution of any dispute as to whether this General Release  Agreement shall be
set aside and/or otherwise be rendered unenforceable.
     I acknowledge and agree that the Company has no legal obligation to provide
the payment under Section  5(d)(2)(c) of the Severance  Agreement offered to me,
and my  acceptance  of the  obligations  and  attendant  additional  payment  as
described therein constitutes my agreement to all terms and conditions set forth
in this General Release Agreement,  and are in consideration of the promises and
undertakings  of the Company  pursuant  to the  Severance  Agreement.  I further
acknowledge and agree that for unemployment  compensation purposes, the payments
I receive under the Severance Agreement shall be considered  additional wages in
lieu  of  notice;  and  that,  accordingly,  I  may  be  ineligible  to  receive
unemployment compensation benefits for an equivalent period of time.
     This General Release  Agreement does not have any effect on any claim I may
have against the Released Parties  unrelated to the termination of my employment
or with  respect  to any  rights  or claims  that may arise  after the date this
General Release Agreement is executed.
     I have  carefully  read and fully  understand all of the provisions of this
General Release.  I further  acknowledge that entering into this General Release
Agreement is knowing and voluntary on my part, that I have had a reasonable time
to deliberate regarding its terms, and that I have had the right to consult with
an attorney if I so desired.
     I  acknowledge  that I  initially  executed  a General  Release  Agreement,
containing the same terms and conditions as this General Release Agreement, more
than seven days prior to the date appearing below and placed the General Release
Agreement in the mail  addressed to the Company.  I further  acknowledge  that I
have had at least  seven  days  since the date of  execution  of the  originally
executed  General  Release  Agreement  in  which to  reconsider  and  revoke  my
agreement  to the  terms  and  conditions  set  forth  in this  General  Release
Agreement.
Date signed:  -----------------                   -----------------------------
                                                     Signature of Officer
Date signed:  -----------------                   -----------------------------
                                                     Signature of Officer
                                       B-2

                                   Schedule I
I. Jon Brumley
Timothy L. Dove
Dennis E. Fagerstone
Mel Fischer
Mark L. Withrow
Lon C. Kile
M. Garrett Smith
                                       B-3

                                                                   EXHIBIT 10.8
                        PIONEER NATURAL RESOURCES COMPANY
                            INDEMNIFICATION AGREEMENT
     This Agreement  ("Agreement") is made and entered into as of the 8th day of
August,  1997 (the "Effective  Date"),  by and between Pioneer Natural Resources
Company,  a  Delaware  corporation  (the  "Company"),  and  Scott  D.  Sheffield
("Indemnitee").
                                    RECITALS
     A. Highly competent and experienced  persons are becoming more reluctant to
serve  corporations  as  directors,  executive  officers or in other  capacities
unless they are provided with adequate protection through insurance and adequate
indemnification  against  inordinate  risks of claims and actions  against  them
arising out of their service to and activities on behalf of the Company.
     B. The Board of Directors of the Company (the "Board") has determined  that
the  inability to attract and retain such persons  would be  detrimental  to the
best interests of the Company and its  stockholders  and that the Company should
act to assure  such  persons  that there  will be  increased  certainty  of such
protection in the future.
     C. The  Board  has  also  determined  that it is  reasonable,  prudent  and
necessary for the Company,  in addition to purchasing and maintaining directors'
and  officers'   liability   insurance  (or  otherwise  providing  for  adequate
arrangements of  self-insurance),  contractually to obligate itself to indemnify
such persons to the fullest extent permitted by applicable law so that they will
serve or continue to serve the Company  free from undue  concern  that they will
not be so indemnified.
     D.  Indemnitee  is  willing  to  serve,  continue  to serve  and to take on
additional  service for or on behalf of the Company on the condition  that he be
so indemnified to the fullest extent permitted by law.
     E. Article Twelfth of the Amended and Restated Certificate of Incorporation
of  the  Company   provides  for   indemnification,   advancement  of  expenses,
arrangements of insurance and  self-insurance  and  specifically  authorizes the
Company to enter into indemnification  agreements that contractually  provide to
indemnitees  the  benefits  of the  provisions  of  Article  Twelfth  and  other
indemnification protections to the fullest extent permitted by law.
     In   consideration  of  the  foregoing  and  the  mutual  covenants  herein
contained,  and other  good and  valuable  consideration,  the  sufficiency  and
receipt of which are hereby acknowledged, the parties hereby agree as follows:

                                    ARTICLE I
                               Certain Definitions
     As used  herein,  the  following  words and terms shall have the  following
respective meanings (whether singular or plural):
     "Acquiring Person" means any person other than (i) the Company, (ii) any of
the Company's Subsidiaries, (iii) any employee benefit plan of the Company or of
a Subsidiary of the Company or of a Company owned  directly or indirectly by the
stockholders  of the  Company in  substantially  the same  proportions  as their
ownership  of  stock of the  Company,  or (iv) any  trustee  or other  fiduciary
holding  securities  under  an  employee  benefit  plan of the  Company  or of a
Subsidiary  of the Company or of a Company  owned  directly or indirectly by the
stockholders  of the  Company in  substantially  the same  proportions  as their
ownership of stock of the Company.
     "Change in Control" means the occurrence of any of the following events:
     (i) The  acquisition  by any person of  beneficial  ownership  (within  the
meaning  of Rule 13d-3  promulgated  under the  Exchange  Act) of 20% or more of
either  (x) the then  outstanding  shares of Common  Stock of the  Company  (the
"Outstanding Company Common Stock") or (y) the combined voting power of the then
outstanding  voting  securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting  Securities");  provided,
however, that for purposes of this Subparagraph (i), the following  acquisitions
shall not constitute a Change of Control:  (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by any employee
benefit plan (or related  trust)  sponsored or  maintained by the Company or any
corporation  controlled by the Company or (D) any acquisition by any corporation
pursuant to a  transaction  which  complies  with  clauses  (A),  (B) and (C) of
paragraph (iii) below; or
     (ii) Members of the  Incumbent  Board cease for any reason to constitute at
least a majority of the Board; or
     (iii) Consummation of a reorganization,  merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or an
acquisition of assets of another corporation (a "Business Combination"), in each
case, unless, following such Business Combination,  (A) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding  Company Common Stock and Outstanding  Company Voting Securities
immediately  prior to such Business  Combination  beneficially  own, directly or
indirectly,  more  than 50% of,  respectively,  the then  outstanding  shares of
common  stock  and the  combined  voting  power of the then  outstanding  voting
securities entitled to vote generally in the election of directors,  as the case
may be, of the corporation resulting from such Business Combination  (including,
without limitation, a corporation which as a result of such transaction owns the
Company  or all or substantially all  of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership,  immediately  prior to such Business  Combination of the  Outstanding
Company Common Stock and Outstanding Company Voting Securities,  as the case may

be, (B) no person (excluding any employee benefit plan (or related trust) of the
Company  or  the   corporation   resulting   from  such  Business   Combination)
beneficially owns,  directly or indirectly,  20% or more of,  respectively,  the
then outstanding  shares of common stock of the corporation  resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation  except to the extent that such ownership results
solely  from  ownership  of the  Company  that  existed  prior  to the  Business
Combination and (C) at least a majority of the members of the board of directors
of the corporation  resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
     (iv) Approval by the stockholders of the Company of a complete  liquidation
or dissolution of the Company.
     "Claim" means an actual or threatened  claim or request for relief which is
or may be made by reason of anything  done or not done by  Indemnitee  in, or by
reason of any event or occurrence related to, Indemnitee's Corporate Status.
     "Corporate  Status"  means the status of a person who is,  becomes or was a
director, officer, employee, agent or fiduciary of the Company or is, becomes or
was  serving at the  request of the  Company as a  director,  officer,  partner,
venturer, proprietor, trustee, employee, agent, fiduciary or similar functionary
of another foreign or domestic  corporation,  partnership,  joint venture,  sole
proprietorship,  trust, employee benefit plan or other enterprise.  For purposes
of this Agreement,  the Company agrees that Indemnitee's service on behalf of or
with  respect  to any  Subsidiary  of the  Company  shall be deemed to be at the
request of the Company.
     "DGCL" means the Delaware General Corporation Law and any successor statute
thereto, as either of them may from time to time be amended.
     "Disinterested  Director"  with  respect to any request by  Indemnitee  for
indemnification  hereunder,  means a director  of the Company who at the time of
the vote is not a named  defendant or respondent in the Proceeding in respect of
which indemnification is sought by Indemnitee.
     "Expenses" means all attorneys' fees,  retainers,  court costs,  transcript
costs,  fees of experts,  witness  fees,  travel  expenses,  duplicating  costs,
printing and binding costs,  telephone charges,  postage,  delivery service fees
and all other disbursements, costs or expenses of the types customarily incurred
in connection with prosecuting,  defending  (including  affirmative defenses and
counterclaims),  preparing  to prosecute  or defend,  investigating  or being or
preparing to be a witness in, or participating in or preparing to participate in
(including on appeal), a Proceeding.
     "Incumbent  Board"  means  the  individuals  who,  as of the  date  of this
Agreement,  constitute the Board and any other individual who becomes a director
of the Company after that date and whose election or appointment by the Board or
nomination for election by the Corporation's stockholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board, but
excluding,  for this purpose,  any such individual  whose initial  assumption of
office  occurs  as a result of an actual or  threatened  election  contest  with
respect  to the election or  removal of directors  or other actual or threatened

