PIONEER NATURAL RESOURCES COMPANY

Definitions of Certain Terms and Conventions Used Herein

Within this Report, the following terms and conventions have specific meanings:

•"Bbl" means a standard barrel containing 42 United States gallons.

•"Bcf" means one billion cubic feet and is a measure of gas volume.

•"BOE" means a barrel of oil equivalent and is a standard convention used to express oil and gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the relative energy content method by using the ratio of six thousand cubic feet of gas to one Bbl of oil or natural gas liquid.

•"BOEPD" means BOE per day.

•"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.

•"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.

•"DD&A" means depletion, depreciation and amortization.

•"ESG"means environmental, social and governance.

•"Field fuel" means gas consumed to operate field equipment (primarily compressors) prior to the gas being delivered to a sales point.

•"GAAP" means accounting principles generally accepted in the United States of America.

•"GHG" means greenhouse gases.

•"HH" means Henry Hub, a distribution hub in Louisiana that serves as the delivery location for gas futures contracts on the NYMEX.

•"MBbl" means one thousand Bbls.

•"MBOE" means one thousand BOEs.

•"Mcf" means one thousand cubic feet and is a measure of gas volume.

•"MMBbl" means one million Bbls.

•"MMBOE" means one million BOEs.

•"MMBtu" means one million Btus.

•"MMcf" means one million cubic feet.

•"Mont Belvieu" means the daily average natural gas liquids components as priced in OPIS in the table "U.S. and Canada LP – Gas Weekly Averages" at Mont Belvieu, Texas.

•"NGLs" means natural gas liquids, which are the heavier hydrocarbon liquids that are separated from the gas stream; such liquids include ethane, propane, isobutane, normal butane and natural gasoline.

•"NYMEX" means the New York Mercantile Exchange.

•"NYSE" means the New York Stock Exchange.

•"OPEC" means the Organization of Petroleum Exporting Countries.

•"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.

•"Proved developed reserves" ~~mean~~means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.

•"Proved reserves" ~~mean~~means those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons ("LKH") as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty.

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(iii) Where direct observation from well penetrations has defined a highest known oil ("HKO") elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir

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only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty.

(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

•"Proved undeveloped reserves" means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.

(iii) Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.

•"SEC" means the United States Securities and Exchange Commission.

•"Standardized Measure" means the after-tax present value of estimated future net cash flows of proved reserves, determined in accordance with the rules and regulations of the SEC, using prices and costs employed in the determination of proved reserves and a ten percent discount rate.

•"U.S." means United States.

•"WTI" means West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil used as a benchmark in oil pricing.

•With respect to information on the working interest in wells, drilling locations and acreage, "net" wells, drilling locations and acres are determined by multiplying "gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.

•All currency amounts are expressed in U.S. dollars.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate," or the negative of such terms and similar expressions as they relate to the Company are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.

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 synergies and accretion metrics 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 forecasts, including forecasts of production, well costs, capital expenditures, rates of return, expenses, cashflow and cash flow from purchases and sales of oil and gas, net of firm transportation commitments; sources of funding; tax rates; 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. 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 ~~from~~than the anticipated results described in the forward-looking statements. See "Item 1. Business — Competition, Markets and Regulations," "Item 1A. Risk Factors," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no duty to publicly update these statements except as required by law.

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PIONEER NATURAL RESOURCES COMPANY

PART I

ITEM 1. BUSINESS

General

Pioneer is a large independent oil and gas exploration and production company that explores for, develops and produces oil, NGLs and gas within the United States, with operations in the Permian Basin in West Texas. The Company is a Delaware corporation, and its common stock has been listed and traded on the NYSE under the ticker symbol "PXD" since its formation in 1997.

The Company's principal executive office is located at 777 Hidden Ridge, Irving, Texas, 75038. The Company also maintains an office in Midland, Texas and field offices in its area of operation.

~~At December 31, 2019, Pioneer had 2,323 employees, 826 of whom were employed in field operations and 360 of whom were employed in vertical integration activities.~~

Available Information

Pioneer files or furnishes annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, including Pioneer, that file electronically with the SEC.

The Company makes available free of charge through its website (www.pxd.com) its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC. In addition to the reports filed or furnished with the SEC, Pioneer publicly discloses information from time to time in its press releases and investor presentations that are posted on its website or during publicly ~~during~~ accessible investor conferences. Such information, including information posted on or connected to the Company's website, is not a part of, or incorporated by reference in, this Report or any other document the Company files with or furnishes to the SEC.

Mission and Strategies

The Company's mission is to be America's leading independent energy company, focused on value, safety, the environment, technology and ~~our greatest asset, our~~its people. The Company's long-term ~~growth~~ strategy is centered around the following strategic objectives:

•maintaining a strong balance sheet to ensure financial flexibility;

•delivering economic production and proved reserve ~~growth~~additions through drilling, completion and production improvement activities;

•utilizing the Company's scale and technology advancements to reduce costs and improve efficiency;

•reinvesting 50 percent to 60 percent of Company's operating cash flow, with the remaining cash flow targeted to debt reduction and returning ~~free~~cash to shareholders, primarily through dividends;

•evaluating accretive acquisitions or acreage trades that enhance the Company's reinvestment framework and allow incremental cash flow to ~~investors through a combination of dividends and share repurchases;~~be returned to shareholders;

•developing and training employees and contractors to perform their jobs in a safe manner; and

•stewarding the environment through industry leading sustainable development efforts.

The Company's long-term strategy is anchored by the Company's interests in the long-lived Spraberry/Wolfcamp oil field located in the Permian Basin in West Texas, which has an estimated remaining productive life in excess of 5045 years.

~~Business Activities~~Competition

Pioneer's purpose is to competitively and profitably explore for, develop and produce oil and gas reserves. In so doing, the Company sells homogeneous oil, NGL and gas units that, except for geographic and relatively minor quality differences, cannot be significantly differentiated from units offered for sale by the Company's competitors. The Company's portfolio of resources and opportunities are located in the Spraberry/Wolfcamp oil field, and provide long-lived, dependable production and lower-risk exploration and development opportunities.

~~Petroleum industry.~~Over the past several years, the oil price environment has been characterized by high volatility. During 2019, Brent oil prices rose to a high of $74.57 per barrel in April 2019, up from a low of $54.91 per barrel in early January 2019. During 2020 to date, Brent oil prices declined to a low of $49.45 in February 2020. Significant factors that are likely to affect 2020 commodity prices include: the effect of U.S. energy, monetary, environmental and trade policies, including

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policies related to U.S. and China trade negotiations and Iranian oil sanctions; fiscal challenges facing the United States federal government; the pace of economic growth in the U.S. and throughout the world; geopolitical issues globally, especially in the Middle East; the extent to which Organization of Petroleum Exporting Countries ("OPEC") members and some nonmembers, including Russia, adhere to and agree to extend their oil production quota's; uncertain demand fundamentals in 2020 and beyond, led by rising oil consumption in China and India offset by European Union members reshaping their fossil fuel consumption towards lower carbon energy; overall North American and worldwide gas supply and demand fundamentals, including the timing of incremental LNG export capacity additions; and global or national health concerns, including the outbreak of pandemic or contagious disease, such as the recent coronavirus, which may reduce demand for oil, NGL and gas because of reduced global or national economic activity. Because the global economic and political outlook and commodity price environment are uncertain, the Company endeavors to maintain a strong financial liquidity position to provide financial flexibility should commodity prices decline and remain low for an extended period of time.

While the industry has invested in initiatives designed to increase oil, NGL and gas takeaway capacity associated with growing U.S. shale production, such as the construction of additional oil and NGL export facilities and new liquefied natural gas ("LNG") facilities, the supply of these products has increased at a faster pace than the overall U.S. and international demand for these commodities. Oil, NGL products and gas supplies are expected to continue to increase during 2020 and prices are expected to remain volatile. To mitigate this risk, Pioneer enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's area of production with the objective of transporting a significant portion of the Company's oil and gas sales to higher priced markets. Specifically, the Company has entered 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 LNG facilities, international export markets and to satisfy unused gas pipeline capacity commitments. These marketing activities provided incremental cash flow of $283 million in 2019 and $458 million in 2018, compared to cash outlays of $31 million in 2017.

The Company also uses commodity derivative contracts to mitigate the effect of commodity price volatility on the Company's net cash provided by operating activities and its net asset value. The Company has entered into derivative contracts for a portion of its forecasted 2020 production; consequently, if commodity prices decline, the Company could realize lower prices for volumes not protected by the Company's derivative activities and could see a reduction in derivative contract prices available on additional volumes in the future. As a result, the Company's internal cash flows will be negatively impacted by a reduction in commodity prices or to the extent that sales prices do not cover the third-party purchase price and cost of transportation for that portion of volumes transported to other markets. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" and ~~Note 5~~ ~~of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~

~~Liquidity.~~ The Company's primary needs for cash are for (i) capital expenditures, (ii) acquisitions of oil and gas properties, (iii) payments of contractual obligations, including debt maturities, (iv) dividends and share repurchases and (v) working capital obligations. Funding for these cash needs may be provided by any combination of the Company's primary sources of liquidity including: (i) cash and cash equivalents, (ii) net cash provided by operating activities, (iii) sales of investments, (iv) unused borrowing capacity under its credit facility, (v) issuances of debt or equity securities and (vi) other sources, such as sales of nonstrategic assets. Although the Company expects that these sources of funding will be adequate to fund its 2020 capital expenditures, dividend payments and provide adequate liquidity to fund other needs, including stock repurchases, no assurance can be given that such funding sources will be adequate to meet the Company's future needs.

~~Production.~~ The Company focuses its efforts towards maximizing its average daily production of oil, NGLs and gas through development drilling, production enhancement activities and acquisitions of producing properties, while minimizing controllable costs associated with production activities. For the year ended December 31, 2019, the Company's production of 126 MMBOE, excluding field fuel usage, represented an eight percent increase compared to production during 2018. See "Item 2. Properties — Selected Oil and Gas Information — Production, price and cost data" for additional information.

~~Drilling activities.~~ ~~The Company believes that its current property base provides a substantial inventory of prospects for future reserve, production and cash flow growth.~~

~~Development activities~~. The Company seeks to increase its proved oil and gas reserves, production and cash flow through development drilling and by conducting other production enhancement activities, such as well recompletions. The Company's proved reserves as of December 31, 2019 include proved undeveloped reserves and proved developed non-producing reserves of 39 MMBbls of oil, 16 MMBbls of NGL and 83 Bcf of gas. The timing of the development of these proved reserves will be dependent upon commodity prices, drilling and operating costs and the Company's expected operating cash flows and financial condition. During the three years ended December 31, 2019, the Company drilled 854 gross (745 net) exploration and development wells, with 98 percent of the gross wells (99 percent of net wells) being successfully completed as productive wells, at a total drilling cost (net to the Company's interest) of $9.2 billion, including infrastructure capital.

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~~Exploratory activities.~~The Company has a significant portfolio of lower-risk exploration opportunities that are expected to be evaluated and tested in the future. Exploratory and extension drilling involve greater risks of dry holes or failure to find commercial quantities of hydrocarbons than development drilling or enhanced recovery activities.

~~Acquisition activities.~~ The Company regularly seeks to acquire or trade for acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of future horizontal wells and potentially provides superior returns on investment. The Company periodically evaluates and pursues acquisition and acreage trade opportunities (including opportunities to acquire particular oil and gas assets or entities owning oil and gas assets and opportunities to engage in mergers, consolidations or other business combinations with such entities) and at any given time may be in various stages of evaluating such opportunities. Such stages may take the form of internal financial analyses, oil and gas reserve analyses, due diligence, the submission of indications of interest, preliminary negotiations, negotiations of letters of intent or negotiations of definitive agreements. The success of any acquisition or acreage trade is uncertain and depends on a number of factors, some of which are outside the Company's control.

During 2019, 2018 and 2017, the Company spent $28 million, $65 million and $136 million, respectively, primarily to purchase undeveloped acreage for future exploitation and exploration activities in the Spraberry/Wolfcamp field of the Permian Basin. See ~~Note 3~~ ~~of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~

~~Integrated Services.~~ The Company continues to utilize its integrated services to control well costs and operating costs in addition to supporting the execution of its drilling and production activities. The Company owns field service equipment that supports its drilling and production operations, including pulling units, fracture stimulation tanks, water transport trucks, hot oilers, blowout preventers, construction equipment and fishing tools.

The Company continues to construct a field-wide water distribution system to reduce the cost of water for drilling and completion activities and to secure adequate supplies of water to support the Company's long-term growth plan for the Spraberry/Wolfcamp field. During 2019, the Company expanded its mainline system, subsystems and frac ponds to efficiently deliver water to Pioneer's drilling locations. The Company is purchasing approximately 120 thousand barrels per day of effluent water from the City of Odessa and is partnering with the City of Midland to upgrade the city's wastewater treatment plant in return for approximately two billion barrels of low-cost, non-potable water over a 28-year contract period (up to 240 thousand barrels per day) to support its drilling and completion activities. The Midland wastewater treatment plant is scheduled for completion in early 2021.

~~Asset divestitures.~~ The Company regularly reviews its asset base to identify nonstrategic assets, the disposition of which would increase capital resources available for other activities, create organizational and operational efficiencies and further the Company's objective of maintaining a strong balance sheet to ensure financial flexibility.

~~See~~ ~~Note 3~~ ~~and~~ ~~Note 4~~ ~~of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~

~~Marketing of Production~~

~~General.~~ Production from the Company's properties is marketed using methods that are consistent with industry practices. Sales prices for oil, NGL and gas production are negotiated based on factors normally considered in the industry, such as an index or spot price, price regulations, distance from the well to the pipeline, commodity quality and prevailing supply and demand conditions. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for additional information.

~~Seasonal nature of business.~~ Generally, but not always, the demand for gas decreases during the summer months and increases during the winter months. Seasonal anomalies such as mild winters or hot summers may impact general seasonal changes in demand.

~~Significant purchasers.~~ During 2019 the Company's oil, NGL and gas sales to Sunoco Logistics Partners L.P., Occidental Energy Marketing Inc. and Plains Marketing L.P. accounted for 33 percent, 20 percent and 13 percent of the Company's oil and gas revenues, respectively. The loss of one of these significant purchasers or an inability to secure adequate pipeline, gas plant and NGL fractionation infrastructure for its Permian Basin production could have a material adverse effect on the Company's ability to produce and sell its oil, NGL and gas production.

Revenues from sales of purchased oil and gas to Occidental Energy Marketing Inc. accounted for 30 percent of the Company's sales of purchased oil and gas. No other purchaser of oil or gas purchased by the Company from third parties

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exceeded ten percent during 2019. The loss of this significant purchaser of purchased oil and gas would not be expected to have a material adverse effect on the Company's ability to sell commodities it purchases from third parties.

~~See~~ ~~Note 13~~ ~~of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~

~~Derivative risk management activities.~~ The Company primarily utilizes commodity swap contracts, collar contracts, collar contracts with short puts and basis swap contracts that are intended to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. From time to time, the Company also utilizes interest rate derivative contracts intended to reduce the effect of interest rate volatility on the Company's indebtedness.

The Company enters into pipeline capacity commitments in order to secure available oil, NGL 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 LNG facilities, international export markets and to satisfy unused gas pipeline capacity commitments.

~~See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" and~~ ~~Note 5~~ ~~of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~

~~Competition, Markets and Regulations~~

~~Competition.~~The oil and gas industry is highly competitive in the exploration for and acquisition of reserves, the acquisition of oil and gas leases, marketing of oil, NGL and gas production, the obtaining of equipment and services and the hiring and retention of staff necessary for the identification, evaluation, operation and acquisition and development of oil and gas properties. The Company's competitors include a large number of companies, including major integrated oil and gas companies, other independent oil and gas companies, and individuals engaged in the exploration for and development of oil and gas properties. The Company also faces competition from companies that supply alternative sources of energy, such as wind, solar power, and ~~solar power.~~other renewables. Competition will increase as alternative energy technology becomes more reliable and governments throughout the world support or mandate the use of such alternative energy. ~~Additionally, various entities throughout the world, including governments and public and private companies, are promoting research into new technologies to accelerate the implementation~~

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Competitive advantage is gained in the oil and gas exploration and development industry by employing well-trained and experienced personnel who make prudent capital investment decisions based on management direction, embrace technological innovation and are focused on price and cost management. The Company has a team of dedicated employees who represent the professional disciplines and sciences that the Company believes are necessary to allow Pioneer to maximize the long-term profitability and net asset value inherent in its physical assets.

See "Item 1A. Risk Factors - The Company faces significant competition and some of its competitors have resources in excess of the Company's available resources" for additional information.

Impact of the COVID-19 Pandemic

A novel strain of the coronavirus ("COVID-19") surfaced in late 2019 and has spread around the world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic has significantly affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. In addition, the COVID-19 pandemic has resulted in travel restrictions, business closures and other restrictions that have disrupted the demand for oil throughout the world and when combined with pressures on the global supply-demand balance for oil and related products, resulted in significant volatility in oil prices beginning in late February 2020. The length of this demand disruption is unknown, and will ultimately depend on various factors beyond the Company's control, such as the duration and scope of the pandemic, the length and severity of the worldwide economic downturn, the ability of OPEC, Russia and other oil producing nations to manage the global oil supply, additional actions by businesses and governments in response to the pandemic, the speed and effectiveness of responses to combat the virus, including the effectiveness of the COVID-19 vaccines, and the time necessary to balance oil supply and demand. Additionally, there is significant uncertainty regarding the lasting impacts of the pandemic on global demand, as it cannot be predicted as to whether certain demand-reducing behaviors such as declines in business travel and changes in work-from-home practices will persist beyond the resolution of the pandemic. In response to these developments the Company has implemented measures to mitigate the impact of the COVID-19 pandemic on its employees, operations and financial position. These measures include, but are not limited to, the following:

~~Markets.~~Employee Health and Safety. The Company has taken steps to keep its employees safe in light of the COVID-19 pandemic by implementing preventative measures and developing response plans intended to minimize unnecessary risk of exposure and infection among its employees, as recommended by the Centers for Disease Control and Prevention (the "CDC"). The Company has also modified certain business practices (including those related to non-operational employee work locations, such as a significant reduction in business travel and physical participation in meetings, events and conferences) to conform to government restrictions and best practices encouraged by the CDC, and other governmental and regulatory authorities.

Expense Management. With the reduction in revenue associated with lower oil prices during 2020, the Company focused its efforts on:

•Optimizing drilling, completion and operational efficiencies, resulting in lower well costs and operating costs and

•Reducing general and administrative and other overhead related costs through:

◦a corporate restructuring to reduce the Company's staffing levels to correspond with a planned reduction in future activity levels, resulting in approximately 300 employees being involuntarily separated from the Company in October 2020 (the "2020 Corporate Restructuring");

◦voluntary salary reductions by the Company's officers and board of directors from March 2020 through December 2020;

◦reductions in 2020 cash incentive compensation;

◦2020 benefit reductions; and

◦other cash cost reductions.

Balance Sheet, Cash Flow and Liquidity. During 2020, the Company also took the following actions to strengthen its financial position and increase liquidity during the COVID-19 pandemic:

•Reduced its 2020 capital budget by over 50 percent,

•Enhanced its liquidity position by refinancing a portion of its existing debt and issuing new debt, with the combined objective of increasing liquidity, extending the Company's debt maturities and lowering the Company's future cash interest expense on long-term debt, and

•Adjusted the Company's derivative positions to reduce the effects of oil price volatility on its net cash provided by operating activities.

The Company continues to assess the global impacts of the COVID-19 pandemic and may modify its plans as the health and economic impacts of COVID-19 continue to evolve.

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See Note 5 and Note 7 of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

Acquisition Activities

The Company regularly seeks to acquire or trade acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of future horizontal wells and provides superior returns on investment (including opportunities to acquire particular oil and gas assets or entities owning oil and gas assets and opportunities to engage in mergers, consolidations or other business combinations with such entities). The Company periodically evaluates and pursues acquisition and acreage trade opportunities and at any given time may be in various stages of evaluating such opportunities. Such stages may take the form of internal financial analyses, oil and gas reserve analyses, due diligence, the submission of indications of interest, preliminary negotiations, negotiations of letters of intent or negotiations of definitive agreements. The success of any acquisition or acreage trade is uncertain and depends on a number of factors, some of which are outside the Company's control.

On January 12, 2021, the Company acquired Parsley Energy, Inc., a Delaware corporation that previously traded on the NYSE under the symbol "PE" ("Parsley"), pursuant to the Agreement and Plan of Merger, dated as of October 20, 2020, among Pioneer, certain of its subsidiaries, Parsley and Parsley's subsidiary, Parsley Energy, LLC (the "Parsley Acquisition"). Although this Annual Report is being filed following the completion of the Parsley Acquisition, unless otherwise specifically noted, information set forth herein only relates to the period as of and for the fiscal year ended December 31, 2020 and therefore does not include information relating to Parsley or its subsidiaries as of and for such periods. Accordingly, unless otherwise specifically noted, references herein to "Pioneer" or the "Company" refer only to Pioneer and its subsidiaries prior to the Parsley Acquisition and do not include Parsley or its subsidiaries.

The Parsley Acquisition will be accounted for as a business combination, with the fair value of consideration allocated to the acquisition date fair value of assets and liabilities acquired. Parsley's post-acquisition date results of operations will be consolidated into the Company's interim consolidated financial statements beginning on January 12, 2021. See Note 19 of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

Marketing of Production

General. Production from the Company's properties is marketed using methods that are consistent with industry practices. Sales prices for oil, NGL and gas production are negotiated based on factors normally considered in the industry, such as an index or spot price, distance from the well to a major pipeline, commodity quality and prevailing supply and demand conditions. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for additional information.

Seasonal nature of business. Generally, but not always, the demand for gas decreases during the summer months and increases during the winter months. Seasonal anomalies such as mild winters or hot summers may impact general seasonal changes in demand.

Delivery commitments. The Company has committed certain volumes of oil, NGL and gas to customers under a variety of contracts, some of which have volumetric firm transportation or fractionation requirements that could require monetary shortfall penalties if the Company's transported or fractionation volumes are insufficient to satisfy associated commitments. See Note 11 of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

Significant purchasers. During 2020 the Company's oil, NGL and gas sales to Sunoco Logistics Partners L.P., Occidental Energy Marketing Inc. and Plains Marketing L.P accounted for 36 percent, 18 percent and 14 percent of the Company's oil and gas revenues, respectively. The loss of one of these significant purchasers or an inability to secure adequate pipeline, gas plant and NGL fractionation infrastructure for its Permian Basin production could have a material adverse effect on the Company's ability to produce and ~~market~~sell its oil, NGL and gas ~~profitably depends on numerous factors beyond~~production.

Revenues from sales of purchased oil and gas to Occidental Energy Marketing Inc. accounted for 28 percent of the Company's ~~control.~~sales of purchased oil and gas. No other sales customer exceeded ten percent of the Company's sales of purchased oil and gas during 2020. The loss of the Company's significant purchaser of purchased oil and gas would not be expected to have a material adverse effect on the Company's ability to sell commodities it purchases from third parties.

See Note 13 of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

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Human Capital

At December 31, 2020, the Company had 1,853 employees, 698 of whom were employed in field operations and 256 of whom were employed in vertical integration activities. The Company understands that employee recruiting, retention and development play a critical role to the Company's business activities and its ability to achieve its long-term strategy. The Company offers a competitive compensation and benefits program and has established policies and talent development programs with the goal of creating an inclusive environment to allow all employees to feel respected, valued and connected to the business.

Compensation and benefits program. The Company annually reviews compensation for all employees to adjust compensation for market conditions and attract and retain a highly skilled workforce. The Company considers its employees to be its greatest asset and encourages them to take full advantage of the benefits and programs the Company offers. To ensure Pioneer attracts and retains top talent, the Company maintains an above-average benefits package. Pioneer's employees participate in incentive plans that take into consideration individual and Company performance through a traditional bonus plan that is influenced by individual performance and a variable compensation plan denominated in Company stock. In addition to cash and equity compensation, the Company also offers other employee benefits such as life and health (medical, dental & vision) insurance, paid time off, paid parental leave, flexible work schedules and a 401(k) plan.

Diversity and inclusion. The Company is committed to creating an inclusive environment where all employees feel respected, valued and connected to the business — a workplace to which individuals bring their "authentic" selves and can be successful in achieving their goals. The Company has established a variety of diversity and inclusion initiatives, such as OnePioneer, a single organization that was created in 2019 through the merger of Pioneer's various employee resource groups. OnePioneer is led by a diverse representation of the Company's employees who advance diversity and inclusion across the entire company.

Talent development.The Company's talent planning approach identifies and targets development for critical talent. The Company identifies critical roles based on several factors, including strategic importance, scope and impact, and unique skills. Successor candidates for those critical roles are then identified as those who have the interest, ability and experience to succeed in the critical role within five years. Talent planning enables Pioneer to proactively approach succession planning and offer targeted development for high potential employees and successors, while enabling a cross-functional view of talent to increase visibility and mobility.

Community involvement. Pioneer's dedication to community well-being and success shows in the many ways the Company seeks to be a good neighbor in all of its operating areas. The Company's employees continually seek out events, organizations, initiatives and partnerships to support, and the Company is honored to support their ongoing efforts to enrich the communities where they live and work, including through a charitable matching program.

Health, safety and environment. The Company maintains a culture of continuous improvement in safety and environmental practices, supports a diverse workforce and inspires teamwork to drive innovation, with oversight from the Health, Safety and Environment Committee and the Nominating and Corporate Governance Committee of the board of directors.

Regulation

The oil and gas industry is extensively regulated at the federal, state, and local levels. Regulations affecting elements of the energy sector are under constant review for amendment or expansion over time and frequently more stringent requirements are imposed. Various federal and state agencies, including the Texas Railroad Commission, the Bureau of Land Management (the "BLM"), the U.S. Environmental Protection Agency (the "EPA"), the U.S. Occupational Safety and Health Administration ("OSHA"), have legal and regulatory authority and oversight over the Company's exploration and development activities and operations. Other agencies with certain authority over the Company's business include the Internal Revenue Service (the "IRS"), the SEC and NYSE. Ensuring compliance with the rules, regulations and orders promulgated by such entities requires extensive effort and incremental costs to comply, which consequently affects the Company's profitability. Because public policy changes are commonplace, and existing laws and regulations are frequently amended, the Company is unable to predict the future cost or impact of compliance. However, the Company does not expect that any of these ~~factors cannot be accurately predicted or anticipated. Although~~laws and regulations will affect its operations materially differently than they would affect other companies with similar operations, size and financial strength.

The following are significant areas of government control and regulation affecting the Company cannot predict the occurrence of events that may affect commodity prices or the degree to which commodity prices will be affected, the prices for any commodity that the Company produces will generally approximate current market prices in the geographic region of the production unless the Company effectively enhances margins through marketing and derivative arrangements.Company:

Securities regulations. Enterprises that sell securities in public markets are subject to regulatory oversight by agencies such as the SEC and the NYSE. This regulatory oversight imposes on the Company many requirements, including the

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responsibility for establishing and maintaining disclosure controls and procedures ~~and~~alongside internal controls over financial reporting, and ensuring that the financial statements and other information included in submissions to the SEC do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made in such submissions not misleading. Failure to comply with the rules and regulations of the SEC could subject the Company to litigation from public or private plaintiffs. Failure to comply with the rules of the NYSE could result in the ~~de-listing~~delisting of the Company's common stock, which would have an adverse effect on the market price and liquidity of the Company's common stock. Compliance with some of these rules and regulations is costly, and regulations are subject to change or reinterpretation.

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Environmental and occupational health and safety matters. The ~~Company's~~Company strives to conduct its operations ~~are subject~~in a socially and environmentally responsible manner and is required to ~~stringent~~comply with many federal, state and local laws, regulations and executive orders concerning occupational safety and health, the discharge or other release of materials and protection of the environment and natural resources. These environmental legal requirements primarily relate to:

•the discharge or other release of pollutants into federal and state waters;

•assessing the environmental impact of seismic acquisition, drilling or construction activities;

•the generation, storage, transportation and disposal of waste materials, including hazardous substances;

•the emission of certain gases, including GHGs, into the atmosphere;

•the monitoring, abandonment, reclamation and remediation of well and other sites, including sites of former operations;

•the development of emergency response and spill contingency plans;

•the protection of threatened and endangered species; and

•worker protection.

The more significant of these existing environmental and occupational health and safety laws and regulations include the following U.S. legal standards, as amended from time to time:

•the Clean Air Act ("CAA"), which restricts the emission of air pollutants from many sources and imposes various pre construction, operational, monitoring and reporting requirements, and that the EPA has relied upon as authority for adopting climate change regulatory initiatives relating to GHG emissions;

•the Federal Water Pollution Control Act, also known as the Clean Water Act ("CWA"), which regulates discharges of pollutants from facilities to state and federal waters and establishes the extent to which waterways are subject to federal jurisdiction and rulemaking as protected waters of the United States;

•the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), which imposes liability on generators, transporters, disposers and arrangers of hazardous substances at sites where hazardous substance releases have occurred or are threatening to occur;

•the Resource Conservation and Recovery Act ("RCRA"), which governs the generation, treatment, storage, transport and disposal of solid wastes, including oil and gas exploration and production wastes and hazardous wastes;

•the Safe Drinking Water Act ("SDWA"), which ensures the quality of the nation's public drinking water through adoption of drinking water standards and controlling the injection of waste fluids into below-ground formations that may adversely affect drinking water sources;

•OSHA, which establishes workplace standards for the protection of the health and safety of employees, including the implementation of hazard communications programs designed to inform employees about hazardous substances in the workplace, potential harmful effects of these substances, and appropriate control measures; and

•the Endangered Species Act ("ESA"), which restricts activities that may affect federally identified endangered and threatened species or their habitats through the implementation of operating restrictions or a temporary, seasonal or permanent ban in affected areas.

Additionally, there exist tribal, state and local jurisdictions where the Company operates that also have, or are developing or considering developing, similar environmental and occupational health and safety laws and regulations governing ~~worker health and safety,~~many of these same types of activities. Failure by the discharge of materials into the environment and environmental protection. Numerous governmental entities, including the U.S. Environmental Protection Agency (the "EPA"), the U.S. Occupational Safety and Health Administration ("OSHA") and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, which may cause the Company ~~to incur significant capital expenditures or take costly actions to achieve and maintain compliance. Failure~~ to comply with these laws, regulations and ~~regulations~~regulatory initiatives or controls may result in the assessment of sanctions, including administrative, civil and criminal ~~penalties,~~penalties; the imposition of investigatory, remedial orand corrective action obligations or the incurrence of ~~obligations,~~capital expenditures; the occurrence of restrictions, delays or ~~restrictions~~cancellations in the permitting, development or ~~the performance~~expansion of ~~projects~~projects; and ~~the~~ issuance of ~~orders enjoining the Company from conducting certain operations~~injunctions restricting or prohibiting some or all of our activities in a particular area. ~~While~~Historically, the Company's environmental and worker safety compliance costs have ~~historically~~ not had a material adverse effect on its results of ~~operations,~~operations. However, there can be no assurance that such costs will not be material in the future or that ~~new or more stringently applied laws and regulations~~such future compliance will not ~~materially increase the cost of doing business.~~

The following is a summary of the more significant environmental and worker health and safety laws, as amended from time to time, to which the Company's business operations are or may be subject and with which compliance or the failure to maintain compliance may have a material adverse effect on the Company's ~~capital expenditures, results of operations or financial position.~~business and operational results.

~~Hazardous wastes and substances.~~ The federal Resource Conservation and Recovery Act ("RCRA") and comparable state statutes regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the authority delegated by the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. The Company ~~generates some amounts of ordinary industrial wastes~~owns, leases or operates numerous properties that may be regulated as RCRA hazardous wastes. RCRA currently excludes from the definition of hazardous waste drilling fluids, produced waters and certain other wastes associated with the exploration, development and production of oil or gas. These wastes are instead regulated under RCRA's less stringent non-hazardous waste provisions. There have been efforts from time to time to remove this exclusion. For example, in response to a federal consent decree issued in 2016, the EPA was required during 2019 to determine whether certain Subtitle D criteria regulations required revision in a manner that could result in oil and gas wastes being regulated as RCRA hazardous wastes. In April 2019, the EPA made a determination that such revision of the regulations was unnecessary. Any future loss of the RCRA exclusion could have a material adverse effect on the Company's results of operations and financial position, and it is possible that certainused for oil and gas exploration and production ~~wastes now classified as non-hazardous could be classified as hazardous waste in the future.~~

activities for many years. The ~~federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),~~Company also known as the Superfund law, and analogous state laws impose joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a "hazardous substance" into the environment. These persons include: (i) the current owner or operator of the site where the release occurred, (ii) a past owner or operator of the site at the time of the disposal of the hazardous substance and (iii) anyone who disposed or arranged for the disposal of a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs ofhas acquired certain ~~health studies. CERCLA also authorizes the EPA and, in some instances,~~properties from third parties to act in response to threats to public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. It is not uncommon for neighboring landowners and other third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. The Company generates materials in the course of its operations that may be regulated as CERCLA hazardous substances.

See "Item 1A. Risk Factors - The nature of the Company's assets and production operations may impact the environment or cause environmental contamination, which could result in material liabilities to the Company" for additional information.

~~Water use, surface discharges and injections into underground formations.~~ ~~The federal Water Pollution Control Act, also known as the Clean Water Act (the "CWA"), and analogous state laws impose restrictions and strict controls~~whose actions with respect to the discharge of pollutants, including spills and leaks of oil and hazardous substances, into waters of the United States and state waters. Spill prevention, control and countermeasure plan requirements imposed under the CWA require appropriate containment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon spill, rupture or leak. Additionally, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of stormwater runoff from certain types of facilities. The CWA also prohibits the discharge of dredge and fill material into regulated waters, including wetlands, unless authorized by an appropriately issued permit. Federal and state regulatory agencies can impose administrative, civil and criminal penalties, as well as require remedial or mitigation measures, for noncompliance with discharge permits or other requirements of the CWA and analogous state laws.

The federal Oil Pollution Act ("OPA") sets minimum standards for prevention, containment and cleanup of oil spills into waters of the United States. Under OPA, responsible parties, including owners and operators of onshore facilities, such as

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~~exploration~~respect to the management and ~~production facilities, may be held strictly liable for oil spill cleanup costs and natural resource damages as well as a variety~~disposal or release of ~~public and private damages that may result~~hydrocarbons, hazardous substances or wastes at or from ~~oil spills. OPA amends the CWA and thus noncompliance with OPA could result in civil and criminal penalties~~such properties were not under the ~~CWA.~~

~~The Company may dispose of produced water from oil and gas activities in underground injection wells, which are designed and permitted~~Company's control prior to place the water into non-productive geologic formations that are isolated from fresh water sources. The Underground Injection Control ("UIC") program established under the federal Safe Drinking Water Act ("SDWA") requires issuance of permits from the EPA or an analogous state agency for the construction and operation of these disposal wells. Additionally, the UIC program establishes minimum standards for disposal well operations and restricts the types and quantities of fluids that may be disposed. Because some states have become concerned that the disposal of produced water into underground formations could contribute to seismicity, they have adopted or are considering adopting additional regulations governing such disposal. Should future bans relating to underground injection wells be placed in effect in the Permian Basin, where the Company has significant operations, there could be an adverse impact on the Company's ability to operate.

