PIONEER NATURAL RESOURCES COMPANY Item 2.02 Results of Operations and Financial Condition Explanatory note:Pioneer Natural Resources Company and its subsidiaries ("Pioneer" or the "Company") presents in this Item 2.02 certain information for the three and six months endedJune 30, 2020 regarding (i) the impact of changes in the fair value of derivative instruments on its results of operations and certain other information regarding its derivative instruments, (ii) the average realized prices for oil, NGLs and gas for the three months endedJune 30, 2020 , (iii) the impact of the change in fair value of divestiture contingent consideration on its results of operations, (iv) the impact of the change in fair value of investment in affiliate on its results of operations and (v) the net effect of third party purchases and sales of oil and gas. Derivative Activity The following table summarizes the net derivative results that the Company expects to report in its earnings for the three and six months endedJune 30, 2020 : Three Months Ended June Six Months Ended June 30, 30, 2020 2020 (in millions) Noncash changes in fair value: Oil derivative loss, net $ (466) $ (52) Gas derivative gain, net 2 - Total noncash derivative loss, net (464) (52)
Net cash receipts on settled derivative instruments: Oil derivative receipts
128 191
Interest rate derivative payments - (22)
Total cash receipts on settled derivative instruments, net
128 169
Total derivative gain (loss), net $ (336) $ 117
Commodity Price Realizations
During the three months ended June 30, 2020 , the Company expects the average
realized price for oil to be $23.16 per barrel, the average realized price for
NGLs to be $12.65 per barrel and the average realized price for gas to be $1.43
per thousand cubic feet. These prices exclude the effects of derivatives.
Divestiture Contingent Consideration
The Company is entitled to receive contingent consideration associated with the
sale in 2019 of its Eagle Ford and other remaining assets in South Texas . The
divestiture contingent consideration is measured at fair value on a recurring
basis. The Company expects to report noncash divestiture contingent
consideration losses in its earnings for the three and six months ended June 30,
2020 of $1 million and $64 million , respectively.
Investment in Affiliate
The Company owns 16.6 million shares of ProPetro Holding Corp. ("ProPetro"),
which is measured on a recurring basis at fair value. The Company expects to
report a noncash gain of $44 million and a noncash loss of $101 million on its
investment in ProPetro for the three and six months ended June 30, 2020 ,
respectively.
Sales of Purchased Oil and Gas
The Company enters into pipeline capacity commitments in order to secure
available oil, NGLs and gas transportation capacity from the Company's areas of
production. The Company enters into purchase transactions with third parties and
separate sale transactions with third parties to diversify a portion of the
Company's oil and gas sales to Gulf Coast refineries and Gulf Coast and West
Coast gas markets, international export markets and to satisfy unused gas
pipeline capacity commitments. The Company expects the net effect of third party
purchases and sales of oil and gas for the three and six months ended June 30,
2020 to result in losses of $31 million and $144 million , respectively.
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Item 7.01 Regulation FD Disclosure
The Company's open commodity oil and gas derivative positions as of July 20,
2020 are as follows:
2020 Year Ending
December
Third Quarter Fourth Quarter 31, 2021
Average daily oil production associated with
derivatives (Bbl)
Brent collar contracts with short puts: (a)
Volume 115,500 115,500 -
Price:
Ceiling $ 69.78 $ 69.78 $ -
Floor $ 62.06 $ 62.06 $ -
Short put $ 53.56 $ 53.56 $ -
Brent swap contracts:
Volume 172,200 155,200 -
Price $ 35.70 $ 36.47 $ -
Brent call contracts sold:
Volume (b) - - 20,000
Price $ - $ - $ 69.74
Brent collar contracts with short puts:
Volume 30,000 30,000 107,000
Price:
Ceiling $ 43.09 $ 43.09 $ 49.22
Floor $ 34.83 $ 34.83 $ 43.74
Short put $ 24.83 $ 24.83 $ 33.78
Average daily gas production associated with
derivatives (MMBtu)
NYMEX swap contracts:
Volume 30,000 16,739 132,466
Price $ 2.41 $ 2.43 $ 2.64
NYMEX collar contracts:
Volume - - 80,000
Price:
Call $ - $ - $ 3.15
Put $ - $ - $ 2.50
Basis swap contracts:
Permian Basin index swap volume (c) 30,000 16,739 2,466
Price differential $ (1.68) $ (1.59) $ (1.46)
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(a)Represents collar contracts with short puts that were entered into prior to
the March 2020 oil price decline. During and subsequent to March 2020 , the
Company entered into incremental swap contracts and collar contracts with short
puts to provide additional downside protection for its remaining 2020 volumes.
(b)The referenced call contracts were sold in exchange for higher ceiling prices
on certain 2020 collar contracts.
(c)The referenced basis swap contracts fix the basis differentials between the
index price at which the Company sells its Permian Basin gas and the NYMEX index
price used in swap contracts.
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Cautionary Statement Concerning Forward-Looking Statements
Except for historical information contained herein, the statements in this
Current Report on Form 8-K are forward-looking statements that are made pursuant
to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements and the business prospects of the Company are
subject to a number of risks and uncertainties that may cause the Company's
actual results in future periods to differ materially from the forward-looking
statements. These risks and uncertainties include, among other things,
volatility of commodity prices, product supply and demand, the impact of a
widespread outbreak of an illness, such as the COVID-19 pandemic, on global and
U.S. economic activity, competition, the ability to obtain environmental and
other permits and the timing thereof, other government regulation or action, the
ability to obtain approvals from third parties and negotiate agreements with
third parties on mutually acceptable terms, litigation, the costs and results of
drilling and operations, availability of equipment, services, resources and
personnel required to perform the Company's drilling and operating activities,
access to and availability of transportation, processing, fractionation,
refining, storage and export facilities, Pioneer's ability to replace reserves,
implement its business plans or complete its development activities as
scheduled, access to and cost of capital, the financial strength of
counterparties to Pioneer's credit facility, investment instruments and
derivative contracts and purchasers of Pioneer's oil, NGL and gas production,
uncertainties about estimates of reserves, identification of drilling locations
and the ability to add proved reserves in the future, the assumptions underlying
production forecasts, quality of technical data, environmental and weather
risks, including the possible impacts of climate change, cybersecurity risks,
ability to implement planned stock repurchases, the risks associated with the
ownership and operation of the Company's oilfield services businesses and acts
of war or terrorism. These and other risks are described in the Company's Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the
United States Securities and Exchange Commission . In addition, the Company may
be subject to currently unforeseen risks that may have a materially adverse
effect on it. Accordingly, no assurances can be given that the actual events and
results will not be materially different than the anticipated results described
in the forward-looking statements. The Company undertakes no duty to publicly
update these statements except as required by law.
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