solicitation  of proxies or consents by or on behalf of a person  other than the
Incumbent Board.
     "Independent  Counsel" means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither  contemporaneously is, nor
in the five years theretofore has been,  retained to represent:  (a) the Company
or  Indemnitee  in any  matter  material  to either  such party  (other  than as
Independent  Counsel under this Agreement or similar  agreements,  (b) any other
party to the Proceeding giving rise to a claim for indemnification  hereunder or
(c) the beneficial owner,  directly or indirectly,  of securities of the Company
representing 40% or more of the combined voting power of the Corporation's  then
outstanding  voting  securities  (other than, in each such case, with respect to
matters  concerning the rights of Indemnitee  under this Agreement,  or of other
indemnitees  under  similar  indemnification  agreements).  Notwithstanding  the
foregoing,  the term  "Independent  Counsel"  shall not  include any person who,
under the applicable  standards of professional  conduct then prevailing,  would
have a conflict of interest in representing  either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
     "person"  means any  individual,  entity or group  (within  the  meaning of
Sections 13(d)(3) and 14(d)(2) of the Exchange Act).
     "Potential  Change in Control"  shall be deemed to have occurred if (i) the
Company enters into an agreement,  the consummation of which would result in the
occurrence  of a Change in  Control;  (ii) any person  (including  the  Company)
publicly  announces an intention to take or consider  taking  actions  that,  if
consummated,  would  constitute a Change in Control;  (iii) any Acquiring Person
who is or  becomes  the  beneficial  owner  (within  the  meaning  of Rule 13d-3
promulgated  under the Exchange Act) of  securities of the Company  representing
10% or more of the combined voting power of the then Outstanding  Company Voting
Securities  increases his beneficial  ownership of such securities by 5% or more
over the percentage so owned by the person on the date hereof; or (iv) the Board
adopts a  resolution  to the effect  that,  for  purposes of this  Agreement,  a
Potential Change of Control has occurred.
     "Proceeding"  means any  threatened,  pending or  completed  action,  suit,
arbitration,    investigation,    alternate   dispute   resolution    mechanism,
administrative hearing or any other proceeding  (including,  without limitation,
any securities laws action,  suit,  arbitration,  alternative dispute resolution
mechanism,  hearing  or  procedure)  whether  civil,  criminal,  administrative,
arbitrative or investigative and whether or not based upon events occurring,  or
actions taken,  before the date hereof, and any appeal in or related to any such
action, suit, arbitration,  investigation, hearing or proceeding and any inquiry
or investigation (including discovery),  whether conducted by the Company or any
other party,  that Indemnitee in good faith believes could lead to any appeal in
or  related  to,  any  such  action,  suit,  arbitration,   alternative  dispute
resolution mechanism, hearing or other proceeding.
     "Subsidiary"  means,  with respect to any person,  any corporation or other
entity of which a majority of the voting power of the voting  equity  securities
or equity interest is owned, directly or indirectly, by that person.

     "Voting  Securities"  means  any  securities  that  vote  generally  in the
election of directors, in the admission of general partners, or in the selection
of any other similar governing body.
                                   ARTICLE II
                             Services by Indemnitee
     Indemnitee is serving as Director,  President & Chief Executive  Officer of
the  Company.  Indemnitee  may from  time to time also  agree to  serve,  as the
Company  may  request  from time to time,  in another  capacity  for the Company
(including  another  officer or director  position)  or as a director,  officer,
partner,  venturer,  proprietor,  trustee, employee, agent, fiduciary or similar
functionary  of another  foreign or  domestic  corporation,  partnership,  joint
venture, sole proprietorship,  trust, employee benefit plan or other enterprise.
Indemnitee  and the Company  each  acknowledge  that they have entered into this
Agreement as a means of inducing  Indemnitee to serve, or continue to serve, the
Company in such capacities. Indemnitee may at any time and for any reason resign
from such position or positions (subject to any other contractual  obligation or
any  obligation  imposed  by  operation  of  law).  The  Company  shall  have no
obligation  under this Agreement to continue  Indemnitee in any such position or
positions.
                                   ARTICLE III
                                 Indemnification
     Section 3.1 General.  Subject to the provisions set forth in Article V, the
Company  shall  indemnify,  and advance  Expenses to,  Indemnitee to the fullest
extent  permitted  by  applicable  law in effect on the date  hereof and to such
greater extent as applicable law may  thereafter  from time to time permit.  The
other  provisions set forth in this Agreement are provided in addition to and as
a means of  furtherance  and  implementation  of, and not in limitation  of, the
obligations  expressed  in this  Article  III. No  requirement,  condition to or
limitation of any right to  indemnification  III, or to  advancement of Expenses
under this Article III,  shall in any way limit the rights of  Indemnitee  under
Section 7.3.
     Section  3.2  Additional  Indemnity  of the  Company.  Indemnitee  shall be
entitled  to  indemnification  pursuant  to this  Section  3.2 if,  by reason of
anything  done or not  done by  Indemnitee  in,  or by  reason  of any  event or
occurrence  related to,  Indemnitee's  Corporate  Status,  Indemnitee is, was or
becomes,  or is  threatened  to be  made,  a  party  to,  or  witness  or  other
participant in any Proceeding. Pursuant to this Section 3.2, Indemnitee shall be
indemnified against any and all Expenses, judgments, penalties (including excise
or similar taxes), fines and amounts paid in settlement (including all interest,
assessments  and other charges paid or payable in connection  with or in respect
of  any  such  Expenses,  judgments,   penalties,  fines  and  amounts  paid  in
settlement)  actually  and  reasonably  incurred  by  him or on  his  behalf  in
connection  with  such  Proceeding  or  any  Claim,  issue  or  matter  therein.
Notwithstanding the foregoing, the obligations of the Company under this Section
3.2 shall be subject to the condition that no determination  (which, in any case
in  which Independent  Counsel is  involved,  shall  be in  a form of  a written