~~See "Item 1A. Risk Factors - The Company's operations are subject to stringent~~acquiring them. Under certain environmental ~~oil and gas-related and occupational safety and health~~ laws and regulations ~~that~~such as CERCLA and RCRA, the Company could ~~cause it~~incur strict joint and several liability due to ~~delay, curtail~~damages to natural resources or ~~cease its operations~~for remediating hydrocarbons, hazardous substances or ~~expose it to material costs and liabilities" and "Item 1A. Risk Factors - The~~wastes disposed of or released by prior owners or operators. Moreover, an accidental release of materials into the environment during the Company's operations are substantially dependent upon the availability of water and its ability to dispose of produced water gathered from drilling and production activities. Restrictions on the Company's ability to obtain water or dispose of produced water may ~~have a material adverse effect on its financial condition, results of operations and cash flows" for additional information.~~

~~Hydraulic fracturing~~. Hydraulic fracturing is an important and common practice to stimulate production of oil and gas from dense subsurface rock formations. The process involves the injection of water, sand and additives under pressure into targeted subsurface formations to fracture the surrounding rock and stimulate oil and gas production. The Company routinely conducts hydraulic fracturing in its drilling and completion programs. The process is typically regulated by state oil and gas commissions, but, in recent years, several federal, state and local agencies have asserted regulatory authority over certain aspects of the process. Additionally, the threat of climate change has resulted in increasing political risks in the United States, including climate-related pledges to ban hydraulic fracturing of oil and gas wells being made by certain candidates seeking the office of President of the United Sates in 2020. In the event federal, state or local restrictions are adopted in areas where the Company is currently conducting operations, or in the future plans to conduct operations, the Company may incur additional costs to comply with such requirements that may be significant in nature, experience delays, curtailment or a cessation in the pursuit of exploration, development or production activities, and be limited or precluded in the drilling of wells or the volume that the Company is ultimately able to produce from its reserves.

See "Item 1A. Risk Factors - Laws and regulations regarding hydraulic fracturing, as well as governmental reviews of such activities, could result in increased costs and additional operating restrictions, delays or cancellations and have a material adverse effect on the Company's production" and "Item 1A. Risk Factors - The Company's hydraulic fracturing and former sand mining operations may result in silica-related health issues and litigation that could have a material adverse effect on the Company" for additional information.

~~Air emissions.~~ The federal Clean Air Act (the "CAA") and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other compliance requirements. Such laws and regulations could require a facility to obtain pre-approval for construction or modification projects expected to produce new air pollutant emissions or result in the increase of existing air pollutant emissions. Additionally, these legal requirements could impose stringent air permit conditions or utilize specific emission control technologies to limit emissions of certain air pollutants. Federal and state regulatory agencies can also impose administrative, civil and criminal penalties for noncompliance with air permits or other requirements of the CAA and associated state laws and regulations.

See "Item 1A. Risk Factors - The Company's operations are subject to stringent environmental, oil and gas-related and occupational safety and health laws and regulations that could cause it to delay, curtail or cease its operations or expose it to material costs and liabilities" for additional information.

~~Climate change.~~ Climate change continues to attract considerable public, political and scientific attention. As a result, numerous regulatory initiatives have been proposed, and are likely to continue to be proposed, at the international, national, regional and state levels of government to monitor and limit existing sources of GHG emissions as well as to restrict or eliminate emissions from new sources. These regulatory efforts have included consideration of cap-and-trade programs, carbon taxes, GHG reporting and tracking programs, and regulations that directly limit GHG emissions from certain sources. Additionally, the threat of climate change has resulted in increasing political, litigation and financial risks associated with the production of fossil fuels and emission of GHGs. The adoption and implementation of any federal or state legislation, regulations or executive orders or the occurrence of any litigation or financial developments that impose more stringent requirements or bans on GHG-emitting production activities or locations where such production activities may occur, impose liabilities for past conduct relating to GHG-emitting production activities, or limit or eliminate sources of financing for on-

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~~PIONEER NATURAL RESOURCES COMPANY~~

going production operations could require the Company to incur increased costs, such as compliance or consumption costs, and thereby reduce demand for oil and gas, or otherwise impair the ability of the Company to continue to operate in an economic manner.

See "Item 1A. Risk Factors - The Company’s operations are subject to a number of risks arising out of concerns regarding the threat of climate change, including regulatory, political, litigation and financial risks, that could result in increased operating costs and costs of compliance, limit the areas in which oil and gas production may occur, reduce demand for the oil and gas the Company produces, and expose the Company to the risk of increased activism and decreased funding for the industry, while the potential physical effects of climate change could disrupt the Company's production and cause it to incur significant costs ~~in preparing~~and liabilities. The Company also could incur costs related to the clean-up of third-party sites to which it sent regulated substances for disposal or ~~responding~~ to ~~those effects"~~which it sent equipment for ~~additional information.~~cleaning and for damages to natural resources or other claims related to releases of regulated substances at or from such third-party sites.

~~Endangered species.~~
~~The federal Endangered Species Act (the "ESA")~~

Over time, the trend in environmental and ~~analogous state~~occupational health and safety laws ~~regulate~~and regulations is to typically place more restrictions and limitations on activities that ~~could have an adverse effect on species listed as threatened~~may adversely affect the environment or ~~endangered under~~expose workers to injury. If existing legal requirements change or new legislative, regulatory or executive initiatives are developed and implemented in the ~~ESA. Some of the Company's operations are conducted in areas where protected species or their habitats are known to exist. In these areas,~~future, the Company may be ~~obligated~~required to ~~develop~~make significant, unanticipated capital and ~~implement plans to avoid potential adverse effects to protected species and their habitats, and the~~operating expenditures. The Company may not have insurance or be ~~delayed, restricted or prohibited from conducting operations in certain locations or during certain seasons, such as breeding~~fully covered by insurance against all environmental and nesting seasons, when the Company's operations could have an adverse effect on the species. It is also possible that a federal or state agency could order a complete halt to drilling activities in certain locations if it is determined that such activities may have a serious adverse effect on a protected species.

See "Item 1A. Risk Factors - Laws and regulations pertaining to protection of threatened and endangered species or to critical habitat, wetlands and natural resources could delay, restrict or prohibit the Company's operations and cause it to incur substantial costs that may have a material adverse effect on the Company's development and production of reserves" for additional information.

~~Occupational health and safety.~~ The Company's operations are subject to the requirements of the federal Occupational Safety and Health Act and comparable state statutes. These laws and the implementing regulations issued by OSHA strictly govern the protection of theoccupational health and safety ~~of employees. The OSHA hazard communication standard,~~risks. For more information on environmental and occupational health and safety matters, see the ~~EPA community right-to-know regulations under Title III of CERCLA~~risk factors identified as Health, Safety and ~~similar state statutes require that the Company organize or disclose information about hazardous materials used or produced~~Environmental Risks in ~~the Company's operations.~~

OSHA published a final rule in 2016 that established a more stringent permissible exposure to respirable crystalline silica and provides other provisions to protect employees. This final rule required compliance with most applicable requirements by various industry sectors, including the hydraulic fracturing sector, by June 2018, and further requires compliance with engineering control obligations to limit exposures to respirable crystalline silica in connection with hydraulic fracturing activities by June 2021. Respirable silica is a known health hazard for workers exposed over long periods.

~~See "Item~~Item 1A. Risk Factors - The Company's operations are subject to stringent environmental, oil and gas-related and occupational safety and health laws and regulations that could cause it to delay, curtail or cease its operations or expose it to material costs and liabilities" and "Item 1A. Risk Factors - The Company's hydraulic fracturing and former sand mining operations may result in silica-related health issues and litigation that could have a material adverse effect on the Company" for additional information.Factors.

Other regulation of the oil and gas industry. The Company's oil and gas ~~industry is regulated by numerous federal, state~~operations are subject to laws and ~~local authorities. Legislation affecting~~ regulations that relate to matters including:

•the acquisition of seismic data;

•location, drilling and casing of wells;

•hydraulic fracturing;

•well production operations;

•disposal of produced water;

•regulation of transportation and sale of oil, NGLs and gas;

•surface usage;

•calculation and disbursement of royalty payments and production taxes;

•restoration of properties used for oil and gas ~~industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous federal~~operations; and state departments and agencies are authorized by statute to issue rules and regulations that are binding on the oil and gas industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the oil and gas industry may increase the Company's cost of doing business by increasing the cost of production, the Company believes that these burdens generally do not affect the Company any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations

•transportation of production.

~~Development and production.~~Development and production operations are subject to ~~various types of regulation at the federal, state and local levels. These types of regulation include~~regulations including requiring permits for the drilling of wells, the posting of bonds in connection with various types of activities and filing reports concerning operations. ~~Most states,~~Texas, and some ~~counties and~~ municipalities in which the Company operates, also regulate one or more of the following:

•the location of wells;

•the method of drilling and casing wells;

•the method and ability to fracture stimulate wells;

•the surface use and restoration of properties upon which wells are drilled;

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•the plugging and abandoning of wells; and

•notice to surface owners and other third parties.

State laws regulate the size ~~and shape~~ of drilling and spacing units or proration units governing the ~~pooling~~drilling and production of oil and gas properties. ~~Some states allow forced pooling or integration of tracts to facilitate development, while other states rely~~The Company relies on voluntary pooling, production sharing agreements and the drilling of ~~lands and~~allocation wells to develop its leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce the Company's interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from oil and gas wells and generally prohibit the venting or flaring of gas ~~and impose requirements regarding production rates.~~without a permit. These laws and regulations may limit the amount of oil and gas the Company can produce from the Company's wells, negatively affect the economic decision to continue to produce these wells or limit the number of wells or ~~the~~ locations that the Company can economically drill. ~~Moreover, each state generally imposes a production or severance tax with respect to~~

Approximately one percent of the production and sale of oil, NGL and gas within its jurisdiction. States do not regulate wellhead prices or engage in other similar direct regulation, but there can be no assurance that they will not do so in the future. The effect of such future regulations may limit the amounts ofCompany's U.S. oil and gas ~~that may be produced from~~leases are granted or approved by the federal government and administered by the BLM. All of the Company's ~~wells, negatively affect the economics~~federal leases are outside of ~~production from these wells or limit the number of locations~~Texas and the Company ~~can drill.~~

~~Regulation of transportation~~has no current plans to further develop the leases at this time. Such leases require compliance with detailed federal regulations and ~~sale of gas.~~ The availability, terms and cost of transportation significantly affect sales of gas. Federal and state regulations govern the price and terms for access to gas pipeline transportation. Intrastate gas pipeline transportation activities are subject to various state laws and regulations, as well as orders of state regulatory bodies. The interstate transportation and sale of gas is subject to federal regulation, including regulation of the terms, conditions and rates for interstate transportation, storage and variousthat regulate, among other matters, ~~primarily~~drilling and operations on lands covered by ~~the Federal Energy Regulatory Commission ("FERC"). FERC endeavors to make gas transportation more accessible to gas buyers~~these leases and ~~sellers on an open-access~~calculation and ~~non-discriminatory basis.~~

~~Pursuant~~disbursement of royalty payments to the Energy Policy Act of 2005 ("EPAct 2005") it is unlawful for any entity, such as the Company, to use any deceptive or manipulative device or contrivance in connection with the purchase or sale of gas or transportation services subject to regulation by FERC, in contravention of rules prescribed by FERC. The EPAct 2005 also gives FERC authority to impose civil penalties of up to $1 million per day, subject to annual inflation adjustment, for each violation of the Natural Gas Act ("NGA"), the Natural Gas Policy Act of 1978 and related regulations.

Under FERC Order 704, which regulates annual gas transaction reporting requirements, any market participant, including a producer such as the Company, that engages in wholesale sales or purchases of gas that equal or exceed 2.2 million MMBtus of physical gas in the previous calendar year must annually report such sales and purchases to FERC on Form No. 552 by May 1 of the year following the calendar year when such sales and purchases occurred. Form No. 552 contains aggregate volumes of wholesale gas purchased or sold in the prior calendar year to the extent such transactions utilize, contribute to or may contribute to the formation of price indices. Order 704 is intended to increase the transparency of the wholesale gas markets and to assist FERC in monitoring those markets and in detecting market manipulation.

Intrastate gas pipeline transportation rates are subject to regulation by state regulatory commissions. The basis for intrastate gas pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate gas pipeline rates, vary from state to state. Additional proposals and proceedings that might affect the gas industry are considered from time to time by the U.S. Congress, FERC, state legislatures, state regulatory bodies and the courts. The Company cannot predict when or if any such proposals might become effective or their effect, if any, on its operations. The Company believes that the regulation of intrastate gas pipeline transportation rates will not affect its operations in any way that is materially different from the effects on its similarly situated competitors.federal government.

See ~~additional information~~the risk factors identified as Regulatory Risks and Health, Safety and Environmental Risks in ~~"Item~~Item 1A. Risk Factors - The Company may not be able to obtain access on commercially reasonable terms or otherwise to pipelines and storage facilities, gathering systems and other transportation, processing, fractionation, refining and export facilities to market its oil, NGL and gas production; the Company relies on a limited number of purchasers for a majority of its products" and "Item 1A. Risk Factors - The Company's transportation of gas, sales and purchases of oil, NGL, gas or other energy commodities, and any derivative activities related to such energy commodities, expose the Company to potential regulatory risks."

~~Gas processing. The Company's gas processing operations are generally not subject to FERC or state regulation with respect to rates or terms and conditions of service.~~

See "Item 1A. Risk Factors - The Company's gas processing, gathering and treating operations are subject to operational and regulatory risks, which could result in significant damages and the loss of revenue" for additional information.

~~Gas gathering.~~ Section 1(b) of the NGA exempts gas gathering facilities from FERC jurisdiction. While the Company owns or operates some gas gathering facilities, the Company also depends on gathering facilities owned and operated by thirdFactors.

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parties to gather production from its properties, and therefore the Company is affected by the rates charged by these third parties for gathering services. To the extent that changes in federal or state regulation affect the rates charged for gathering services, the Company also may be affected by these changes. The Company does not anticipate that the Company would be affected any differently than similarly situated gas producers.

See "Item 1A. Risk Factors - The Company's gas processing, gathering, and treating operations are subject to operational and regulatory risks, which could result in significant damages and the loss of revenue" and "Item 1A. Risk Factors - The Company may not be able to obtain access on commercially reasonable terms or otherwise to pipelines and storage facilities, gathering systems and other transportation, processing, fractionation, refining and export facilities to market its oil, NGL and gas production; the Company relies on a limited number of purchasers for a majority of its products" for additional information.

~~Regulation of transportation and sale of oil and NGL~~. Intrastate liquids pipeline transportation rates, terms and conditions are subject to regulation by numerous federal, state and local authorities and, in a number of instances, the ability to transport and sell such products on interstate pipelines is dependent on pipelines that are also subject to FERC jurisdiction under the Interstate Commerce Act (the "ICA"). The Company does not believe these regulations affect it any differently than other producers.

The ICA requires that pipelines maintain a tariff on file with the FERC. The tariff sets forth the established rates as well as the rules and regulations governing the service. The ICA requires, among other things, that rates and terms and conditions of service on interstate common carrier pipelines be "just and reasonable." Such pipelines must also provide jurisdictional service in a manner that is not unduly discriminatory or unduly preferential. Shippers have the power to challenge new and existing rates and terms and conditions of service before the FERC.

Rates of interstate liquids pipelines are currently regulated by the FERC, primarily through an annual indexing methodology, under which pipelines increase or decrease their rates in accordance with an index adjustment specified by the FERC. For the five-year period beginning in July 2016, the FERC established an annual index adjustment equal to the change in the producer price index for finished goods plus 1.23 percent. This adjustment is subject to review every five years. Under the FERC's regulations, a liquids pipeline can request a rate increase that exceeds the rate obtained through application of the indexing methodology by using a cost-of-service approach, but only after the pipeline establishes that a substantial divergence exists between the actual costs experienced by the pipeline and the rates resulting from application of the indexing methodology. Increases in liquids transportation rates may result in lower revenue and cash flows for the Company.

In addition, due to common carrier regulatory obligations of liquids pipelines, capacity must be prorated among shippers in an equitable manner in the event there are nominations in excess of capacity by current shippers or capacity requests are received from a new shipper. Therefore, new shippers or increased volumes by existing shippers may reduce the capacity available to the Company. Any prolonged interruption in the operation or curtailment of available capacity of the pipelines that the Company relies upon for liquids transportation could have a material adverse effect on its business, financial condition, results of operations and cash flows. However, the Company believes that access to liquids pipeline transportation services generally will be available to it to the same extent, if not better given the Company's firm transportation contracts, as to its similarly situated competitors.

In November 2009, the Federal Trade Commission (the "FTC") issued regulations pursuant to the Energy Independence and Security Act of 2007 intended to prohibit market manipulation in the petroleum industry. Violators of the regulations face civil penalties of up to $1 million per violation per day, subject to annual inflation adjustment. The Commodity Futures Trading Commission (the "CFTC") has also issued anti-manipulation rules that subject violators to a civil penalty of up to the greater of $1 million per violation, subject to annual inflation adjustment, or triple the monetary gain to the person for each violation.

See "Items 1A. Risk Factors - The Company's transportation of gas, sales and purchases of oil, NGL, gas or other energy commodities, and any derivative activities related to such energy commodities, expose the Company to potential regulatory risks."

~~Energy commodity prices~~. Sales prices of oil, NGL and gas are not currently regulated and sales are made at market prices. Although prices of these energy commodities are currently unregulated, the U.S. Congress historically has been active in their regulation. The Company cannot predict whether new legislation to regulate oil and gas might actually be enacted by the U.S. Congress or the various state legislatures, and what effect, if any, the proposals might have on the Company's operations.

~~Transportation of hazardous materials~~. The federal Department of Transportation has adopted regulations requiring that certain entities transporting designated hazardous materials develop plans to address security risks related to the transportation of hazardous materials. The Company does not believe that these requirements will have an adverse effect on the Company or its operations. The Company cannot provide any assurance that the security plans required under these regulations would

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~~PIONEER NATURAL RESOURCES COMPANY~~

~~protect against all security risks and prevent an attack or other incident related to the Company's transportation of hazardous materials.~~

ITEM 1A. RISK FACTORS

The ~~nature of the business activities conducted by the Company subjects it~~Company's operations and financial results are subject to ~~certain hazards~~various risks and ~~risks. The following is a summary of some of the material risks relating~~uncertainties, including but not limited to ~~the Company's business activities.~~those described below. Other risks are described in "Item 1. Business — Competition, Markets and Regulations," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk." ~~These risks are not the only risks facing the Company.~~ The Company's business could also be affected by additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial. If any of these risks actually occurs, it could materially harm the Company's business, financial condition or results of operations or impair the Company's ability to implement business plans or complete development activities as scheduled. In that case, the market price of the Company's common stock could decline. The following risk factors are summarized as general business and industry, operational, financial, health, safety and environmental, regulatory risks and risks associated with the Parsley Acquisition.

General Business and Industry Risks

•The COVID-19 pandemic and recent developments in the global oil markets have had, and may continue to have, material adverse consequences for general economic, business and industry conditions.

•Declining general economic, business or industry conditions could have a material adverse effect on the Company's results of operations.

•The Company may be unable to make attractive acquisitions and any acquisition it completes is subject to substantial risks that could materially and adversely affect its business.

•The Company's ability to complete dispositions of assets, or interests in assets, may be subject to factors beyond its control, and in certain cases the Company may be required to retain liabilities for certain matters.

•The Company's operations and drilling activity are concentrated in the Permian Basin of West Texas; such concentration makes the Company vulnerable to risks associated with operating in a limited geographic area.

•The Company may not be able to obtain access on commercially reasonable terms or otherwise to pipelines and storage facilities, gathering systems and other transportation, processing, fractionation, refining and export facilities to market its oil, NGL and gas production.

•The refining industry may be unable to absorb U.S. oil production; in such a case, the resulting surplus could depress prices and restrict the availability of markets.

•Estimates of proved reserves and future net cash flows are not precise. The actual quantities and net cash flows of the Company's proved reserves may prove to be lower than estimated.

•Because the Company's producing wells decline continually over time, the Company will need to mitigate these declines through drilling and production enhancement initiatives and/or acquisitions.

•A portion of the Company's total estimated proved reserves at December 31, 2020 were undeveloped, and those proved reserves may not ultimately be developed.

•The Company faces significant competition and some of its competitors have resources in excess of the Company's available resources.

•The Company's business could be materially and adversely affected by security threats, including cybersecurity threats, and other disruptions.

•Provisions of the Company's charter documents and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for the Company's common stock.

•The Company has identified a material weakness in its internal control over financial reporting that, if not remediated, could result in additional material misstatements in its consolidated financial statements.

Operational Risks

•The Company's operations involve many operational risks, some of which could result in unforeseen interruptions to the Company's operations and substantial losses to the Company for which the Company may not be adequately insured.

•Exploration and development drilling involve substantial costs and risks and may not result in commercially productive reserves.

•Part of the Company's strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application.

•The Company's expectations for future drilling activities will be realized over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of such activities.

•Multi-well pad drilling may result in volatility in the Company's operating results.

•The Company's operations are substantially dependent upon the availability of water and its ability to dispose of produced water gathered from drilling and production activities.

•The Company's use of seismic data is subject to interpretation and may not accurately identify the presence of oil and gas, which could materially and adversely affect the results of its drilling operations.

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•The Company's gas processing, gathering and treating operations are subject to operational and regulatory risks.

Financial Risks

•The prices of oil, NGL and gas are highly volatile.

•Future declines in the price of oil, NGLs, and gas could result in a reduction in the carrying value of the Company's proved oil and gas properties.

•The Company's actual production could differ materially from its forecasts.

•The Company could experience periods of higher costs if commodity prices rise.

•The Company is a party to debt instruments, a credit facility and other financial commitments that may limit the Company's ability to fund future business and financing activities.

•The Company's ability to declare and pay dividends and repurchase shares is subject to certain considerations.

•A failure by purchasers of the Company's production to satisfy their obligations to the Company could have a material adverse effect on the Company's results of operations.

•The failure by counterparties to the Company's derivative risk management activities to perform their obligations could have a material adverse effect on the Company's results of operations.

•The Company's derivative risk management activities could result in financial losses, limit the Company’s potential gains or fail to protect the Company from declines in commodity prices.

•Pioneer's ability to utilize its historic U.S. net operating loss carryforwards and those of Parsley may be limited.

•The Company periodically evaluates its unproved oil and gas properties to determine recoverability of its cost and could be required to recognize noncash charges in the earnings of future periods.

•The Company periodically evaluates its goodwill for impairment and could be required to recognize noncash charges in the earnings of future periods.

Health, Safety and Environmental Risks

•The Company's operations are subject to a series of risks arising out of the threat of climate change.

•The nature of the Company's assets and production operations may impact the environment or cause environmental contamination.

•The Company's hydraulic fracturing and former sand mining operations may result in silica-related health issues and litigation.

•Increasing attention to ESG matters may impact the Company’s business.

Regulatory Risks

•The Company's operations are subject to stringent environmental, oil and gas-related and occupational safety and health legal requirements.

•Laws, regulations and other executive actions or regulatory initiatives regarding hydraulic fracturing could increase the Company's cost of doing business and result in additional operating restrictions, delays or cancellations that could have a material adverse effect on the Company's business, results of operations and financial condition.

•Laws and regulations pertaining to protection of threatened and endangered species or to critical habitat, wetlands and natural resources could delay, restrict or prohibit the Company's operations and cause it to incur substantial costs.

•The Company's transportation of gas, sales and purchases of oil, NGLs and gas or other energy commodities, and any derivative activities related to such energy commodities, expose the Company to potential regulatory risks.

•The enactment of derivatives legislation could have a material adverse effect on the Company's ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks.

•The Company's bylaws provide that the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for certain legal actions between the Company and its stockholders and that the federal district courts of the United States shall be the sole and exclusive forum for the resolution of causes of action arising under the Securities Act of 1933.

Risks associated with the Parsley Acquisition

•The financial and operational synergies attributable to the Parsley Acquisition may vary from expectations.

•Litigation relating to the Parsley Acquisition could result in substantial costs to the Company.

•The Company may be unable to integrate the business of Parsley successfully and/or realize the anticipated benefits of the Parsley Acquisition.

•The Company's future results will suffer if it does not effectively manage its expanded operations.

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General business and industry risks.

The ~~prices of~~COVID-19 pandemic and recent developments in the global oil ~~NGL~~markets have had, and ~~gas are highly volatile~~may continue to have, material adverse consequences for general economic, business and ~~have declined significantly in recent years. A sustained decline in these commodity prices could materially~~industry conditions and ~~adversely affect~~for the Company's ~~business,~~operations, financial condition, ~~and~~ results of ~~operations.~~operations, cash flows and liquidity and those of its purchasers, suppliers and other counterparties.

The ~~Company's revenues, profitability, cash flow~~COVID-19 pandemic has significantly affected the global economy, disrupted global supply chains and ~~future rate of growth are highly dependent on commodity prices. Commodity prices may fluctuate widely in response to relatively minor changes~~created significant volatility in the ~~supply of~~financial markets. In addition, the pandemic has resulted in travel restrictions, business closures and other restrictions that have led to a significant reduction in demand for oil, NGL and gas, which, when combined with the oil supply increase attributable to the battle for market ~~uncertainty~~share among OPEC, Russia and other oil producing nations that occurred during the first quarter of 2020, resulted in oil prices declining significantly beginning in late February 2020. For instance, on April 20, 2020, WTI crude oil future prices for May reached a ~~variety~~record low of ~~additional factors that are beyond~~negative $37.63 per barrel. As a result of the pandemic and low oil prices, the Company reduced its 2020 drilling, completion, facilities and water infrastructure capital budget significantly in an effort to fund its budget fully from its forecasted cash flow. While prices for oil, NGLs and gas have generally improved during the fourth quarter of 2020 and the first quarter of 2021, if the reduced demand for and prices of oil, NGLs and gas, or the oversupply of oil, were to continue for a prolonged period, the Company may have to make changes to its operations and capital budgets, and the Company's ~~control, such as:~~operations, financial condition, results of operations, cash flows and liquidity may be materially and adversely affected. Risks include, but are not limited to, the following:

•~~domestic and worldwide supply of and demand for oil, NGL and gas;~~

•worldwide oil, NGL and gas inventory levels, including at Cushing, Oklahoma, the benchmark location for WTI oil prices, and the U.S. Gulf Coast, where the majority of the U.S. refinery capacity exists;

•~~volatility and trading patterns in the commodity-futures markets;~~

•~~the capacity of U.S. and international refiners to utilize U.S. supplies of oil and condensate;~~

•~~weather conditions;~~

•overall domestic and global political and economic conditions, including the imposition of tariffs or trade or other economic sanctions, political instability or armed conflict in oil and gas producing regions;

•global or national health concerns, including the outbreak of pandemic or contagious disease, such as the recent coronavirus, which may reduce demand for oil, NGL and gas because of reduced global or national economic activity;

•~~actions of OPEC, its members and other state-controlled oil companies relating to oil price and production controls;~~

•~~the price and quantity of oil, NGL and LNG imports to and exports from the U.S.;~~

•~~technological advances or social attitudes or policies affecting energy consumption and energy supply;~~

•~~domestic and foreign governmental regulations, including environmental regulations, climate change regulations and taxation;~~

•~~the effect of energy conservation efforts;~~

•~~stockholder activism or activities by non-governmental organizations to limit certain sources of capital for the energy sector or restrict the exploration, development and production of oil and gas;~~

•~~the proximity, capacity, cost and availability of pipelines and other processing, fractionation, refinery, storage and export facilities; and~~

•~~the price, availability and acceptance of alternative fuels.~~

Commodity prices have historically been, and continue to be, extremely volatile. For example, the Brent oil prices in 2019 ranged from a high of $74.57 to a low of $54.91 per Bbl and the NYMEX gas prices in 2019 ranged from a high of $3.59 to a low of $2.07 per MMBtu.The Company expects this volatility to continue. A further orAn extended decline in commodity prices could materially and adversely affect the Company's future business, financial condition, results of operations, liquidity or its ability to repurchase shares of common stock, pay dividends or finance planned capital expenditures. The Company makes price assumptions that are used for planning purposes, and a significant portion of the Company's cash outlays, including rent, salaries and noncancellable capital and transportation commitments, are largely fixed in nature. Accordingly, if commodity prices are below the expectations on which these commitments were based, the Company's financial results are likely to be adversely and disproportionately affected because these cash outlays are not variable in the short term and cannot be quickly reduced to respond to unanticipated decreases in commodity prices.

~~Significant or extended price declines could also~~ materially and adversely affect the amount of oil, NGL and gas that the Company can produce economically, which may result in (i) the Company having to make significant downward adjustments to its estimated proved ~~reserves. A reduction in production could also result in~~reserves and (ii) a shortfall in expected cash flows, ~~and~~which could require the Company to reduce capital spending or borrow funds to cover any such shortfall. In addition, the continuation of depressed prices may adversely affect the ability of the Company to pay dividends or repurchase shares of common stock in the future.

•The reduced demand for oil, combined with the oversupply of oil, is expected to result in an oil surplus in the United States and worldwide. If the global demand for oil exports to foreign markets, or if the price that can be obtained in foreign markets does not support the transportation and other costs to reach those destinations, it may be uneconomical to invest in new wells and may cause the Company to shut in producing wells. The Company cannot be certain whether shut-in wells can successfully return to pre-shut-in production levels or that the costs required to return the wells to production will be economical.

•The Company's ability to develop and sell its production could be materially and adversely affected by the inability or unwillingness of third parties to provide sufficient processing, fractionation, refining, transportation, storage or export facilities to the Company. For example, oil storage in the United States has, at times, been near full capacity in many locations. If this were to occur for an extended period, the Company's purchasers might decline to purchase the Company's oil, NGLs and gas, and the Company may not be able to store its production. Such a lack of market for or storage capacity for the Company's products could require that the Company shut in some portion of its production. The amount of oil in storage may also keep oil prices at low levels for an extended period, even after demand begins to rise.

•Under Texas law, the Texas Railroad Commission is empowered to prorate oil production in the state based on market demand. If the Texas Railroad Commission finds that waste is taking place or is reasonably imminent, it is empowered to adopt a rule or order to correct, prevent, or lessen the waste. If the Texas Railroad Commission imposes proration in the future, or if any other similar laws or regulations are imposed, those restrictions would limit the amount of oil and gas the Company can produce.

•It is possible that any delay, reduction or curtailment of the Company's development and producing operations, whether due to regulatory actions or actions by the Company in reaction to market conditions, could result in the loss of acreage through lease expiration.

•Market conditions resulting from the effects of the COVID-19 pandemic, low oil prices, or a negative or recessionary economy could also increase the risk that the purchasers of the Company's production, lenders under its credit agreements, counterparties to its derivative instruments, and service providers may be unable to fulfill their obligations in a timely manner, or at all. If any such counterparty were to default on its obligations, such a default could have a material adverse effect on the Company's results of operations.

•The Company performs assessments of its proved and unproved oil and gas properties whenever events or circumstances indicate that the carrying values of those assets may not be recoverable. To the extent such tests indicate a reduction of the estimated useful life or estimated future cash flows of the Company's proved oil and gas properties, an impairment charge could be required to reduce the carrying value of its proved oil and gas properties to their fair value. In addition, goodwill is assessed for impairment whenever it is likely that events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value.

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•The Company's operations may be adversely affected if significant portions of its workforce are unable to work effectively, including because of illness, quarantines, social distancing, government actions, or other restrictions in connection with the COVID-19 pandemic. The Company, as recommended by the CDC, has implemented workplace restrictions, including guidance for employees to ~~reduce capital spending~~work remotely for health and safety reasons, where possible. As some employees may have been or ~~borrow funds~~may in the future be placed in workplaces where exposure to ~~cover any~~COVID-19 is possible, the Company may be subject to risk of liability should such ~~shortfall. Any~~employees allege that the Company failed to adequately mitigate the risk of ~~these factors~~exposure to COVID-19, to the extent obligated to do so. In addition, in order to facilitate remote working arrangements, some employees are accessing workspaces from their personal devices through cloud-based systems, which could ~~negatively affect~~increase cybersecurity risks to the Company and to its employees. There can be no assurance that the Company's ~~ability~~operations will not be curtailed or suspended or otherwise adversely affected due to ~~replace its production and its future rate of growth.~~such workforce issues.

The Company ~~could experience periods~~is not able to predict the ultimate long-term impact of ~~higher costs if commodity prices rise. These increases could reduce~~the COVID-19 pandemic on the Company's ~~profitability, cash flow~~business, which will depend on numerous evolving factors and ~~ability to complete development activities as planned.~~

~~Historically, the Company's capital and operating costs have risen during periods of increasing oil, NGL and gas prices. These cost increases result from a variety of factors~~future developments that are beyond the Company's control, ~~such as increases in~~including the ~~cost~~length of ~~electricity, steel and other raw materials~~time that the ~~Company~~pandemic continues, the speed and effectiveness of responses to combat the virus, the impact of the pandemic and its ~~vendors rely upon; increased~~aftermath on the demand for ~~labor, services and materials as drilling activity increases; and increased production and ad valorem taxes. Decreased levels of drilling activity in the~~ oil, NGLs and gas, ~~industry have historically led to cost reductions for some drilling equipment, materials~~the response of the overall economy and ~~supplies. However, such costs may rise faster than increases~~the financial markets as well as the effect of governmental actions taken in the Company's revenue if commodity prices rise, thereby negatively impacting the Company's profitability, cash flow and ability to complete development activities as scheduled and on budget. This impact may be magnifiedresponse to the ~~extent that the Company's ability to participate in the commodity price increases is limited by its derivative risk management activities.~~COVID-19 pandemic.

Declining general economic, business or industry conditions could have a material adverse effect on the Company's results of operations.

