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 months endedMarch 31, 2021 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 impact to results of operations from Winter Storm Uri inFebruary 2021 . Derivative Activity The following table summarizes the net derivative results that the Company expects to report in its earnings for the three months endedMarch 31, 2021 : Three Months Ended March 31, 2021 (in millions) Noncash changes in fair value: Oil derivative loss, net $ (349) Gas derivative loss, net (1) Marketing derivative loss, net (20) Total noncash derivative loss, net (370)
Net cash payments on settled derivative instruments:
Oil derivative payments (a) (306) Gas derivative payments (b) (7) Marketing derivative payments (8) Total cash payments on settled derivative instruments, net (321) Total derivative loss, net $ (691) _____________________ (a)Includes the effect of liquidating certain of the Company's 2022West Texas Intermediate swap contracts for cash payments of$13 million during the three months endedMarch 31, 2021 . (b)Includes the effect of liquidating certain of the Company's 2021 NYMEX swap contracts for cash receipts of$447 thousand during the three months endedMarch 31, 2021 . 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$54 million on its investment in ProPetro for the three months endedMarch 31, 2021 . Sales ofPurchased 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 theGulf Coast to the Company's operations in thePermian 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 andWest 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, gas and diesel for the three months endedMarch 31, 2021 to result in a loss of$15 million . Winter Storm Uri DuringFebruary 2021 , the Company's operations inWest Texas were significantly impacted by Winter Storm Uri that brought abnormally cold temperatures, along with snow and icy conditions across the state ofTexas . The extreme winter weather impacted production operations, midstream infrastructure and power providers throughout the state, along with many other services. As a result, most of the Company's production was offline for about a week. Early in the weather event, the Company attempted to perform or otherwise satisfy its firm gas sales commitments, but as the impacts of the winter weather -------------------------------------------------------------------------------- became clearer, the Company subsequently issued force majeure notices to its customers given the inability to perform such contracts for a variety of reasons, including significant production being offline, interruptions to midstream operations, the inability to flow gas to markets due to infrastructure downtime and compliance with government orders to direct any available gas volumes towards supporting power generation. The Company expects to report cash costs of$80 million in connection with its firm gas sales commitments early in the weather event. These cash costs are included in other expense for the three months endedMarch 31, 2021 . -------------------------------------------------------------------------------- Item 7.01 Regulation FD Disclosure The Company's open commodity oil and gas derivative positions as ofApril 26, 2021 are as follows. These positions include contracts assumed by the Company as a result of the acquisition of Parsley Energy, Inc. ("Parsley") onJanuary 12, 2021 . 2021 Year Ending December 31, Second Quarter Third Quarter Fourth Quarter 2022
Average daily oil production associated with derivatives (Bbl):
Brent swap contracts: Volume 102,000 17,000 17,000 - Price$ 46.48 $ 44.45 $ 44.45 $ - MEH swap contracts: Volume 54,000 43,000 43,000 2,055 Price$ 41.85 $ 40.52 $ 40.52 $ 42.80 Midland WTI swap contracts: Volume 5,000 5,000 5,000 - Price$ 40.50 $ 40.50 $ 40.50 $ - Brent call contracts sold: Volume (a) 20,000 20,000 20,000 - Price$ 69.74 $ 69.74 $ 69.74 $ - Brent collar contracts: Volume - - - 10,000 Price: Ceiling $ - $ - $ -$ 60.32 Floor $ - $ - $ -$ 50.00 Brent collar contracts with short puts: Volume 90,000 110,000 90,000 57,000 Price: Ceiling$ 50.74 $ 54.46 $ 50.74 $ 64.41 Floor$ 45.11 $ 47.82 $ 45.11 $ 50.18 Short put$ 35.07 $ 36.87 $ 35.07 $ 38.25 MEH collar contracts with short puts: Volume 20,187 9,446 9,446 - Price: Ceiling$ 59.39 $ 51.29 $ 51.29 $ - Floor$ 49.30 $ 41.55 $ 41.55 $ - Short put$ 39.30 $ 31.55 $ 31.55 $ - Average daily gas production associated with derivatives (MMBtu): NYMEX swap contracts: Volume 20,000 20,000 20,000 - Price $ 2.81 $ 2.81 $ 2.81 $ - ICE Dutch TTF swap contracts: Volume 30,000 30,000 30,000 - Price $ 5.07 $ 5.07 $ 5.07 $ - WAHA swap contracts: Volume 116,484 116,304 116,304 4,932 Price $ 2.36 $ 2.36 $ 2.36$ 2.46 NYMEX collar contracts: Volume 200,000 200,000 200,000 - Price: Ceiling $ 3.18 $ 3.18 $ 3.18 $ - Floor $ 2.56 $ 2.56 $ 2.56 $ - ____________________
(a)The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar 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 industry 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; 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; 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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