opinion) shall have been made pursuant to Article V that Indemnitee would not be
permitted to be indemnified  under  applicable law.  Nothing in this Section 3.2
shall limit the benefits of Section 3.1 or any other Section hereunder.
     Section 3.3  Advancement of Expenses.  The Company shall pay all reasonable
Expenses  incurred by or on behalf of Indemnitee  (or, if applicable,  reimburse
Indemnitee  for any and all  Expenses  reasonable  incurred  by  Indemnitee  and
previously  paid by  Indemnitee)  in  connection  with any Claim or  Proceeding,
whether  brought by the Company or  otherwise,  in advance of any  determination
respecting  entitlement to indemnification  pursuant to Article IV hereof within
10  days  after  the  receipt  by the  Company  of (a) a  written  request  from
Indemnitee  requesting such payment or payments from time to time, whether prior
to or after final disposition of such Proceeding,  and (b) a written affirmation
from Indemnitee of his good faith belief that he has met the standard of conduct
necessary for Indemnitee to be permitted to be indemnified under applicable law.
Such statement or statements shall reasonably  evidence the Expenses incurred by
Indemnitee.  Any such payment by the Company is referred to in this Agreement as
an "Expense Advance." In connection with any request for an Expense Advance,  if
requested by the Company,  Indemnitee or Indemnitee's  counsel shall also submit
an affidavit stating that the Expenses incurred were reasonable.  Any dispute as
to the  reasonableness  of any Expense shall not delay an Expense Advance by the
Company,  and the Company  agrees that any such dispute  shall be resolved  only
upon  the  disposition  or  conclusion  of  the  underlying  Claim  against  the
Indemnitee. Indemnitee hereby undertakes and agrees (which agreement shall be an
unsecured obligation of Indemnitee) that he will reimburse and repay the Company
without interest for any Expenses Advance to the extent that it shall ultimately
be determined (in a final adjudication by a court from which there is no further
right of appeal or in a final adjudication of an arbitration pursuant to Section
5.1 if  Indemnitee  elects  to seek such  arbitration)  that  Indemnitee  is not
entitled to be indemnified by the Company against such Expenses.
     Section 3.4  Indemnification  for  Additional  Expenses.  The Company shall
indemnity   Indemnitee  against  any  and  all  costs  and  expenses  (including
attorneys' and expert  witnesses' fees) and,  if requested by Indemnitee,  shall
(within two business days of that  request)  advance those costs and expenses to
Indemnitee,  that are  incurred  by  Indemnitee  in  connection  with any  claim
asserted against or action brought by Indemnitee for (i)  indemnification  or an
Expense  Advance by the Company under this  Agreement or any other  agreement or
provision of the  Corporation's  Certificate of  Incorporation or  Bylaws now or
hereafter in effect relating to any Claim or Proceeding,  or (ii) recovery under
any  directors' and officers'  liability  insurance  policies  maintained by the
Company,  regardless  of  whether  Indemnitee  ultimately  is  determined  to be
entitled  to  that  indemnification,   advance  expense  payment,  or  insurance
recovery, as the case may be.
     Section  3.5  Partial  Indemnity.  If  Indemnitee  is  entitled  under  any
provision  of this  Agreement  to  indemnification  by the Company for some or a
portion of the  Expenses,  judgments,  fines,  penalties,  and  amounts  paid in
settlement  of a Claim or  Proceeding  but not,  however,  for all of the  total
amount  thereof,  the Company shall  nevertheless  indemnify  Indemnitee for the
portion thereof to which Indemnitee is entitled.  Moreover,  notwithstanding any
other  provision  of this  Agreement,  to the extent  that  Indemnitee  has been
successful  on the  merits  or  otherwise  in  defense  of any or all  Claims or
Proceedings,  or in defense of any issue or matter therein,  including dismissal

without prejudice, Indemnitee shall be indemnified against all Expenses incurred
in connection therewith.
                                   ARTICLE IV
                   Procedure for Determination of Entitlement
                               to Indemnification
     Section 4.1 Request by  Indemnitee.  To obtain  indemnification  under this
Agreement,  Indemnitee shall submit to the Company a written request,  including
therein  or  therewith  such  documentation  and  information  as is  reasonably
available to Indemnitee and is reasonably  necessary to determine whether and to
what extent  Indemnitee  is entitled to  indemnification.  The  Secretary  or an
Assistant  Secretary  of the  Company  shall,  promptly  upon  receipt of such a
request for  indemnification,  advise the Board in writing that  Indemnitee  has
requested indemnification.
     Section 4.2  Determination  of Request.  Upon written request by Indemnitee
for  indemnification  pursuant to the first  sentence  of Section 4.1 hereof,  a
determination, if required by applicable law, with respect to whether Indemnitee
is permitted under applicable law to be indemnified  shall be made in accordance
with the terms of Section 4.5(b), in the specific case as follows:
(a)  If a  Potential  Change  in  Control  or a Change  in  Control  shall  have
     occurred,  by Independent Counsel (selected in accordance with Section 4.3)
     in a written opinion to the Board and Indemnitee,  unless  Indemnitee shall
     request that such determination be made by the Board, or a committee of the
     Board, in which case by the person or persons or in the manner provided for
     in clause (i) or (ii) of paragraph (b) below; or
(b)  If a  Potential  Change in Control  or a Change in  Control  shall not have
     occurred,  (i) by the  Board by a  majority  vote of a quorum  of the Board
     consisting   of   Disinterested   Directors,   or  (ii)  if  there  are  no
     Disinterested  Directors,  or  if a  quorum  of  the  Board  consisting  of
     Disinterested  Directors  is  not  obtainable,  by  a  majority  vote  of a
     committee of the Board  designated  to act in the matter by a majority vote
     of the  entire  Board,  consisting  solely  of two  or  more  Disinterested
     Directors,  or (iii) by  Independent  Counsel  selected  by the  Board or a
     committee  of the  Board by a vote as set forth in  clauses  (i) or (ii) of
     this paragraph (b), or if such quorum is not obtainable or such a committee
     cannot be  established,  by a majority  vote of all  directors,  or (iv) if
     Indemnitee and the Company agree,  by the  stockholders of the Company in a
     vote that excludes the shares held by directors  who are not  Disinterested
     Directors.
If it is so  determined  that  Indemnitee is permitted to be  indemnified  under
applicable  law,  payment to Indemnitee  shall be made within 10 days after such
determination.  Nothing  contained  in this  Agreement  shall  require  that any
determination  be made  under  this  Section  4.2  prior to the  disposition  or
conclusion of a Claim or Proceeding against the Indemnitee;  provided,  however,
that Expense  Advances shall continue to be made by the Company pursuant to, and
to the  extent required by,  the provisions  of Article  III.   Indemnitee shall

cooperate with the person or persons making such  determination  with respect to
Indemnitee's entitlement to indemnification,  including providing to such person
upon reasonable  advance request any  documentation  or information  that is not
privileged  or  otherwise  protected  from  disclosure  and  that is  reasonably
available to Indemnitee  and  reasonably  necessary to such  determination.  Any
costs  or expenses  (including  attorneys' fees and  disbursements)  incurred by
Indemnitee  in  so   cooperating   with  the  person  or  persons   making  such
determination  shall be borne by the Company  (irrespective of the determination
as to  Indemnitee's  entitlement  to  indemnification)  and  the  Company  shall
indemnify and hold harmless Indemnitee therefrom.
     Section 4.3  Independent  Counsel.  If a  Potential  Change in Control or a
Change in Control shall not have occurred and the  determination  of entitlement
to indemnification is to be made by Independent Counsel, the Independent Counsel
shall be selected by (a) a majority vote of the  Disinterested  Directors,  even
though  less than a quorum  of the  Board or (b) if there  are no  Disinterested
Directors,  by a majority vote of the Board,  and the Company shall give written
notice  to  Indemnitee,   within  10  days  after  receipt  by  the  Company  of
Indemnitee's request for indemnification, specifying the identity and address of
the  Independent  Counsel so  selected.  If a  Potential  Change in Control or a
Change in Control shall have occurred and the  determination  of  entitlement to
indemnification is to be made by Independent  Counsel,  the Independent  Counsel
shall be selected by Indemnitee, and Indemnitee shall give written notice to the
Company,   within  10  days  after   submission  of  Indemnitee's   request  for
indemnification,  specifying the identity and address of the Independent Counsel
so selected (unless  Indemnitee shall request that such selection be made by the
Disinterested  Directors or a committee of the Board, in which event the Company
shall  give  written  notice to  Indemnitee  within  10 days  after  receipt  of
Indemnitee's request for the Board or a committee of the Disinterested Directors
to make such  selection,  specifying the identity and address of the Independent
Counsel so  selected).  In either  event,  (i) such notice to  Indemnitee or the
Company,  as the case may be, shall be accompanied  by a written  affirmation of
the  Independent  Counsel so selected that it satisfies the  requirements of the
definition of "Independent  Counsel" in Article I and that it agrees to serve in
such  capacity  and (ii)  Indemnitee  or the  Company,  as the case may be, may,
within seven days after such written notice of selection  shall have been given,
deliver to the Company or to Indemnitee, as the case may be, a written objection
to such selection. Any objection to selection of Independent Counsel pursuant to
this Section 4.3 may be asserted only on the ground that the Independent Counsel
so selected does not meet the  requirements  of the  definition of  "Independent
Counsel" in Article I, and the objection shall set forth with  particularity the
factual basis of such assertion.  If such written  objection is timely made, the
Independent  Counsel so selected may not serve as Independent Counsel unless and
until a court of competent  jurisdiction  (the "Court") has determined that such
objection  is without  merit.  In the event of a timely  written  objection to a
choice of Independent  Counsel,  the party originally  selecting the Independent
Counsel  shall have seven days to make an  alternate  selection  of  Independent
Counsel and to give written notice of such  selection to the other party,  after
which time such other party shall have five days to make a written  objection to
such alternate selection.  If, within 30 days after submission of Indemnitee's s
request for  indemnification  pursuant to Section  4.1, no  Independent  Counsel
shall have been  selected and not objected to,  either the Company or Indemnitee
may petition the Court for resolution of any objection that shall have been made
by the  Company or  Indemnitee to  the other's selection  of Independent Counsel