The economies in the United States and certain countries in Europe and Asia have been growing, with resulting improvements in industrial demand and consumer confidence. However, other economies, such as those of certain South American nations, continue to face economic struggles or slowing economic growth. If these conditions worsen, combined with a decline in economic growth in other parts of the world, there could be a significant adverse effect on global financial markets and commodity prices. In addition, continued hostilities in the Middle East, and the occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the global economy. Global or national health concerns, including the outbreak of pandemic or contagious disease, such as the ~~recent coronavirus,~~COVID-19 pandemic, may adversely affect the Company by (i) reducing demand for its oil, NGL and gas because of reduced global or national economic activity, (ii) impairing its supply chain (for example, by limiting manufacturing of materials used in operations), and (iii) affecting the health of its workforce, rendering employees unable to work or travel. If the economic climate in the United States or abroad were to deteriorate, demand for petroleum products could diminish or stagnate, which could depress the prices at which the Company could sell its oil, NGLs and gas, affect the ability of the Company's vendors, suppliers and customers to continue operations and ultimately decrease the Company's cash flows and profitability. In addition, reduced worldwide demand for debt and equity securities issued by oil and gas companies may make it more difficult for it to raise capital.

The ~~refining industry~~Company may be unable to ~~absorb rising U.S. oil production; in such a case, the resulting surplus could depress prices~~make attractive acquisitions and ~~restrict the availability of markets, which~~any acquisition it completes is subject to substantial risks that could materially and adversely affect its business.

Acquisitions of oil and gas properties, including acreage trades, have from time to time contributed to the Company's ~~results of operations.~~

~~Absent an expansion of U.S. refining and export capacity, rising U.S. production of oil could result in a surplus of these products~~growth. Acquisition opportunities in the ~~U.S.,~~oil and gas industry are very competitive, which ~~would likely~~can increase the cost of, or cause the Company to refrain from, completing acquisitions. The success of any acquisition will depend on a number of factors and involves potential risks, including, among other things:

•the inability to accurately forecast future commodity prices ~~for these commodities~~and estimate the costs to ~~fall and markets to constrict. Although U.S. law was changed in 2015 to permit~~develop the ~~export of oil, exports may not occur if demand is lacking in foreign markets or~~acquired reserves, the price that can be obtained in foreign markets does not support associated export capacity expansions, transportation and other costs. In such circumstances, the rate of return on the Company's capital projects would decline, possibly to levels that would make executionrecoverable volumes of the ~~Company's drilling plans uneconomical,~~acquired reserves, rates of future production and ~~a lack~~future net cash flows attainable from the acquired reserves;

•the assumption of ~~market~~unknown liabilities, including environmental liabilities, and losses or costs for ~~the Company's products could require that~~which the Company ~~shut in some portion~~is not indemnified or for which the indemnity the Company receives is inadequate;

•the validity of ~~its production. If this were to occur,~~ assumptions about costs, including synergies;

•the ~~Company's production and cash flow could decrease, or could increase less than forecasted, which could have a material adverse~~ effect on the Company's liquidity or financial leverage of using available cash ~~flow and profitability.~~

~~The Company faces significant competition and some~~or debt to finance acquisitions or from the amount of ~~its competitors have resources in excess~~debt assumed as part of the ~~Company's available resources.~~

~~The oil and gas industry is highly competitive. The Company competes with a large number of companies, producers and operators in a number of areas such as:~~

•~~seeking to acquire oil and gas properties suitable for exploration or development;~~acquisition;

•~~marketing oil, NGL and gas production;~~the diversion of management's attention from other business concerns; and

•~~seeking~~an inability to hire, train or retain qualified personnel to manage and operate the Company's growing business and assets.

All of these factors affect whether an acquisition will ultimately generate cash flows sufficient to provide a suitable return on investment. Even though the Company performs a review of the properties it seeks to acquire ~~the equipment, services and expertise, including trained personnel, necessary to identify, evaluate, develop and operate its properties.~~

~~Some of~~that it believes is consistent with industry practices, such reviews are often limited in scope. As a result, among other risks, the Company's ~~competitors are larger and have substantially greater financial and other resources than the Company, and as such, the Company~~initial estimates of reserves may be ~~at a competitive disadvantage in~~subject to revision following an acquisition, which may materially and adversely affect the identification, acquisition and development of properties that complement the Company's operations. The Company also faces competition from companies that supply alternative sources of energy, such as wind or solar power. Competition is expected to increase and in certain cases,desired

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~~governments are providing tax advantages and other subsidies to support alternative energy sources or are mandating~~benefits of the ~~use of specific fuels or technologies. Governments and other parties are also promoting research into new technologies to accelerate~~acquisition. See Risks Associated with the ~~implementation of alternative energy sources.~~

~~The Company's operations involve many operational risks, some of which could result~~Parsley Acquisition included in ~~unforeseen interruptions to the Company's operations and substantial losses to the Company~~"Item 1A. Risk Factor" for ~~which the Company may not be adequately insured.~~

The Company's operations, including drilling and completion activities and water distribution, collection and disposal activities, are subject to all the risks incident to the oil and gas development and production business, including:

•~~blowouts, cratering, explosions and fires;~~

•~~adverse weather effects;~~

•environmental hazards, such as NGL and gas leaks, oil and produced water spills, pipeline and vessel ruptures, encountering naturally occurring radioactive materials ("NORM"), and unauthorized discharges of toxic chemicals, gases, brine, well stimulation and completion fluids or other pollutants onto the surface or into the subsurface environment;

•~~high costs, shortages or delivery delays of equipment, labor or other services or water and sand for hydraulic fracturing;~~

•~~facility or equipment malfunctions, failures or accidents;~~

•~~title problems;~~

•~~pipe or cement failures or casing collapses;~~

•~~uncontrollable flows of oil, gas or water;~~

•~~compliance with environmental and other governmental requirements;~~

•~~lost or damaged oilfield workover and service tools;~~

•~~surface access restrictions;~~

•~~unusual or unexpected geological formations or pressure or irregularities in formations;~~

•terrorism, vandalism and physical, electronic and cybersecurity breaches, and global or national health concerns, including the outbreak of pandemic or contagious disease, such as the recent coronavirus; and

•~~natural disasters.~~additional information.

The Company's ~~overall exposure~~ability to ~~operational risks~~complete dispositions of assets, or interests in assets, may ~~increase as~~be subject to factors beyond its ~~drilling activity expands~~control, and ~~as it increases internally-provided well services, water distribution, water collection, disposal~~in certain cases the Company may be required to retain liabilities for certain matters.

From time to time, the Company sells an interest in its oil and gas properties for the purpose of assisting or ~~other services.~~accelerating the asset's development. In addition, any of these risks could adversely impact the Company’s service providers and suppliers, causing its supply chains to be interrupted, slowed, or rendered inoperable. Any of these risks could result in substantial losses to the Company ~~due to injury or loss~~regularly reviews its property base for the purpose of ~~life, damage to or destruction~~identifying nonstrategic assets, the disposition of ~~wells, production facilities or~~which would increase capital resources available for other ~~property~~activities and ~~natural resources, clean-up responsibilities, regulatory investigations~~create organizational and ~~penalties and suspension of operations.~~

The Company may not be insured or is not fully insured against certain of the risks described above, either because such insurance is not available or because of the high premium costs and deductibles associated with obtaining such insurance. Additionally, the Company relies to a large extent on facilities owned and operated by third-parties, and damage to or destruction of those third-party facilitiesoperational efficiencies. Various factors could ~~adversely~~materially affect the ability of the Company to ~~produce, transport~~dispose of such interests or nonstrategic assets or complete announced dispositions, including the receipt of approvals of governmental agencies or third parties and ~~sell its hydrocarbons.~~the availability of purchasers willing to acquire the interests or purchase the nonstrategic assets on terms and at prices acceptable to the Company.

Sellers typically retain certain liabilities or indemnify buyers for certain pre-closing matters, such as matters of litigation, environmental contingencies, royalty obligations and income taxes. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction and ultimately may be material. Also, as is typical in divestiture transactions, third parties may be unwilling to release the Company from guarantees or other credit support provided prior to the sale of the divested assets. As a result, after a divestiture, the Company may remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations.

The Company's operations and drilling activity are concentrated in the Permian Basin of West Texas, an area of high industry activity, which may affect its ability to obtain the personnel, equipment, services, resources and facilities access needed to complete its development activities as planned or result in increased costs; such concentration also makes the Company vulnerable to risks associated with operating in a limited geographic area.

The Company's producing properties are geographically concentrated in the Permian Basin of West Texas. Industry activity is high in the Permian Basin and demand for and costs of personnel, equipment, power, services and resources remains high. Any delay or inability to secure the personnel, equipment, power, services and resources could result in oil, NGL and gas production volumes being below the Company's forecasted volumes. In addition, any such negative effect on production volumes, or significant increases in costs, could have a material adverse effect on the Company's results of operations, cash flow and profitability.

As a result of this concentration, the Company may be disproportionately exposed to the impact of delays or interruptions of operations or production in this area caused by external factors such as governmental regulation, state politics, market limitations, water or sand shortages or extreme weather related conditions.

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~~The Company's actual production could differ materially from its forecasts.~~

From time to time, the Company provides forecasts of expected quantities of future oil and gas production and other financial and operating results. These forecasts are based on a number of estimates and assumptions, including that none of the risks associated with the Company's oil and gas operations summarized in this "Item 1A. Risk Factors" occur. Production forecasts, specifically, are based on assumptions such as:

•~~expectations of production from existing wells and future drilling activity;~~

•~~the absence of facility or equipment malfunctions;~~

•~~the absence of adverse weather effects;~~

•~~expectations of commodity prices, which could experience significant volatility;~~

•~~expected well costs; and~~

•~~the assumed effects of regulation by governmental agencies, which could make certain drilling activities or production uneconomical.~~

~~Should any of these assumptions prove inaccurate, or should the Company's development plans change, actual production could be materially and adversely affected.~~

~~Exploration and development drilling involve substantial costs and risks and may not result in commercially productive reserves.~~

Drilling involves numerous risks, including the risk that no commercially productive oil or gas reservoirs will be encountered. The cost of drilling, completing and operating wells is often uncertain and drilling operations may be curtailed, delayed or canceled, or become costlier, as a result of a variety of factors, including:

•~~unexpected drilling conditions;~~

•~~unexpected pressure or irregularities in formations;~~

•~~equipment failures or accidents;~~

•~~construction delays;~~

•~~fracture stimulation accidents or failures;~~

•~~adverse weather conditions;~~

•~~restricted access to land for drilling or laying pipelines;~~

•~~title defects;~~

•~~lack of available gathering, transportation, processing, fractionation, storage, refining or export facilities;~~

•~~lack of available capacity on interconnecting transmission pipelines;~~

•~~access to, and the cost and availability of, the equipment, services, resources and personnel required to complete the Company's drilling, completion and operating activities; and~~

•~~delays imposed by or resulting from compliance with or changes in environmental and other governmental, regulatory or contractual requirements.~~

The Company's future drilling activities may not be successful and, if unsuccessful, the Company's proved reserves and production would decline, which could have an adverse effect on the Company's future results of operations and financial condition. While all drilling, whether developmental, extension or exploratory, involves these risks, exploratory and extension drilling involves greater risks of dry holes or failure to find commercial quantities of hydrocarbons. The Company expects that it will continue to recognize exploration and abandonment expense in 2020.

~~Part of the Company's strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application.~~

The Company's operations involve utilizing some of the latest drilling and completion techniques as developed by it and its service providers. Risks that the Company faces while drilling horizontal wells include, but are not limited to, the following:

• ~~landing the wellbore in the desired drilling zone;~~

• ~~staying in the desired drilling zone while drilling horizontally through the formation;~~

• ~~running casing the entire length of the wellbore; and~~

• ~~being able to run tools and other equipment consistently through the horizontal wellbore.~~

~~Risks that the Company faces while completing wells include, but are not limited to, the following:~~

• ~~the ability to fracture stimulate the planned number of stages;~~

• ~~the ability to run tools the entire length of the wellbore during completion operations; and~~

• ~~the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage.~~

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Drilling in emerging areas is more uncertain than drilling in areas that are more developed and have a longer history of established drilling operations. New discoveries and emerging formations have limited or no production history and, consequently, the Company is more limited in assessing future drilling results in these areas. If the Company's drilling results are worse than anticipated, the return on investment for a particular project may not be as attractive as anticipated and the Company may recognize noncash charges to reduce the carrying value of its unproved properties in those areas.

~~Multi-well pad drilling may result in volatility in the Company's operating results.~~

The Company utilizes multi-well pad drilling, and wells drilled on a pad are not placed on production until all wells on the pad are drilled and completed. In addition, problems affecting a single well could adversely affect production from all of the wells on the pad. As a result, multi-well pad drilling can cause delays in the scheduled commencement of production, or interruptions in ongoing production. These delays or interruptions may cause volatility in the Company's operating results. Further, any delay, reduction or curtailment of the Company's development and producing operations due to operational delays caused by multi-well pad drilling could result in the loss of acreage through lease expiration.

The Company's use of seismic data is subject to interpretation and may not accurately identify the presence of oil and gas, which could materially and adversely affect the results of its drilling operations.

Even when properly used and interpreted, seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are, in fact, present in those structures. As a result, the Company's drilling activities may not be successful or economic. In addition, the use of advanced technologies, such as 3-D seismic data, requires greater pre-drilling expenditures than traditional drilling strategies, and the Company could incur losses as a result of such expenditures.

The Company's expectations for future drilling activities will be realized over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of such activities.

The Company has identified drilling locations and prospects for future drilling opportunities, including development, exploratory and infill drilling activities. These drilling locations and prospects represent a significant part of the Company's future drilling plans. For example, the Company's proved reserves as of December 31, 2019 include proved undeveloped reserves and proved developed non-producing reserves of 39 MMBbls of oil, 16 MMBbls of NGL and 83 Bcf of gas. The Company's ability to drill and develop these locations depends on a number of factors, including the availability and cost of capital, regulatory approvals, negotiation of agreements with third parties, commodity prices, costs, access to and availability of equipment, services, resources and personnel, and drilling results. There can be no assurance that the Company will drill these locations or that the Company will be able to produce oil or gas reserves from these locations or any other potential drilling locations. Well results vary by formation and geographic area, and the Company generally prioritizes its drilling activities to focus on remaining locations that are believed to offer the highest return. Changes in the laws or regulations on which the Company relies in planning and executing its drilling programs could materially and adversely impact the Company's ability to successfully complete those programs. For example, under current Texas laws and regulations, the Company may receive permits to drill, and may drill and complete, certain horizontal wells that traverse one or more units and/or leases; a change in those laws or regulations could materially and adversely impact the Company's ability to drill those wells. Because of these uncertainties, the Company cannot give any assurance as to the timing of these activities or that they will ultimately result in the realization of proved reserves or meet the Company's expectations for success. As such, the Company's actual drilling activities may materially differ from the Company's current expectations, which could have a material adverse effect on the Company's proved reserves, financial condition and results of operations.

The Company's operations are substantially dependent upon the availability of water and its ability to dispose of produced water gathered from drilling and production activities. Restrictions on the Company's ability to obtain water or dispose of produced water may have a material adverse effect on its financial condition, results of operations and cash flows.

Water is an essential component of the Company's drilling and hydraulic fracturing processes. Limitations or restrictions on the Company's ability to secure sufficient amounts of water (including limitations resulting from natural causes such as drought), could materially and adversely impact its operations. Severe drought conditions can result in local water districts taking steps to restrict the use of water in their jurisdiction for drilling and hydraulic fracturing in order to protect the local water supply. If the Company is unable to obtain water to use in its operations from local sources, it may need to be obtained from new sources and transported to drilling sites, resulting in increased costs, which could have a material adverse effect on its financial condition, results of operations and cash flows.

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based on concerns of the public or governmental authorities regarding such disposal activities. One such concern arises from seismic events near underground disposal wells that are used for the disposal by injection of produced water resulting from oil and gas activities. In 2016, the United States Geological Survey identified Texas as being among the states with areas of increased rates of induced seismicity that could be attributed to fluid injection or oil and gas extraction. While the agency has seen these rates decrease since that time, concern continues to exist over earthquakes arising from induced seismic activities. In response to concerns regarding induced seismicity, regulators in some states have imposed, or are considering imposing, additional requirements in the permitting of produced water disposal wells to assess any relationship between seismicity and the use of such wells. For example, in Texas, the Texas Railroad Commission has adopted rules governing the permitting or re-permitting of wells used to dispose of produced water and other fluids resulting from the production of oil and gas in order to address these seismic activity concerns within the state. Among other things, these rules require companies seeking permits for disposal wells to provide seismic activity data in permit applications, provide for more frequent monitoring and reporting for certain wells and allow the state to modify, suspend or terminate permits on grounds that a disposal well is likely to be, or determined to be, causing seismic activity.

States may issue orders to temporarily shut down or to curtail the injection depth of existing wells in the vicinity of seismic events. Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal. These developments could result in additional regulation and restrictions on the use of injection wells by the Company or by commercial disposal well vendors whom the Company may use from time to time to dispose of produced water. Increased regulation and attention given to induced seismicity could also lead to greater opposition, including litigation to limit or prohibit oil and gas activities utilizing injection wells for produced water disposal. Any one or more of these developments may result in the Company or its vendors having to limit disposal well volumes, disposal rates and pressures or locations, or require the Company or its vendors to shut down or curtail the injection of produced water into disposal wells, which events could have a material adverse effect on the Company's business, financial condition and results of operations.

~~The Company's gas processing,gathering and treating operations are subject to operational and regulatory risks, which could result in significant damages and the loss of revenue.~~

As of December 31, 2019, the Company owns interests in 11 gas processing plants, including the related gathering systems. There are significant risks associated with the operation of gas processing plants and the associated gathering systems. Gas and NGLs are volatile and explosive and may include carcinogens. Damage to or improper operation of gas processing plants, gathering systems or treating facilities could result in an explosion or the discharge of toxic gases, which could result in significant damage claims in addition to interrupting a revenue source.

Moreover, while the Company's gas processing and gathering systems generally are not currently subject to FERC or state regulation with respect to rates or terms and conditions of service, there can be no assurance that such processing and gathering operations will continue to be unregulated in the future. Although these facilities may not be directly regulated, other laws and regulations may affect the availability of gas for gathering and processing, such as state regulations regarding production rates and maximum daily production allowable from gas wells, which could impact the Company's business in these areas. Such regulation could result in additional costs and reduced revenues.

The Company may not be able to obtain access on commercially reasonable terms or otherwise to pipelines and storage facilities, gathering systems and other transportation, processing, fractionation, refining and export facilities to market its oil, NGL and gas production; the Company relies on a limited number of purchasers for a majority of its products.

The marketing of oil, NGL and gas production depends in large part on the availability, proximity and capacity of pipelines and storage facilities, gathering systems and other transportation, processing, fractionation, refining and export facilities, as well as the existence of adequate markets. If there were insufficient capacity available on these systems, if these systems were unavailable to the Company or if access to these systems were to become commercially unreasonable, the price offered for the Company's production could be significantly depressed, or the Company could be forced to shut in some production or delay or discontinue drilling plans and commercial production following a discovery of hydrocarbons while it constructs its own facility or awaits the availability of third party facilities. The Company also relies (and expects to rely in the future) on facilities developed and owned by third parties in order to gather, store, process, transport, fractionate, refine, export and sell its oil, NGL and gas production. The Company's plans to develop and sell production from its oil and gas reserves could be materially and adversely affected by the inability or unwillingness of third parties to provide sufficient gathering, transportation, storage, or processing, fractionation, refining or export facilities to the Company, especially in areas of planned expansion where such facilities do not currently exist. Additionally, certain of these challenges may be compounded by ~~the~~a high level of industry activity in the Permian Basin.

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For example, following Hurricane Harvey in 2017 and Hurricanes Gustav and Ike in 2008, certain Permian Basin gas processors were forced to shut down their plants due to the inability of certain Texas Gulf Coast NGL fractionators to operate. The Company was able to produce its oil wells and vent or flare the associated gas; however, there is no certainty the Company will be able to vent or flare gas in the future due to potential changes in regulations. The amount of oil and gas that can be produced is subject to limitations in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage to the gathering, transportation, storage, processing, fractionation, refining or

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export facilities, or lack of capacity at such facilities. The Company has periodically experienced high line pressure at its tank batteries, which has occasionally led to the flaring of gas due to the inability of the gas gathering systems in the areas to support the increased gas production. The curtailments arising from these and similar circumstances may last from a few days to several months, and in many cases, the Company may be provided only limited, if any, notice as to when these circumstances will arise and their duration.

To the extent that the Company enters into transportation contracts with pipelines that are subject to FERC regulation, the Company is subject to FERC requirements related to use of such capacity. Any failure on the Company's part to comply with FERC's regulations and policies related to pipeline transportation, reporting requirements, or other regulations, and any failure to comply with a FERC-related pipeline's tariff, could result in the imposition of civil and criminal penalties. In addition, any changes in FERC or state regulations or requirements on pipeline transportation may result in increased transportation costs on pipelines that are subject to such regulation, thereby negatively impacting the Company's profitability.

A limited number of companies purchase a majority of the Company's oil, NGL and gas. The loss of a significant purchaser could have a material adverse effect on the Company's ability to sell its production.

A failure by purchasers of the Company's production to satisfy their obligations to the Company could require the Company to recognize a charge in earnings and have a material adverse effect on the Company's results of operation.

The Company relies on a limited number of purchasers to purchase a majority of its products. To the extent that purchasers of the Company's production rely on access to the credit or equity markets to fund their operations, there is a risk that those purchasers could default in their contractual obligations to the Company if such purchasers wererefining industry may be unable to ~~access~~absorb U.S. oil production; in such a case, the credit or equity markets for an extended period of time. If for any reason the Company were to determine that it was probable that some or all of the accounts receivable from any one or more of the purchasers of the Company's production were uncollectible, the Company would recognize a charge in the earnings of that period for the probable loss.

~~Laws~~resulting surplus could depress prices and regulations regarding hydraulic fracturing, as well as governmental reviews of such activities, could result in increased costs and additional operating restrictions, delays or cancellations and have a material adverse effect on the Company's production.

Hydraulic fracturing is a common practice that is used to stimulate production of hydrocarbons from tight formations. The Company conducts hydraulic fracturing in its drilling and completion programs. The process involves the injection of water, sand or other proppants and additives under pressure into targeted subsurface formations to stimulate oil and gas production. The process is typically regulated by state oil and gas commissions or similar agencies, but in recent years, several federal agencies have conducted investigations or asserted regulatory authority over certain aspects of the process. For example, in 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that "water cycle" activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances. Additionally, the EPA has asserted regulatory authority pursuant to the SDWA's UIC program over hydraulic fracturing activities involving the use of diesel and has issued guidance covering such activities. Moreover, the EPA has published an Advance Notice of Proposed Rulemaking to collect data on chemicals used in hydraulic fracturing under the Toxic Substances Control Act and has implemented a final rule under the CWA prohibiting the discharge of wastewater from onshore unconventional oil and gas extraction facilities to publicly-owned wastewater treatment plants. Also, the federal Bureau of Land Management ("BLM") published a final rule in 2015 that established new or more stringent standards for performing hydraulic fracturing on federal and Indian lands. The BLM rescinded the 2015 rule in late 2017; however, litigation challenging the BLM's decision to rescind the 2015 rule remains pending in federal district court.

From time to time, the U.S. Congress has considered adopting legislation intended to provide for federal regulation of hydraulic fracturing and to require disclosure of the additives used in the hydraulic-fracturing process. In addition, certain states, including Texas where the Company operates, have adopted, and other states are considering adopting, regulations that could impose new or more stringent permitting, disclosure, disposal and well-construction requirements on hydraulic-fracturing operations. For example, in April 2019, Colorado passed legislation reforming exploration and production activities by the oil and gas industry in the state including, among other things, revising the mission of the state oil and gas agency from fostering energy development in the state to instead focusing on regulating the industry in a manner that is protective of public health and safety and the environment, as well as authorizing cities and counties to regulate oil and gas operations within their jurisdictions as they do other development. While the Company does not conduct operations in Colorado, passage or enactment of similar legislation in other states in which it does operate could significantly increase the Company’s operating costs and have a

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significant adverse effect on the Company’s ability to conduct operations. States could elect to prohibit hydraulic fracturing or high volume hydraulic fracturing altogether, following the approach taken by the states of Vermont, Maryland and New York. Also, local land use restrictions, such as city ordinances, may be adopted to restrict or prohibit drilling in general or hydraulic fracturing in particular. In Texas, legislation was adopted providing that the regulation of oil and gas operations in Texas is under the exclusive jurisdiction of the state and thus preempts local regulation of those operations. Nonetheless, municipalities and political subdivisions in Texas continue to have the right to enact "commercially reasonable" regulations for surface activities.

Also, the threat of climate change has resulted in increasing political risks in the United States, including climate-related pledges to ban hydraulic fracturing of oil and gas wells being made by certain candidates seeking the office of President of the United States in 2020. Additionally, Senator Bernie Sanders (D-VT), who is one of the presidential candidates that has pledged to ban hydraulic fracturing, introduced Senate Bill 3247 on January 28, 2020 that, if enacted as proposed, would ban hydraulic fracturing nationwide by 2025.

In the event federal, state or local restrictions or bans pertaining to hydraulic fracturing are adopted in areas where the Company is currently conducting operations, or in the future plans to conduct operations, the Company may incur additional costs to comply with such requirements, experience restrictions, delays or cancellations in the pursuit of exploration, development or production activities, and perhaps be limited or precluded in the drilling of wells or in the volume that the Company is ultimately able to produce from its reserves; one or more of which developments could have a material adverse effect on the Company.

The Company's operations are subject to stringent environmental, oil and gas-related and occupational safety and health laws and regulations that could cause it to delay, curtail or cease its operations or expose it to material costs and liabilities.

The Company's operations are subject to stringent federal, state and local laws and regulations governing, among other things, the drilling of wells, rates of production, the size and shape of drilling and spacing units or proration units, the transportation and sale of oil, NGL and gas, and the discharging of materials into the environment and environmental protection. For example, state laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of oil and gas properties. Some states allow forced pooling or integration of tracts to facilitate development, while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce the Company's interest in the unitized properties. In addition, state conservation laws (i) establish maximum rates of production from oil and gas wells, (ii) generally prohibit the venting or flaring of gas and (iii) impose requirements regarding production rates. These laws and regulations may limit the amount of oil and gas the Company can produce from the Company's wells or limit the number of wells or the locations that the Company can drill.

In connection with its operations, the Company must obtain and maintain numerous environmental and oil and gas-related permits, approvals and certificates from various federal, state and local governmental authorities, and may incur substantial costs in doing so. The need to obtain permits has the potential to delay, curtail or cease the development of oil and gas projects. The Company may in the future be charged royalties on gas emissions or required to incur certain capital expenditures for air pollution control equipment or other air emissions-related issues. For example, in 2015, the EPA issued a final rule under the CAA lowering the National Ambient Air Quality Standard ("NAAQS") for ground-level ozone from 75 parts per billion to 70 parts per billion under standards to provide protection of public health and welfare. In subsequent years, the EPA has issued area designations with respect to ground-level ozone and final requirements that apply to state, local and tribal air agencies for implementing the 2015 NAAQS for ground-level ozone. State implementation of the revised NAAQS could, among other things, require installation of new emission controls on some of the Company's equipment, resulting in longer permitting timelines, and significantly increase the Company's capital expenditures and operating costs. In another example, the EPA and U.S. Army Corps of Engineers (the "Corps") released a final rule in 2015 outlining federal jurisdictional reach under the CWA over waters of the U.S., including wetlands. In 2017, the EPA and the Corps agreed to reconsider the 2015 rule and, thereafter, on October 22, 2019, the agencies published a final rule, which became effective on December 31, 2019, rescinding the 2015 rule. On January 23, 2020, the two agencies issued a final rule re-defining the Clean Water Act's jurisdiction over waters of the United States, which redefinition is narrower than found in the 2015 rule. Upon being published in the Federal Register and the passage of 60 days thereafter, the January 23, 2020 final rule will become effective, at which point the United States will be covered under a single regulatory scheme as it relates to federal jurisdictional reach over waters of the United States. However, there remains the expectation that the January 23, 2020 final rule also will be legally challenged in federal district court. To the extent that any challenge to the January 23, 2020 final rule is successful and the 2015 rule or a revised rule expands the scope of the Clean Water Act's jurisdiction in areas where the Company conducts operations, the Company could incur (i) delays, restrictions or prohibitions in the issuance of necessary permits, (ii) restrictions or cessations in the development or expansion of projects, or (iii) increases in the Company's capital expenditures and operating expenses by, for example, requiring installation of new emission controls on some of the Company's equipment, any one or more of which developments could have a material adverse effect on the Company's business, financial condition and results of operations.

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Additionally, the Company's operations are subject to a number of federal and state laws and regulations, including the federal OSHA and comparable state statutes, whose purpose is to protect the health and safety of employees. Among other things, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in the Company's operations and that this information be provided to employees, state and local government authorities and citizens.

There can be no assurance that existing or future regulations will not result in a delay, curtailment or cessation of production or processing activities, result in a material increase in the costs of production, development, exploration or processing operations or materially and adversely affect the Company's future operations and financial condition. Noncompliance with these laws and regulations may subject the Company to sanctions, including administrative, civil or criminal penalties, remedial cleanups or corrective actions, delays in permitting or performance of projects, natural resource damages and other liabilities. Such laws and regulations may also affect the costs of acquisitions. In addition, these laws and regulations are subject to amendment or replacement in the future with more stringent legal requirements. Further, any delay, reduction or curtailment of the Company's development and producing operations due to these laws and regulations could result in the loss of acreage through lease expiration.

~~The nature of the Company's assets and production operations may impact the environment or cause environmental contamination, which could result in material liabilities to the Company.~~

The Company's assets and production operations may give rise to significant environmental costs and liabilities as a result of the Company's handling of petroleum hydrocarbons and wastes, because of air emissions and water discharges related to its operations, and due to past industry operations and waste disposal practices. The Company's oil and gas business involves the generation, handling, treatment, storage, transport and disposal of wastes, hazardous substances and petroleum hydrocarbons and is subject to environmental hazards, such as oil and produced water spills, NGL and gas leaks, pipeline and vessel ruptures and unauthorized discharges of such wastes, substances and hydrocarbons, that could expose the Company to substantial liability due to pollution and other environmental damage. For example, drilling fluids, produced waters and certain other wastes associated with the Company's exploration, development and production of oil or gas are currently excluded under RCRA from the definition of hazardous waste. These wastes are instead regulated under RCRA's less stringent non-hazardous waste provisions. There have been efforts from time to time to remove this exclusion. For example, in response to a federal consent decree issued in 2016, the EPA was required during 2019 to determine whether certain Subtitle D criteria regulations required revision in a manner that could result in oil and gas wastes being regulated as RCRA hazardous waste. In April 2019, the EPA made a determination that such revision of the regulations was unnecessary. Any future loss of the RCRA exclusion could have a material adverse effect on the Company's results of operations and financial position.

The Company currently owns, leases or operates, and in the past has owned, leased or operated, properties that for many years have been used for oil and gas exploration and production activities, and petroleum hydrocarbons, hazardous substances and wastes may have been released on or under such properties, or on or under other locations, including off-site locations, where such substances have been taken for treatment or disposal. These wastes, substances and hydrocarbons may also be released during future operations. In addition, some of the Company's properties have been operated by predecessors or previous owners or operators whose treatment and disposal of hazardous substances, wastes or petroleum hydrocarbons were not under the Company's control. Joint and several strict liabilities may be incurred in connection with such releases of petroleum hydrocarbons, hazardous substances and wastes on, under or from the Company's properties. Private parties, including lessors of properties on which the Company operates and the owners or operators of properties adjacent to the Company's operations and facilities where the Company's petroleum hydrocarbons, hazardous substances or wastes are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance as well as seek damages for noncompliance with environmental laws and regulations or for personal injury or damage to property or natural resources. Such properties and the substances disposed or released on or under them may be subject to CERCLA, RCRA and analogous state laws, which could require the Company to remove previously disposed substances, wastes and petroleum hydrocarbons, remediate contaminated property or perform remedial plugging or pit closure operations to prevent future contamination, the costs of which could have a material adverse effect on the Company's business, financial condition and results of operations.

The Company may not be able to recover some or any of these costs from sources of contractual indemnity or insurance, as pollution and similar environmental risks generally are not insurable or fully insurable, either because such insurance is not available or because of the high premium costs and deductibles associated with obtaining such insurance.

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The Company’s operations are subject to a number of risks arising out of concerns regarding the threat of climate change, including regulatory, political, litigation and financial risks, that could result in increased operating costs and costs of compliance, limit the areas in which oil and gas production may occur, reduce demand for the oil and gas the Company produces, and expose the Company to the risk of increased activism and decreased funding for the industry, while the potential physical effects of climate change could disrupt the Company's production and cause it to incur significant costs in preparing for or responding to those effects.

The threat of climate change continues to attract considerable attention in the United States and in foreign countries. Numerous initiatives have been proposed and are expected to continue to be proposed at the international, national, regional and state levels of government to monitor and limit existing sources of GHG emissions as well as to restrict or eliminate emissions from new sources. As a result, the Company’s operations are subject to a series of regulatory, political, litigation and financial risks associated with the production and processing of fossil fuels and emission of GHGs.

In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, following the U.S. Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, (i) establish construction and operating permit reviews for GHG emissions from certain large stationary sources, (ii) require the monitoring and annual reporting of GHG emissions from certain petroleum and gas system sources in the United States, (iii) implement CAA emission standards directing the reduction of methane from certain new, modified, or reconstructed facilities in the oil and gas sector, and (iv) together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States. Additionally, various states, groups of states, and other countries have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions. At the international level, there is a non-binding agreement, the United Nations sponsored "Paris Agreement," for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, although the United States has announced its withdrawal from such agreement, effective November 4, 2020.

Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change related pledges made by certain candidates seeking the office of the President of the United States in 2020. Critical declarations made by one or more candidates running for President include proposals to ban hydraulic fracturing of oil and gas wells and ban new leases for production of minerals on federal properties, including onshore lands and offshore waters. Other actions that could be pursued by presidential candidates may include more restrictive requirements for the establishment of pipeline infrastructure or the permitting of LNG export facilities, the reversal of the United States’ withdrawal from the Paris Agreement in November 2020 and reinstatement of the ban on oil exports. Litigation risks are also increasing, as a number of cities, local governments or other persons have sought to bring suit against oil and gas exploration and production companies in state or federal court, alleging, among other things, that such companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore are responsible for roadway and infrastructure damages, or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts.

There are also financial risks for fossil fuel producers as stockholders or bondholders currently invested in fossil-fuel energy companies concerned about the threat of climate change may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors. Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies. Additionally, investing and lending practices of various investment firms and institutional lenders have been the subject of intensive lobbying efforts in recent years, oftentimes public in nature, by environmental activists, proponents of the Paris Agreement, and foreign citizenry concerned about the threat of climate change not to provide funding for fossil fuel producers. For example, there have been efforts in recent years to influence the investment community, including investment advisors and certain sovereign wealth, pension and endowment funds, to divest of fossil fuel equities and lenders to limit funding to companies engaged in the extraction of fossil fuel reserves. Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities.

