PIONEER NATURAL RESOURCES COMPANY Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
Corrections to Previously Issued Financial Statements
(a) OnFebruary 22, 2021 , the Audit Committee of the Board of Directors (the "Audit Committee") of the Company, after discussion with management andErnst & Young LLP , the Company's independent registered public accounting firm, concluded that the Company's previously issued unaudited consolidated financial statements for the three and nine months endedSeptember 30, 2020 should no longer be relied upon. In connection with the preparation of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "2020 Form 10-K"), management became aware that the unaudited consolidated financial statements for the three and nine months endedSeptember 30, 2020 contained misstatements related to two long-term marketing contracts that should have been accounted for as derivative contracts. The contracts were executed inOctober 2019 , each with aJanuary 1, 2021 contract commencement date and aDecember 31, 2026 contract termination date. In order to properly account for the contracts as derivatives, certain noncash revisions will be made to theSeptember 30, 2020 consolidated financial statements. Accordingly, the Company will restate its unaudited consolidated financial statements for the three and nine months endedSeptember 30, 2020 in its 2020 Form 10-K. The effects of the noncash corrections to the Company's previously reported unaudited consolidated statements of operations are as follows (unaudited, in millions, except for per share data): Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 As Reported Adjustments As Restated As Reported Adjustments As Restated Oil and gas revenues $ 922 $ -$ 922 $ 2,617 $ -$ 2,617 Derivative gain (loss), net $ (57) $ (84)$ (141) $ 60$ (101) $ (41) Total revenues and other income$ 1,815 $ (84)$ 1,731 $ 4,930 $ (101) $ 4,829 Total costs and expenses 1,831 - 1,831 5,118 - 5,118 Loss before income taxes (16) (84) (100) (188) (101) (289) Income tax benefit (provision) (4) 19 15 18 28 46 Net loss $ (20) $ (65)$ (85) $ (170) $ (73) $ (243) Basic and diluted net loss attributable to common stockholders per share$ (0.12) $ (0.40) $ (0.52) $ (1.03) $ (0.44) $ (1.47)
The effects of the noncash corrections on the Company's previously reported unaudited consolidated balance sheet are as follows (in millions):
As of September 30, 2020
As Reported Adjustments As Restated
Derivative asset - current $ 49 $ (1) $ 48
Total current assets $ 2,420 $ (1) $ 2,419
Total assets $ 18,977 $ (1) $ 18,976
Derivative liability - current $ 51 $ 23 $ 74
Total current liabilities $ 1,688 $ 23 $ 1,711
Derivative liability - noncurrent $ 14 $ 56 $ 70
Deferred income taxes $ 1,406 $ (24) $ 1,382
Retained earnings $ 3,582 $ (56) $ 3,526
Total equity $ 11,654 $ (56) $ 11,598
Total liabilities and equity $ 18,977 $ (1) $ 18,976
The Company will also make other immaterial revisions to its first and second
quarter 2020 unaudited interim consolidated financial statements and its 2019
audited consolidated financial statements in the 2020 Form 10-K, principally
related to the derivative treatment of the marketing contracts. The Company's
net cash flows from operating activities, investing activities or financing
activities were not impacted for any prior period.
The Company has not filed and does not intend to file an amendment to the
Company's previously filed Quarterly Report on Form 10-Q for the period ending
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other disclosures regarding the three and nine months endedSeptember 30, 2020 included herein, in the 2020 Form 10-K and in future filings with theSEC (as applicable). Management of the Company has concluded the control deficiency that resulted in the failure to detect the misstatement described above is a material weakness in the Company's internal control over financial reporting as ofDecember 31, 2020 relating to the design and maintenance of internal controls over the review of marketing contracts for indicators of derivative accounting. The Company will report the material weakness in the 2020 Form 10-K and is implementing additional controls to remediate the material weakness in 2021.
The Company's management and the Audit Committee have discussed the matters
disclosed in this Item 4.02 with the Company's independent registered public
accounting firm,
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