and/or for the  appointment as Independent  Counsel of a person  selected by the
Court or by such other person as the Court shall designate,  and the person with
respect to whom an objection is so resolved or the person so appointed shall act
as  Independent  Counsel  under  Section 4.2. The Company  shall pay any and all
reasonable fees and expenses incurred by such Independent  Counsel in connection
with acting  pursuant to Section 4.2, and the Company  shall pay all  reasonable
fees and expenses incident to the procedures of this Section 4.3,  regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial  proceeding or arbitration  pursuant to Section
5.1,  Independent  Counsel  shall be  discharged  and  relieved  of any  further
responsibility  in  such  capacity  (subject  to  the  applicable  standards  of
professional conduct then prevailing).
     Section 4.4 Establishment of a Trust. In the event of a Potential Change in
Control or a Change in Control,  the Company shall,  upon written request by the
Indemnitee,  create a trust for the benefit of the Indemnitee  (the "Trust") and
from time to time upon written request of the Indemnitee shall fund the Trust in
an amount sufficient to satisfy any and all Expenses  reasonably  anticipated at
the time of each such request to be incurred in connection  with  investigating,
preparing  for,  and  defending  any Claim,  and any and all  judgments,  fines,
penalties,  and  settlement  amounts  of any and all  Claims  from  time to time
actually paid or claimed,  reasonably  anticipated,  or proposed to be paid. The
amount to be deposited in the Trust pursuant to the foregoing funding obligation
shall be determined by the Independent  Counsel (or other  person(s)  making the
determination of whether Indemnitee is permitted to be indemnified by applicable
law). The terms of the Trust shall provide that,  upon a Change in Control,  (i)
the Trust shall not be revoked or the  principal  thereof  invaded,  without the
written consent of the Indemnitee;  (ii) the trustee of the Trust shall advance,
within ten  business  days of a request by  Indemnitee,  any and all  reasonable
Expenses to Indemnitee, any required determination concerning the reasonableness
of the Expenses to be made by the  Independent  Counsel (and  Indemnitee  hereby
agrees to reimburse the Trust under the  circumstances in which Indemnitee would
be required to reimburse the Company for Expenses  Advances under Section 3.3 of
this  Agreement);  (iii) the Trust shall continue to be funded by the Company in
accordance with the funding  obligation set forth above; (iv) the trustee of the
Trust shall promptly pay to Indemnitee all amounts for which Indemnitee shall be
entitled to indemnification  pursuant to this Agreement;  and (v) all unexpended
funds in the Trust shall revert to the Company upon a final determination by the
Independent  Counsel or a court of competent  jurisdiction,  as the case may be,
that  Indemnitee has been fully  indemnified  under the terms of this Agreement.
The  trustee  of the  Trust  shall  be  chosen  by  Indemnitee  and  shall be an
institution that is not affiliated with the Indemnitee.  Nothing in this Section
4.4 shall relieve the Company of any of its obligations under this Agreement.
     Section 4.5  Presumptions and Effect of Certain Proceedings.
     i.   The  Indemnitee  shall be presumed  to be entitled to  indemnification
          under this Agreement upon submission of a request for  indemnification
          under  Section 4.1, and the Company  shall have the burden of proof in
          overcoming that  presumption in reaching a  determination  contrary to
          that  presumption.  Such  presumption  shall  be used  by  Independent
          Counsel  (or  other  person  or  persons  determining  entitlement  to

          indemnification)  as a basis  for  a determination  of  entitlement to
          indemnification unless  the Company provides information sufficient to
          overcome such  presumption by clear and  convincing evidence or unless
          the investigation, review and analysis of Independent Counsel (or such
          other  person  or  persons)  convinces  him  by  clear and  convincing
          evidence that the presumption should not apply.
     ii.  If the person or persons  empowered  or selected  under  Article IV of
          this  Agreement  to  determine  whether   Indemnitee  is  entitled  to
          indemnification  shall  not have made a  determination  within 60 days
          after  receipt by the Company of the request by  Indemnitee  therefor,
          the requisite determination of entitlement to indemnification shall be
          deemed to have  been made and  Indemnitee  shall be  entitled  to such
          indemnification,  absent (i) a knowing misstatement by Indemnitee of a
          material  fact, or knowing  omission of a material  fact  necessary to
          make Indemnitee's  statement not materially misleading,  in connection
          with the request for  indemnification,  or (ii) a prohibition  of such
          indemnification  under applicable law;  provided,  however,  that such
          60-day period may be extended for a reasonable  time, not to exceed an
          additional  30 days,  if the  person  making  the  determination  with
          respect to entitlement to  indemnification in good faith requires such
          additional  time for the  obtaining  or  evaluating  of  documentation
          and/or  information  relating  to such  determination;  and  provided,
          further,  that the 60-day  limitation set forth in this Section 4.5(b)
          shall not apply and such period shall be extended as necessary  (i) if
          within  30 days  after  receipt  by the  Company  of the  request  for
          indemnification  under  Section 4.1  Indemnitee  and the Company  have
          agreed, and the Board has resolved to submit such determination to the
          stockholders  of the  Company  pursuant  to  Section  4.2(b) for their
          consideration  at an annual meeting of  stockholders to be held within
          90 days after such agreement and such  determination  is made thereat,
          or a special  meeting of  stockholders  is called within 30 days after
          such  receipt  for the  purpose  of making  such  determination,  such
          meeting is held for such  purpose  within 60 days after having been so
          called  and  such  determination  is  made  thereat,  or  (ii)  if the
          determination  of  entitlement  to  indemnification  is to be  made by
          Independent  Counsel pursuant to Section 4.2(a) of this Agreement,  in
          which  case the  applicable  period  shall be as set forth in  Section
          5.1(c).
     iii. The termination of any Proceeding or of any Claim,  issue or matter by
          judgment,  order,  settlement (whether with or without court approval)
          or conviction,  or upon a plea of nolo  contendere or its  equivalent,
          shall not (except as otherwise  expressly  provided in this Agreement)
          by itself adversely affect the rights of Indemnitee to indemnification
          or create a presumption  that Indemnitee meet any particular  standard
          of  conduct  or  have  any  particular  belief  or  that a  court  has
          determined  that  indemnification  is not permitted by applicable law.
          Indemnitee shall be deemed to have been found liable in respect of any