The adoption and implementation of new or more stringent international, federal or state regulations or other regulatory initiatives that impose more stringent standards for GHG emissions from the oil and gas sector or otherwise restrict the areas in which this sector may produce oil and gas or generate GHG emissions could result in increased compliance and consumption costs, and thereby reduce demand for the oil and gas the Company produces. Additionally, political, litigation and financial risks could result in the restriction or cancellationavailability of production activities, incurring liability for infrastructure damages as a result of climate changes, or impairing the Company's ability to continue to operate in an economic manner. Finally, if increasing concentrations of GHGs in the Earth's atmosphere were to result in significant physical effects, such as increased

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~~frequency and severity of storms, floods, droughts and other extreme climatic events, then such effects could have a material adverse effect on the Company's exploration and production operations.~~

In addition, companies in the oil and gas industry have been the target of activist efforts from both individuals and non-governmental organizations, including instituting litigation and supporting political or regulatory efforts to, among other things, limit or ban hydraulic fracturing, restrict or ban certain operating practices, including the disposal of waste materials, such as hydraulic fracturing fluids and produced water, deny or delay drilling permits, prohibit the venting or flaring of gas, reduce access of the oil and gas industry to federal and state government lands, and delay or cancel oil and gas developmental or expansion projects. The Company may need to incur significant costs associated with responding to these initiatives, and complying with any resulting additional legal or regulatory requirements could have a material adverse effect on the Company’s business, financial condition, cash flows and results of operations.

Laws and regulations pertaining to protection of threatened and endangered species or to critical habitat, wetlands and natural resources could delay, restrict or prohibit the Company's operations and cause it to incur substantial costs that may have a material adverse effect on the Company's development and production of reserves.

The federal ESA and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species' habitat. Similar protections are offered to migratory birds under the Federal Migratory Bird Treaty Act. Oil and gas operations in the Company's operating areas may be adversely affected by seasonal or permanent restrictions imposed on drilling activities by the U.S. Fish and Wildlife Services (the "FWS") that are designed to protect various wildlife, which may materially restrict the Company's access to federal or private land use. Permanent restrictions imposed to protect endangered and threatened species could prohibit drilling in certain areas, impact suppliers of critical materials or services, or require the implementation of expensive mitigation measures. Additionally, federal statutes, including the CWA, the OPA and CERCLA, as well as comparable state laws, prohibit certain actions that adversely affect critical habitat, wetlands and natural resources. If harm to species or damages to wetlands, habitat or natural resources occur or may occur, government entities or, at times, private parties may act to prevent oil and gas exploration or development activities or seek damages for harm to species, habitat or natural resources resulting from drilling, construction or releases of petroleum hydrocarbons, wastes, hazardous substances or other regulated materials, and, in some cases, may seek criminal penalties.

Moreover, the FWS may make determinations with respect to the listing of species as endangered or threatened under the ESA, which may result in more fulsome protections for non-protected or lesser-protected species. The designation of previously unprotected species or the re-designation of under protected species as threatened or endangered in areas where the Company conducts operations could cause the Company to incur increased costs arising from species protection measures or could result in delays, restrictions or prohibitions on its development and production activities that could have a material adverse effect on the Company's ability to develop and produce reserves.

~~Future price declines could result in a reduction in the carrying value of the Company's proved oil and gas properties,~~markets, which could materially and adversely affect the Company's results of operations.

~~Significant or extended price declines~~Absent an expansion of U.S. refining and export capacity, an increase in U.S. production of oil could result in a surplus of these products in the ~~Company having~~U.S., which would likely cause prices for these commodities to ~~make downward adjustments~~fall and markets to constrict. Although U.S. law was changed in 2015 to permit the ~~carrying value~~export of ~~its proved~~ oil, ~~and gas properties. The Company performs assessments of its oil and gas properties whenever events or circumstances indicate that the carrying values of those assets~~exports may not occur if demand is lacking in foreign markets or the price that can be ~~recoverable.~~obtained in foreign markets does not support associated export capacity expansions, transportation and other costs. In ~~order~~such circumstances, the rate of return on the Company's capital projects would decline, possibly to perform these assessments, management uses various observable and unobservable inputs, including management's outlooks for (i) proved reserves and risk-adjusted probable and possible reserves, (ii) commodity prices, (iii) production costs, (iv) capital expenditures and (v) production. To the extent such tests indicate a reduction of the estimated useful life or estimated future cash flowslevels that would make execution of the Company's ~~oil~~drilling plans uneconomical, and ~~gas properties, the carrying value may not be recoverable and therefore an impairment charge would be required to reduce the carrying value~~a lack of the proved properties to their fair value. For example, during 2018 and 2017, the Company recorded impairment charges of $77 million and $285 million, respectively, attributable to its Raton Basin field in southeast Colorado, primarily due to declines in commodity prices and downward adjustments to the economically recoverable reserves attributable to the asset. The Company may incur impairment charges in the future, which could materially affectmarket for the Company's results of operations in the period incurred. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Impairment of oil and gas properties and other long-lived assets" and ~~Note 4~~ ~~of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~

~~A portion of the Company's total estimated proved reserves at December 31, 2019 were undeveloped, and those proved reserves may not ultimately be developed.~~

At December 31, 2019, approximately five percent of the Company's total estimated proved reserves were undeveloped. Recovery of undeveloped proved reserves requires significant capital expenditures and successful drilling. The Company's

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~~reserve data assumes~~products could require that the Company ~~can and will make these expenditures and conduct these operations successfully, which assumptions may not prove~~shut in some portion of its production. If this were to be correct. If the Company chooses not to spend the capital to develop these proved undeveloped reserves, or if the Company is not otherwise able to successfully develop these proved undeveloped reserves, the Company will be required to write-off these proved reserves. In addition, under the SEC's rules, because proved undeveloped reserves may be booked only if they relate to wells planned to be drilled within five years of the date of booking, the Company may be required to write-off any proved undeveloped reserves that are not developed within this five-year timeframe. As with all oil and gas leases,occur, the Company's ~~leases require~~production and cash flow could decrease, or could increase less than forecasted, which could have a material adverse effect on the Company to drill wells that are commercially productive and to maintain the production in paying quantities, and if the Company is unsuccessful in drilling such wells and maintaining such production, the Company could lose its rights under such leases. The Company's ~~future production levels and, therefore, its future~~ cash flow and ~~profitability will be impacted if it does not successfully developing its proved undeveloped leasehold acreage.~~profitability.

Estimates of proved reserves and future net cash flows are not precise. The actual quantities and net cash flows of the Company's proved reserves may prove to be lower than estimated.

Numerous uncertainties exist in estimating quantities of proved reserves and future net cash flows therefrom. The estimates of proved reserves and related future net cash flows set forth in this Report are based on various assumptions, which may ultimately prove to be inaccurate.

Petroleum engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner. Estimates of economically recoverable oil and gas reserves and estimates of future net cash flows depend upon a number of variable factors and assumptions, including the following:

•historical production from the area compared with production from other producing areas;

•the quality and quantity of available data;

•the interpretation of that data;

•the assumed effects of regulations by governmental agencies;

•assumptions concerning future commodity prices; and

•assumptions concerning future development costs, operating costs, severance, ad valorem and excise taxes, gathering, processing, transportation and fractionation costs and workover and remedial costs.

Because all proved reserve estimates are to some degree subjective, each of the following items may differ materially from those assumed in estimating proved reserves:

•the quantities of oil and gas that are ultimately recovered;

•the production costs incurred to recover the reserves;

•the amount and timing of future development expenditures; and

•future commodity prices.

Furthermore, different reserve engineers may make different estimates of proved reserves and cash flows based on the same available data. The Company's actual production, revenues and expenditures with respect to proved reserves will likely differ from the estimates, and the differences may be material.

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As required by the SEC, the estimated discounted future net cash flows from proved reserves are based on average prices preceding the date of the estimate and costs as of the date of the estimate, while actual future prices and costs may be materially higher or lower. Actual future net cash flows also will be affected by factors such as:

•the amount and timing of actual production;

•the level of future capital spending;

•increases or decreases in the supply of or demand for oil, NGL and gas; and

•changes in governmental regulations or taxation.

Standardized Measure is a reporting convention that provides a common basis for comparing oil and gas companies subject to the rules and regulations of the SEC. In general, it requires the use of commodity prices that are based upon a historical 12-month unweighted average, as well as operating and development costs being incurred at the end of the reporting period. Consequently, it may not reflect the prices ordinarily received or that will be received for future oil and gas production because of seasonal price fluctuations or other varying market conditions, nor may it reflect the actual costs that will be required to produce or develop the oil and gas properties. Accordingly, estimates included herein of future net cash flows may be materially different from the future net cash flows that are ultimately received. In addition, the ten percent discount factor, which is required by the SEC to be used in calculating discounted future net cash flows for reporting purposes, may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company or the

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oil and gas industry in general. Therefore, the estimates of discounted future net cash flows or Standardized Measure in this Report should not be construed as accurate estimates of the current market value of the Company's proved reserves.

~~The Company periodically evaluates its unproved oil and gas properties to determine recoverability of its cost and could be required to recognize noncash charges in the earnings of future periods.~~

At December 31, 2019, the Company carried unproved oil and gas property costs of $584 million. GAAP requires periodic evaluation of these costs on a project-by-project basis. These evaluations are affected by the results of exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of the leases and the contracts and permits appurtenant to such projects. If the quantity of potential reserves determined by such evaluations is not sufficient to fully recover the cost invested in each project, the Company will recognize noncash charges in the earnings of future periods.

Because the Company's ~~proved reserves and production~~producing wells decline continually over time, the Company will need to mitigate these declines through drilling and production enhancement initiatives and/or acquisitions.

Producing oil and gas reservoirs are characterized by declining production rates, which vary depending upon reservoir characteristics and other factors. Because the Company's ~~proved reserves and production~~producing wells decline continually over time as those ~~reserves~~wells are produced, the Company will need to mitigate these declines through drilling and production enhancement initiatives and/or acquisitions of additional recoverable reserves. There can be no assurance that the Company will be able to develop, exploit, find or acquire sufficient additional reserves to replace its current or future production.

~~The Company may be unable to make attractive acquisitions and any acquisition it completes is subject to substantial risks that could materially and adversely affect its business.~~

~~Acquisitions~~A portion of ~~oil and gas properties, including acreage trades, have from time to time contributed to~~ the Company's ~~growth. Acquisition opportunities in~~total estimated proved reserves at December 31, 2020 were undeveloped, and those proved reserves may not ultimately be developed.

At December 31, 2020, approximately five percent of the ~~oil~~Company's total estimated proved reserves were undeveloped. Recovery of undeveloped proved reserves requires significant capital expenditures and ~~gas industry are very competitive, which can increase the cost of, or cause~~successful drilling. The Company's reserve data assumes that the Company can and will make these expenditures and conduct these operations successfully, which assumptions may not prove to ~~refrain from, completing acquisitions. The success of any acquisition will depend on a number of factors and involves potential risks, including, among other things:~~

•be correct. If the ~~inability~~Company chooses not to ~~accurately forecast future commodity prices and estimate~~spend the ~~costs~~capital to develop ~~the acquired~~these proved undeveloped reserves, ~~the recoverable volumes of reserves, rates of future production and future net cash flows attainable from the acquired reserves;~~

•~~the assumption of unknown liabilities, including environmental liabilities, and losses~~ or ~~costs for which~~if the Company is not ~~indemnified or for which the indemnity~~otherwise able to successfully develop these proved undeveloped reserves, the Company ~~receives is inadequate;~~

•will be required to write-off these proved reserves. In addition, under the ~~validity of assumptions about costs, including synergies;~~

•~~the effect on the Company's liquidity or financial leverage of using available cash or debt to finance acquisitions;~~

•~~the diversion of management's attention from other business concerns; and~~

•~~an inability to hire, train or retain qualified personnel to manage and operate the Company's growing business and assets.~~

All of these factors affect whether an acquisition will ultimately generate cash flows sufficient to provide a suitable return on investment. Even though the Company performs a review of the properties it seeks to acquire that it believes is consistent with industry practices, such reviews are often limited in scope. As a result, among other risks, the Company's initial estimates ofSEC's rules, because proved undeveloped reserves may be ~~subject~~booked only if they relate to ~~revision following an acquisition, which may materially and adversely affect the desired benefits~~wells planned to be drilled within five years of the ~~acquisition.~~

~~The Company's ability to complete dispositions~~date of ~~assets, or interests in assets, may be subject to factors beyond its control, and in certain cases~~booking, the Company may be required to ~~retain liabilities for certain matters.~~

~~From time to time,~~write-off any proved undeveloped reserves that are not developed within this five-year timeframe. As with all oil and gas leases, the Company's leases require the Company ~~sells an interest~~to drill wells that are commercially productive and to maintain the production in ~~a strategic asset for~~paying quantities, and if the ~~purpose of assisting or accelerating~~Company is unsuccessful in drilling such wells and maintaining such production, the ~~asset's development.~~Company could lose its rights under such leases. In addition, the Company's future production levels and, therefore, its future cash flow and profitability will be impacted if it is not able to successfully develop its undeveloped leasehold acreage.

The Company ~~regularly reviews~~faces significant competition and some of its ~~property base for the purpose of identifying nonstrategic assets, the disposition of which would increase capital~~competitors have resources ~~available for other activities and create organizational and operational efficiencies. Various factors could materially affect the ability~~in excess of the Company's available resources.

The oil and gas industry is highly competitive. The Company competes with a large number of companies, producers and operators in a number of areas such as:

•seeking to ~~dispose of such interests~~acquire oil and gas properties suitable for exploration or ~~nonstrategic assets or complete announced dispositions, including the receipt of approvals of governmental agencies or third parties~~development;

•marketing oil, NGL and ~~the availability of purchasers willing~~gas production; and

•seeking to acquire the ~~interests or purchase~~equipment, services and expertise, including trained personnel, necessary to identify, evaluate, develop and operate its properties.

Some of the ~~nonstrategic assets on terms~~Company's competitors are larger and have substantially greater financial and other resources than the Company, and as such, the Company may be at ~~prices acceptable to~~a competitive disadvantage in the ~~Company.~~

~~Sellers typically retain certain liabilities or indemnify buyers for certain pre-closing matters,~~identification, acquisition and development of properties that complement the Company's operations. The Company also faces competition from companies that supply alternative sources of energy, such as matters of litigation, environmental contingencies, royalty obligations and income taxes. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction and ultimately may be material. Also, as is typical in divestiture transactions, third parties may be unwilling to release the Company from guaranteeswind, solar power or other ~~credit support~~renewable energy. Competition is expected to increase and in

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~~provided prior~~certain cases, governments are providing tax advantages and other subsidies to support alternative energy sources or are mandating the use of specific fuels or technologies. Governments and other parties are also promoting research into new technologies to accelerate the implementation of alternative energy sources.

The Company's business could be materially and adversely affected by security threats, including cybersecurity threats, and other disruptions.

As an oil and gas producer, the Company faces various security threats, including cybersecurity threats to gain unauthorized access to, or control of, sensitive information or to render data or systems corrupted or unusable; threats to the security of the Company's facilities and infrastructure or third party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts. The potential for such security threats has subjected the Company's operations to increased risks that could have a material adverse effect on the Company's business. In particular, the Company's implementation of various procedures and controls to monitor and mitigate security threats and to increase security for the Company's information, facilities and infrastructure may result in increased capital and operating costs. Costs for insurance may also increase as a result of security threats, and some insurance coverage may become more difficult to obtain, if available at all. Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring. If any of these security breaches were to occur, they could lead to losses of sensitive information, critical infrastructure or capabilities essential to the Company's operations and could have a material adverse effect on the Company's reputation, financial position, results of operations and cash flows.

Cybersecurity attacks in particular are becoming more sophisticated. The Company relies extensively on information technology systems, including internet sites, computer software, data hosting facilities and other hardware and platforms, some of which are hosted by third parties, to assist in conducting its business. The Company's technologies systems and networks, and those of its business associates may become the target of cybersecurity attacks, including without limitation denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems and materially and adversely affect the Company in a variety of ways, including the following:

•unauthorized access to and release of seismic data, reserves information, strategic information or other sensitive or proprietary information, which could have a material adverse effect on the Company's ability to compete for oil and gas resources;

•data corruption, communication interruption or other operational disruptions during drilling activities, which could result in the failure to reach the intended target or a drilling incident;

•data corruption or operational disruptions of production infrastructure, which could result in loss of production or accidental discharges;

•unauthorized access to and release of personal information of royalty owners, employees and vendors, or the data or confidential information of customers, suppliers or other third parties, which could expose the Company to allegations that it did not sufficiently protect that information;

•a cybersecurity attack on a vendor or service provider, which could result in supply chain disruptions and could delay or halt operations;

•a cybersecurity attack on third-party gathering, transportation, processing, fractionation, refining, storage or export facilities, which could delay or prevent the Company from transporting and marketing its production, resulting in a loss of revenues;

•a cybersecurity attack involving commodities exchanges or financial institutions, which could slow or halt commodities trading, thus preventing the Company from marketing its production or engaging in derivative activities, resulting in a loss of revenues;

•a cybersecurity attack on a communications network or power grid, which could cause operational disruptions resulting in the loss of revenues; and

•a cybersecurity attack on the Company's automated and surveillance systems, which could cause a loss in production and potential environmental hazards.

These events could damage the Company's reputation and lead to financial losses from remedial actions, loss of business or potential liability. Additionally, certain cyber incidents, such as surveillance, may remain undetected for an extended period of time.

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to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities. Additionally, the continuing and evolving threat of cybersecurity attacks has resulted in evolving legal and compliance matters, including increased regulatory focus on prevention, which could require the Company to expend significant additional resources to meet such requirements.

Provisions of the Company's charter documents and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for the Company's common stock.

Provisions in the Company's certificate of incorporation and bylaws may have the effect of delaying or preventing an acquisition of the Company or a merger in which the Company is not the surviving company and may otherwise prevent or slow changes in the Company's board of directors and management. In addition, because the Company is incorporated in Delaware, it is governed by the provisions of Section 203 of the Delaware General Corporation Law. These provisions could discourage an acquisition of the Company or other change in control transactions and thereby negatively affect the price that investors might be willing to pay in the future for the Company's common stock.

The Company has identified a material weakness in its internal control over financial reporting that, if not remediated, could result in additional material misstatements in its consolidated financial statements.

As described in "Part II, Item 9A — Controls and Procedures," management has identified and evaluated the control deficiencies that gave rise to the accounting corrections related to contracts governing the sale of purchased oil and gas and has concluded that those deficiencies, collectively, represent a material weakness in the ~~divested assets.~~Company's internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. As a result ~~after~~of the material weakness, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2020. See Note 2 of Notes to Consolidated Financial Statements and "Unaudited Supplementary Information - Selected Quarterly Financial Results" included in "Item 8. Financial Statements and Supplementary Data" for additional information.

The Company is in the process of developing and implementing a ~~divestiture,~~remediation plan to address the material weakness. If the Company’s remediation efforts are insufficient or if additional material weaknesses in its internal control over financial reporting are discovered or occur in the future, the Company's consolidated financial statements may contain material misstatements and it could be required to revise or restate its financial results, which could materially and adversely affect the Company’s business, results of operations and financial condition, restrict its ability to access the capital markets, require it to expend significant resources to correct the material weakness, subject it to fines, penalties or judgments, harm its reputation or otherwise cause a decline in investor confidence.

Operational risks.

The Company's operations involve many operational risks, some of which could result in unforeseen interruptions to the Company's operations and substantial losses to the Company for which the Company may ~~remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations.~~not be adequately insured.

•blowouts, cratering, explosions and fires;

•adverse weather effects;

•high costs, shortages or delivery delays of equipment, labor or other services or materials, such as water and sand for hydraulic fracturing;

•facility or equipment malfunctions, failures or accidents;

•title problems;

•pipe or cement failures or casing collapses;

•uncontrollable flows of oil, gas or water;

•compliance with environmental and other governmental requirements, including executive actions and regulatory or legislative efforts under a Biden administration;

•lost or damaged oilfield workover and service tools;

•surface access restrictions;

•unusual or unexpected geological formations or pressure or irregularities in formations;

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•terrorism, vandalism and physical, electronic and cybersecurity breaches and global or national health concerns, including the outbreak of a pandemic or contagious disease, such as the recent COVID-19 pandemic; and

•natural disasters.

The Company's overall exposure to operational risks may increase as its drilling activity expands, along with any associated increases in internally-provided well services, water distribution, water collection, disposal or other services. In addition, any of these risks could adversely impact the Company's service providers and suppliers, causing its supply chain to be interrupted, slowed or rendered inoperable. Any of these risks could result in substantial losses to the Company due to injury or loss of life, damage to or destruction of wells, production facilities or other property and natural resources, clean-up responsibilities, regulatory investigations and penalties and suspension of operations.

Exploration and development drilling involve substantial costs and risks and may not result in commercially productive reserves.

•unexpected drilling conditions;

•unexpected pressure or irregularities in formations;

•equipment failures or accidents;

•construction delays;

•fracture stimulation accidents or failures;

•adverse weather conditions;

•restricted access to land for drilling or laying pipelines;

•title defects;

•lack of available gathering, transportation, processing, fractionation, storage, refining or export facilities;

•lack of available capacity on interconnecting transmission pipelines;

•access to, and the cost and availability of, the equipment, services, resources and personnel required to complete the Company's drilling, completion and operating activities; and

•delays imposed by or resulting from compliance with or changes in environmental and other governmental, regulatory or contractual requirements.

Part of the Company's strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application.

•landing the wellbore in the desired drilling zone;

•staying in the desired drilling zone while drilling horizontally through the formation;

•running casing the entire length of the wellbore; and

•being able to run tools and other equipment consistently through the horizontal wellbore.

Risks that the Company faces while completing wells include, but are not limited to, the following:

•the ability to fracture stimulate the planned number of stages;

•the ability to run tools the entire length of the wellbore during completion operations; and

•the ability to successfully clean out the wellbore after completion of the final fracture stimulation stage.

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The Company has identified drilling locations and prospects for future drilling opportunities, including development, exploratory, extension and infill drilling activities. These drilling locations and prospects represent a significant part of the Company's future drilling plans. For example, the Company's proved reserves as of December 31, 2020 include proved undeveloped reserves and proved developed non-producing reserves of 31 MMBbls of oil, 17 MMBbls of NGL and 88 Bcf of gas. The Company's ability to drill and develop these locations depends on a number of factors, including the availability and cost of capital, regulatory approvals, negotiation of agreements with third parties, commodity prices, costs, access to and availability of equipment, services, resources and personnel, and drilling results. There can be no assurance that the Company will drill these locations or that the Company will be able to produce oil or gas reserves from these locations or any other potential drilling locations. Well results vary by formation and geographic area, and the Company generally prioritizes its drilling activities to focus on remaining locations that are believed to offer the highest return. Changes in the laws or regulations on which the Company relies in planning and executing its drilling programs could materially and adversely impact the Company's ability to successfully complete those programs. For example, under current Texas laws and regulations, the Company may receive permits to drill, and may drill and complete, certain horizontal wells that traverse one or more units and/or leases; a change in those laws or regulations could materially and adversely impact the Company's ability to drill those wells. Because of these uncertainties, the Company cannot give any assurance as to the timing of these activities or that they will ultimately result in the realization of proved reserves or meet the Company's expectations for success. As such, the Company's actual drilling activities may materially differ from the Company's current expectations, which could have a material adverse effect on the Company's proved reserves, financial condition and results of operations.

Multi-well pad drilling may result in volatility in the Company's operating results.

In addition, the Company must dispose of the fluids produced from oil and gas production operations, including produced water, which it does directly or through the use of third party vendors. The legal requirements related to the disposal of produced water into a non-producing geologic formation by means of underground injection wells are subject to change based on concerns of the public or governmental authorities regarding such disposal activities. One such concern arises from seismic events near underground disposal wells that are used for the disposal of produced water resulting from oil and gas activities. In 2016, the United States Geological Survey identified Texas as being among the states with areas of increased rates of induced seismicity that could be attributed to fluid injection or oil and gas extraction. While the agency has seen these rates decrease since that time, concern continues to exist over earthquakes arising from induced seismic activities. In response to concerns regarding induced seismicity, regulators in some states have imposed, or are considering imposing, additional requirements in the permitting of produced water disposal wells to assess any relationship between seismicity and the use of such wells. For example, in Texas, the Texas Railroad Commission has adopted rules governing the permitting or re-permitting

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of wells used to dispose of produced water and other fluids resulting from the production of oil and gas in order to address these seismic activity concerns within the state. Among other things, these rules require companies seeking permits for disposal wells to provide seismic activity data in permit applications, provide for more frequent monitoring and reporting for certain wells and allow the state to modify, suspend or terminate permits on grounds that a disposal well is likely to be, or determined to be, causing seismic activity.

The Company's gas processing,gathering and treating operations are subject to operational and regulatory risks, which could result in significant damages and the loss of revenue.

As of December 31, 2020, the Company owns interests in 11 gas processing plants, including the related gathering systems. There are significant risks associated with the operation of gas ~~sales~~processing plants and ~~purchases~~the associated gathering systems. Gas and NGLs are volatile and explosive and may include carcinogens. Damage to or improper operation of gas processing plants, gathering systems or treating facilities could result in an explosion or the discharge of toxic gases, which could result in significant damage claims in addition to interrupting a revenue source.

Moreover, while the Company's gas processing and gathering systems generally are not currently subject to FERC or state regulation with respect to rates or terms and conditions of service, there can be no assurance that such processing and gathering operations will continue to be unregulated in the future. Although these facilities may not be directly regulated, other laws and regulations may affect the availability of gas for gathering and processing, such as state regulations regarding production rates and the maximum daily production allowable from gas wells, which could impact the Company's business in these areas. Such regulation could result in additional costs and reduced revenues.

Financial risks.

The prices of oil, NGL and gas are highly volatile. A sustained decline in these commodity prices could materially and adversely affect the Company's business, financial condition and results of operations.

The Company's revenues, profitability, cash flow and future rate of growth are highly dependent on commodity prices. Commodity prices may fluctuate widely in response to relatively minor changes in the supply of and demand for oil, NGL and gas, market uncertainty and a variety of additional factors that are beyond the Company's control, such as:

•domestic and worldwide supply of and demand for oil, NGL and gas;

•volatility and trading patterns in the commodity-futures markets;

•the capacity of U.S. and international refiners to utilize U.S. supplies of oil and condensate;

•weather conditions;

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•global or national health concerns, including the outbreak of pandemic or contagious disease, such as the recent coronavirus, which may reduce the demand for oil, NGL and gas because of reduced global or national economic activity;

•actions of OPEC, its members and other state-controlled oil companies relating to oil price and production controls;

•the price and quantity of oil, NGL and LNG imports to and exports from the U.S.;

•technological advances or social attitudes or policies affecting energy consumption and energy supply;

•domestic and foreign governmental legislative efforts, executive actions and regulations, including environmental regulations, climate change regulations and taxation;

•the effect of energy conservation efforts;

•stockholder activism or activities by non-governmental organizations to limit certain sources of capital for the energy sector or restrict the exploration, development and production of oil and gas;

•the proximity, capacity, cost and availability of pipelines and other processing, fractionation, refinery, storage and export facilities; and

•the price, availability and acceptance of alternative fuels.

Commodity prices have historically been, and continue to be, extremely volatile. For example, the Brent oil prices in 2020 ranged from a high of $68.91 to a low of $19.33 per Bbl and the NYMEX gas prices in 2020 ranged from a high of $3.35 to a low of $1.48 per MMBtu. The Company expects this volatility to continue. A further or extended decline in commodity prices could materially and adversely affect the Company's future business, financial condition, results of operations, liquidity or its ability to fund planned capital expenditures, pay dividends or repurchase shares of common stock. The Company makes price assumptions that are used for planning purposes, and a significant portion of the Company's cash outlays, including rent, salaries and noncancellable capital and transportation commitments, are largely fixed in nature. Accordingly, if commodity prices are below the expectations on which these commitments were based, the Company's financial results are likely to be adversely and disproportionately affected because these cash outlays are not variable in the short term and cannot be quickly reduced to respond to unanticipated decreases in commodity prices.

Significant or extended price declines could also materially and adversely affect the amount of oil, NGL and gas that the Company can produce economically, which may result in the Company having to make significant downward adjustments to its estimated proved reserves. A reduction in production could also result in a shortfall in expected cash flows and require the Company to reduce capital spending or borrow funds to cover any such shortfall. Any of these factors could negatively affect the Company's ability to replace its production and its future rate of growth.

Future declines in the price of oil, NGLs and gas ~~or other energy commodities, and any derivative activities related to such energy commodities, expose the Company to potential regulatory risks.~~

The FERC, the FTC and the CFTC hold statutory authority to monitor certain segments of the physical and futures energy commodities markets relevant to the Company's business. These agencies have imposed broad regulations prohibiting fraud and manipulation of such markets. With regard to the Company's transportation of gas in interstate commerce, physical sales and purchases of oil, NGL, gas or other energy commodities, and any derivative activities related to these energy commodities, the Company is required to observe the market-related regulations enforced by these agencies, which hold substantial enforcement authority. Failure to comply with such regulations, as interpreted and enforced, could result in ~~agency actions that~~a reduction in the carrying value of the Company's proved oil and gas properties, which could materially and adversely affect the Company's results of operations.

Significant or extended price declines could result in the Company having to make downward adjustments to the carrying value of its proved oil and gas properties. The Company performs assessments of the recoverability of its oil and gas properties whenever events or circumstances indicate that the carrying values of those assets may not be recoverable. In order to perform these assessments, management uses various observable and unobservable inputs, including management's outlooks for (i) proved reserves and risk-adjusted probable and possible reserves, (ii) commodity prices, (iii) production costs, (iv) capital expenditures and (v) production. To the extent such tests indicate a reduction of the estimated useful life or estimated future cash flows of the Company's oil and gas properties, the carrying value may not be recoverable and therefore an impairment charge would be required to reduce the carrying value of the proved properties to their fair value. For example, during 2018, the Company recorded impairment charges of $77 million attributable to its Raton Basin field in southeast Colorado, primarily due to declines in commodity prices and downward adjustments to the economically recoverable reserves attributable to the asset. The Company may incur impairment charges in the future, which could materially affect the Company's results of operations in the period incurred. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Impairment of oil and gas properties and other long-lived assets" and Note 4 of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

The Company's actual production could differ materially from its forecasts.

•expectations of production from existing wells and future drilling activity;

•the absence of facility or equipment malfunctions;

•the absence of adverse weather effects;

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•expectations of commodity prices, which could experience significant volatility;

•expected well costs; and

•the assumed effects of regulation by governmental agencies, which could make certain drilling activities or production uneconomical.

Should any of these assumptions prove inaccurate, or should the Company's development plans change, actual production could be materially and adversely affected.

The Company could experience periods of higher costs if commodity prices rise. These increases could reduce the Company's profitability, cash flow and ability to complete development activities as planned.

Historically, the Company's capital and operating costs have risen during periods of increasing oil, NGL and gas prices. These cost increases result from a variety of factors beyond the Company's control, such as increases in the cost of electricity, steel and other raw materials that the Company and its vendors rely upon; increased demand for labor, services and materials as drilling activity increases; and increased production and ad valorem taxes. Decreased levels of drilling activity in the oil and gas industry have historically led to cost reductions for some drilling equipment, materials and supplies. However, such costs may rise faster than increases in the Company's revenue if commodity prices rise, thereby negatively impacting the Company's profitability, cash flow and ability to complete development activities as scheduled and on budget. This impact may be magnified to the extent that the Company's ability to participate in the commodity price increases is limited by its derivative risk management activities.

The Company is a party to debt instruments, a credit facility and other financial commitments that may limit the Company's ability to fund future business and financing activities.

The Company is a borrower under fixed rate senior and convertible notes and maintains a credit facility that was undrawn as of December 31, 2020. The terms of the Company's borrowings specify scheduled debt repayments and require the Company to comply with certain associated covenants and restrictions. The Company's ability to comply with the debt repayment terms, associated covenants and restrictions is dependent on, among other things, factors outside the Company's direct control, such as commodity prices and interest rates. In addition, from time to time, the Company enters into arrangements and transactions that can give rise to material off-balance sheet obligations, including firm purchase, transportation and fractionation commitments, gathering, processing, transportation and storage commitments on uncertain volumes of future throughput, commitments to purchase minimum volumes of goods and services, operating lease agreements and drilling commitments. The Company's financial commitments could have important consequences to its business including, but not limited to, the following:

•the incurrence of charges associated with unused commitments if actual activities do not meet the Company's expectations at the time such commitments are entered into;

•increasing its vulnerability to adverse economic and industry conditions;

•limiting its flexibility to plan for, or react to, changes in its business and industry;

•limiting its ability to fund future development activities or engage in future acquisitions; and

•placing it at a competitive disadvantage compared to competitors that have less debt and/or fewer financial commitments.

The Company's ability to obtain additional financing is also affected by the Company's debt credit ratings and competition for available debt financing. A ratings downgrade could materially and adversely impact the Company's ability to access debt markets, increase the borrowing cost under the Company's credit facility and the cost of future debt and potentially require the Company to post letters of credit or other forms of credit support for certain obligations.

The Company's ability to declare and pay dividends and repurchase shares is subject to certain considerations.

Dividends are authorized and determined by the Company's board of directors in its sole discretion. The Company's stock repurchase program has no time limit, may be modified, suspended or terminated at any time by the board of directors, and the repurchase of shares pursuant to the stock repurchase program approved by the board of directors are made from time to time based on management's discretion. Decisions regarding the payment of dividends and the repurchase of shares are subject to a number of considerations, including:

•cash available for distribution or repurchases;

•the Company's results of operations and anticipated future results of operations;

•the Company's financial ~~condition.~~condition, especially in relation to the anticipated future capital needs;

•the level of cash reserves the Company may establish to fund future capital expenditures;

•the Company's stock price; and

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•other factors the board of directors deems relevant.

The Company can provide no assurance that it will continue to pay dividends or authorize share repurchases at the current rate or at all. Any elimination of or downward revision in the Company's dividend payout or stock repurchase program could have a material adverse effect on the market price of the Company's common stock.

A failure by purchasers of the Company's production to satisfy their obligations to the Company could have a material adverse effect on the Company's results of operation.

The Company relies on a limited number of purchasers to purchase a majority of its products. To the extent that purchasers of the Company's production rely on access to the credit or equity markets to fund their operations, there is a risk that those purchasers could default in their contractual obligations to the Company if such purchasers were unable to access the credit or equity markets for an extended period of time. If for any reason the Company were to determine that it was probable that some or all of the accounts receivable from any one or more of the purchasers of the Company's production were uncollectible, the Company would recognize a charge in the earnings of that period for the probable loss.

