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 twelve months endedDecember 31, 2020 regarding (i) the impact to results of operations related to changes in the fair value of derivative instruments and certain other information regarding its derivative instruments, (ii) the impact to results of operations from the change in fair value of the Company's investment in affiliate, (iii) the net effect of third party purchases and sales of oil, gas and diesel on its results of operations and (iv) the average daily production for the one and three months endedDecember 31, 2020 attributable to Parsley Energy Inc. ("Parsley"), reflecting production prior to the closing of the acquisition by the Company onJanuary 12, 2021 . Derivative Activity The following table summarizes the net derivative results that the Company expects to report in its earnings for the three and twelve months endedDecember 31, 2020 : Three Months Ended Twelve Months Ended December 31, 2020 December 31, 2020 (in millions) Noncash changes in fair value: Oil derivative loss, net $ (193) $ (197) Gas derivative gain (loss), net 15 (9) Total noncash derivative loss, net (178) (206)
Net cash receipts (payments) on settled derivative instruments: Oil derivative receipts (payments) (a)
(44) 69
Gas derivative payments (b) - (3)
Interest rate derivative payments - (22)
Total cash receipts (payments) on settled derivative
instruments, net (44) 44
Total derivative loss, net $ (222) $ (162)
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(a)Includes the effect of liquidating certain of the Company's 2020 and 2021
Brent collar contracts with short puts for cash payments of $11 million for the
twelve months ended December 31, 2020 .
(b)Includes the effect of liquidating certain of the Company's 2021 NYMEX swap
contracts for cash receipts of $1 million for the three and twelve months ended
December 31, 2020 .
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 $55 million and a noncash loss of $64 million on its
investment in ProPetro for the three and twelve months ended December 31, 2020 ,
respectively.
Sales of Purchased Commodities
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 and secure diesel supply from the Gulf Coast to the Company's
operations in the Permian Basin . The Company enters into purchase transactions
with third parties and separate sale transactions with third parties to
diversify a portion of the Company's oil and gas sales to (i) Gulf Coast
refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international
oil markets, and to satisfy unused gas pipeline capacity commitments. The
Company expects the net effect of third party purchases and sales of oil and gas
for the three and twelve months ended December 31, 2020 to result in losses of
$32 million and $239 million , respectively.
Parsley Average Daily Production
The Company acquired Parsley on January 12, 2021 and will include Parsley's
production in its reported results from the acquisition date forward. For
informational purposes only, the Company is providing Parsley's expected average
daily production for the one and three months ended December 31, 2020 . The
production volumes exclude production attributable to assets that were divested
to an unaffiliated third party during the fourth quarter of 2020. The divested
assets included
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approximately 12,000 net acres in Pecos county of the Delaware Basin with
production of approximately 1,900 net barrels of oil equivalent per day and
1,400 net barrels of oil per day.
Production. During the three months ended December 31, 2020 , the Company expects
Parsley production to average 178 thousand barrels of oil equivalent per day,
which is comprised of (i) average daily oil production of 106 thousand barrels
per day, (ii) average daily NGL production of 40 thousand barrels per day and
(iii) average daily gas production of 193 million cubic feet per day.
During the month ended December 31, 2020 , the Company expects Parsley production
to average 174 thousand barrels of oil equivalent per day, which is comprised of
(i) average daily oil production of 104 thousand barrels per day, (ii) average
daily NGL production of 39 thousand barrels per day and (iii) average daily gas
production of 186 million cubic feet per day.
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Item 7.01 Regulation FD Disclosure
The Company's open commodity oil and gas derivative positions as of February 5,
2021 are as follows. These positions include contracts assumed by the Company as
a result of the acquisition of Parsley on January 12, 2021 .
2021 Year Ending
First December 31,
Quarter Second Quarter Third Quarter Fourth Quarter 2022
Average daily oil production associated with derivatives (Bbl):
Brent swap contracts: Volume 88,400 102,000 17,000 17,000 - Price$ 46.47 $ 46.47 $ 44.45 $ 44.45 $ - MEH swap contracts: Volume 46,800 54,000 43,000 43,000 4,932 Price$ 41.85 $
41.85
4,333 5,000 5,000 5,000 -
Price $ 40.50 $ 40.50 $ 40.50 $ 40.50 $ -
Brent call contracts sold:
Volume (a) 20,000 20,000 20,000 20,000 -
Price $ 69.74 $ 69.74 $ 69.74 $ 69.74 $ -
Brent collar contracts with short puts:
Volume 90,000 90,000 90,000 90,000 20,000
Price:
Ceiling $ 50.74 $ 50.74 $ 50.74 $ 50.74 $ 57.88
Floor $ 45.11 $ 45.11 $ 45.11 $ 45.11 $ 45.50
Short put $ 35.07 $ 35.07 $ 35.07 $ 35.07 $ 35.00
MEH collar contracts with short puts:
Volume 17,680 20,187 9,446 9,446 -
Price:
Ceiling $ 59.44 $ 59.39 $ 51.29 $ 51.29 $ -
Floor $ 49.34 $ 49.30 $ 41.55 $ 41.55 $ -
Short put $ 39.34 $ 39.30 $ 31.55 $ 31.55 $ -
Average daily gas production associated with derivatives (MMBtu):
NYMEX swap contracts:
Volume 127,222 100,000 100,000 100,000 -
Price $ 2.66 $ 2.68 $ 2.68 $ 2.68 $ -
ICE Dutch TTF swap contracts:
Volume 30,000 30,000 30,000 30,000 -
Price $ 5.07 $ 5.07 $ 5.07 $ 5.07 $ -
WAHA swap contracts:
Volume 101,183 116,484 116,304 116,304 4,932
Price $ 2.36 $ 2.36 $ 2.36 $ 2.36 $ 2.46
NYMEX collar contracts:
Volume 150,000 150,000 150,000 150,000 -
Price:
Ceiling $ 3.15 $ 3.15 $ 3.15 $ 3.15 $ -
Floor $ 2.50 $ 2.50 $ 2.50 $ 2.50 $ -
Basis swap contracts:
Permian Basin index swap volume (b) 10,000 - - - -
Price differential $ (1.46) $ - $ - $ - $ -
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(a)The referenced call contracts were sold in exchange for higher ceiling prices
on certain 2020 collar contracts.
(b)The referenced basis swap contracts locks-in the basis differential 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; the effect of future regulatory or
legislative actions on Pioneer or the industries in which it operates, including
the risk of new restrictions with respect to development activities; the ability
to obtain approvals from third parties and negotiate agreements with third
parties on mutually acceptable terms; potential liability resulting from pending
or future litigation; the costs 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; the risk that the Company
will not be able to successfully integrate the business of Parsley or fully or
timely realize the expected cost savings, synergies and growth from the Parsley
acquisition; 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;
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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