          Claim, issue or matter only after he shall  have  been so  adjudged by
          the Court after exhaustion of all appeals therefrom.
                                    ARTICLE V
                         Certain Remedies of Indemnitee
     Section 5.1 Indemnitee Entitled to Adjudication in an Appropriate Court. If
(a) a  determination  is made  pursuant  to  Article IV that  Indemnitee  is not
entitled to indemnification under this Agreement; (b) there has been any failure
by the  Company  to make  timely  payment  or  advancement  of any  amounts  due
hereunder;  or (c) the determination of entitlement to  indemnification is to be
made by Independent Counsel pursuant to Section 4.2 and such determination shall
not have been made and delivered in a written  opinion  within 90 days after the
latest of (i) such Independent Counsel's being appointed, (ii) the overruling by
the Court of objections to such counsel's  selection or (iii)  expiration of all
periods for the Company or  Indemnitee  to object to such  counsel's  selection,
Indemnitee  shall be entitled to commence an action seeking an  adjudication  in
the Court of his entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the commercial arbitration rules of
the American  Arbitration  Association.  Indemnitee  shall  commence such action
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such action pursuant to
this Section 5.1, or such right shall expire.  The Company  agrees not to oppose
Indemnitee's right to seek any such adjudication or award in arbitration.
     Section 5.2 Adverse Determination Not to Affect any Judicial Proceeding. If
a  determination  shall have been made pursuant to Article IV that Indemnitee is
not entitled to indemnification under this Agreement, any judicial proceeding or
arbitration  commenced  pursuant  to this  Article V shall be  conducted  in all
respects as a de novo trial or arbitration on the merits,  and Indemnitee  shall
not be  prejudiced  by  reason of such  initial  adverse  determination.  In any
judicial  proceeding  or  arbitration  commenced  pursuant  to this  Article  V,
Indemnitee shall be presumed to be entitled to indemnification or advancement of
Expenses,  as the case may be, under this  Agreement  and the Company shall have
the  burden of proof in  overcoming  such  presumption  and to show by clear and
convincing  evidence  that  Indemnitee  is not  entitled to  indemnification  or
advancement of Expenses, as the case may be.
     Section 5.3 Company Bound by  Determination  Favorable to Indemnitee in any
Judicial  Proceeding or Arbitration.  If a determination shall have been made or
deemed to have been made  pursuant to Article IV that  Indemnitee is entitled to
indemnification, the Company shall be irrevocably bound by such determination in
any judicial proceeding or arbitration commenced pursuant to this Article V, and
shall be precluded from asserting that such  determination  has not been made or
that the procedure by which such  determination  was made is not valid,  binding
and  enforceable,  in each  such  case  absent  (a) a  knowing  misstatement  by
Indemnitee  of a  material  fact,  or a  knowing  omission  of a  material  fact
necessary to  make a  statement by  Indemnitee  not  materially  misleading,  in

connection  with the request for  indemnification  or (b) a prohibition  of such
indemnification under applicable law.
     Section 5.3 Company Bound by the Agreement.  The Company shall be precluded
from asserting in any judicial  proceeding or arbitration  commenced pursuant to
this Article V that the  procedures and  presumptions  of this Agreement are not
valid,  binding and  enforceable and shall stipulate in any such court or before
any such  arbitrator  that the  Company is bound by all the  provisions  of this
Agreement.
     Section 5.4  Indemnitee  Entitled to  Expenses of Judicial  Proceeding.  If
Indemnitee  seeks a  judicial  adjudication  of or an  award in  arbitration  to
enforce his rights under,  or to recover  damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company,  and the Company shall
indemnify  Indemnitee  against,  any and all expenses (of the types described in
the definition of Expenses in Article I) actually and reasonably incurred by him
in such judicial  adjudication  or arbitration  but only if Indemnitee  prevails
therein. If it shall be determined in such judicial  adjudication or arbitration
that  Indemnitee is entitled to receive part but not all of the  indemnification
or advancement  of expenses or other benefit  sought,  the expenses  incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall be
equitably  allocated  between the Company and  Indemnitee.  Notwithstanding  the
foregoing,  if a Change in Control  shall  have  occurred,  Indemnitee  shall be
entitled  to  indemnification  under  this  Section  5.5  regardless  of whether
Indemnitee ultimately prevails in such judicial adjudication or arbitration.
                                   ARTICLE VI
                                  Contribution
     Section  6.1  Contribution  Payment.  To  the  extent  the  indemnification
provided for under any provision of this  Agreement is determined (in the manner
hereinabove  provided)  not to be permitted  under  applicable  law, then in the
event Indemnitee was, is, or becomes a party to or witness or other  participant
in, or is threatened to be made a party to or witness or other participant in, a
Proceeding  by  reason of (or  arising  in part out of)  Indemnitee's  Corporate
Status, the Company, in lieu of indemnifying Indemnitee, shall contribute to the
amount of any and all Expenses,  judgments, fines, or penalties assessed against
or incurred or paid by Indemnitee on account of such  Proceeding and any and all
amounts  paid  in  settlement  of  that  Proceeding   (including  all  interest,
assessments,  and other charges paid or payable in connection with or in respect
of such Expenses,  judgments,  fines,  penalties, or amounts paid in settlement)
for which such  indemnification is not permitted  ("Contribution  Amounts"),  in
such  proportion as is appropriate to reflect the relative fault with respect to
the subject matter of the Proceeding giving rise to the Contribution  Amounts of
Indemnitee,  on the one hand,  and of the Company and any and all other  parties
(including  officers and directors of the Company other than Indemnitee) who may
be at fault with respect to such matter  (collectively,  including  the Company,
the "Third Parties") on the other hand.

     Section 6.2 Relative Fault. The relative fault of the Third Parties and the
Indemnitee  shall  be  determined  (i) by  reference  to the  relative  fault of
Indemnitee as determined by the court or other governmental agency assessing the
Contribution  Amounts  or (ii) to the extent  such  court or other  governmental
agency does not apportion  relative fault,  by the Independent  Counsel (or such
other party which makes a determination under Article IV after giving effect to,
among other things, the relative intent, knowledge,  access to information,  and
opportunity  to prevent or correct the  subject  matter of the  Proceedings  and
other  relevant  equitable   considerations  of  each  party.  The  Company  and
Indemnitee  agree  that it  would  not be just  and  equitable  if  contribution
pursuant to this Section 6.2 were  determined  by pro rata  allocation or by any
other  method  of   allocation   which  does  take  account  of  the   equitable
considerations referred to in this Section 6.2.
                                   ARTICLE VII
                                  Miscellaneous
     Section  7.1   Non-Exclusivity.   The  rights  of   Indemnitee  to  receive
indemnification  and  advancement of Expenses  under this Agreement  shall be in
addition to, and shall not be deemed  exclusive of, any other rights  Indemnitee
shall have under the DGCL or other  applicable law, the charter or bylaws of the
Company, any other agreement, vote of stockholders or a resolution of directors,
or otherwise. No amendment or alteration of the charter or bylaws of the Company
or any provision  thereof shall adversely affect  Indemnitee's  rights hereunder
and such rights shall be in addition to any rights Indemnitee may have under the
charter,  Bylaws and the DGCL or other  applicable law. To the extent that there
is a change in the DGCL or other  applicable law (whether by statute or judicial
decision)  that  allows  greater  indemnification  by  agreement  than  would be
afforded currently under the Corporation's charter or bylaws and this Agreement,
it is the intent of the parties hereto that the Indemnitee shall enjoy by virtue
of this Agreement the greater benefit so afforded by such change.
     Section 7.2   Insurance and Subrogation.
(a)  To the extent that the Company  maintains an  insurance  policy or policies
     providing liability insurance for directors, officers, employees, agents or
     fiduciaries of the Company or for individuals serving at the request of the
     Company as directors, officers, partners, venturers, proprietors, trustees,
     employees,  agents, fiduciaries or similar functionaries of another foreign
     or domestic corporation,  partnership,  joint venture, sole proprietorship,
     trust,  employee  benefit  plan or other  enterprise,  Indemnitee  shall be
     covered by such policy or policies in accordance with its or their terms to
     the  maximum  extent  of the  coverage  available  for any  such  director,
     officer, employee, agent or fiduciary under such policy or policies.
(b)  In the event of any  payment  by the  Company  under  this  Agreement,  the
     Company  shall be  subrogated  to the extent of such  payment to all of the
     rights of recovery of Indemnitee, who shall execute all papers required and
     take all action  necessary  to secure such rights,  including  execution of
     such  documents  as are  necessary  to enable the  Company to bring suit to
     enforce such rights.