The failure by counterparties to the Company's derivative risk management activities to perform their obligations could have a material adverse effect on the Company's results of operations.

The use of derivative risk management transactions involves the risk that the counterparties will be unable to meet the financial terms of such transactions. The Company is unable to predict changes in a counterparty's creditworthiness or ability to perform. Even if the Company accurately predicts sudden changes, the Company's ability to negate the risk may be limited depending upon market conditions and the contractual terms of the transactions. During periods of declining commodity prices, the Company's derivative receivable positions generally increase, which increases the Company's counterparty credit exposure. If any of the Company's counterparties were to default on its obligations under the Company's derivative arrangements, such a default could (i) have a material adverse effect on the Company's results of operations, (ii) result in a larger percentage of the Company's future production being subject to commodity price changes and (iii) increase the likelihood that the Company's derivative arrangements may not achieve their intended strategic purposes.

The Company's derivative risk management activities could result in financial losses, limit the ~~Company’s~~Company's potential gains or fail to protect the Company from declines in commodity prices; the Company may not enter into derivative arrangements with respect to future volumes if prices are unattractive.

The Company's strategy is to enter into derivative arrangements covering a portion of its oil, NGL and gas production to mitigate the effect of commodity price volatility on the Company's net cash provided by operating activities and its net asset value, support the Company's annual capital ~~budgeting and~~ expenditure plans and ~~reduce commodity price risk associated with certain capital projects.~~planned dividend payments. In addition, Pioneer assumed existing derivative arrangements in the Parsley Acquisition, and they are now part of the Company's consolidated derivative arrangements. These derivative arrangements, on a combined basis, are subject to mark-to-market accounting treatment, and the changes in fair market value of the contracts are reported in the Company's statements of operations each quarter, which may result in significant noncash gains or losses.

While intended to reduce the effects of oil, NGL and gas price volatility, the Company's derivative arrangements may limit the Company's potential gains if prices rise over the price established by such arrangements. Conversely, the Company's derivative arrangements may be inadequate to protect the Company from continuing and prolonged declines in the price of oil, NGL or gas. Global commodity prices are volatile. Such volatility challenges the Company's ability to forecast the price of oil, NGL and gas, and, as a result, it may become more difficult for the Company to manage its derivative arrangements. In trying to manage its exposure to commodity price risk, the Company may end up with too many or too few derivatives, depending upon where commodity prices settle relative to the Company's derivative price thresholds and how the ~~Company’s~~Company's oil, NGL and gas volumes and production mix fluctuate relative to expectations when the derivatives were entered.

The ~~Company’s~~Company's derivative arrangements may also expose the Company to risk of financial loss in certain circumstances, including, but not limited to, when:

•production is less than the contracted derivative volumes;

•the counterparty to the derivative contract defaults on its contract obligations;

•there is a change in the expected differential between the underlying price in the derivative contract and actual prices received; or

•a sudden, unexpected event materially impacts oil ~~and/or~~and gas prices.

Failure to protect against declines in commodity prices exposes the Company to reduced liquidity when prices decline. A sustained lower commodity price environment would result in lower realized prices for unprotected volumes and reduce the

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prices at which the Company could enter into derivative contracts on future volumes. This could make such transactions unattractive, and, as a result, some or all of the Company's production volumes forecasted for ~~2020~~2021 and beyond may not be protected by derivative arrangements. In addition, the Company's derivatives arrangements may not achieve their intended strategic purposes.

~~The failure~~Pioneer's ability to utilize its historic U.S. net operating loss carryforwards and those of Parsley may be limited.

As of December 31, 2020, Pioneer and Parsley had U.S. federal net operating loss carryforwards ("NOLs") of $5.3 billion and $1.2 billion, respectively. Pioneer and Parsley NOLs of $2.8 billion and $611 million, respectively, were incurred prior to January 1, 2018 and will begin to expire, if unused, in 2032 and 2034, respectively, and $2.5 billion and $638 million, respectively, were incurred on or after January 1, 2018 and will not expire and will be carried forward indefinitely. Pioneer's ability to utilize these NOLs and other tax attributes to reduce future taxable income depends on many factors, including its future income, which cannot be assured. Section 382 of the Code ("Section 382") generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an "ownership change" (as determined under Section 382). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least five percent of such corporation's stock increase their ownership by ~~counterparties~~more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of the relevant corporation's NOLs would be subject to an annual limitation under Section 382, generally determined, subject to certain adjustments, by multiplying (i) the fair market value of such corporation's stock at the time of the ownership change by (ii) a percentage approximately equivalent to the ~~Company's derivative risk management activities~~yield on long-term tax-exempt bonds during the month in which the ownership change occurs. Any unused annual limitation may be carried over to ~~perform their obligations~~later years.

Parsley underwent an ownership change under Section 382 as a result of the Parsley Acquisition, which, based on information currently available, may trigger a limitation (calculated as described above) on Pioneer's ability to utilize any historic Parsley NOLs and could ~~have~~cause some of Parsley's NOLs incurred prior to January 1, 2018 to expire before Pioneer would be able to utilize them to reduce taxable income in future periods. While Pioneer's issuance of stock in the mergers would, standing alone, be insufficient to result in an ownership change with respect to Pioneer, the Company cannot assure that Pioneer will not undergo an ownership change as a ~~material adverse effect~~result of the mergers taking into account other changes in ownership of Pioneer stock occurring within the relevant three-year period described above. If Pioneer were to undergo an ownership change, it may be prevented from fully utilizing its historic NOLs incurred prior to January 1, 2018.

The Company periodically evaluates its unproved oil and gas properties to determine recoverability of its cost and could be required to recognize noncash charges in the earnings of future periods.

At December 31, 2020, the Company carried unproved oil and gas property costs of $576 million. GAAP requires periodic evaluation of these costs on a project-by-project basis. These evaluations are affected by the ~~Company's~~ results of ~~operations.~~exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of the leases and the contracts and permits appurtenant to such projects. If the quantity of potential reserves determined by such evaluations is not sufficient to fully recover the cost invested in each project, the Company will recognize noncash charges in the earnings in the period in which the unproved oil and gas properties is determined to be impaired.

The ~~use~~Company periodically evaluates its goodwill for impairment and could be required to recognize noncash charges in the earnings of ~~derivative risk management transactions involves~~future periods.

At December 31, 2020, the ~~risk~~Company had a carrying value for goodwill of $261 million. Goodwill is assessed for impairment annually during the third quarter and whenever facts or circumstances indicate that the counterparties will be unable to meet the financial terms of such transactions. The Company is unable to predict changes in a counterparty's creditworthiness or ability to perform. Even if the Company accurately predicts sudden changes, the Company's ability to negate the risk may be limited depending upon market conditions and the contractual terms of the transactions. During periods of declining commodity prices, the Company's derivative receivable positions generally increase, which increases the Company's counterparty credit exposure. If anycarrying value of the Company's ~~counterparties were to default on its obligations under~~goodwill may be impaired, which may require an estimate of the fair values of the reporting unit's assets and liabilities. Those assessments may be affected by (i) positive or negative reserve adjustments, (ii) results of drilling activities, (iii) management's outlook for commodity prices and costs and expenses, (iv) changes in the Company's ~~derivative arrangements, such a default could have a material adverse effect on~~market capitalization, (v) changes in the Company's ~~results~~weighted average cost of ~~operations,~~capital and (vi) changes in income taxes. If the fair value of the reporting unit's net assets is not sufficient to fully support the goodwill balance in the future, the Company will reduce the carrying value of goodwill for the impaired value, with a corresponding noncash charge to earnings in the period in which goodwill is determined to be impaired. If incurred, an impairment of the goodwill could result in a ~~larger percentage~~material noncash charge to the Company's earnings in the period in which goodwill is determined to be impaired.

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Health, safety and environmental risks.

The Company's operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and gas production may occur, and reduce demand for the oil and gas production it provides.

The threat of climate change continues to attract considerable attention in the United States and around the world. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions.

No comprehensive climate change legislation has been implemented at the federal level, but President Biden may pursue new climate change legislation and has already issued executive orders and may issue more orders or other regulatory initiatives to limit GHG emissions. At the federal level, the EPA has adopted rules that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and gas system sources, and impose new standards reducing methane emissions from oil and gas operations through limitations on venting and flaring and the implementation of enhanced emission leak detection and repair requirements. In recent years, there has been considerable uncertainty surrounding regulation of methane emissions, as the EPA under the Obama Administration published a CAA final rule in 2016 establishing new source performance standards ("NSPS") for methane, but since that time the EPA has undertaken several measures, including publishing in September 2020 final rule policy and technical amendments to the NSPS, for stationary sources of air emissions. The policy amendments, effective September 14, 2020, notably removed the transmission and storage sector from the regulated source category and rescinded methane and volatile organic compound ("VOC") requirements for the remaining sources that were established by former President Obama's Administration, whereas the technical amendments, effective November 16, 2020, included changes to fugitive emissions monitoring and repair schedules for gathering and boosting compressor stations and low-production wells, recordkeeping and reporting requirements, and more. Various state, industry and environmental groups are separately challenging both the original 2016 standards and the EPA's September 2020 final rules and on January 20, 2021, President Biden issued an executive order, that among other things, directed EPA to reconsider the technical amendments and to issue a proposed rule suspending, revising or rescinding those amendments by no later than September 2021. A reconsideration of the September 2020 policy amendments is expected to follow. The January 20, 2021 executive order also directed the establishment of new methane and VOC standards applicable to existing oil and gas operations, including the production, transmission, processing and storage segments.

Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as greenhouse gas cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of emissions. At the international level, President Biden issued executive orders in January 2021 re-committing the United States to the "Paris Agreement," a non-binding agreement for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, and directed the federal government to formulate the United States' emissions reduction goal under the agreement. Separately, on January 27, 2021, President Biden issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry and an increased emphasis on climate-related risks across government agencies and economic sectors.

Litigation risks are also increasing, as a number of states, municipalities and other plaintiffs have sought to bring suit against the largest oil and gas exploration and production companies in state or federal court, alleging, among other things, that such energy companies created public nuisances by producing fuels that contributed to global warming effects, such as rising sea levels, and therefore, are responsible for roadway and infrastructure damages as a result, or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors by failing to adequately disclose those impacts. There are also increasing financial risks for fossil fuel producers and other companies supportive of the oil and gas industry as shareholders and bondholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors. Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending and investment practices and some of them may elect not to provide funding for fossil fuel energy companies. Additionally, there is the possibility that financial institutions will be required to adopt policies that limit funding for fossil fuel energy companies, as President Biden recently signed an executive order calling for the development of a climate finance plan and, separately, the Federal Reserve announced that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector.

Finally, increasing concentrations of GHG in the Earth's atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods, rising sea levels and other climatic events. The occurrence of any one or more of these developments with respect to climate change initiatives and further

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restrictions on GHG emissions could have a material adverse effect on the Company's ~~future~~business, financial condition and results of operations.

The nature of the Company's assets and production ~~being~~operations may impact the environment or cause environmental contamination, which could result in material liabilities to the Company.

In recent years, wells used for the disposal by injection of flowback water or certain other oilfield fluids into non-producing formations have been associated with an increased number of seismic events, with research suggesting that the link between seismic events and wastewater disposal may vary by region and local geology. The U.S. geological survey has in the recent past identified six states with the most significant hazards from induced seismicity, which list included Texas. In response to these concerns, regulators in some states have adopted additional requirements related to seismicity and its potential association with hydraulic fracturing. For example, Texas has issued rules for wastewater disposal wells that imposed certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults. Other states, such as Oklahoma, have also issued orders for certain wells where seismic incidents have occurred to restrict or suspend disposal well operations. Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal. The occurrence of any one or more of these developments could have a material adverse effect on the Company's business, financial condition and results of operations.

The Company's hydraulic fracturing and former sand mining operations may result in silica-related health issues and litigation that could have a material adverse effect on the Company.

The Company routinely conducts hydraulic fracturing in its drilling and completion programs, which activity requires management and use of significant volumes of sand. Additionally, the Company owns and formerly operated certain sand mining operations. The inhalation of respirable crystalline silica dust is associated with the lung disease silicosis. There is evidence of an association between crystalline silica exposure or silicosis and lung cancer and a possible association with other diseases, including immune system disorders, such as scleroderma. These health risks have been, and may continue to be, a significant issue confronting the commercial sand industry. The actual or perceived health risks of mining, processing and handling sand could materially and adversely affect the Company through the threat of product liability or personal injury lawsuits, recently adopted OSHA silica regulations and increased scrutiny by federal, state and local regulatory authorities. The occurrence of significant silica-related health issues as well as any pending or future claims or inadequacies of insurance coverage or contractual indemnification arising out of such issues could have a material adverse effect on the Company's results of operations.

Increasing attention to ESG matters may impact the Company's business.

Businesses across all industries are facing increasing scrutiny from stakeholders related to their ESG practices. Businesses that do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price ~~changes~~of such business entity could be materially and adversely affected. Increasing attention to climate change, increasing societal expectations on businesses to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for the Company's hydrocarbon products, reduced profits, increased investigations and litigation, and negative impacts on its stock price and access to capital markets. Increasing attention to climate change, for example, may result in demand shifts for the Company's hydrocarbon products and additional governmental investigations and private litigation.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating business entities on their approach to ESG matters. Currently, there are no universal standards for such scores or ratings, but the importance of sustainability evaluations is becoming more broadly accepted by investors and shareholders. Such ratings are used by some investors to inform their investment and voting decisions. Additionally, certain investors use these scores to benchmark businesses against their peers and if a business entity is perceived as lagging, these investors may engage with such entities to require improved ESG disclosure or performance. Moreover,

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certain members of the broader investment community may consider a business entity's sustainability score as a reputational or other factor in making an investment decision. Consequently, a low sustainability score could result in exclusion of the Company's stock from consideration by certain investment funds, engagement by investors seeking to improve such scores and a negative perception of the Company's operations by certain investors.

Regulatory risks.

The Company's operations are subject to stringent environmental, oil and gas-related and occupational safety and health legal requirements that could increase its costs of doing business and result in additional operating restrictions, delays or cancellations in the completion of oil and gas wells, which could have a material adverse effect on the Company's business, results of operations and financial condition.

The Company's crude oil and gas exploration and production operations are subject to stringent federal, state and local legal requirements governing among other things, the drilling of wells, rates of production, the size and shape of drilling and spacing units or proration units, the transportation and sale of oil, NGLs and gas, the discharging of materials into the environment, environmental protection and occupational safety and health. These requirements may take the form of laws, regulations, and executive actions, and noncompliance with these legal requirements may subject the Company to sanctions, including administration, civil or criminal penalties, remedial cleanups or corrective actions, delays in permitting or performance of projects, natural resource damages and other liabilities.

In connection with its operations, the Company must obtain and maintain numerous environmental and oil and gas related permits, approvals and certificates from various federal, state and local governmental authorities, and may incur substantial costs in doing so. The need to obtain permits has the potential to delay, curtail or cease the development of oil and gas projects. The Company may in the future be charged royalties on gas emissions or required to incur certain capital expenditures for air pollution control equipment or other air emissions-related issues. For example, in 2015, the EPA under the Obama Administration issued a final rule under the CAA, making the National Ambient Air Quality Standard ("NAAQS") for ground-level ozone more stringent. Since that time, the EPA has issued area designations with respect to ground-level ozone and, more recently, in December 2020, the EPA, under the Trump Administration, published a final action that, upon conducting a periodic review of the ozone standard in accord with CAA requirements, elected to retain the 2015 ozone NAAQS without revision on a going-forward basis; however, several groups have filed litigation over this December decision, and the NAAQS may be subject to further revision under the Biden Administration. State implementation of the revised NAAQS could, among other things, require installation of new emission controls on some of the Company's equipment, result in longer permitting timelines, and significantly increase the Company's capital expenditures and operating costs.

In another example, in 2015, the EPA and U.S. Army Corps of Engineers ("Corps") under the Obama Administration released a final rule outlining federal jurisdictional reach under the CWA over waters of the United States; including wetlands; however, the 2015 rule was repealed by the EPA and the Corps under the Trump Administration in a final rule that became effective in December 2019. The EPA and the Corps also published a final rule in April 2020 re-defining the term "waters of the United States" as applied under the CWA and narrowed the scope of waters subject to federal regulation. The April 2020 final rule is subject to various pending legal challenges, and there is an expectation that this final rule will be reconsidered by the Biden Administration. If the EPA and the Corps revise the June 2020 final rule in a manner similar to or more stringent than the original 2015 final rule, or if any challenge to the June 2020 final rule is successful, the scope of the Clean Water Act's jurisdiction in areas where the Company conducts operations could again be expanded, which could result in increased costs and delay, restrict or halt permitting or development of projects.

Additionally, the Company's operations are subject to federal and state laws and regulations, including the federal OSHA and comparable state statutes, whose purpose is to protect the health and safety of employees. Among other things, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act, and comparable state statutes require that information be maintained concerning hazardous materials used or produced in the Company's operations and that this information be provided to employees, state and local government authorities and citizens.

Compliance with these legal requirements, or any other new environmental or occupational safety and health laws, regulations or executive actions could, among other things, require the Company to install new or modified emission or safety controls on equipment or processes, incur longer permitting timelines, and incur increased capital or operating expenditures, which costs may be significant. Additionally, one or more of these developments could impact the Company's oil and gas exploration, production and development activities, which could have a material adverse effect on its business, results of operations and financial condition.

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Laws, regulations and other executive actions or regulatory initiatives regarding hydraulic fracturing could increase the ~~likelihood~~Company's cost of doing business and result in additional operating restrictions, delays or cancellations that could have a material adverse effect on the Company's business, results of operations and financial condition.

The Company routinely conducts hydraulic fracturing in its drilling and completion programs. Hydraulic fracturing is typically regulated by state oil and gas commissions, but the practice continues to attract considerable public, scientific and governmental attention in certain parts of the country, resulting in increased scrutiny and regulation, including by federal agencies.

At the federal level, the EPA asserted federal regulatory authority under the SDWA over certain hydraulic fracturing activities involving the use of diesel fuels and published permitting guidance for such activities. Additionally, the EPA issued a final regulation under the CWA prohibiting discharges to publicly owned treatment works of wastewater from onshore unconventional oil and gas extraction facilities. In late 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that "water cycle" activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances. Also, in 2016, the BLM under the Obama Administration published a final rule imposing more stringent standards on hydraulic fracturing on federal lands; however, in late 2018, the BLM under the Trump Administration published a final rule rescinding the 2016 final rule. Since that time, litigation challenging the BLM's 2016 final rule and the 2018 final rule has resulted in rescission in federal courts of both the 2016 rule and the 2018 final rule but appeals of one or both of those decisions are expected.

Notwithstanding these regulatory developments, the Biden Administration has issued executive orders, could issue additional executive orders and could pursue other legislative and regulatory initiatives that restrict hydraulic fracturing activities on federal lands. For example, the Biden Administration issued an order on January 20, 2021 temporarily suspending the issuance of new leases and authorizations, including drilling permits on federal lands and waters for a period of 60 days, and subsequently issued a second order on January 27, 2021 suspending the issuance of new leases on federal lands and waters pending completion of a study of current oil and gas practices. Further constraints may be adopted by the Biden Administration in the future.

At the state level, many states have adopted legal requirements that have imposed new or more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities, including in states where the Company's oil and gas exploration and production activities occur. States could also elect to place prohibitions on hydraulic fracturing and local governments may seek to adopt ordinances within their jurisdictions regulating the time, place or manner of drilling activities in general or hydraulic fracturing activities in particular.

The federal ESA and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species' habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act ("MBTA"). The U.S. Fish and Wildlife Service ("FWS"), during the Trump Administration, issued a final rule on January 7, 2021, which clarifies that criminal liability under the MBTA will apply only to actions "directed at" migratory birds, its nests, or its eggs; however, in 2020, the U.S. District Court for the Southern District of New York vacated a Department of Interior memorandum articulating a similar interpretation. The Company expects that the January 7 rulemaking will be subject to litigation or to reconsideration by the Biden Administration. Some of the Company's operations are conducted in areas where protected species or their habitats are known to exist. In these areas, the Company may be obligated to develop and implement plans to avoid potential adverse effects to protected species and their habitats, and the Company may be delayed, restricted or prohibited from conducting operations in certain locations or during certain seasons, such as breeding and nesting seasons, when the Company's operations could have an adverse effect on the species. In addition, the FWS may make new determinations on the listing of species as endangered or threatened under the ESA. The dunes sagebrush lizard is one example of a species that, if listed as endangered or threatened under the ESA in the future, could impact the Company's operations. The designation of previously unprotected species or the re-designation of under protected species as threatened or endangered in areas where the Company conducts operations could cause the Company to incur increased costs arising from species protection measures or could result in delays, restrictions or prohibitions on its development and production activities that could have a material adverse effect on the Company's ability to develop and produce reserves.

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The Company's transportation of gas, sales and purchases of oil, NGLs and gas or other energy commodities, and any derivative ~~arrangements may not achieve their intended strategic purposes.~~activities related to such energy commodities, expose the Company to potential regulatory risks.

The FERC, the FTC and the CFTC hold statutory authority to monitor certain segments of the physical and futures energy commodities markets relevant to the Company's business. These agencies have imposed broad regulations prohibiting fraud and manipulation of such markets. With regard to the Company's transportation of gas in interstate commerce, physical sales and purchases of oil, NGL, gas or other energy commodities, and any derivative activities related to these energy commodities, the Company is required to observe the market-related regulations enforced by these agencies, which hold substantial enforcement authority. Failure to comply with such regulations, as interpreted and enforced, could result in agency actions that could materially and adversely affect the Company's results of operations and financial condition.

The enactment of derivatives legislation could have a material adverse effect on the Company's ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with its business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") enacted in July 2010, established federal oversight and regulation of the over-the-counter derivatives market and entities, such as the Company, that participate in that market. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations for its implementation. While many Dodd-Frank Act regulations are already in effect, the rulemaking and implementation process is ongoing, and the ultimate effect of the adopted rules and regulations and any future rules and regulations on the Company's business remain uncertain.

In one of the rulemaking proceedings still pending under the Dodd-Frank Act, the CFTC issued in ~~December 2016,~~January 2020 (withdrawing previous proposals from 2013 and 2016), proposed rules imposing position limits for certain futures and options contracts in various commodities (including oil and gas) and for swaps that are their economic equivalents. Under the proposed rules on position limits, certain types of derivative transactions are exempt from these limits, provided that such derivative transactions satisfy the CFTC's requirements for certain enumerated "bona fide" derivative transactions. The CFTC has also adopted final rules regarding aggregation of positions, under which a party that controls the trading of, or owns ten percent or more of the equity interests in, another party will have to aggregate the positions of the controlled or owned party with its own positions for purposes of determining compliance with position limits unless an exemption applies. The CFTC's aggregation rules are now in effect, although CFTC staff has granted relief until August 12, 2022 from various conditions and requirements in the final aggregation rules. These rules may affect both the size of the positions that the Company may hold and the ability or willingness of counterparties to trade with the Company, potentially increasing the costs of transactions. Moreover, such changes could materially reduce the Company's access to derivative opportunities, which could adversely affect revenues or cash flow during periods of low commodity prices. As the new position limit rules are not yet final, the impact of those provisions on the Company is uncertain at this time.

The CFTC has designated certain interest rate swaps and credit default swaps for mandatory clearing and the associated rules also will require the Company, in connection with covered derivative activities, to comply with clearing and trade-execution requirements or to take steps to qualify for an exemption to such requirements. Although the Company believes it qualifies for the end-user exception from the mandatory clearing requirements for swaps entered to mitigate its commercial risks, the application of the mandatory clearing and trade execution requirements to other market participants, such as swap dealers, may change the cost and availability of the swaps that the Company uses. If the Company's swaps do not qualify for the commercial end-user exception, or if the cost of entering into uncleared swaps becomes prohibitive, the Company may be required to clear such transactions. The ultimate effect of these rules and any additional regulations on the Company's business is uncertain.

In addition, certain banking regulators and the CFTC have adopted final rules establishing minimum margin requirements for uncleared swaps. Although the Company expects to qualify for the end-user exception from margin requirements for swaps entered into to manage its commercial risks, the application of such requirements to other market participants, such as swap dealers, may change the cost and availability of the swaps that the Company uses. If any of the Company's swaps do not qualify for the commercial end-user exception, the posting of collateral could reduce its liquidity and cash available for capital expenditures and could reduce its ability to manage commodity price volatility and the volatility in its cash flows.

The full impact of the Dodd-Frank Act and related regulatory requirements upon the Company's business will not be known until the regulations are fully implemented and the market for derivatives contracts has adjusted. In addition, it is possible that the Biden administration could expand regulation of the over-the-counter derivatives market and the entities that participate in that market through either the Dodd-Frank Act or the enactment of new legislation. The Dodd-Frank Act (and any regulations implemented thereunder) and any new ~~regulations~~legislation could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks the Company

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encounters and reduce the Company's ability to monetize or restructure its existing derivative contracts. Further, the Dodd-Frank Act was intended, in part, to reduce the volatility of oil and gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil and gas. The Company's revenues could therefore be materially and adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is to lower commodity prices.

The European Union and other non-U.S. jurisdictions are implementing regulations with respect to the derivatives market. To the extent the Company transacts with counterparties in foreign jurisdictions or counterparties with other businesses that subject them to regulations in foreign jurisdictions, the Company may become subject to, or otherwise affected by, such regulations. At this time, the impact of such regulations is not clear.

Regulation by the CFTC and banking regulators of the over-the-counter derivatives market and market participants could cause the Company's contract counterparties, which are generally financial institutions and other market participants, to curtail

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~~PIONEER NATURAL RESOURCES COMPANY~~

or cease their derivatives activities. The Company believes that these regulatory trends have contributed to a reduction in liquidity of the over-the-counter derivatives market, which could make it more difficult to engage in derivative transactions covering significant volumes of the ~~Company’s~~Company's future production, and which could materially and adversely affect the cost and availability of derivatives to the Company. If the Company reduces its use of derivatives as a result of such regulation, the Company's results of operations may become more volatile and its cash flows may be less predictable, which could materially and adversely affect the Company's ability to plan for and fund capital expenditures. Any of these consequences could have a material adverse effect on the Company, its financial condition and its results of operations.

The Company's bylaws provide, to the fullest extent permitted by law, that the Court of Chancery of the State of Delaware (orif the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for certain legal actions between the Company isand its stockholders and that the federal district courts of the United States shall be the sole and exclusive forum for the resolution of causes of action arising under the Securities Act of 1933. These provisions could increase costs to bring a ~~party to debt instruments, a credit facility and other financial commitments that may restrict its business and financing activities.~~

~~The Company is a borrower under fixed rate senior notes and maintains a credit facility that was undrawn as of December 31, 2019. The terms~~claim, discourage claims or limit the ability of the Company's ~~borrowings specify scheduled debt repayments~~stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company's directors, officers or other employees.

The Company's bylaws provide to the fullest extent permitted by law that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and ~~require~~exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or agent or stockholder of the Company to ~~comply with certain associated covenants and restrictions.~~the Company or the Company's stockholders, (c) any action against the Company arising pursuant to any provision of the Delaware General Corporation Law or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (d) any action against the Company or any director, officer, other employee or agent of the Company asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Company's certificate of incorporation or the Company's bylaws. The Company's bylaws also provided that the federal district courts of the United States shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933. Although the Company's bylaws provide for an exclusive forum for causes of action under the Securities Act of 1933, its stockholders will not be deemed to have waived compliance with the federal securities laws and the rules and regulations thereunder. The choice of forum provisions may increase costs to bring a claim, discourage claims or limit a stockholder's ability to ~~comply~~bring a claim in a judicial forum that it finds favorable for disputes with the ~~debt repayment terms,~~Company or the Company's directors, officers or other employees, which may discourage such lawsuits against the Company or the Company's directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company's bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated ~~covenants~~with resolving such action in other jurisdictions.

Risks associated with the Parsley Acquisition.

The financial and ~~restrictions is dependent~~operational synergies attributable to the Parsley Acquisition may vary from expectations.

Pioneer may fail to realize the anticipated benefits and synergies expected from the Parsley Acquisition, which could adversely affect its business, financial condition and operating results. The success of the Parsley Acquisition will depend, in significant part, on Pioneer's ability to successfully integrate the acquired business and realize the anticipated strategic benefits and synergies from the combination. Pioneer believes that the addition of Parsley will complement Pioneer's strategy by providing operational and financial scale, increasing free cash flow and enhancing Pioneer's corporate rate of return. However, achieving these goals requires, among other things, ~~factors outside~~realization of the ~~Company's direct control, such as commodity prices~~targeted cost synergies expected from the Parsley Acquisition. The anticipated benefits of the transaction may not be realized fully or at all, or may take longer to realize than expected. Actual operating, technological, strategic and interest rates. In addition, from time to time, the Company enters into arrangements and transactions that can give rise to material off-balance sheet obligations, including firm purchase, transportation and fractionation commitments, gathering, processing and transportation commitments on uncertain volumes of future throughput, commitments to purchase minimum volumes of goods and services, operating lease agreements and drilling commitments. The Company's financial commitments could have important consequences to its business including, but not limited to, the following:

•~~the incurrence of charges associated with unused commitments~~revenue opportunities, if ~~actual activities do not meet the Company's expectations~~achieved at ~~the time such commitments are entered into;~~

•~~increasing its vulnerability to adverse economic and industry conditions;~~

•~~limiting its flexibility to plan for, or react to, changes in its business and industry;~~

•~~limiting its ability to fund future development activities or engage in future acquisitions; and~~

•~~placing it at a competitive disadvantage compared to competitors that have less debt and/or fewer financial commitments.~~

~~The Company's ability to declare and pay dividends and repurchase shares is subject to certain considerations.~~

~~Dividends are authorized and determined by the Company's board of directors in its sole discretion. The Company's stock repurchase program has no time limit,~~all, may be modified, suspended or terminated at any time by the board of directors, and the repurchase of shares pursuant to the stock repurchase program approved by the board of directors are made from time to time based on management's discretion. Decisions regarding the payment of dividends and the repurchase of shares are subject to a number of considerations, including:

•~~cash available for distribution or repurchases;~~

•~~the Company's results of operations and anticipated future results of operations;~~

•~~the Company's financial condition, especially in relation to the anticipated future capital needs;~~

•~~the level of cash reserves the Company may establish to fund future capital expenditures;~~

•~~the Company's stock price; and~~

•~~other factors the board of directors deems relevant.~~

~~The Company's business could be materially and adversely affected by security threats, including cybersecurity threats, and other disruptions.~~

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~~implementation~~expected or may take longer to achieve than anticipated. If Pioneer is not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Parsley Acquisition within the anticipated timing or at all, Pioneer's business, financial condition and operating results may be adversely affected.

Litigation relating to the Parsley Acquisition could result in substantial costs to the Company.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert the time and resources of ~~various procedures and controls to monitor and mitigate security threats and to increase security for~~management. An adverse judgment could result in monetary damages, which could have a negative impact on the Company's ~~information, facilities~~liquidity and ~~infrastructure may result~~financial condition.

The Company, subsidiaries, or persons that have indemnification rights against the Company or its subsidiaries have been sued in increased capital and operating costs. Costs for insurance may also increase as a result of security threats, and some insurance coverage may become more difficult to obtain, if available at all. Moreover, thereconnection with the Parsley Acquisition. There can be no assurance that ~~such procedures~~the Company and ~~controls~~the other defendants will be ~~sufficient to prevent security breaches from occurring. If~~successful in the outcome of any such pending or any potential future lawsuits. The defense or settlement of any of these ~~security breaches were to occur, they could lead to losses of sensitive information, critical infrastructure~~pending or ~~capabilities essential to the Company's operations and could have a material adverse effect on the Company's reputation, financial position, results of operations and cash flows.~~

Cybersecurity attacks in particular are becoming more sophisticated. The Company relies extensively on information technology systems, including internet sites, computer software, data hosting facilities and other hardware and platforms, some of which are hosted by third parties, to assist in conducting its business. The Company's technologies systems and networks, and those of its business associatesfuture lawsuits may become the target of cybersecurity attacks, including without limitation denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, attempts to gain unauthorized access to data and systems, and other electronic security breaches that could lead to disruptions in critical systems and materially and adversely affect the Company's business, liquidity, financial condition and results of operations.

The Company ~~in a variety~~may be unable to integrate the business of ~~ways, including~~Parsley successfully and/or realize the anticipated benefits of the Parsley Acquisition.

The Parsley Acquisition involves the combination of two companies that operated as independent public companies. The combination of two independent businesses is complex, costly and time consuming, and the Company will be required to devote significant management attention and resources to integrating Parsley's business practices and operations with those of the Company. Potential difficulties that the Company may encounter as part of the integration process include the following:

•the inability to successfully combine the business of Parsley in a manner that permits the Company to achieve, on a timely basis or at all, the enhanced revenue opportunities, cost savings and other benefits anticipated to result from the Parsley Acquisition;

•~~unauthorized access to~~complexities associated with managing the combined businesses, including difficulty addressing possible differences in operational philosophies and ~~release~~the challenge of ~~seismic data, reserves information, strategic information~~integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on the customers, suppliers, employees and other constituencies;

•the assumption of contractual obligations with less favorable or ~~other sensitive~~more restrictive terms;

•potential unknown liabilities and unforeseen increased expenses associated with the Parsley Acquisition;

•diversion of the attention of the Company's management; and

•the disruption of, or ~~proprietary information, which~~the loss of momentum in, the Company's ongoing business or inconsistencies in standards, controls, procedures and policies.

Any of these issues could ~~have a material adverse effect on~~adversely affect the Company's ability to ~~compete for oil and gas resources;~~

•~~data corruption, communication interruption or other operational disruptions during drilling activities, which could result in the failure to reach the intended target or a drilling incident;~~

•~~data corruption or operational disruptions of production infrastructure, which could result in loss of production or accidental discharges;~~

•~~unauthorized access to and release of personal information of royalty owners,~~maintain relationships with customers, suppliers, employees and ~~vendors,~~other constituencies or achieve the ~~data~~anticipated benefits of the Parsley Acquisition, or ~~confidential information of customers, suppliers or other third parties, which~~ could ~~expose the Company to allegations that it did not sufficiently protect that information;~~

•~~a cybersecurity attack on a vendor or service provider, which could result in supply chain disruptions and could delay or halt operations;~~

•a cybersecurity attack on third-party gathering, transportation, processing, fractionation, refining or export facilities, which could delay or prevent the Company from transporting and marketing its production, resulting in a loss of revenues;

•~~a cybersecurity attack on a communications network or power grid, which could cause operational disruptions resulting in the loss of revenues; and~~

•~~a cybersecurity attack on~~reduce the Company's ~~automated and surveillance systems, which could cause a loss in production and potential environmental hazards.~~

~~These events could damage~~earnings or otherwise adversely affect the Company's ~~reputation~~business and ~~lead~~financial results.

The Company's future results will suffer if it does not effectively manage its expanded operations.

As a result of the Parsley Acquisition, the size and geographic footprint of the Company's business has increased. The Company's future success will depend, in part, upon its ability to ~~financial losses~~manage this expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and basins and associated increased costs and complexity. The Company may also face increased scrutiny from ~~remedial actions, loss of business or potential liability. Additionally, certain cyber incidents, such as surveillance, may remain undetected for an extended period of time.~~

While the Company has experienced cybersecurity attacks in the past, including attempts to gain unauthorized access to data and systems, inadvertent data privacy breaches by employees and phishing-attacks, the Company has not suffered any material lossesgovernmental authorities as a result of ~~such attacks. However, there is~~the increase in the size of its business. There can be no ~~assurance~~assurances that the Company will ~~not suffer such losses in~~be successful or that it will realize the future. As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities. Additionally, the continuing and evolving threat of cybersecurity attacks has resulted in evolving legal and compliance matters, including increased regulatory focus on prevention, which could require the Company to expend significant additional resources to meet such requirements.

~~Provisions of the Company's charter documents and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for the Company's common stock.~~

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~~discourage an acquisition of the Company~~expected operating efficiencies, cost savings, revenue enhancements or other ~~change in control transactions and thereby negatively affect~~benefits currently anticipated from the ~~price that investors might be willing to pay in the future for the Company's common stock.~~

~~The Company periodically evaluates its goodwill for impairment and could be required to recognize noncash charges in the earnings of future periods.~~

At December 31, 2019, the Company had a carrying value for goodwill of $261 million. Goodwill is assessed for impairment annually during the third quarter and whenever facts or circumstances indicate that the carrying value of the Company's goodwill may be impaired, which may require an estimate of the fair values of the reporting unit's assets and liabilities. Those assessments may be affected by (i) positive or negative reserve adjustments, (ii) results of drilling activities, (iii) management's outlook for commodity prices and costs and expenses, (iv) changes in the Company's market capitalization, (v) changes in the Company's weighted average cost of capital and (vi) changes in income taxes. If the fair value of the reporting unit's net assets is not sufficient to fully support the goodwill balance in the future, the Company will reduce the carrying value of goodwill for the impaired value, with a corresponding noncash charge to earnings in the period in which goodwill is determined to be impaired.

~~The Company's hydraulic fracturing and former sand mining operations may result in silica-related health issues and litigation that could have a material adverse effect on the Company.~~

The inhalation of respirable crystalline silica dust is associated with the lung disease silicosis. There is evidence of an association between crystalline silica exposure or silicosis and lung cancer and a possible association with other diseases, including immune system disorders, such as scleroderma. These health risks have been, and may continue to be, a significant issue confronting the commercial sand industry. The actual or perceived health risks of mining, processing and handling sand could materially and adversely affect the Company through the threat of product liability or personal injury lawsuits, recently adopted OSHA silica regulations and increased scrutiny by federal, state and local regulatory authorities.

Pioneer Sands LLC ("Pioneer Sands"), the Company's wholly-owned subsidiary that conducted sand mining operations, is named as a defendant, usually among many defendants, in numerous products liability lawsuits brought by or on behalf of current or former employees of Pioneer Sands or its commercial customers alleging damages caused by silica exposure. As of December 31, 2019, Pioneer Sands was the subject of silica exposure claims from two plaintiffs. Almost all of the claims pending against Pioneer Sands arise out of the alleged use of Pioneer Sands' sand products in foundries or as an abrasive blast media and have been filed in the states of Texas and Georgia, although some cases have been brought in other jurisdictions over the years.

It is possible that Pioneer Sands will have additional silica-related claims filed against it, including claims that allege silica exposure for periods for which there is not insurance coverage. In addition, it is possible that similar claims could be asserted arising out of the Company's other operations, including its hydraulic fracturing operations. Any pending or future claims or inadequacies of insurance coverage or contractual indemnification could have a material adverse effect on the Company's results of operations.Parsley Acquisition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

Reserve Estimation Procedures and Audits

The information included in this Report about the Company's proved reserves as of December 31, 2020, 2019 ~~2018~~ and ~~2017~~2018 is based on evaluations prepared by the Company's engineers and audited by Netherland, Sewell & Associates, Inc. ("NSAI"). ~~The Company has no oil and gas reserves from non-traditional sources. Additionally, the Company does not provide optional disclosure of probable or possible reserves.~~

Reserve estimation procedures. The Company has established internal controls over reserve estimation processes and procedures to support the accurate and timely preparation and disclosure of reserve estimates in accordance with SEC requirements. These controls include oversight of the reserves estimation reporting processes by Pioneer's Corporate Reserves Group ("Corporate Reserves"), and annual external audits of substantial portions of the Company's proved reserves by NSAI.

Corporate Reserves is ~~responsible for the management of the oil and gas proved reserve estimation processes. Corporate Reserves is~~ staffed with reservoir engineers and geoscientists who prepare reserve estimates ~~at the end of each calendar quarter,~~ using reservoir engineering information technology. Corporate Reserves interacts with the exploration and production functions to ensure all available engineering and geologic data is taken into account prior to establishing or revising an estimate. There is oversight of the reservoir engineers by the Director of ~~Corporate~~ Reserves who is in turn subject to direct oversight by the Company's management committee ("MC")~~. The Company's MC~~ which is comprised of its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and other executive officers. ~~The reserve estimates are prepared by reservoir engineers before being submitted to the Director of Corporate Reserves for further review.~~

The reserve estimates are summarized in reserve reconciliations that quantify reserve changes since the previous year end as revisions of previous estimates, purchases of minerals-in-place, improved recovery, extensions and discoveries, production and sales of minerals-in-place. All reserve estimates, material assumptions and inputs used in reserve estimates and significant changes in reserve estimates are reviewed for ~~engineering and financial~~ appropriateness and compliance with SEC rules and ~~GAAP standards by Corporate Reserves, in consultation with the Company's accounting and financial management personnel.~~U.S. GAAP. Annually, the MC reviews the reserve estimates, and any differences with ~~the reserve auditors (for~~NSAI for the portion of the reserves ~~audited by NSAI) on a consolidated basis~~that it audits, before these estimates are approved. The engineers and geoscientists who participate in the reserve estimation and disclosure process periodically attend training provided by external consultants and through internal Pioneer programs. Additionally, Corporate Reserves has prepared and maintains written policies and guidelines for its staff to reference on reserve estimation and preparation to promote consistency in the preparation of the Company's reserve estimates and compliance with the SEC reserve estimation and reporting rules.

Proved reserves audits. The proved ~~reserve audits performed~~reserves audited by NSAI, ~~for~~in aggregate, represented the following:


	As of December 31,
	2020		2019		2018
Proved reserves audited by NSAI	89	%	83	%	79	%
Pre-tax present value of proved reserves discounted at ten percent audited by NSAI	100	%	99	%	95	%

In connection with the annual reserves audit, NSAI prepared its own estimates of the Company's proved reserves and compared its estimates to those prepared by the Company. NSAI determined that the Company's estimates of reserves were prepared in accordance with the definitions and regulations of the SEC, including the criteria of "reasonable certainty," as it pertains to expectations about the recoverability of reserves in future years, under existing economic and operating conditions, consistent with the definition in Rule 4-10(a)(24) of Regulation S-X. NSAI issued an unqualified audit opinion on the Company's proved reserves at December 31, 2020, 2019 and 2018, ~~and 2017,~~respectively, based upon their evaluation. NSAI concluded that the Company's estimates of proved reserves were, in the aggregate, represented 83 percent, 79 percent and 77 percent of the Company's year-end 2019, 2018 and 2017 proved reserves, respectively; and 99 percent, 95 percent and 91 percent of the Company's year-end 2019, 2018 and 2017 associated pre-tax present value of proved reserves discounted at ten percent, respectively.

NSAI follows the general principles set forth in the "Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information" promulgated by the Society of Petroleum Engineers (the "SPE"). A reserve audit as defined by the SPE is not the same as a financial audit. The SPE's definition of a reserve audit includes the following concepts:

•~~A reserve audit is an examination of reserve information that is conducted for the purpose of expressing an opinion as to whether such reserve information, in the aggregate, is~~ reasonable and ~~has~~had been ~~presented~~prepared in ~~conformity~~accordance with ~~the 2007 SPE publication entitled "Standards~~Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves ~~Information."~~

•The estimation of reserves is an imprecise science due to the many unknown geologic and reservoir factors that cannot be estimated through sampling techniques. Since reserves are only estimates, they cannot be audited for the purpose of verifying exactness. Instead, reserve information is audited for the purpose of reviewing in sufficient detail the policies, procedures and methods used by a company in estimating its reserves so that the reserve auditors may express an opinion as to whether, in the aggregate, the reserve information furnished by a company is reasonable.

•The methods and procedures used by a company, and the reserve information furnished by a company, must be reviewed in sufficient detail to permit the reserve auditor, in their professional judgment, to express an opinion as to the reasonableness of the reserve information. The auditing procedures require the reserve auditor to prepare their own estimates of reserve information for the audited properties.

In conjunction with the audit of the Company's proved reserves and associated pre-tax present value discounted at ten percent, Pioneer provided to NSAI its external and internal engineering and geoscience technical data and analyses. Following

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NSAI's review of that data, it had the option of honoring Pioneer's interpretations, or making its own interpretations. No data was withheld from NSAI. NSAI accepted without independent verification the accuracy and completeness of the historical information and data furnished by Pioneer with respect to ownership interest, oil and gas production, well test data, commodity prices, operating and development costs, and any agreements relating to current and future operations of the properties and sales of production. However, if in the course of its evaluations something came to its attention that brought into question the validity or sufficiency of any such information or data, NSAI did not rely on such information or data until it had satisfactorily resolved its questions relating thereto or had independently verified such information or data.

In the course of its evaluations, NSAI prepared, for all of the audited properties, its own estimates of the Company's proved reserves and the pre-tax present values of such reserves discounted at ten percent. NSAI reviewed its audit differences with the Company, and, in a number of cases, held meetings with the Company to review additional reserves work performedInformation promulgated by the ~~Company's technical teams and any updated performance data related to the proved reserve differences. Such data was incorporated,~~Society of Petroleum Engineers. NSAI's report as ~~appropriate, by both parties into the proved reserve estimates. NSAI's estimates, including any adjustments resulting from additional data,~~ of those proved reserves and the pre-tax present value of such reserves discounted at ten percent did not differ from Pioneer's estimates by more than ten percent in the aggregate. However, when compared on a lease-by-lease, field-by-field or area-by-area basis, some of the Company's estimates were greater than those of the reserve auditors and some were less than the estimates of the reserve auditors. When such differences do not exceed ten percent in the aggregate and NSAI is satisfied that the proved reserves and pre-tax present values of such reserves discounted at ten percent are reasonable and that its audit objectives have been met, NSAI will issue an unqualified audit opinion. Remaining differences are not resolved due to the limited cost benefit of continuing such analyses by the Company and the reserve auditors. At the conclusion of the audit process, it was NSAI's opinion, as set forthDecember 31, 2020, which should be read in its ~~audit letter, which~~entirety, is ~~included~~attached as ~~an exhibit~~Exhibit 99.1 to this Annual Report that Pioneer's estimates of the Company's proved oil and gas reserves and associated pre-tax present values discounted at ten percent are, in the aggregate, reasonable and have been prepared in accordance with the "Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information."on Form 10-K.

Qualifications of proved reserves preparers and auditors. Corporate Reserves is staffed by petroleum engineers with extensive industry experience and is managed by the Director of ~~Corporate~~ Reserves, the technical person who is primarily responsible for overseeing the Company's reserves estimates. These individuals meet the professional qualifications of reserves estimators and reserves auditors as defined by the ~~"Standards~~Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information." The qualifications of the Director of ~~Corporate~~ Reserves include 4041 years of international and domestic experience as a petroleum engineer, with 2223 years focused on reserves reporting for independent oil and gas companies, including Pioneer. He has an additional 1819 years of Permian Basin-focused production engineering, advanced reservoir engineering, petrophysics, consulting and special project research experience with major oil companies. His educational background includes an undergraduate degree in Geological Engineering with a Petroleum Engineering emphasis.

NSAI provides worldwide petroleum property analysis services for energy clients, financial organizations and government agencies. NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-2699. The technical person primarily responsible for auditing the Company's reserves estimates has been a practicing consulting petroleum engineer at NSAI since ~~1983~~1998 and has over 40 years of practical experience in petroleum engineering, including over 3735 years of experience in the estimation and evaluation of proved reserves.

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He graduated with a Bachelor of Science degree in ~~Chemical~~Petroleum Engineering in ~~1978~~1980 and meets or exceeds the education, training and experience requirements set forth in the ~~"Standards~~Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information."

Technologies used in proved reserves estimates. Proved undeveloped reserves include those reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. Undeveloped reserves may be classified as proved reserves on undrilled acreage directly offsetting development areas that are reasonably certain of production when drilled, or where reliable technology provides reasonable certainty of economic producibility. Undrilled locations may be classified as having undeveloped proved reserves only if an ability and intent has been established to drill the reserves within five years, unless specific circumstances justify a longer time period.

In the context of reserves estimations, reasonable certainty means a high degree of confidence that the quantities will be recovered and reliable technology means a grouping of one or more technologies (including computational methods) that has been field-tested and has been demonstrated to provide reasonable certainty that the results will be consistent and repeatable in the formation being evaluated or in an analogous formation. In estimating proved reserves, the Company uses several different traditional methods such as performance-based methods, volumetric-based methods and analogy with similar properties. In addition, the Company utilizes additional technical analysis such as seismic interpretation, wireline formation tests, geophysical logs and core data to provide incremental support for more complex reservoirs. Information from this incremental support is combined with the traditional technologies outlined above to enhance the certainty of the Company's proved reserve estimates.

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Proved Reserves

~~Oil~~The Company's oil and gas proved reserves ~~located entirely in the United States,~~ are as follows:


		Summary of Oil and Gas Proved Reserves as of Fiscal Year-End Based on Average Fiscal-Year Prices
		Proved Reserve Volumes											Proved Reserve Volumes
		Oil (MBbls)	NGLs (MBbls)	Gas (MMcf) (a)	Total (MBOE)	%			Oil (MBbls)	NGLs (MBbls)	Gas (MMcf) (a)	Total (MBOE)	%
As of December 31, 2020:								As of December 31, 2020:
Developed								Developed	539,320	362,584	1,855,607	1,211,172	95	%
Undeveloped								Undeveloped	29,464	16,603	84,493	60,149	5	%
Total proved reserves								Total proved reserves	568,784	379,187	1,940,100	1,271,321	100	%
As of December 31, 2019:	As of December 31, 2019:							As of December 31, 2019:
Developed	Developed	571,293	268,468	1,429,417	1,077,997	95	%	Developed	571,293	268,468	1,429,417	1,077,997	95	%
Undeveloped	Undeveloped	32,457	13,515	70,096	57,655	5	%	Undeveloped	32,457	13,515	70,096	57,655	5	%
Total proved reserves	Total proved reserves	603,750	281,983	1,499,513	1,135,652	100	%	Total proved reserves	603,750	281,983	1,499,513	1,135,652	100	%
As of December 31, 2018:	As of December 31, 2018:							As of December 31, 2018:
Developed	Developed	521,579	219,730	1,330,852	963,118	92	%	Developed	521,579	219,730	1,330,852	963,118	92	%
Undeveloped	Undeveloped	43,431	21,184	127,722	85,902	8	%	Undeveloped	43,431	21,184	127,722	85,902	8	%
Total proved reserves	Total proved reserves	565,010	240,914	1,458,574	1,049,020	100	%	Total proved reserves	565,010	240,914	1,458,574	1,049,020	100	%
As of December 31, 2017:
Developed		442,364	189,434	1,629,451	903,373	92	%
Undeveloped		40,525	21,063	122,429	81,993	8	%
Total proved reserves		482,889	210,497	1,751,880	985,366	100	%

_____________________

(a)Total proved gas reserves include 115,239 MMcf, 100,236 MMcf ~~106,948 MMcf~~ and ~~171,623~~106,948 MMcf of gas that the Company expected to be produced and used as field fuel (primarily for compressors) as of December 31, 2020, 2019 ~~2018~~ and ~~2017,~~2018, respectively.

The Company's Standardized Measure of total proved reserves are as follows:


		As of December 31,											As of December 31,
		2019		2018		2017			2020		2019		2018
		(in millions)											(in millions)
Proved developed reserves	Proved developed reserves	$	7,588	$	10,694	$	7,708	Proved developed reserves	$	6,992	$	9,386	$	10,694
Proved undeveloped reserves	Proved undeveloped reserves	2,146		639		443		Proved undeveloped reserves	210		348		639
		$	9,734	$	11,333	$	8,151		$	7,202	$	9,734	$	11,333

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PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)


		Year Ended December 31,											Year Ended December 31,
		2019		2018		2017			2020		2019		2018
Revenues and other income:	Revenues and other income:							Revenues and other income:
Oil and gas	Oil and gas	$	4,916	$	4,991	$	3,518	Oil and gas	$	3,630	$	4,916	$	4,991
Sales of purchased oil and gas		4,755		4,388		1,776
Interest and other		76		38		53
Sales of purchased commodities								Sales of purchased commodities	3,394		4,755		4,388
Interest and other income (loss), net								Interest and other income (loss), net	(67)		76		38
Derivative gain (loss), net	Derivative gain (loss), net	34		(292)		(100)		Derivative gain (loss), net	(281)		55		(292)
Gain (loss) on disposition of assets, net	Gain (loss) on disposition of assets, net	(477)		290		208		Gain (loss) on disposition of assets, net	9		(477)		290
		9,304		9,415		5,455			6,685		9,325		9,415
Costs and expenses:	Costs and expenses:							Costs and expenses:
Oil and gas production	Oil and gas production	874		855		591		Oil and gas production	682		874		855
Production and ad valorem taxes	Production and ad valorem taxes	299		284		215		Production and ad valorem taxes	242		299		284
Depletion, depreciation and amortization	Depletion, depreciation and amortization	1,711		1,534		1,400		Depletion, depreciation and amortization	1,639		1,711		1,534
Purchased oil and gas		4,472		3,930		1,807
Purchased commodities								Purchased commodities	3,633		4,472		3,930
Impairment of oil and gas properties	Impairment of oil and gas properties	—		77		285		Impairment of oil and gas properties	0		0		77
Exploration and abandonments	Exploration and abandonments	58		114		106		Exploration and abandonments	47		58		114
General and administrative	General and administrative	324		381		326		General and administrative	244		324		381
Accretion of discount on asset retirement obligations	Accretion of discount on asset retirement obligations	10		14		19		Accretion of discount on asset retirement obligations	9		10		14
Interest	Interest	121		126		153		Interest	129		121		126
Other	Other	448		849		244		Other	321		448		849
		8,317		8,164		5,146			6,946		8,317		8,164
Income before income taxes		987		1,251		309
Income tax (provision) benefit		(231)		(276)		524
Net income		756		975		833
Income (loss) before income taxes								Income (loss) before income taxes	(261)		1,008		1,251
Income tax benefit (provision)								Income tax benefit (provision)	61		(235)		(276)
Net income (loss)								Net income (loss)	(200)		773		975
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	—		3		—		Net loss attributable to noncontrolling interests	0		0		3
Net income attributable to common stockholders		$	756	$	978	$	833
Net income (loss) attributable to common stockholders								Net income (loss) attributable to common stockholders	$	(200)	$	773	$	978

Net income per share attributable to common stockholders:
Net income (loss) per share attributable to common stockholders:								Net income (loss) per share attributable to common stockholders:
Basic	Basic	$	4.50	$	5.71	$	4.86	Basic	$	(1.21)	$	4.60	$	5.71
Diluted	Diluted	$	4.50	$	5.70	$	4.85	Diluted	$	(1.21)	$	4.59	$	5.70

Basic and diluted weighted average shares outstanding	Basic and diluted weighted average shares outstanding	167		171		170		Basic and diluted weighted average shares outstanding	165		167		171

The accompanying notes are an integral part of these consolidated financial statements.

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PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except share data and dividends per share)


			Equity Attributable to Common Stockholders
		Shares Outstanding	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Noncontrolling Interests		Total Equity			Shares Outstanding	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Noncontrolling Interests		Total Equity
		(in thousands)														(in thousands)
Balance as of December 31, 2016		169,724	$	2	$	8,892	$	(218)	$	1,728	$	7	$	10,411
Balance as of December 31, 2017															Balance as of December 31, 2017	170,189	$	2	$	8,974	$	(249)	$	2,547	$	5	$	11,279

Dividends declared ($0.08 per share)		—	—		—		—		(14)		—		(14)
Dividends declared ($0.32 per share)															Dividends declared ($0.32 per share)	—	—		—		—		(55)		—		(55)
Exercise of long term incentive plan stock options and employee stock purchases	Exercise of long term incentive plan stock options and employee stock purchases	81	—		1		5		—		—		6		Exercise of long term incentive plan stock options and employee stock purchases	58	—		3		5		—		—		8
Purchase of treasury stock	Purchase of treasury stock	(191)	—		—		(36)		—		—		(36)		Purchase of treasury stock	(1,272)	—		—		(179)		—		—		(179)
Compensation costs:	Compensation costs:														Compensation costs:
Vested compensation awards, net	Vested compensation awards, net	575	—		—		—		—		—		—		Vested compensation awards, net	524	—		—		—		—		—		0
Compensation costs included in net income	Compensation costs included in net income	—	—		79		—		—		—		79		Compensation costs included in net income	—	—		85		—		—		—		85
Purchase of noncontrolling interest		—	—		2		—		—		(2)		—
Sale of noncontrolling interest															Sale of noncontrolling interest	—	—		0		—		—		(2)		(2)
Net income	Net income	—	—		—		—		833		—		833		Net income	—	—		—		—		978		(3)		975
Balance as of December 31, 2017		170,189	$	2	$	8,974	$	(249)	$	2,547	$	5	$	11,279
Balance as of December 31, 2018															Balance as of December 31, 2018	169,499	$	2	$	9,062	$	(423)	$	3,470	$	0	$	12,111

Dividends declared ($0.32 per share)		—	—		—		—		(55)		—		(55)
Dividends declared ($1.20 per share)															Dividends declared ($1.20 per share)	—	—		—		—		(201)		—		(201)
Exercise of long-term incentive plan stock options and employee stock purchases	Exercise of long-term incentive plan stock options and employee stock purchases	58	—		3		5		—		—		8		Exercise of long-term incentive plan stock options and employee stock purchases	64	—		(1)		7		—		—		6
Purchase of treasury stock	Purchase of treasury stock	(1,272)	—		—		(179)		—		—		(179)		Purchase of treasury stock	(4,753)	—		—		(653)		—		—		(653)
Compensation costs:	Compensation costs:														Compensation costs:
Vested compensation awards, net	Vested compensation awards, net	524	—		—		—		—		—		—		Vested compensation awards, net	737	—		—		—		—		—		0
Compensation costs included in net income	Compensation costs included in net income	—	—		85		—		—		—		85		Compensation costs included in net income	—	—		100		—		—		—		100
Sale of noncontrolling interest		—	—		—		—		—		(2)		(2)
Net income (loss)		—	—		—		—		978		(3)		975
Balance as of December 31, 2018		169,499	$	2	$	9,062	$	(423)	$	3,470	$	—	$	12,111

Net income															Net income	—	—		—		—		773		0		773
Balance as of December 31, 2019															Balance as of December 31, 2019	165,547	$	2	$	9,161	$	(1,069)	$	4,042	$	0	$	12,136

The accompanying notes are an integral part of these consolidated financial statements.

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PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF EQUITY (continued)

(in millions, except share data and dividends per share)

Equity Attributable to Common Stockholders
Shares
Outstanding Common
Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Total
Equity
(in thousands)
Balance as of December 31, 2018 169,499 $ 2 $ 9,062 $ (423) $ 3,470 $ 12,111
Dividends declared ($1.20 per share) — — — — (201) (201)
Exercise of long-term incentive plan stock options and employee stock purchases 64 — (1) 7 — 6
Purchases of treasury stock (4,753) — — (653) — (653)
Compensation costs:
Vested compensation awards, net 737 — — — — —
Compensation costs included in net income — — 100 — — 100
Net income — — — — 756 756
Balance as of December 31, 2019 165,547 $ 2 $ 9,161 $ (1,069) $ 4,025 $ 12,119



	Shares Outstanding	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Total Equity
	(in thousands)
Balance as of December 31, 2019	165,547	$	2	$	9,161	$	(1,069)	$	4,042	$	12,136

Dividends declared ($2.20 per share)	—	—		—		—		(364)		(364)
Convertible senior notes:
Equity component	—	—		230		—		—		230
Capped call	—	—		(113)		—		—		(113)
Deferred tax provision	—	—		(25)		—		—		(25)
Exercise of long-term incentive plan stock options and employee stock purchases	98	—		(2)		11		—		9
Purchases of treasury stock	(1,634)	—		—		(176)		—		(176)
Compensation costs:
Vested compensation awards, net	466	—		—		—		—		0
Compensation costs included in net loss	—	—		72		—		—		72
Net loss	—	—		—		—		(200)		(200)
Balance as of December 31, 2020	164,477	$	2	$	9,323	$	(1,234)	$	3,478	$	11,569

The accompanying notes are an integral part of these consolidated financial statements.

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PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Year Ended December 31,
2019 2018 2017
Cash flows from operating activities:
Net income $ 756 $ 975 $ 833
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation and amortization 1,711 1,534 1,400
Impairment of oil and gas properties — 77 285
Impairment of inventory and other property and equipment 38 11 2
Exploration expenses, including dry holes 8 27 22
Deferred income taxes 236 274 (519)
(Gain) loss on disposition of assets, net 477 (290) (208)
Accretion of discount on asset retirement obligations 10 14 19
Interest expense 9 5 5
Derivative related activity 13 (270) 174
Amortization of stock-based compensation 100 85 79
Investment in affiliate valuation adjustment (15) — —
Contingent consideration valuation adjustment 45 — —
Other 105 658 85
Change in operating assets and liabilities:
Accounts receivable (227) (52) (120)
Inventories (20) (70) (35)
Other assets (33) 3 (3)
Accounts payable (7) 321 134
Interest payable — (5) (9)
Other liabilities (91) (55) (45)
Net cash provided by operating activities 3,115 3,242 2,099
Cash flows from investing activities:
Proceeds from disposition of assets, net of cash sold 149 469 352
Proceeds from investments 624 1,373 1,467
Purchase of investments — (669) (904)
Additions to oil and gas properties (2,988) (3,520) (2,365)
Additions to other assets and other property and equipment, net (232) (263) (342)
Net cash used in investing activities (2,447) (2,610) (1,792)
Cash flows from financing activities:
Principal payments on long-term debt — (450) (485)
Payments of other liabilities (14) (23) —
Exercise of long-term incentive plan stock options and employee stock purchases 6 8 6
Purchases of treasury stock (653) (179) (36)
Payments of financing fees — (4) —
Dividends paid (127) (55) (14)
Net cash used in financing activities (788) (703) (529)
Net decrease in cash, cash equivalents and restricted cash (120) (71) (222)
Cash, cash equivalents and restricted cash, beginning of period 825 896 1,118
Cash, cash equivalents and restricted cash, end of period $ 705 $ 825 $ 896


	Year Ended December 31,
	2020		2019		2018
Cash flows from operating activities:
Net income (loss)	$	(200)	$	773	$	975
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization	1,639		1,711		1,534
Impairment of oil and gas properties	0		0		77
Impairment of inventory and other property and equipment	3		38		11
Exploration expenses, including dry holes	11		8		27
Deferred income taxes	(52)		240		274
Gain (loss) on disposition of assets, net	(9)		477		(290)
Loss on early extinguishment of debt	27		0		0
Accretion of discount on asset retirement obligations	9		10		14
Interest expense	51		9		5
Derivative related activity	325		(8)		(270)
Amortization of stock-based compensation	72		100		85
Investment in affiliate valuation adjustment	64		(15)		0
South Texas contingent consideration valuation adjustment	42		45		0
South Texas deficiency fee obligation, net	80		0		0
Other	125		105		658
Change in operating assets and liabilities:
Accounts receivable	309		(227)		(52)

Inventories	(20)		(20)		(70)


Other assets	24		(33)		3
Accounts payable	(179)		(7)		321
Interest payable	(19)		0		(5)

Other liabilities	(219)		(91)		(55)
Net cash provided by operating activities	2,083		3,115		3,242
Cash flows from investing activities:
Proceeds from disposition of assets, net of cash sold	60		149		469

Proceeds from investments	0		624		1,373
Purchase of investments	(1)		0		(669)
Additions to oil and gas properties	(1,602)		(2,988)		(3,520)
Additions to other assets and other property and equipment, net	(125)		(232)		(263)
Net cash used in investing activities	(1,668)		(2,447)		(2,610)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net of discount	1,091		0		0
Proceeds from issuance of convertible senior notes	1,323		0		0

Purchase of derivatives related to issuance of convertible senior notes	(113)		0		0
Borrowing under credit facility	800		0		0
Repayment of credit facility	(800)		0		0
Repayment of senior notes, including tender offer premiums	(1,198)		0		(450)




Payments of other liabilities	(173)		(14)		(23)
Payments of financing fees	(36)		0		(4)
Purchases of treasury stock	(176)		(653)		(179)
Exercise of long-term incentive plan stock options and employee stock purchases	9		6		8

Dividends paid	(346)		(127)		(55)
Net cash provided by (used in) financing activities	381		(788)		(703)
Net increase (decrease) in cash, cash equivalents and restricted cash	796		(120)		(71)
Cash, cash equivalents and restricted cash, beginning of period	705		825		896
Cash, cash equivalents and restricted cash, end of period	$	1,501	$	705	$	825

The accompanying notes are an integral part of these consolidated financial statements.

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 ~~2018~~ and ~~2017~~2018

NOTE 1. Organization and Nature of Operations

Pioneer Natural Resources Company ("Pioneer" or the "Company") is a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. The Company is a large independent oil and gas exploration and production company that explores for, develops and produces oil, natural gas liquids ("NGLs") and gas in the Permian Basin in West Texas.

Impact of the COVID-19 Pandemic. A novel strain of the coronavirus ("COVID-19") surfaced in late 2019 and has spread around the world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic has significantly affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. In addition, the COVID-19 pandemic has resulted in travel restrictions, business closures and other restrictions that have disrupted the demand for oil throughout the world and when combined with pressures on the global supply-demand balance for oil and related products, resulted in significant volatility in oil prices beginning in late February 2020. The length of this demand disruption is unknown, and will ultimately depend on various factors beyond the Company's control, such as the duration and scope of the pandemic, the length and severity of the worldwide economic downturn, the ability of OPEC, Russia and other oil producing nations to manage the global oil supply, additional actions by businesses and governments in response to the pandemic, the speed and effectiveness of responses to combat the virus, including the effectiveness of the COVID-19 vaccines, and the time necessary to balance oil supply and demand. Additionally, there is significant uncertainty regarding the lasting impacts of the pandemic on global demand, as it cannot be predicted as to whether certain demand-reducing behaviors such as declines in business travel and changes in work-from-home practices will persist beyond the resolution of the pandemic. The length of this demand disruption is unknown, and there is significant uncertainty regarding the long-term impact of the effects of the COVID-19 pandemic to global oil demand, which has negatively impacted the Company's results of operations and led to a significant reduction in the Company's 2020 capital activities.

NOTE 2. Summary of Significant Accounting Policies

Principles of consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries since their acquisition or formation. All material intercompany balances and transactions have been eliminated. ~~Certain reclassifications~~

Correction of previously issued financial statements. During the Company's review of its marketing contracts during the fourth quarter of 2020, the Company identified two long-term marketing contracts that should have been accounted for as derivative contracts. The contracts were entered in October 2019, each with a January 1, 2021 contract commencement date and a December 31, 2026 contract termination date. In order to properly account for the contracts as derivatives, certain noncash revisions have been made to ~~prior period amounts to conform~~the 2019 consolidated financial statements. In addition, the unaudited consolidated financial statements for the first three quarters of 2020 were revised or restated accordingly.

In accordance with Staff Accounting Bulletin ("SAB") No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the misstatements and, based on an analysis of quantitative and qualitative factors, determined that the related impact was not material to the ~~current period's presentation.~~Company's 2019 annual consolidated financial statements or interim periods prior to September 30, 2020; however, the Company determined that the impact of the misstatement to its interim period ending September 30, 2020 was material. In accordance with Accounting Standards Codification 250, Accounting Changes and Error Corrections, the Company has corrected the misstatement for the year ended December 31, 2019 by revising the consolidated financial statements appearing herein. The net impact of these immaterial corrections to the Company's previously reported consolidated financial statements for the year ended December 31, 2019 is shown below. In addition, see Selected Quarterly Financial Results for revisions and restatements to the Company's previously issued unaudited interim consolidated financial statements that were impacted by this misstatement.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

Consolidated balance sheet (in millions):


	December 31, 2019
	As Reported		Revisions		As Revised
ASSETS

























Derivatives	$	0	$	21	$	21

Total assets	$	19,067	$	21	$	19,088
LIABILITIES AND EQUITY
Deferred income taxes	$	1,389	$	4	$	1,393

Retained earnings	$	4,025	$	17	$	4,042
Total equity	$	12,119	$	17	$	12,136

Total liabilities and equity	$	19,067	$	21	$	19,088

Consolidated statement of operations (in millions, except per share data):


	December 31, 2019
	As Reported		Revisions		As Revised




Derivative gain, net	$	34	$	21	$	55














Income before income taxes	$	987	$	21	$	1,008
Income tax provision	$	(231)	$	(4)	$	(235)
Net income	$	756	$	17	$	773

Net income attributable to common stockholders	$	756	$	17	$	773

Net income per share attributable to common stockholders:
Basic	$	4.50	$	0.10	$	4.60
Diluted	$	4.50	$	0.09	$	4.59

These revisions had no effect on the Company's previously reported year ended 2019 net cash flows from operating activities, investing activities or financing activities.

Use of estimates in the preparation of financial statements. Preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Depletion of oil and gas properties ~~and impairment of proved and unproved oil and gas properties and goodwill, in part,~~ is determined using estimates of proved ~~probable and possible~~ oil and gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved ~~probable and possible~~ reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves, ~~and~~ commodity price ~~outlooks.~~outlooks and prevailing market rates of other sources of income and costs. Actual results could differ from the estimates and assumptions utilized.

Cash and cash equivalents. The Company's cash and cash equivalents include depository accounts held by banks and marketable securities (including commercial paper and time deposits) with original issuance maturities of 90 days or less.