(c)  The Company shall not be liable under this Agreement to make any payment of
     amounts  otherwise  indemnifiable  hereunder  if  and to  the  extent  that
     Indemnitee  has  otherwise   actually   received  such  payment  under  the
     Corporation's  charter  or  bylaws  or  any  insurance  policy,   contract,
     agreement or otherwise.
     Section 7.3 Self Insurance of the Company; Other Arrangements.  The parties
hereto  recognize  that the Company  may,  but is not  required  to,  procure or
maintain  insurance or other similar  arrangements,  at its expense,  to protect
itself and any  person,  including  the  Indemnitee,  who is or was a  director,
officer, employee, agent or fiduciary of the Company or who is or was serving at
the  request  of  the  Company  as  a  director,   officer,  partner,  venturer,
proprietor,  trustee,  employee,  agent,  fiduciary  or similar  functionary  of
another  foreign or  domestic  corporation,  partnership,  joint  venture,  sole
proprietorship,  trust,  employee benefit plan or other  enterprise  against any
expense,  liability or loss asserted against or incurred by such person, in such
a  capacity  or arising  out of his status as such a person,  whether or not the
Company  would have the power to indemnify  such person  against such expense or
liability or loss.
     In considering the cost and  availability  of such  insurance,  the Company
(through the exercise of the business  judgment of its  directors  and officers)
may,  from time to time,  purchase  insurance  which  provides  for  certain (i)
deductibles, (ii) limits on payments required to be made by the insurer or (iii)
coverage  which  may not be as  comprehensive  as that  previously  included  in
insurance  purchased  by  the  Company  or its  predecessors.  The  purchase  of
insurance with deductibles,  limits on payments and coverage exclusions, even if
in the best  interest  of the  Company,  may not be in the best  interest of the
Indemnitee. As to the Company, purchasing insurance with deductibles,  limits on
payments and coverage  exclusions  is similar to the  Corporation's  practice of
self-insurance  in other  areas.  In  order  to  protect  Indemnitee  who  would
otherwise be more fully or entirely  covered  under such  policies,  the Company
shall,  to the maximum extent  permitted by applicable  law,  indemnify and hold
Indemnitee  harmless  to the  extent  (i) of such  deductibles,  (ii) of amounts
exceeding  payments  required  to be made by an  insurer  or  (iii)  that  prior
policies of officer's and director's  liability insurance held by the Company or
its predecessors would have provided for payment to Indemnitee,  if by reason of
his  Corporate  Status  he  is or is  threatened  to be  made  a  party  to  any
Proceeding.  The  obligation of the Company in the preceding  sentence  shall be
without  regard to whether the Company would  otherwise be required to indemnify
such officer or director under the other provisions of this Agreement,  or under
any law,  agreement,  vote of  stockholders  or directors or other  arrangement.
Without  limiting  the  generality  of any  provision  of  this  Agreement,  the
procedures in Article IV hereof  shall,  to the extent  applicable,  be used for
determining entitlement to indemnification under this Section 7.3.
     Section  7.4  Certain  Settlement  Provisions.  The  Company  shall have no
obligation  to indemnify  Indemnitee  under this  Agreement  for amounts paid in
settlement  of a Proceeding  or Claim  without the  Corporation's  prior written
consent. The Company shall not settle any Proceeding or Claim in any manner that
would impose any fine or other  obligation  on Indemnitee  without  Indemnitee's
prior written  consent.  Neither the Company nor Indemnitee  shall  unreasonably
withhold their consent to any proposed settlement.

     Section 7.5 Exculpation of Directors. If Indemnitee is or was a director of
the  Company,  he shall not in that  capacity  be liable to the  Company  or its
stockholders  for  monetary  damages  for  an act or  omission  in  Indemnitee's
capacity  as a  director,  except  that  Indemnitee's  liability  shall  not  be
eliminated or limited for: (a) any breach of Indemnitee's duty of loyalty to the
Company  or its  stockholders;  (b) any acts or  omissions  not in good faith or
which involve  intentional  misconduct or a knowing  violation of the law; (c) a
transaction from which Indemnitee  received an improper benefit,  whether or not
the  benefit  resulted  from an action  taken  within the scope of  Indemnitee's
office;  or (d) an act or omission  for which the  liability  of  Indemnitee  is
expressly provided for by statute.
     Section 7.6 Duration of Agreement.  This  Agreement  shall  continue for so
long as Indemnitee serves as a director,  officer,  employee, agent or fiduciary
of the  Company  or, at the  request of the  Company,  as a  director,  officer,
partner,  venturer,  proprietor,  trustee, employee, agent, fiduciary or similar
functionary  of another  foreign or  domestic  corporation,  partnership,  joint
venture, sole proprietorship,  trust, employee benefit plan or other enterprise,
and thereafter shall survive until and terminate upon the later to occur of: (a)
the  expiration  of 20 years  after the latest date that  Indemnitee  shall have
ceased to serve in any such capacity;  (b) the final  termination of all pending
Proceedings in respect of which Indemnitee is granted rights of  indemnification
or  advancement  of  Expenses  hereunder  and of  any  proceeding  commenced  by
Indemnitee pursuant to Article IV relating thereto; or (c) the expiration of all
statutes of limitation applicable to possible Claims arising out of Indemnitee's
Corporate Status.
     Section  7.7 Notice by Each Party.  Indemnitee  shall  promptly  notify the
Company in writing  upon being  served  with any  summons,  citation,  subpoena,
complaint,  indictment,  information or other document or communication relating
to  any   Proceeding  or  Claim  for  which   Indemnitee   may  be  entitled  to
indemnification or advancement of Expenses hereunder;  provided,  however,  that
any failure of Indemnitee  to so notify the Company  shall not adversely  affect
Indemnitee's  rights under this Agreement except to the extent the Company shall
have been materially  prejudiced as a direct result of such failure. The Company
shall promptly notify Indemnitee in writing as to the pendency of any Proceeding
or Claim that may involve a claim against the  Indemnitee  for which  Indemnitee
may be entitled to indemnification or advancement of Expenses hereunder.
     Section 7.8 Amendment. This Agreement may not be modified or amended except
by a written instrument executed by or on behalf of each of the parties hereto.
     Section 7.9 Waivers.  The  observance of any term of this  Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively)  by the party  entitled  to  enforce  such term only by a writing
signed  by the  party  against  which  such  waiver  is to be  asserted.  Unless
otherwise expressly provided herein, no delay on the part of any party hereto in
exercising  any right,  power or privilege  hereunder  shall operate as a waiver
thereof,  nor shall any  waiver  on the part of any party  hereto of any  right,
power or privilege  hereunder  operate as a waiver of any other right,  power or
privilege hereunder nor shall any single or partial exercise of any right, power

or privilege  hereunder  preclude any other or further  exercise  thereof or the
exercise of any other right, power or privilege hereunder.
     Section 7.10 Entire Agreement.  This Agreement and the documents  expressly
referred to herein  constitute the entire  agreement  between the parties hereto
with  respect  to  the  matters   covered   hereby,   and  any  other  prior  or
contemporaneous oral or written understandings or agreements with respect to the
matters covered hereby are expressly superseded by this Agreement.
     Section 7.11  Severability.  If any provision of this Agreement  (including
any provision within a single section, paragraph or sentence) or the application
of such provision to any person or circumstance, shall be judicially declared to
be invalid,  unenforceable  or void,  such  decision will not have the effect of
invalidating   or  voiding  the  remainder  of  this  Agreement  or  affect  the
application  of such provision to other persons or  circumstances,  it being the
intent and agreement of the parties that this Agreement  shall be deemed amended
by modifying  such provision to the extent  necessary to render it valid,  legal
and  enforceable  while  preserving its intent,  or if such  modification is not
possible,  by substituting  therefor another provision that is valid,  legal and
unenforceable  and  that  achieves  the same  objective.  Any  such  finding  of
invalidity  or  unenforceability  shall  not  prevent  the  enforcement  of such
provision  in  any  other  jurisdiction  to  the  maximum  extent  permitted  by
applicable law.
     Section 7.12 Notices. All notices and other communications  hereunder shall
be in writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt  of a  facsimile  transmission,  (b)  confirmed  delivery  of a standard
overnight  courier  or when  delivered  by hand  or (c) the  expiration  of five
business  days after the date mailed by  certified  or  registered  mail (return
receipt  requested),  postage prepaid, to the parties at the following addresses
(or at such other addresses for a party as shall be specified by like notice):
                  If to the Company, to it at:
                           Pioneer Natural Resources Company
                           1400 Williams Square West
                           5205 North O'Connor Blvd.
                           Irving, Texas  75039-3746
                           Attn: Chief Financial Officer
                  If to Indemnitee, to him at:
                           Scott D. Sheffield
                           Pioneer Natural Resources Company
                           1400 Williams Square West
                           5205 N. O'Connor Blvd.
                           Irving, Texas 75039

or to such other  address or to such other  individuals  as any party shall have
last  designated  by  notice  to  the  other  parties.  All  notices  and  other
communications  given to any party in  accordance  with the  provisions  of this
Agreement  shall be deemed  to have been  given  when  delivered  or sent to the
intended  recipient  thereof in accordance  with the  provisions of this Section
7.12.
     Section 7.13 Governing Law. This Agreement shall be construed in accordance
with and  governed  by the laws of the State of Delaware  without  regard to the
principles of conflict of laws.