Restricted cash. The Company's restricted cash includes funds held in escrow to cover future deficiency fee payments in connection with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas (the "South Texas Divestiture"). Beginning in 2021, the required escrow balance declines and, to the extent there is any remaining balance after the payment of deficiency fees, the balance will become unrestricted and revert to the Company on March 31, 2023. Interest income related to restricted cash is recorded in interest and other income in the consolidated statements of operations.

~~Investments.~~ Periodically, the Company invests in commercial paper and corporate bonds with investment grade rated entities. The Company also periodically enters into time deposits with financial institutions. Commercial paper and time deposits are included in cash and cash equivalents if they have maturity dates that are less than 90 days at the date of purchase; otherwise, investments are included in short-term investments or long-term investments in the consolidated balance sheets based on their maturity dates.

As of December 31, 2019, the Company has no investments classified as held-to-maturity. As of December 31, 2018, the Company's investments were carried at amortized cost and classified as held-to-maturity as the Company had the intent and ability to hold them until they mature. The carrying values of held-to-maturity investments were adjusted for amortization of premiums and accretion of discounts over the remaining life of the investment. Income related to these investments was recorded in interest and other income in the consolidated statements of operations.

Accounts receivable. The Company's accounts receivable – trade are primarily comprised of oil and gas sales receivables, joint interest receivables and other receivables for which the Company does not require collateral security. The

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

Company's share of oil and gas production is sold to various purchasers who must be prequalified under the Company's credit risk policies and procedures. The Company records allowances for doubtful accounts based on historical collection experience, current and future economic and market conditions, the ~~age~~length of time that the accounts receivables have been outstanding and the financial condition of its purchasers. The Company's credit risk related to collecting accounts receivables is mitigated by using credit and other financial criteria to evaluate the credit standing of the entity obligated to make payment on the accounts receivable, and where appropriate, the Company obtains assurances of payment, such as a guarantee by the parent company of the counterparty letters of credit or other credit support.

The Company's allowance for doubtful accounts totaled $3 million and $2 million ~~for each~~as of ~~the years ended~~ December 31, 2020 and 2019, ~~and 2018.~~respectively. On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") prospectively. This ASU replaced the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires the Company to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. As a result of adopting ASU 2016-13, the Company establishes allowances for bad debts equal to the estimable portions of accounts receivable for which

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~~December 31, 2019, 2018 and 2017~~

failure to collect is ~~considered probable.~~expected to occur. The Company estimates ~~the portions of~~uncollectible amounts for joint interest receivables for which failure to collect is probable based on percentages of joint interest receivables that are past due. The Company estimates the portions of other receivables for which failure to collect is probable based on the ~~relevant facts~~length of time that the accounts receivables have been outstanding, historical collection experience and ~~circumstances surrounding the receivable.~~current and future economic and market conditions. Allowances for doubtful accounts are recorded as reductions to the carrying values of the receivables included in the Company's consolidated balance sheets and are recorded in other expense in the consolidated statements of operations in the accounting periods during which failure to collect an estimable portion is determined to be probable.

Inventories. The Company's inventories consist of materials, supplies and commodities. The Company's materials and supplies inventory is primarily comprised of oil and gas maintenance materials and repair parts, water, chemicals and other operating supplies. The materials and supplies inventory is primarily acquired for use in future drilling and production operations or repair operations and is carried at the lower of cost or market, on a weighted average cost basis. Valuation allowances for materials and supplies inventories are recorded as reductions to the carrying values of the materials and supplies inventories included in the Company's consolidated balance sheets and are recorded in other expense in the consolidated statements of operations.

Commodity inventories are carried at the lower of cost or market, on a first-in, first-out basis. The Company's commodity inventories consist of oil, NGLs, gas and ~~gas~~diesel volumes held in storage or as linefill in pipelines. Any valuation allowances of commodity inventories are recorded as reductions to the carrying values of the commodity inventories included in the Company's consolidated balance sheets and as charges to other expense in the consolidated statements of operations.

The components of inventories are as follows:


		As of December 31,							As of December 31,
		2019		2018			2020		2019
		(in millions)							(in millions)
Materials and supplies (a)	Materials and supplies (a)	$	75	$	128	Materials and supplies (a)	$	75	$	75
Commodities	Commodities	130		114		Commodities	149		130

Total inventories	Total inventories	$	205	$	242	Total inventories	$	224	$	205

____________________

(a)As of December 31, ~~2019~~2020 and ~~2018,~~2019, the Company's materials and supplies inventories were net of valuation allowances of $2$1 million and $5$2 million, respectively.

Investment in affiliate. In December 2018, the Company completed the sale of its pressure pumping assets to ProPetro Holding Corp. ("ProPetro") in exchange for cash and 16.6 million shares of ProPetro's common stock, representing an ownership interest in ProPetro of 16 percent. Additionally, in October 2019, Phillip A. Gobe, a nonemployee member of the Company's board of directors, was appointed by the board of directors of ProPetro to serve as its Executive ~~Chairman.~~Chairman, and in March 2020 he was appointed as Chief Executive Officer and Chairman of the Board of Directors. Mark S. Berg, the Company's Executive Vice President, Corporate Operations, ~~continues to serve~~serves as a member of the ProPetro board of directors under the Company's right acquired upon the sale of its pressure pumping assets to designate a director to the board of directors of ProPetro so long as the Company owns 5five percent or more of ProPetro's outstanding common stock. Based on the Company's ownership in ProPetro and representation on the ProPetro board of directors, ProPetro is considered an affiliate and deemed to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

be a related party. The Company uses the fair value option to account for its equity method investment in ProPetro with any changes in fair value recorded in interest and other income in the consolidated ~~statements~~statement of operations. The carrying value of the Company's investment in ProPetro is included in investment in affiliate in the consolidated balance sheets. See Note 4 and Note 12 for additional information.

Oil and gas properties. The Company utilizes the successful efforts method of accounting for its oil and gas properties. Under this method, all costs associated with productive wells and nonproductive development wells are capitalized while nonproductive exploration costs and geological and geophysical expenditures are expensed. The Company capitalizes interest on expenditures for significant development projects, generally when the underlying project is sanctioned, until such projects are ready for their intended use.

The Company does not carry the costs of drilling an exploratory well as an asset in its consolidated balance sheets following the completion of drilling unless both of the following conditions are met: (i) the well has found a sufficient quantity of reserves to justify its completion as a producing well and (ii) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project.

~~Table~~ The Company's exploratory wells include extension wells which extend the limits of ~~Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

a known reservoir.

Due to the capital-intensive nature and the geographical location of certain projects, it may take an extended period of time to evaluate the future potential of an exploration project and the economics associated with making a determination on its commercial viability. In these instances, the project's feasibility is not contingent upon price improvements or advances in technology, but rather the Company's ongoing efforts and expenditures related to accurately predicting the hydrocarbon recoverability based on well information, gaining access to other companies' production data in the area, transportation or processing facilities, and/or getting partner approval to drill additional appraisal wells. These activities are ongoing and are being pursued constantly. Consequently, the Company's assessment of suspended exploratory well costs is continuous until a decision can be made that the project has found sufficient proved reserves to sanction the project or is noncommercial and is charged to exploration and abandonments expense. See Note 6 for additional information.

As of December 31, ~~2019,~~2020, the Company owns interests in 11 gas processing plants, including the related gathering systems. The Company's ownership interests in the gas processing plants are primarily to accommodate handling the Company's gas production and thus are considered a component of the capital and operating costs of the respective fields that they service. The ~~operators~~operator's of the plants process the Company's and third-party gas volumes for a fee. The Company's share of revenues and expenses derived from volumes processed through the plants and treating facilities are reported as components of oil and gas production costs. Revenues generated from the processing plants and treating facilities for the years ended December 31, 2020, 2019 and 2018 ~~and 2017~~ were ~~$90~~$178 million, ~~$78~~$140 million and ~~$60~~$124 million, respectively. Expenses attributable to the processing plants and treating facilities for the same respective periods were ~~$43~~$76 million, ~~$36~~$65 million and ~~$26~~$75 million. The capitalized costs of the plants and treating facilities are included in proved oil and gas properties and are depleted using the unit-of-production method along with the other capitalized costs of the field that they service.

The capitalized costs of proved properties are depleted using the unit-of-production method based on proved reserves. Costs of significant nonproducing properties, wells in the process of being drilled and development projects are excluded from depletion until the related project is completed and proved reserves are established or, if unsuccessful, impairment is recognized.

Proceeds from the sales of individual properties and the capitalized costs of individual properties sold or abandoned are credited and charged, respectively, to accumulated depletion, depreciation and amortization, if doing so does not materially impact the depletion rate of an amortization base. Generally, no gain or loss is recorded until an entire amortization base is sold. However, gain or loss is recorded from the sale of less than an entire amortization base if the disposition is significant enough to materially impact the depletion rate of the remaining properties in the amortization base.

The Company performs assessments of its long-lived assets to be held and used, including proved oil and gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. An impairment loss is indicated if the sum of the expected future cash flows, including vertical integrated services that are used in the development of the assets, is less than the carrying amount of the assets, including the carrying value of vertical integrated services assets. In these circumstances, the Company recognizes an impairment charge for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Impairment charges for proved oil and gas properties are recorded in impairment of oil and gas properties in the consolidated statements of operations. See Note 4 for additional information.

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Unproved oil and gas properties are periodically assessed for impairment on a project-by-project basis. These impairment assessments are affected by the results of exploration activities, commodity price outlooks, planned future property sales or expiration of all or a portion of such projects. If the estimated future net cash flows attributable to such projects are not expected to be sufficient to fully recover the costs invested in each project, the Company will recognize an impairment charge at that time. Impairment charges for unproved oil and gas properties are recorded in exploration and abandonments in the consolidated statements of operations.

Goodwill. Goodwill is assessed for impairment whenever it is more likely than not that events or circumstances indicate the carrying value of a reporting unit exceeds its fair value, but no less often than annually. An impairment charge is recorded for the amount by which the carrying amount exceeds the fair value of a reporting unit in the period it is determined to be impaired.

The Company performed its annual qualitative assessment of goodwill during the third quarter of ~~2019~~2020 to determine whether it was more likely than not that the fair value of the Company's reporting unit was less than its carrying amount. Based on the results of the assessment, the Company determined it was not likely that the carrying value of the Company's reporting unit exceeded its fair value.

See ~~Table of Contents~~Note 4

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

for additional information.

Other property and equipment, net. Other property and equipment is recorded at cost. The carrying values of other property and equipment, net of accumulated depreciation of ~~$382~~$463 million and ~~$854~~$382 million as of December 31, ~~2019~~2020 and ~~2018,~~2019, respectively, are as follows:


		As of December 31,							As of December 31,
		2019		2018			2020		2019
		(in millions)							(in millions)
Land and buildings (a)	Land and buildings (a)	$	877	$	380	Land and buildings (a)	$	849	$	877
Water infrastructure (b)	Water infrastructure (b)	404		343		Water infrastructure (b)	414		404
Construction-in-progress and capitalized interest (c)	Construction-in-progress and capitalized interest (c)	152		311		Construction-in-progress and capitalized interest (c)	174		152
Information technology	Information technology	120		143		Information technology	71		120
Transport and field equipment (d)	Transport and field equipment (d)	35		50		Transport and field equipment (d)	34		35
Furniture and fixtures	Furniture and fixtures	28		15		Furniture and fixtures	27		28
Proved and unproved sand properties (e)		16		36
Leasehold improvements		—		13
Sand reserves (e)						Sand reserves (e)	15		16

Total other property and equipment, net	Total other property and equipment, net	$	1,632	$	1,291	Total other property and equipment, net	$	1,584	$	1,632

____________________

(a)Includes land, buildings, any related improvements to land and buildings, and a finance lease entered into by the Company for its ~~new~~ corporate headquarters in Irving, Texas. See Note 10 for additional information.

(b)Includes costs for pipeline infrastructure and water supply wells.

(c)Includes capitalized costs and capitalized interest on other property and equipment not yet placed in service.

(d)Includes vehicles and well servicing equipment, including pulling units, fracture stimulation tanks, water transport trucks, hot oilers, construction equipment and fishing tools, that are used on Company-operated properties.

(e)Includes sand mines ~~facilities~~ and unproved leaseholds that ~~primarily~~ provide the Company with proppant for use in the fracture stimulation of oil and gas wells.

Other property and equipment is depreciated over its estimated useful life on a straight-line basis. Buildings are generally depreciated over 20 to 39 years. Water infrastructure is generally depreciated over three to 50 years. Equipment, vehicles, furniture and fixtures and information technology assets are generally depreciated over three to 10 years. ~~Water infrastructure is generally depreciated over~~ ~~three~~ ~~to 50 years. Leasehold improvements~~Sand reserves are ~~amortized over the lesser of their estimated useful lives or the underlying terms of the associated leases.~~depleted on a units-of-production basis.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recorded is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value. The estimated fair value is determined using either a discounted future cash flow model or another appropriate fair value method.

Leases. The Company enters into leases for drilling rigs, storage tanks, equipment and buildings and recognizes lease expense on a straight-line basis over the lease term. Lease right-of-use assets and liabilities are initially recorded on the lease commencement date based on the present value of lease payments over the lease term. As most of the Company's lease contracts do not provide an implicit discount rate, the Company uses its incremental borrowing rate, which is determined based

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December 31, 2020, 2019 and 2018

on information available at the commencement date of a lease. Leases may include renewal, purchase or termination options that can extend or shorten the term of the lease. The exercise of those options is at the ~~Company’s~~Company's sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required. Leases with an initial term of 12 months or less are not recorded as a lease right-of-use asset and liability. See Note 10 for additional information.

Asset retirement obligations. The Company records a liability for the fair value of an asset retirement obligation in the period in which the associated asset is acquired or placed into service, if a reasonable estimate of fair value can be made. Asset retirement obligations are generally capitalized as part of the carrying value of the long-lived asset to which it relates. Conditional asset retirement obligations meet the definition of liabilities and are recorded when incurred and when fair value can be reasonably estimated.

The Company includes the current and noncurrent portions of asset retirement obligations in other current liabilities and other liabilities, respectively, in the consolidated balance sheets and expenditures are included as cash used in operating activities in the consolidated statements of cash flows. See Note 9 for additional information.

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~~December 31, 2019, 2018 and 2017~~

Treasury stock. Treasury stock purchases are recorded at cost. Upon reissuance, the cost of treasury shares held is reduced by the average purchase price per share of the aggregate treasury shares held.

Revenue recognition. On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers," ("ASC 606") using the modified retrospective transition method. The adoption did not require an adjustment to retained earnings as there was no material change to the timing or pattern of revenue recognition due to the adoption of ASC 606. The Company recognizes revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

Oil sales. Sales under the Company's oil contracts are generally considered performed when the Company sells oil production at the wellhead and receives an agreed-upon index price, net of any price differentials. The Company recognizes the sales revenue when (i) control/custody transfers to the purchaser at the wellhead and (ii) the net price is fixed and determinable.

NGL and gas sales. Under the majority of the ~~Company’s~~Company's gas processing contracts, gas is delivered to a midstream processing entity and the Company elects to take residue gas and NGLs in-kind at the tailgate. The Company recognizes revenue when the products are delivered (custody transfer) to the ultimate third-party purchaser at a contractually agreed-upon delivery point at a specified index price.

Sales of purchased ~~oil and gas.~~commodities. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's ~~West Texas Intermediate~~ oil ~~("WTI")~~ and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and ~~LNG facilities,~~West Coast gas markets and (iii) international ~~export~~oil markets and to satisfy unused gas pipeline capacity commitments. Revenues and expenses from these transactions are generally presented on a gross basis as the Company acts as a principal in the transaction by assuming both the ~~risk~~risks and rewards of ownership, including credit risk, of the commodities purchased and the responsibility to deliver the commodities sold. ~~Transportation~~In conjunction with the Company's downstream sales, the Company also enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production to downstream sales points. The transportation costs associated with these transactions are ~~presented on a net basis~~included in purchased ~~oil and gas~~commodities expense. ~~Firm transportation payments on excess pipeline capacity are recorded as other expense in the consolidated statements of operations.~~

See Note 14 ~~and~~ ~~Note 16~~ for additional information.

Derivatives. All of the Company's derivatives are accounted for as non-hedge derivatives and are recorded at estimated fair value in the consolidated balance sheets. All changes in the fair values of its derivative contracts are recorded as gains or losses in the earnings of the periods in which they occur. The Company enters into derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty. The Company classifies the fair value amounts of derivative assets and liabilities executed under master netting arrangements as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by commodity and counterparty.

Net derivative asset values are determined, in part, by utilization of the derivative counterparties' credit-adjusted risk-free rate curves and net derivative liabilities are determined, in part, by utilization of the Company's credit-adjusted risk-free rate

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December 31, 2020, 2019 and 2018

curve. The credit-adjusted risk-free rate curves for the Company and the counterparties are based on their independent market-quoted credit default swap rate curves plus the United States Treasury Bill yield curve as of the valuation date.

The Company's credit risk related to derivatives is a counterparty's failure to perform under derivative contracts owed to the Company. The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the Company's credit risk policies and procedures.

The Company has entered into International Swap Dealers Association Master Agreements ("ISDA Agreements") with each of its derivative counterparties. The terms of the ISDA Agreements provide the Company and the counterparties with rights of set off upon the occurrence of defined acts of default by either the Company or a counterparty to a derivative, whereby the party not in default may set off all derivative liabilities owed to the defaulting party against all derivative asset receivables from the defaulting party. See Note 5 for additional information.

Income taxes. The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.

The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not (likelihood of greater than 50 percent) that some portion or all of the deferred tax assets will not be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company's deferred tax liability and will affect the Company's effective tax rate in the period it is recognized. See Note 17 for additional information.

The Company records any tax-related interest charges as interest expense and any tax-related penalties as other expense in the consolidated statements of operations.

Stock-based compensation. Stock-based compensation expense for restricted stock, restricted stock units and performance units expected to be settled in the Company's common stock ("Equity Awards") is measured at the grant date or modification date, as applicable, using the fair value of the award, and is recorded, net of estimated forfeitures, on a straight line basis over the requisite service period of the respective award. The fair value of Equity Awards, except performance unit awards, is determined on the grant date or modification date, as applicable, using the prior day's closing stock price. The fair value of performance unit awards is determined using the Monte Carlo simulation model.

Equity Awards are net settled by withholding shares of the Company's common stock to satisfy income tax withholding payments due upon vesting. Remaining vested shares are remitted to individual employee brokerage accounts. Shares to be delivered upon vesting of Equity Awards are made available from authorized, but unissued shares or shares held as treasury stock.

Restricted stock awards expected to be settled in cash on their vesting dates, rather than in common stock ("Liability Awards"), are included in accounts payable – due to affiliates in the consolidated balance sheets. The fair value of Liability Awards ~~is determined~~ on the grant date is determined using the prior day's closing stock price. The Company recognizes the value of Liability Awards on a straight line basis over the requisite service period of the award. Liability Awards are marked to fair value as of each balance sheet date using the closing stock price on the balance sheet date. Changes in the fair value of Liability Awards are recorded as increases or decreases to stock-based compensation expense.

Equity Awards and Liability ~~awards~~Awards participate in dividends during vesting periods and generally vest over three years.

Segments. Based upon how the Company is organized and managed, the Company has 1 reportable operating segment, which is oil and gas development, exploration and production. The Company considers its vertical integration services

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

and sales of purchased commodities as ancillary to its oil and gas development, exploration and producing activities and manages these services to support such activities. In addition, the Company has a single, company-wide management team that allocates capital resources to maximize profitability and measures financial performance as a single enterprise.

~~Adoption of new accounting standards.~~ In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)" ("ASC 842"), which supersedes the lease recognition requirements in ASC 840, "Leases" ("ASC 840"), and requires lessees to recognize lease assets and lease liabilities for those leases previously classified as operating leases. The Company adopted ASC 842 as of January 1, 2019 using the modified retrospective transition method. The Company elected to apply the transition guidance under ASU 2018-11, "Leases (Topic 842) Targeted Improvements," in which ASC 842 is applied at the adoption date, while the comparative periods will continue to be reported in accordance with historic accounting under ASC 840. This standard does not apply to leases to explore for or use minerals, oil or gas resources, including the right to explore for those natural resources and rights to use the land in which those natural resources are contained.

ASC 842 allowed for the election of certain practical expedients at adoption to ease the burden of implementation. At implementation, the Company elected to (i) maintain the historical lease classification for leases prior to January 1, 2019, (ii) maintain the historical accounting treatment for land easements that existed at adoption, (iii) use historical practices in assessing

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~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

the lease term of existing contracts at adoption, (iv) combine lease and non-lease components of a contract as a single lease and (v) not record short-term leases in the consolidated balance sheet, all in accordance with ASC 842.

The adoption of ASC 842 did not have a material impact on the consolidated statements of operations and had no impact on the Company's cash flows. The Company did not record a change to its opening retained earnings as of January 1, 2019, as there was no material change to the timing or pattern of recognition of lease costs due to the adoption of ASC 842.

New accounting pronouncements.In ~~June 2016,~~August 2020, the FASB issued ASU ~~2016-13, "Financial~~2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments ~~- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"~~and Contracts in an Entity's Own Equity" ("ASU ~~2016-13"~~2020-06"). ASU ~~2016-13 changes~~2020-06 simplifies the ~~impairment model~~accounting for ~~most financial assets~~certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, this ASU amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The treasury stock method will no longer be available. Entities may adopt this ASU using either a full or modified retrospective approach, and certain other instruments, including trade and other receivables, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowances for losses. This updateit is effective for ~~fiscal years~~interim and annual reporting periods beginning after December 15, ~~2019, including~~2021. Early adoption is permitted for interim and annual reporting periods ~~within those fiscal years, with~~beginning after December 15, 2020. This ASU is applicable to the Company's 0.25% convertible senior notes due 2025.

The Company plans to early adoption permitted. Entities will use the modified retrospective approach to apply the standard's provisions and record a cumulative-effect adjustment to retained earnings for additional receivable loss allowances, if any, asadopt ASU 2020-06 on January 1, 2021. Upon issuance of the ~~beginning~~Company's 0.25% convertible senior note due 2025, the Company bifurcated the debt and equity components of the ~~first reporting period~~note to long-term debt and additional paid-in capital in ~~which~~ the ~~guidance is adopted. While the Company continues to prepare for the~~accompanying consolidated balance sheets respectively. Upon adoption of ASU ~~2016-13 on January 1, 2020,~~2020-06, the Company ~~does not expect that it will have~~expects to reclassify the unamortized discount and fees on the convertible senior notes of $202 million from additional paid-in capital to long-term debt, which is expected to result in a ~~material impact on its consolidated financial statements.~~reduction in the interest expense recognized over the remaining term of the convertible senior notes. See Note 7 for additional information.

NOTE 3. Acquisitions, Divestitures, Decommissioning and Restructuring Activities

Acquisitions. During 2020, 2019 ~~2018~~ and ~~2017,~~2018, the Company spent a total of $14 million, $28 million ~~$65 million~~ and ~~$136~~$65 million, respectively, to acquire primarily undeveloped acreage for future exploitation and exploration activities in the Spraberry/Wolfcamp field of the Permian Basin.

Divestitures. The Company's significant divestitures to unaffiliated third parties (except for the sale of the Company's pressure pumping assets that were sold to a related party) are as follows:

•In May 2020, the Company completed the sale of certain vertical wells and approximately 1,500 undeveloped acres in Upton County of the Permian Basin for net cash proceeds of $6 million. The Company recorded a gain of $6 million associated with the sale.

•In December 2019, the Company completed the sale of certain vertical and horizontal wells and approximately 4,500 undeveloped acres in Glasscock County of the Permian Basin ~~to an unaffiliated third party~~ for net cash proceeds of $64 million. The Company recorded a gain of $10 million associated with the sale.

•In July 2019, the Company completed the sale of certain vertical wells and approximately 1,400 undeveloped acres in Martin County of the Permian Basin to ~~an unaffiliated third party~~ for net cash proceeds of $27 million. The Company recorded a gain of $26 million associated with the sale.

•In June 2019, the Company completed the sale of certain vertical wells and approximately 1,900 undeveloped acres in Martin County of the Permian Basin to ~~an unaffiliated third party~~ for net cash proceeds of $38 million. The Company recorded a gain of $31 million associated with the sale.

•In May 2019, the Company completed the sale of its Eagle Ford assets and other remaining assets in South Texas ~~Divestiture to an unaffiliated third party~~(the "South Texas Divestiture") in exchange for total consideration having an estimated fair value of $210 million. The fair value of the consideration included (i) net cash proceeds of $2 million, (ii) $136 million in contingent consideration and (iii) a $72 million receivable associated with estimated deficiency fees to be paid by the buyer. ~~Of the total consideration, $208 million is considered a noncash investing activity for the year December 31, 2019.~~ The Company recorded a loss of $525 ~~million and recognized employee-related charges of $19~~ million associated with the sale.

Contingent Consideration. Per the terms of the ~~purchase and sale agreement,~~South Texas Divestiture, the Company iswas entitled to receive contingent consideration ~~of up to $450 million~~ based on future annual oil and NGL prices during each of the five years from 2020 to 2024. The Company ~~determined~~revalued the ~~fair value~~contingent consideration using an option pricing model each reporting period prior to the settlement of the contingent consideration asin July 2020, at which time, the Company received cash proceeds of

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December 31, 2020, 2019 and 2018

$49 million from the ~~date of~~buyer to fully satisfy the ~~sale to be $136 million using an option pricing model. The~~ contingent ~~consideration is included in noncurrent other assets in the consolidated balance sheets.~~consideration. The Company ~~revalues the contingent consideration each reporting period and records the resulting valuation changes in~~recorded a noncash loss of $42 million to interest and other income induring the ~~consolidated statements of operations.~~year ended December 31, 2020 associated with the settlement. See Note 4, Note 5 and Note 15 for additional information.

Deficiency Fee Obligation. The Company transferred its long-term midstream agreements and associated minimum volume commitments ("MVC") to the buyer. However, the Company retained the obligation to pay 100 percent of any deficiency fees associated with the MVC from January 2019 through July 2022. The Company ~~determined~~determines the fair value of the deficiency fee obligation ~~as of the date of the sale to be $348 million~~ using a probability weighted ~~present value~~discounted cash flow model. The deficiency fee obligation is included in current or noncurrent

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~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

liabilities in the consolidated balance sheets, based on the ~~forecasted~~estimated timing of payments. During the year ended December 31, 2020, the Company recorded a charge of $84 million in other expense in the consolidated statements of operations, to increase the Company's forecasted deficiency fee payments as a result of a reduction in planned drilling activities by the buyer. The estimated remaining deficiency fee obligation was $333 million as of December 31, 2020. See Note 4 and Note 16for additional information.

Deficiency Fee Receivable. The buyer is required to reimburse the Company for ~~up to 20~~18 percent of the deficiency fees paid under the transferred midstream agreements from January 2019 through July 2022. Such reimbursement will be paid by the buyer in installments beginning in 2023 through 2025. The Company ~~determined~~determines the fair value of the deficiency fee receivable using a credit risk-adjusted valuation model. During the year ended December 31, 2020, the Company recorded an increase to the Company's long-term deficiency fee receivable of $4 million in other expense in the consolidated statements of operations, to reflect the buyer's share of 2020 deficiency fees which were greater than originally forecasted as of the date of the ~~sale to be $72 million using a credit risk-adjusted valuation model.~~sale. The deficiency fee receivable is included in noncurrent other assets in the consolidated balance sheets. See Note 4 and Note 11 for additional information.

Restricted Cash. As ~~of the date~~a condition of the sale, the Company deposited $75 million into an escrow account to be used to fund future ~~deficiency fee~~MVC payments. Beginning in 2021, the required escrow balance will decline to $50 ~~million and, to~~million. To the extent that there is any remaining balance after the payment of deficiency fees, the balance will become unrestricted and revert to the Company on March 31, 2023. The escrow account balance is included in restricted cash in the consolidated balance sheets.

•In December 2018, the Company completed the sale of its pressure pumping assets to ProPetro in exchange for total consideration of $282 million, comprised of 16.6 million shares of ProPetro's common stock, which was delivered as of the date of the sale ~~and had~~with a fair value of $172 million, and $110 million in cash, which was received during the first quarter of 2019. During 2018, the Company recorded a gain of $30 million, employee-related charges of $19 million, contract termination charges of $13 million and other divestiture-related charges of $6 million associated with the sale. During 2019, the Company reduced the gain associated with the sale by $10 million and recorded additional employee-related charges of $1 million. See Note 12 for additional information.

•In December 2018, the Company completed the sale of approximately 2,900 net acres in the Sinor Nest (Lower Wilcox) oil field in South Texas ~~to an unaffiliated third party~~ for net cash proceeds of $105 million. ~~During 2018, the~~The Company recorded a gain of $54 million associated with the sale.

•In August 2018, the Company completed the sale of its assets in the West Panhandle gas and liquids field ~~to an unaffiliated third party~~ for net cash proceeds of $170 million. ~~During 2018, the~~The Company recorded a gain of $127 million and employee-related charges of $7 million associated with the sale.

•In July 2018, the Company completed the sale of its gas field assets in the Raton Basin ~~to an unaffiliated third party~~(the "Raton Basin Sale") for net cash proceeds of $54 million. The Company recorded a noncash impairment charge of $77 million in June 2018 to reduce the carrying value of its Raton Basin assets to their estimated fair value less costs to sell as the assets were considered held for sale. ~~During 2018, the~~The Company recorded a gain of $2 million, other divestiture-related charges of $117 million, including $111 million of deficiency charges related to certain firm transportation contracts retained by the Company, and employee-related charges of $6 million associated with the sale.

•In April 2018, the Company completed the sale of approximately 10,200 net acres in the West Eagle Ford Shale gas and liquids field ~~to an unaffiliated third party~~ for net cash proceeds of $100 million. ~~During 2018, the~~The Company recorded a gain of $75 million associated with the sale.

•In April 2017, the Company completed the sale of approximately 20,500 acres in the Martin County region of the Permian Basin to an unaffiliated third party for net cash proceeds of $264 million. During 2017, the Company recorded a gain of $194 million associated with the sale.

•~~Other.~~ During 2019, 2018 and 2017, the Company sold other proved and unproved properties, inventory and other property and equipment and recorded a net loss of $9 million, and net gains of $1 million and $14 million, respectively. The net gain of $14 million for 2017 is primarily related to the sale of nonstrategic proved and unproved properties in the Permian Basin for cash proceeds of $77 million.

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

•The Company sold other proved and unproved properties, inventory and other property and equipment and recorded net gains of $3 million and $1 million during 2020 and 2018, respectively, and ~~2017~~

a net loss of $9 million during 2019.

Decommissioning. In November 2018, the Company announced plans to close its sand mine located in Brady, Texas and transition its proppant supply requirements to West Texas sand sources. ~~During 2018, the Company recorded $443 million of accelerated depreciation and $7 million of employee-related charges associated with the pending shutdown.~~

•During 2019, the Company recorded $23 million of accelerated depreciation, $13 million of inventory and other property and equipment impairment charges and $12 million of sand mine closure-related costs.

•During 2018, the Company recorded $443 million of accelerated depreciation and $7 million of employee-related charges associated with the closure.

Restructuring. During the third quarter of 2020, the Company announced a corporate restructuring to reduce its staffing levels to correspond with a planned reduction in future activity levels (the "2020 Corporate Restructuring"). The restructuring resulted in approximately 300 employees being involuntarily separated from the Company in October 2020. The Company recorded $78 million of employee-related charges, including $5 million of noncash stock-based compensation expense related to the accelerated vesting of certain equity awards, in other expense in the consolidated statements of operations during the year ended December 31, 2020. See Note 8 and Note 16 for additional information.

In June 2020, the Company implemented changes to its well services business, including a staffing reduction of approximately 50 employees. The changes were made to more closely align the well services cost structure and headcount with the Company's reduction in expected activity levels (the "2020 Well Services Restructuring"). The Company recorded $1 million of employee-related charges in other expense in the consolidated statements of operations during the year ended December 31, 2020 related to the staffing reductions in its well services business. See Note 16 for additional information.

During 2019, the Company implemented a corporate restructuring program to align its cost structure with the needs of a Permian Basin-focused company ~~which resulted in an approximately 25 percent employee reduction.~~(the "2019 Corporate Restructuring Program"). The restructuring occurred in three phases ~~(collectively, the "Corporate Restructuring Program")~~ as follows:

•In March 2019, the Company made certain changes to its leadership and organizational structure, which included the early retirement and departure of certain officers of the Company.

•In April 2019, the Company adopted a voluntary separation program ("VSP") for certain eligible employees, and

•In May 2019, the Company implemented an involuntary separation program ("ISP").

During 2019, the Company recorded $159 million of employee-related charges, ~~associated with the Corporate Restructuring Program,~~ including $26 million of noncash stock-based compensation expense related to the accelerated vesting of certain equity ~~awards.~~awards, associated with the 2019 Corporate Restructuring Program. See Note 8 and Note 16 for additional information.

Employee-related costs are primarily recorded in other expense in the consolidated statements of operations. Obligations associated with employee-related charges are included in accounts payable - due to affiliates in the consolidated balance sheets.

The changes in the Company's employee-related obligations associated with its restructuring programs and asset divestitures are as follows:


							Year Ended December 31,
		Year Ended December 31,							2020		2019
		2019		2018			(in millions)
		(in millions)
Beginning employee-related obligations	Beginning employee-related obligations	$	27	$	—	Beginning employee-related obligations	$	6	$	27

Additions (a)	Additions (a)	155		39		Additions (a)	79		181
Less:						Less:
Noncash stock-based compensation						Noncash stock-based compensation	4		26
Cash payments	Cash payments	(176)		(12)		Cash payments	78		176
Ending employee-related obligations	Ending employee-related obligations	$	6	$	27	Ending employee-related obligations	$	3	$	6

____________________

(a)Additions ~~for the year ended~~ are comprised of:

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 ~~primarily include $133 million of charges related to the Corporate Restructuring Program~~ and ~~$19 million of charges related primarily to the South Texas Divestiture. For the year ended December 31,~~ 2018 ~~additions primarily relate to the 2018 divestitures.~~


	Year Ended December 31,
	2020		2019
	(in millions)
2020 Corporate Restructuring	$	78	$	0
2020 Well Services Restructuring	1		0
2019 Corporate Restructuring Program	0		159
Other divestiture and decommissioning charges	0		22
	$	79	$	181

See Note 16 for additional information.

NOTE 4. Fair Value Measurements

The Company determines fair value based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company's own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

The three input levels of the fair value hierarchy are as follows:

•Level 1 – quoted prices for identical assets or liabilities in active markets.

•Level 2 – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

•Level 3 – unobservable inputs for the asset or liability, typically reflecting management's estimate of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including discounted cash flow models.