     Section 7.14  Certain Construction Rules.
(a)  The  article and  section  headings  contained  in this  Agreement  are for
     reference  purposes  only and shall not  affect in any way the  meaning  or
     interpretation  of  this  Agreement.  As used  in  this  Agreement,  unless
     otherwise provided to the contrary,
                (1)  all  references  to  days  shall  be deemed  references  to
                     calendar days and any reference to a "Section" or "Article"
                     shall be  deemed to refer to a section or  article of  this
                     Agreement. The words "hereof," "herein" and "hereunder" and
                     words of similar import  referring to  this Agreement refer
                     to  this  Agreement as a whole  and  not to any  particular
                     provision of this Agreement.  Whenever the words "include,"
                     "includes" or "including"  are used in this Agreement, they
                     shall  be  deemed  to  be followed  by  the words  "without
                     limitation."  Unless  otherwise  specifically  provided for
                     herein,  the term "or" shall not be deemed to be exclusive.
                     Whenever the context may require,  any pronoun used in this
                     Agreement  shall   include   the  corresponding  masculine,
                     feminine or neuter  forms,  and the singular form of nouns,
                     pronouns and verbs shall include the plural and vice versa.
(b)  For purposes of this  Agreement,  references to "other  enterprises"  shall
     include  employee  benefit  plans;  references to "fines" shall include any
     excise  taxes  assessed on a person with  respect to any  employee  benefit
     plan;  references to "serving at the request of the Company"  shall include
     any service as a director,  officer, employee or agent of the Company which
     imposes  duties  on, or  involves  services  by,  such  director,  nominee,
     officer,  employee or agent with respect to an employee  benefit plan,  its
     participants or beneficiaries.
     Section 7.15  Counterparts.  This  Agreement may be executed in two or more
counterparts,  each of which shall be deemed to be an original  and all of which
together shall be deemed to be one and the same instrument, notwithstanding that
both parties are not signatories to the original or same counterpart.
     Section   7.16   Certain   Persons   Not   Entitled   to   Indemnification.
Notwithstanding  any other provision of this Agreement,  Indemnitee shall not be
entitled to indemnification or advancement of Expenses hereunder with respect to
any Proceeding or any Claim,  issue or matter  therein,  brought or made by such
person against the Company,  except as  specifically  provided in Article III or
Article IV hereof.
     Section 7.17 Indemnification for Negligence, Gross Negligence, etc. Without
limiting the  generality  of any other  provision  hereunder,  it is the express
intent of this Agreement that Indemnitee be indemnified and Expenses be advanced
regardless of Indemnitee's acts of negligence,  gross negligence, intentional or

willful  misconduct  to the  extent  that  indemnification  and  advancement  of
Expenses is allowed pursuant to the terms of this Agreement and under applicable
law.
     Section  7.18  Mutual  Acknowledgment.  Both  the  Company  and  Indemnitee
acknowledge  that in  certain  instances,  applicable  law or public  policy may
prohibit the Company  from  indemnifying  the  directors,  officers,  employees,
agents  or  fiduciaries  of the  Company  under  this  Agreement  or  otherwise.
Indemnitee  understands and acknowledges  that the Company has undertaken or may
be  required  in the  future  to  undertake  with the  Securities  and  Exchange
Commission  to submit  the  question  of  indemnification  to a court in certain
circumstances for a determination of the Corporation's right under public policy
to indemnify Indemnitee.
     Section 7.19  Enforcement.  The Company  agrees that its  execution of this
Agreement shall constitute a stipulation by which it shall be irrevocably  bound
in any court or arbitration in which a proceeding by Indemnitee for  enforcement
of his rights hereunder shall have been commenced,  continued or appealed,  that
its  obligations  set forth in this  Agreement are unique and special,  and that
failure of the  Company to comply with the  provisions  of this  Agreement  will
cause irreparable and irremediable  injury to Indemnitee,  for which a remedy at
law will be inadequate. As a result, in addition to any other right or remedy he
may  have  at law or in  equity  with  respect  to  breach  of  this  Agreement,
Indemnitee  shall be  entitled  to  injunctive  or  mandatory  relief  directing
specific performance by the Company of its obligations under this Agreement.
     Section 7.20  Successors  and Assigns.  All of the terms and  provisions of
this Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable  by the parties  hereto and their  respective  successors,  assigns,
heirs, executors, administrators, legal representatives.
     Section 7.21 Period of Limitations. No legal action shall be brought and no
cause  of  action  shall be  asserted  by or on  behalf  of the  Company  or any
affiliate of the Company  against  Indemnitee  or  Indemnitee's  spouse,  heirs,
executors,  or personal or legal  representatives  after the expiration of three
years from the date of  accrual of that cause of action,  and any claim or cause
of action of the  Company  or its  affiliate  shall be  extinguished  and deemed
released  unless  asserted by the timely  filing of a legal  action  within that
three-year period; provided, however, that, if any shorter period of limitations
is otherwise  applicable to any such cause of action,  the shorter  period shall
govern.

     IN WITNESS WHEREOF,  this Agreement has been duly executed and delivered to
be effective as of the date first above written.
                              PIONEER NATURAL RESOURCES COMPANY
                              By:      /s/ Mark L. Withrow
                                     --------------------------
                              Name:    Mark L. Withrow
                              Title:   Executive Vice President
                              INDEMNITEE:
                             /s/ Scott D. Sheffield
                             ----------------------------------      
                             Scott D. Sheffield

                                   Schedule I
I. Jon Brumley
Timothy L. Dove
Dennis E. Fagerstone
Mel Fischer
Mark L. Withrow
Lon C. Kile
M. Garrett Smith
R. Hartwell Gardner
John S. Herrington
Kenneth A. Hersh
James L. Houghton
Jerry P. Jones
Boone Pickens
Richard E. Rainwater
Charles E. Ramsey, Jr.
Arthur L. Smith
Philip B. Smith
Robert L. Stillwell
Michael D. Wortley

                                                                     EXHIBIT 15
                               GATHERING AGREEMENT
     This  Agreement is made and entered into this 29th day of May, 1987, by and
between Mesa Operating Limited Partnership  ("Mesa") and Colorado Interstate Gas
Company ("CIG"), to be effective August 1, 1987.
     WHEREAS, Mesa and CIG have been involved in various disputes concerning the
operation of and the charges made to Mesa by CIG  regarding  the West  Panhandle
Field Gathering System (the "Gathering System"), through which natural gas which
is produced under the agreement, as amended and supplemented, entered on January
3, 1928, between Canadian River Gas Company,  as predecessor in interest to CIG,
and  Amarillo  Oil  Company,  as  predecessor  in  interest  to Mesa  (the  "'B'
Contract") is gathered and delivered; and
     WHEREAS,  the parties have resolved their disputes and have agreed upon the
appropriate  gathering  fees  to be  charged  in the  past,  and the  method  of
calculating  such fees in the future,  for  gathering  and  delivering  such gas
through the Gathering System; and
     WHEREAS,  the parties have agreed upon certain procedures to be followed in
order to avoid the recurrence of certain disputes regarding the operation of the
Gathering System in the future;
     NOW,  THEREFORE,  Mesa  and  CIG,  in  consideration  of  mutual  promises,
covenants, releases and agreements contained herein, do agree as follows:
                                       I.
     For all natural gas delivered  through the Gathering  System to Mesa or its
predecessor,  Amarillo  Oil  Company,  under  the 'B'  Contract  for the  period
commencing October 1, 1984,  through the Settlement Date as determined  pursuant
to  the  Agreement  of  Compromise  and  Settlement  between  the  parties  (the
"Settlement  Date"),  the amounts  which Mesa or its  predecessor,  Amarillo Oil
Company,  has  paid  to  CIG  shall  be  considered  to  be  full  and  complete
compensation for such gathering services. No further amounts shall be payable by
Mesa, nor shall any refunds be owed by CIG, for such gathering  services  during
such period, except for volumes delivered prior to the Settlement Date for which
payment  has not been made by that date.  Mesa and CIG agree that Mesa shall pay
CIG, as full and complete  compensation for such volumes delivered,  at the same
rate per Mcf that Mesa has been paying for  deliveries  during  prior  months in
1987, without regard to amounts invoiced by CIG.
                                       -1-

                                       II.
     CIG shall deliver to Mesa at the inlet to the Fain Processing Plant or such
alternate delivery point as Mesa shall request (subject to CIG's right to reject
such request,  in whole or in part, in the reasonable exercise of its discretion
giving due consideration to the interests of both parties), the natural gas Mesa
is entitled to receive under the 'B' Contract.  For all such  deliveries to Mesa
for the period from the Settlement Date through December 31, 1989, the gathering
fee payable by Mesa to CIG shall be 44 cents per Mcf.
                                      III.
     For all natural gas produced  under the 'B' Contract and delivered  through
the Gathering System to Mesa on and after January 1, 1990, CIG shall calculate a
gathering fee which will be based upon its annual costs,  which shall be the sum
of (a) its  actual,  direct  out-of-pocket  expenses  (including  all  taxes not
related to income taxes) reasonably  incurred in operating the Gathering System;
(b) 20% of such actual,  direct  out-of-pocket  expenses to  compensate  CIG for
general and  administrative  expenses;  (c) depreciation on the original cost of
the  Gathering  System  at  the  applicable   depreciation  rate  for  gathering
facilities  owned by CIG, as  approved  in a final  order of the Federal  Energy
Regulatory  Commission (the "FERC"),  with such  depreciation  not to accumulate
beyond the gross  plant  cost;  and (d) a return  (including  taxes  relating to
return on equity) on net book value (original cost less accumulated depreciation
for the Gathering  System) at the applicable  overall rate of return provided to
CIG  in a  final  order  of the  FERC.  Items  (c)  and  (d)  will  be  adjusted
retroactively,  as appropriate,  to reflect the effect of any final order of the
FERC. Mesa shall provide its prorata share of fuel actually used at its own cost
(including any necessary  facilities)  for the gathering of all gas delivered to
Mesa,  and  such  fuel so  provided  by Mesa  shall  not be  included  in  CIG's
calculations  of cost in  operating  the  Gathering  System.  Mesa and CIG shall
pursue with  diligence the obtaining of any  necessary  regulatory  approvals to
carry out the terms of this Article III. CIG shall  calculate and Mesa shall pay
to CIG  each  month a  gathering  fee for the  volumes  gathered  for  Mesa  and
redelivered  from the  Gathering  System during that month.  Such  gathering fee
shall be  estimated  for each Mcf so  delivered on the basis of the prior year's
actual costs,  as set forth above,  divided by the total volumes of gas gathered
and redelivered  through the Gathering  System for the prior year. Such estimate
shall take into account any significant known and measurable changes expected to
occur  during  the next  billing  year,  if so  agreed to by both  parties.  The
estimated  billing basis will be furnished to Mesa on or before November 20th of
the prior year. On or before the April 30th  succeeding  each billing year,  CIG
shall account to Mesa for actual costs and volumes,  with any necessary  payment
by one party to the other party due 30 days after such accounting is received by
Mesa.
                                       IV.
     In the event that the FERC shall allocate or assign costs, by a final order
in any proceeding  involving  rates charged by CIG, to deliveries of natural gas
to Mesa through the  Gathering  System,  or otherwise  treat the  gathering  fee
payable by Mesa, as if the gathering fee were greater than the amount  otherwise
payable by Mesa to CIG, Mesa shall increase as of the effective date of the FERC
                                       -2-

action the fee payable to CIG by an amount equal to 50 percent of the  increase,
as allocated to Mesa in the determination of CIG's rates. In the event that such
final order of the FERC shall have the effect of treating the  gathering  fee as
if it were greater than 20 cents per Mcf more than the  gathering  fee otherwise
payable by Mesa to CIG under this  Agreement,  then Mesa,  upon  request by CIG,
agrees to meet with CIG and enter into good-faith negotiations to determine what
new  arrangements,  if any, are equitable and reasonable under the circumstances
in existence.
                                       V.
     CIG shall operate the Gathering  System in a fair and equitable manner as a
prudent  operator and without undue  discrimination  so as to reasonably  assure
that Mesa  receives in the natural gas and drip  liquids,  if any,  delivered to
Mesa an average Btu content ("Delivered Btu")  representative of the average Btu
content found in the natural gas produced from all wells committed under the 'B'
Contract ("'B' Contract Btu").  In the event that the  Delivered  Btu during any
fiscal year exceeds two percent  (2%)  greater or less than the 'B' Contract Btu
during that fiscal year, CIG shall correct the imbalance in the Delivered Btu to
the  extent  such imbalance  exceeds two  percent  greater  or less than the 'B'
Contract Btu by delivering  natural gas containing a higher or lower average Btu
content than that contained  in the 'B' Contract Btu during the next fiscal year
and thereafter  until such time as the imbalance has been reduced to within such
two  percent  of the  average.  To the  extent  any  additional  facilities  are
reasonably  necessary to correct such  imbalance,  Mesa shall have the option to
request  the  installation  of such  facilities,  provided  that Mesa  agrees to
reimburse CIG for all costs  reasonably  incurred in constructing and installing
same.  If Mesa chooses not to request  installation  of such  facilities,  CIG's
obligation  to Mesa,  if any, to deliver  natural gas  containing  Delivered Btu
within two percent (2%) of the 'B' Contract Btu shall be suspended to the extent
such additional facilities are necessary.
                                       VI.
     CIG  acknowledges  that  Mesa is  involved  in a  pending  lawsuit.  (Mapco
Westpan, Inc. v. Pioneer Corp., Case No. 62,922-A, 47th Judicial District Court,
Potter  County,  Texas).  CIG agrees,  based upon Mesa's  claims of ownership to
certain drip liquids asserted in such lawsuit, to collect such drips, over which
it has  control,  on a monthly  basis,  and to use  reasonable  efforts  for the
marketing of such drips to achieve the highest net value.  As soon as reasonably
possible, CIG agrees to file with the District Court of Potter County, Texas, an
appropriate  interpleader  action wherein CIG shall tender on a continuing basis
the net revenues  attributable  to the sale of such drips,  into the registry of
such Court;  and petition such Court to ascertain the lawful owner of such drips
and the revenues  attributable  thereto.  In  consideration  of CIG's filing the
interpleader suit as required herein,  Mesa hereby agrees to defend,  indemnify,
and hold CIG  harmless  from and against any and all  claims,  damages,  losses,
causes of  actions,  judgments  or other  actions,  including  costs of suit and
attorneys fees, if any, which may arise directly from the  interpleader  suit to
be filed by CIG,  and which may be  brought  about,  through  and by virtue  of,
claims and/or demands with Mapco Westpan,  Inc., its predecessors and successors
in  interest  allege to have  suffered  as a result  of the  denial to it of the
possession of the drips as aforesaid.  Upon the conclusion of such  interpleader
action,  CIG  and  Mesa  shall  enter  into a new  arrangement,  if  applicable,
consistent with the court's judgment.
                                       -3-

                                      VII.
     CIG and  Mesa  shall  keep  records  sufficient  to  document  requests  or
nominations by Mesa for gas deliveries  from CIG, and deliveries by CIG to Mesa.
Each party  shall have the right at all  reasonable  times to examine the books,
records  and  charts of the other  party to the extent  necessary  to verify the
accuracy  of any  request  or  nomination,  statement,  payment  calculation  or
determination  made pursuant to the provisions of this  Agreement.  If any error
shall be discovered,  proper adjustment and correction thereof shall be made and
any refunds due shall be made as promptly as practicable thereafter.
     IN WITNESS  WHEREOF,  the parties  hereto have caused these  presents to be
executed by their duly authorized  representatives  as of the date first written
above.
                                      MESA OPERATING LIMITED PARTNERSHIP
                                      By:      Pickens Operating Co.,
                                               General Partner
                                      By:   /s/   Paul W. Cain
                                            ----------------------------
                                               Paul W. Cain
                                               President
                                      COLORADO INTERSTATE GAS COMPANY
                                      By:   /s/   Michael Morris
                                            ----------------------------
                                               Michael Morris
                                               President
                                       -4-

 
5 0001038357 PNRCO. 1,000 9-MOS DEC-31-1997 SEP-30-1997 42,347 0 128,093 0 6,839 185,952 4,113,845 554,132 3,796,743 136,577 0 0 0 745 1,717,362 3,796,743 348,980 355,374 91,674 284,650 2,982 0 44,264 23,478 8,500 14,978 0 1,518 0 13,460 .31 .31

Data Provided by Refinitiv. Minimum 15 minutes delayed.