Assets and liabilities measured at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows:


		As of December 31, 2019															As of December 31, 2020
		Fair Value Measurements													Fair Value Measurements
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
		(in millions)															(in millions)
Assets:	Assets:									Assets:
Commodity derivatives	Commodity derivatives	$	—	$	32	$	—	$	32	Commodity derivatives	$	0	$	8	$	0	$	8
Deferred compensation plan assets	Deferred compensation plan assets	85		—		—		85		Deferred compensation plan assets	72		0		0		72
Investment in affiliate	Investment in affiliate	187		—		—		187		Investment in affiliate	123		0		0		123
Contingent consideration		—		91		—		91

Total assets	Total assets	272		123		—		395		Total assets	195		8		0		203
Liabilities:	Liabilities:									Liabilities:
Commodity derivatives	Commodity derivatives	—		20		—		20		Commodity derivatives	0		209		0		209
Marketing derivatives										Marketing derivatives	0		0		91		91
											0		209		91		300
Total recurring fair value measurements	Total recurring fair value measurements	$	272	$	103	$	—	$	375	Total recurring fair value measurements	$	195	$	(201)	$	(91)	$	(97)

As of December 31, 2018
Fair Value Measurements
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total
(in millions)
Assets:
Commodity derivatives $ — $ 52 $ — $ 52
Deferred compensation plan assets 82 — — 82
Investment in affiliate — 172 — 172
Total assets 82 224 — 306
Liabilities:
Commodity derivatives — 27 — 27
Total recurring fair value measurements $ 82 $ 197 $ — $ 279

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018


	As of December 31, 2019
	Fair Value Measurements
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in millions)
Assets:

Commodity derivatives	$	0	$	32	$	0	$	32
Marketing derivatives	0		0		21		21
Deferred compensation plan assets	85		0		0		85
Investment in affiliate	187		0		0		187
Contingent consideration	0		91		0		91
Total assets	272		123		21		416
Liabilities:
Commodity derivatives	0		20		0		20


Total recurring fair value measurements	$	272	$	103	$	21	$	396

Commodity price derivatives. The Company's commodity derivatives primarily represent oil, NGL and gas swap contracts, collar contracts, collar contracts with short puts and basis swap contracts. The asset and liability measurements for the Company's commodity derivative contracts are determined using Level 2 inputs. The Company utilizes discounted cash flow and option-pricing models for valuing its commodity price derivatives.

The asset and liability values attributable to the Company's commodity price derivatives were determined based on inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) the implied rate of volatility inherent in the collar contracts and collar contracts with short puts, which is based on active and independent market-quoted volatility factors.

Marketing derivatives. The Company's marketing derivatives reflect two long-term marketing contracts that were entered in October 2019. Under the contract terms, beginning on January 1, 2021, the Company agreed to purchase and simultaneously sell 50 thousand barrels of oil per day at an oil terminal in Midland, Texas for a six-year term that ends on December 31, 2026. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland WTI price and the price the Company receives for the oil volumes sold is a weighted average sales price ("WASP") that the non-affiliated counterparty receives for selling oil through their Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the marketing contracts, the Company determined that the marketing contracts should be accounted for as derivative instruments not designated as hedges. The asset and liability measurements for the Company's marketing derivative contracts are determined using both Level 2 and 3 inputs. The Company utilizes a discounted cash flow model for valuing its marketing derivatives.

The asset and liability values attributable to the Company's marketing derivative were determined based on Level 2 inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) stated contractual rates. The Level 3 inputs attributable to the Company's marketing derivatives include the historical monthly differential between Brent oil prices and the corresponding WASP of the counterparty to the marketing derivatives ("WASP Differential Deduction") and, to a lesser extent, an estimated annual cost inflation rate. The average WASP Differential Deduction used in the fair value determination as of December 31, 2020 and 2019 was $1.91 per barrel and $1.72 per barrel, respectively. The WASP Differential Deduction and the estimated annual cost inflation rate reflects management's best estimate of future results utilizing historical performance (excluding April 2020 and May 2020 for the average WASP Differential Deduction that were anomalously impacted by COVID-19), but these estimates are not observable inputs by a market participant and contain a high degree of uncertainty. The Company could experience significant mark-to-market fluctuations in the fair value of its marketing derivatives based on changes in the WASP Differential Deduction if it deviates from historical levels. For example, a 10 percent increase or decrease in the WASP Differential Deduction would impact the fair value of the Company's marketing derivatives recorded by approximately $20 million as of December 31, 2020.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

Deferred compensation plan assets. The Company's deferred compensation plan assets include investments in equity and mutual fund securities that are actively traded on major exchanges. The fair value of these investments is determined using Level 1 inputs based on observable prices on major exchanges.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

Investment in affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro. The fair value of its investment in ProPetro is determined using Level 1 inputs based on observable prices on a major exchange. As of December 31, 2018, the fair value of the Company's investment in ProPetro was determined using Level 2 inputs, including the quoted market price for the stock adjusted to reflect a value discount due to restrictions on the Company's ability to sell the investment prior to July 1, 2019. See Note 12 and Note 15 for additional information.

Contingent consideration. ~~The~~Per the terms of the South Texas Divestiture, the Company ~~has a right~~was entitled to receive contingent consideration ~~in conjunction with the South Texas Divestiture of up to $450 million~~ based on future annual oil and NGL prices during each of the five years from 2020 to 2024. The Company revalued the contingent consideration using an option pricing model each reporting period prior to the settlement of the contingent consideration in July 2020, at which time, the Company received cash proceeds of $49 million from the buyer to fully satisfy the contingent consideration. The Company recorded a noncash loss of $42 million to interest and other income during the year ended December 31, 2020 associated with the settlement. During 2019, the Company recorded a noncash loss of $45 million to interest and other income associated with adjusting the contingent consideration to fair value. The fair value of the contingent consideration iswas determined using Level 2 inputs based on an option pricing model using quoted future commodity prices from active markets, implied volatility factors and counterparty credit risk assessments. See Note 3 and Note 5 and Note 15 for additional information.

Assets and liabilities measured at fair value on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis and are subject to fair value adjustments in certain circumstances. These assets and liabilities can include inventory, proved and unproved oil and gas properties and other long-lived assets that are written down to fair value when they are impaired or held for sale.

Convertible Notes. In May 2020, the Company issued $1.3 billion principal amount of 0.25% convertible senior notes due 2025 ("Convertible Notes"). The Company bifurcated the Convertible Notes into debt and equity components at issuance. The value assigned to the debt component of $1.1 billion was the estimated fair value, as of the issuance date, of an equivalent senior note without the conversion feature. The difference between the cash proceeds and the estimated fair value, representing the value assigned to the equity component of $234 million was recorded as a debt discount. Through December 31, 2020, the Company had amortized $28 million of the initially recorded debt discount to interest expense. The Company measured the debt component at fair value by utilizing a discounted cash flow model. This model utilized observable inputs such as the contractual interest rate and repayment terms, the risk-free interest rate, benchmark forward yield curves and the average term-yield on the Company's existing non-convertible debt. See Note 7 for additional information.

Other assets. During the year ended December 31, 2019, the Company impaired the remaining $13 million of inventory and other property and equipment related to the decommissioning of the Company's Brady, Texas sand mine, as these assets had no remaining future economic value. In addition, the Company recognized a $16 million impairment charge related to pressure pumping assets that had no future benefit to the Company. See Note 16 for additional information.

South Texas Divestiture.~~The~~ During May 2019, the Company recorded ~~a deficiency fee~~the MVC obligation and related deficiency fee receivable in conjunction with the South Texas Divestiture. The fair value of the deficiency fee obligation and deficiency fee receivable was determined using Level 3 inputs based on a probability-weighted forecast that considers historical results, market conditions and various development plans to arrive at the estimated present value of the deficiency payments and corresponding receipts. Changes to the Company's forecasted deficiency fee obligation, as a result of the expected impact of the COVID-19 pandemic on the buyer's ability to drill economic wells, resulted in the Company recording a charge of $84 million to other expense in the consolidated statements of operations during the year ended December 31, 2020. In addition, the Company recorded an increase to the deficiency fee receivable of $4 million in other expense in the consolidated statements of operations to reflect an increase to the buyer's share of 2020 deficiency fees. The Company will not increase the estimated deficiency fee receivable associated with 2021 and 2022 forecasted deficiencies until they are realizable. The present value of the future cash payments and expected cash receipts were determined using a ~~2.9~~3.6 percent and 3.2 percent discount rate, respectively, based on the estimated timing of future payments and receipts and the Company's counterparty credit risk assessments. See NNote 3, o ~~te 3~~Note 11 and Note 1116 for additional information.

~~Proved oil and gas properties.~~ As a result of the the Company's proved property impairment assessments, the Company recorded noncash impairment charges to reduce the carrying values of its Raton Basin gas field assets during the year ended December 31, 2017. Impairment charges for proved oil and gas properties are recorded as impairment of oil and gas properties in the consolidated statements of operations.

The Company calculated the fair value of the Raton Basin gas field assets using a discounted cash flow model. Level 3 inputs used to calculate the discounted future cash flows included management's longer-term commodity price outlooks ("Management's Price Outlooks") and management's outlooks for (i) production, (ii) capital expenditures, (iii) production costs and (iv) estimated proved reserves and risk-adjusted probable reserves. Management's Price Outlooks are developed based on third-party longer-term commodity futures price outlooks as of each measurement date. The expected future net cash flows were discounted using an annual rate of 10 percent to determine fair value.

The fair value and fair value adjustments for proved properties, as well as the average oil price per barrel ("Bbl") and gas price per British thermal unit ("MMBtu") utilized in the respective Management's Price Outlooks are as follows:

Fair
Value Fair Value
Adjustment Management's Price Outlooks
Oil Gas
(in millions)
Raton Basin March 2017 $ 186 $ (285) $ 53.65 $ 3.00

Sale of Raton Basin assets. In June 2018, the Company ~~recognized impairment charges of $77 million to reduce~~completed the ~~carrying value of its~~ Raton Basin ~~gas field assets to the agreed upon sales price for these assets, which were sold in July 2018. The impairment charges included $65 million attributable to proved oil~~Sale and ~~gas properties and $12 million of other property and equipment. The Company also~~ recorded ~~other divestiture-related charges of $111 million attributable to~~ deficiency ~~charges~~fee obligations related to certain firm transportation contracts retained by the ~~Company.~~Company of $111 million to other expense in the consolidated statements of operations. The fair value of these contracts was determined using Level 2 inputs, including an ~~annual discount rate of 4.4 percent, to discount the expected future cash flows. See~~ ~~Note 3~~ ~~for additional information.~~

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 ~~2018~~ and ~~2017~~2018

annual discount rate of 4.4 percent, to discount the expected future cash flows. See Note 3, Note 11 and Note 16 for additional information.

Proved oil and gas properties. The Company performs assessments of its proved oil and gas properties, which are accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. An impairment loss is indicated if the sum of the expected future cash flows, including cash flows from vertically integrated services that are used in the development of the assets, is less than the carrying amount of the assets, including the carrying value of the vertically integrated services. In these circumstances, the Company recognizes an impairment charge for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

Based on management's commodity price outlooks as of December 31, 2020, which represent longer-term commodity price outlooks that are developed based on third party future commodity price estimates as of a measurement date ("Management's Price Outlooks"), the Company determined events and circumstances did not indicate that the carrying value of the Company's proved properties were not recoverable.

Based on the Company's annual assessment of the fair value of goodwill as of July 1, 2020, the Company determined that its goodwill was not impaired. As of December 31, 2020, there were no material changes in events or circumstances that would warrant a reassessment for impairment.

There is significant uncertainty surrounding the long-term impact to global oil demand due to the effects of the COVID-19 pandemic. These conditions negatively impacted the Company's 2020 capital activities and production levels and could negatively impact the Company's 2021 forecasted capital activities and production levels. It is reasonably possible that the carrying value of the Company's proved oil and gas properties or goodwill could exceed their estimated fair value potentially resulting in the need to impair their carrying values in the future. If incurred, an impairment of the Company's proved oil and gas properties or goodwill could have a material adverse effect on the Company's results of operation.

Financial instruments not carried at fair value. Carrying values and fair values of financial instruments that are not carried at fair value in the consolidated balance sheets are as follows:

As of December 31, 2019 As of December 31, 2018
Carrying
Value Fair
Value Carrying
Value Fair
Value
(in millions)
Assets:
Cash and cash equivalents:
Cash (a) $ 631 $ 631 $ 775 $ 775
Time deposits (a) — — 50 50
Total $ 631 $ 631 $ 825 $ 825
Restricted cash (a) $ 74 $ 74 $ — $ —
Short-term investments:
Commercial paper (b) $ — $ — $ 53 $ 53
Corporate bonds (c) — — 290 288
Time deposits (b) — — 100 100
Total $ — $ — $ 443 $ 441
Long-term investments:
Corporate bonds (c) $ — $ — $ 125 $ 125
Liabilities:
Current portion of long-term debt (d) $ 450 $ 451 $ — $ —
Long-term debt (d) $ 1,839 $ 1,995 $ 2,284 $ 2,374


	As of December 31, 2020				As of December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
Assets:
Cash and cash equivalents (a)	$	1,442	$	1,442	$	631	$	631

Restricted cash (a)	$	59	$	59	$	74	$	74









Liabilities:
Current portion of long-term debt:
Senior notes (b)	$	140	$	140	$	450	$	451
Long-term debt:
Convertible senior notes (b)	$	1,100	$	1,756	$	0	$	0
Senior notes (b)	$	2,060	$	2,230	$	1,839	$	1,995

______________________

(a)Fair value approximates carrying value due to the short-term nature of the instruments.

(b)~~Fair value is determined using Level 2 inputs.~~

~~(c)Fair value is determined using Level 1 inputs.~~

~~(d)~~Fair value is determined using Level 2 inputs. The Company's senior notes are quoted, but not actively traded on major exchanges; therefore, fair value is based on periodic values as quoted on major exchanges. The carrying value of convertible senior notes does not include $206 million of unamortized debt discount. See Note 7 for additional information.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

The Company has other financial instruments consisting primarily of receivables, payables and other current assets and liabilities that approximate fair value due to the nature of the instrument and their relatively short maturities. Non-financial assets and liabilities initially measured at fair value include assets acquired and liabilities assumed in a business combination, goodwill and asset retirement obligations.

NOTE 5. Derivative Financial Instruments

The Company primarily utilizes commodity swap contracts, collar contracts, collar contracts with short puts and basis swap contracts to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) ~~reduce commodity price risk associated with certain capital projects. The Company also, from time to time, utilizes interest rate contracts to reduce~~support the ~~effect~~payment of ~~interest rate volatility on the Company's indebtedness.~~contractual obligations and dividends.

Oil production derivatives. The Company sells its oil production at the lease and the sales contracts governing such oil production are tied directly to, or are correlated with, New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI") oil prices. The Company also enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production. ~~To diversify the oil prices it receives, the~~The Company also enters into purchase transactions with third parties and separate sale transactions with third parties ~~for~~to diversify a portion of the Company's oil sales to Gulf Coast refineries or international export markets at prices that are highly correlated with Brent oil prices. As a result, the Company will generally use Brent derivative contracts to manage future oil price volatility.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2019, 2018 and 2017~~

Volumes per day associated with outstanding oil derivative contracts as of December 31, ~~2019~~2020 and the weighted average oil prices for those contracts are as follows:


		2020															Year Ending December 31, 2021					2021						Year Ending December 31, 2022
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter				Year Ending December 31, 2021			First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Year Ending December 31, 2022
Brent swap contracts:	Brent swap contracts:
Volume per day (Bbl)	Volume per day (Bbl)	3,407		—		—		—		—		Volume per day (Bbl)	85,000			85,000			0			0			0
Price per Bbl	Price per Bbl	$	60.86	$	—	$	—	$	—	$	—	Price per Bbl	$	46.88		$	46.88		$	0		$	0		$	0
Brent collar contracts with short puts:	Brent collar contracts with short puts:											Brent collar contracts with short puts:
Volume per day (Bbl)	Volume per day (Bbl)	145,500		135,500		115,500		115,500		7,000		Volume per day (Bbl)	90,000			90,000			90,000			90,000			20,000
Price per Bbl:	Price per Bbl:											Price per Bbl:
Ceiling	Ceiling	$	68.46	$	68.84	$	69.78	$	69.78	$	65.37	Ceiling	$	50.74		$	50.74		$	50.74		$	50.74		$	57.88
Floor	Floor	$	61.64	$	61.76	$	62.06	$	62.06	$	60.00	Floor	$	45.11		$	45.11		$	45.11		$	45.11		$	45.50
Short put	Short put	$	53.45	$	53.48	$	53.56	$	53.56	$	52.00	Short put	$	35.07		$	35.07		$	35.07		$	35.07		$	35.00
Brent call contracts sold:	Brent call contracts sold:											Brent call contracts sold:
Volume per day (Bbl) (a)	Volume per day (Bbl) (a)	—		—		—		—		13,000		Volume per day (Bbl) (a)	20,000			20,000			20,000			20,000			0
Price per Bbl:	Price per Bbl:	$	—	$	—	$	—	$	—	$	72.10	Price per Bbl:	$	69.74		$	69.74		$	69.74		$	69.74		$	0

______________________

(a)The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar contracts with short puts.

NGL production derivatives. All material physical sales contracts governing the Company's NGL production are tied directly or indirectly to Mont Belvieu, Texas NGL component product prices. The Company uses derivative contracts to manage the NGL component product price volatility. As of December 31, ~~2019~~2020, the Company did not have any NGL derivative contracts outstanding.

Gas production derivatives. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to NYMEX Henry Hub ("HH") gas prices or regional index prices where the gas is sold. To diversify the gas prices it receives to international market prices, the Company sells a portion of its gas production at Dutch Title Transfer Facility ("Dutch TTF") prices. The Company uses derivative contracts to manage gas price volatility and basis swap contracts to reduce basis risk between HH prices and actual index prices at which the gas is sold.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

Volumes per day associated with outstanding gas derivative contracts as of December 31, ~~2019~~2020 and the weighted average gas prices for those contracts are as follows:


		2020															2021
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter			First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Swap contracts:
Volume per day (MMBtu) (a)		—		30,000		30,000		10,109
NYMEX swap contracts:										NYMEX swap contracts:
Volume per day (MMBtu)										Volume per day (MMBtu)	127,222		100,000		100,000		100,000
Price per MMBtu	Price per MMBtu	$	—	$	2.41	$	2.41	$	2.41	Price per MMBtu	$	2.66	$	2.68	$	2.68	$	2.68

Dutch TTF swap contracts:										Dutch TTF swap contracts:
Volume per day (MMBtu)										Volume per day (MMBtu)	30,000		30,000		30,000		30,000
Price per MMBtu										Price per MMBtu	$	5.07	$	5.07	$	5.07	$	5.07
NYMEX collar contracts:										NYMEX collar contracts:
Volume per day (MMBtu)										Volume per day (MMBtu)	150,000		150,000		150,000		150,000
Price per MMBtu:										Price per MMBtu:
Ceiling										Ceiling	$	3.15	$	3.15	$	3.15	$	3.15
Floor										Floor	$	2.50	$	2.50	$	2.50	$	2.50
Basis swap contracts:	Basis swap contracts:									Basis swap contracts:
Permian Basin index swap volume per day (MMBtu) (a) (b)		—		30,000		30,000		10,109
Permian Basin index swap volume per day (MMBtu) (a)										Permian Basin index swap volume per day (MMBtu) (a)	10,000		0		0		0
Price differential ($/MMBtu)	Price differential ($/MMBtu)	$	—	$	(1.68)	$	(1.68)	$	(1.68)	Price differential ($/MMBtu)	$	(1.46)	$	0	$	0	$	0


Delaware			75-2702753
(State or other jurisdiction of incorporation)			(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	PXD	New York Stock Exchange


Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter	$	~~25,544,329,552~~15,947,085,822
Number of shares of Common Stock outstanding as of February ~~18, 2020~~22, 2021	~~165,714,771~~216,580,280


		Page
Definitions of Certain Terms and Conventions Used Herein			43
Cautionary Statement Concerning Forward-Looking Statements			5
PART I
Item 1.	Business	6
	General	6
	Available Information	6
	Mission and Strategies	6
	~~Business Activities~~Competition	6
	Impact of the COVID-19 Pandemic	7
	Acquisition A ctivities	8
	Marketing of Production	8
	~~Competition, Markets and Regulations~~Human Capital	9
	Regulation	9
Item 1A.	Risk Factors	1512
	Risk Factors Summary	12
	General Business and Industry Risks	14
	Operational Risks	20
	Financial Risks	23
	Health, Safety and Environmental Risks	28
	Regulatory Risks	30
	Risks Associated with the Parsley Acquisition	33
Item 1B.	Unresolved Staff Comments	3234
Item 2.	Properties	3235
	Reserve Estimation Procedures and Audits	3335
	Proved Reserves	3536
	Description of Properties	3537
	Selected Oil and Gas Information	3738
Item 3.	Legal Proceedings	4243
Item 4.	Mine Safety Disclosures	4243
	Information About our Executive Officers	4344
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	47
	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	47
	Performance Graph	48
Item 6.	Selected Financial Data	4948
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	5049
	Financial and Operating Performance	5049
	Parsley Acquisition	49
	First Quarter 20 20 2021 Outlook	5149
	20 20 2021 Capital Budget	5149
	Divestitures, Decommissioning and Restructuring	5150
	Results of Operations	5351
	Liquidity and Capital Resources	5857
	Critical Accounting Estimates	6160
	New Accounting Pronouncements	6362
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	6463
Item 8.	Financial Statements and Supplementary Data	66
	Index to Consolidated Financial Statements	66
	Report of Independent Registered Public Accounting Firm	67
	Consolidated Financial Statements	7069
	Notes to Consolidated Financial Statements	7675
	Unaudited Supplementary Information	~~108~~114


Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	~~115~~125
Item 9A.	Controls and Procedures	~~115~~125
	Management's Report on Internal Control Over Financial Reporting	~~115~~125
	Report of Independent Registered Public Accounting Firm	~~116~~127
Item 9B.	Other Information	~~117~~128


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Year Ended December 31, 2019
	Permian Basin	Total Company
Beginning wells in progress	16	16
Wells spud	15	15
Less:
Successful wells	26	26

Ending wells in progress	5	5


		Year Ended December 31, 2019				Year Ended December 31, 2020
		Permian Basin	Total Company		Development	Exploratory/Extension
Beginning wells in progress	Beginning wells in progress	163	166	Beginning wells in progress	5	234
Wells spud	Wells spud	352	352	Wells spud	17	218
Less:	Less:			Less:
Successful wells	Successful wells	280	280	Successful wells	13	242
Unsuccessful wells		1	1
Wells sold		—	3

Ending wells in progress	Ending wells in progress	234	234	Ending wells in progress	9	210


									Year Ended December 31, 2020

Oil (Bbls)									210,641
NGL (Bbls)									85,728
Gas (Mcf) (a)									425,307
Total (BOE)									367,253


	Year Ended December 31, 2020

	(in millions)
Property acquisition costs:

Unproved	$	14


Exploration costs	1,167
Development costs	280
Asset retirement obligations	112
	$	1,573


	Year Ended December 31, 2018
	Permian Basin		Total Company
Annual sales volumes:
Oil (MBbls)	66,212		69,583
NGLs (MBbls)	19,878		23,280
Gas (MMcf)	102,934		143,588
Total (MBOE)	103,245		116,794
Average daily sales volumes:
Oil (Bbls)	181,402		190,639
NGLs (Bbls)	54,459		63,780
Gas (Mcf)	282,010		393,391
Total (BOE)	282,862		319,984
Average prices:
Oil (per Bbl)	$	57.13	$	57.36
NGL (per Bbl)	$	30.32	$	29.84
Gas (per Mcf)	$	1.90	$	2.13
Revenue (per BOE)	$	44.37	$	42.73
Average costs (per BOE):
Production costs:
Lease operating	$	4.27	$	4.29
Gathering, processing and transportation	2.21		2.52
Net natural gas plant/gathering	(0.67)		(0.41)
Workover	1.01		0.92
Total	$	6.82	$	7.32
Production and ad valorem taxes:
Ad valorem	$	0.59	$	0.60
Production	1.94		1.83
Total	$	2.53	$	2.43
Depletion expense	$	13.42	$	12.52


		Year Ended December 31, 2017							Year Ended December 31, 2019
		Permian Basin		Total Company			Permian Basin		Total Company
Annual sales volumes:	Annual sales volumes:					Annual sales volumes:
Oil (MBbls)	Oil (MBbls)	53,889		57,878		Oil (MBbls)	77,053		77,509
NGLs (MBbls)	NGLs (MBbls)	16,096		20,078		NGLs (MBbls)	25,960		26,398
Gas (MMcf)	Gas (MMcf)	71,140		128,665		Gas (MMcf)	128,848		133,245
Total (MBOE)	Total (MBOE)	81,842		99,401		Total (MBOE)	124,488		126,114
Average daily sales volumes:	Average daily sales volumes:					Average daily sales volumes:
Oil (Bbls)	Oil (Bbls)	147,641		158,571		Oil (Bbls)	211,104		212,353
NGLs (Bbls)	NGLs (Bbls)	44,099		55,008		NGLs (Bbls)	71,123		72,323
Gas (Mcf)	Gas (Mcf)	194,904		352,507		Gas (Mcf)	353,007		365,055
Total (BOE)	Total (BOE)	224,224		272,330		Total (BOE)	341,062		345,518
Average prices:	Average prices:					Average prices:
Oil (per Bbl)	Oil (per Bbl)	$	48.32	$	48.24	Oil (per Bbl)	$	53.77	$	53.77
NGL (per Bbl)		$	18.69	$	19.31
NGLs (per Bbl)						NGLs (per Bbl)	$	19.36	$	19.33
Gas (per Mcf)	Gas (per Mcf)	$	2.45	$	2.63	Gas (per Mcf)	$	1.75	$	1.79
Revenue (per BOE)	Revenue (per BOE)	$	37.62	$	35.39	Revenue (per BOE)	$	39.13	$	38.98
Average costs (per BOE):	Average costs (per BOE):					Average costs (per BOE):
Production costs:	Production costs:					Production costs:
Lease operating	Lease operating	$	4.36	$	4.58	Lease operating	$	4.52	$	4.57
Gathering, processing and transportation	Gathering, processing and transportation	0.19		0.85		Gathering, processing and transportation	2.19		2.24
Net natural gas plant/gathering	Net natural gas plant/gathering	(0.63)		(0.28)		Net natural gas plant/gathering	(0.60)		(0.59)
Workover	Workover	0.87		0.80		Workover	0.72		0.71
Total	Total	$	4.79	$	5.95	Total	$	6.83	$	6.93
Production and ad valorem taxes:	Production and ad valorem taxes:					Production and ad valorem taxes:
Ad valorem	Ad valorem	$	0.58	$	0.57	Ad valorem	$	0.62	$	0.63
Production	Production	1.81		1.59		Production	1.76		1.75
Total	Total	$	2.39	$	2.16	Total	$	2.38	$	2.38
Depletion expense	Depletion expense	$	15.34	$	13.61	Depletion expense	$	12.85	$	12.78


As of December 31, 2019
Gross Productive Wells					Net Productive Wells
Oil	Gas	Total	Oil	Gas	Total
6,677	16	6,693	5,952	9	5,961


		As of December 31, 2019				As of December 31, 2020
		Acres Expiring (a)				Acres Expiring (a)
		Gross	Net		Gross	Net
2020		17,887	15,484
2021	2021	1,667	812	2021	8,687	8,317
2022	2022	3,537	2,108	2022	3,165	2,267
2023	2023	445	445	2023	1,496	820
2024	2024	—	—	2024	160	51
2025				2025	480	320
Thereafter	Thereafter	6,931	5,912	Thereafter	54,402	53,325
		30,467	24,761		68,390	65,100


	As of December 31,
	2014		2015		2016		2017		2018		2019
Pioneer Natural Resources Company	$	100.00	$	84.28	$	121.11	$	116.31	$	88.66	$	102.91
S&P 500	$	100.00	$	101.38	$	113.51	$	138.29	$	132.23	$	173.86
S&P Oil & Gas Exploration & Production	$	100.00	$	65.85	$	87.48	$	81.96	$	65.98	$	73.91


	As of December 31,
	2015		2016		2017		2018		2019		2020
Pioneer Natural Resources Company	$	100.00	$	143.69	$	138.00	$	105.20	$	122.11	$	94.22
S&P 500	$	100.00	$	111.96	$	136.40	$	130.42	$	171.49	$	203.04
S&P Oil & Gas Exploration & Production	$	100.00	$	132.86	$	124.48	$	100.20	$	112.25	$	72.49


		Gross Wells										Net Wells											Gross Wells				Net Wells
		Year Ended December 31,										Year Ended December 31,											Year Ended December 31,				Year Ended December 31,
		2019		2018		2017		2019		2018		2017			2020		2019		2018		2020		2019		2018
Productive wells:	Productive wells:													Productive wells:
Development	Development	26		35		26		20		23		20		Development	13		26		35		12		20		23
Exploratory		280		251		222		249		226		198
Exploratory/extension														Exploratory/extension	242		280		251		218		249		226
Dry holes:	Dry holes:													Dry holes:
Development	Development	—		1		—		—		1		—		Development	—		—		1		—		—		1
Exploratory		1		10		2		1		6		1
Exploratory/extension														Exploratory/extension	—		1		10		—		1		6
		307		297		250		270		256		219			255		307		297		230		270		256
Success ratio (a)	Success ratio (a)	100	%	96	%	99	%	100	%	97	%	99	%	Success ratio (a)	100	%	100	%	96	%	100	%	100	%	97	%


	Three Months Ended December 31, 2019
Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Amount of Shares that May Yet Be Purchased under Plans or Programs (b)
October 2019	1,842	$	131.75	—	$	1,272,379,289
November 2019	23,880	$	133.41	—	$	1,272,379,289
December 2019	165,537	$	132.25	164,192	$	1,250,690,958
	191,259			164,192


	Three Months Ended December 31, 2020
Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Amount of Shares that May Yet Be Purchased under Plans or Programs (b)
October 2020	749	$	83.00	—	$	1,090,693,886
November 2020	453	$	79.56	—	$	1,090,693,886
December 2020	14,638	$	110.85	—	$	1,090,693,886
	15,840			—


	Three Months Ending March 31, ~~2020~~2021
	Preliminary Guidance
	($ in millions, except per BOE amounts)
Average daily production (MBOE)	~~361~~444 - ~~376~~	470
Average daily oil production (MBbls)	~~217~~259 - ~~227~~	274
Production costs per BOE	$~~8.25~~6.50 - ~~$10.25~~	$8.00
DD&A per BOE	$~~12.50~~11.25 - ~~$14.50~~	$13.25
Exploration and abandonments expense	$10 - $20
General and administrative expense	$7265 - ~~$82~~	$75
Accretion of discount on asset retirement obligations	$2 - $5
Interest expense	$3038 - ~~$35~~	$43
Other expense	$2010 - ~~$30~~	$20
Cash flow impact from firm transportation (a)	~~($50)~~$(60) - $0	$(30)
Current income tax provision (benefit)	<$5
Effective tax rate	21% - 25%


Asset Sold	Completion Date	Net Gain (Loss) Recorded
		(in millions)
Year Ended December 31, 2020:
Upton County - Permian Basin acreage and wells	May 2020	$	6
Other		$	3
Year Ended December 31, 2019:



Martin County - Permian Basin acreage	June/July 2019	$	57
~~Eagle Ford and remaining~~ South Texas ~~assets~~Divestiture	May 2019	$	(525)

~~Other~~		$	~~(9)~~
~~Year Ended December 31, 2018:~~
~~Pressure pumping assets~~	~~December 2018~~	$	30
~~Sinor Nest (Lower Wilcox) oil field (South Texas)~~	~~December 2018~~	$	54
~~West Panhandle gas and liquids field (Texas Panhandle)~~	~~August 2018~~	$	~~127~~

~~Western portion of Eagle Ford Shale gas and liquids field (South Texas)~~	~~April 2018~~	$	75
Other		$	4 (9)


	Payments Due by Year
	2020		2021 and 2022		2023 and 2024		Thereafter
	(in millions)
Firm commitments (a)	$	532	$	1,005	$	819	$	1,784
Long-term debt (b)	450		1,100		—		750
Purchase commitments (c)	236		18		3		—
Leases (d)	187		225		105		621
Derivative obligations (e)	12		8		—		—
Other liabilities (f)	333		282		91		122
Total contractual obligations	$	1,750	$	2,638	$	1,018	$	3,277


	Year Ending
	December 31, 2021		December 31, 2022		December 31, 2023		December 31, 2024		December 31, 2025		December 31, 2026
Average forward Brent oil price	$	51.24	$	50.03	$	49.58	$	49.36	$	49.25	$	49.22
Average forward WTI Midland oil price	$	48.94	$	47.15	$	45.99	$	45.44	$	45.14	$	44.81
Average forward basis differential price (a)	$	(2.30)	$	(2.88)	$	(3.59)	$	(3.92)	$	(4.11)	$	(4.41)


			Page
Report of Independent Registered Public Accounting Firm			67
C ~~onsolidated~~Consolidated Balance Sheets as of December 31, ~~2019~~2020 and ~~2018~~2019			7069
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017~~2018			7271
Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017~~2018			7372
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017~~2018			7574
Notes to Consolidated Financial Statements			7675
1. Organization and Nature of Operations			7675
2. Summary of Significant Accounting Policies			7675
3. Acquisitions, Divestitures,, Decommissioning and Restructuring Activities			82
4. Fair Value Measurements			8485
5. Derivative Financial Instruments			8789
6. Exploratory Well Costs			9092
7. Long-term Debt and Interest Expense			9193
8. Incentive Plans			9295
9. Asset Retirement Obligations			9599
10. Leases			9699
11. Commitments and Contingencies			98101
12. Related Party Transactions			~~100~~104
13. Major Customers			~~101~~105
14. Revenue Recognition			~~102~~105
15. Interest and Other Income (Loss), Net			~~102~~106
16. Other Expense			~~103~~107
17. Income Taxes			~~103~~108
18. Net Income (Loss)Per Share			~~106~~111
19. Subsequent Events			~~107~~112
Unaudited Supplementary Information			~~108~~114


			Depreciation, Depletion and Amortization of Proved Oil and Gas Properties

Description of the Matter			At December 31, ~~2019,~~2020, the net book value of the ~~Company’s~~Company's proved oil and gas properties was ~~$13,861~~$13,863 million, and depreciation, depletion and amortization (DD&A) expense was ~~$1,711~~$1,639 million for the year then ended. As described in Note 2, under the successful efforts method of accounting, capitalized costs of proved properties are depleted using the units-of-production method based on proved reserves, as estimated by the ~~Company’s~~Company's engineers. Proved oil and gas reserve estimates are based on geological and engineering interpretation and judgment. Significant judgment is required by the ~~Company’s~~Company's engineers in evaluating geological and engineering data when estimating proved oil and gas reserves. Estimating reserves also requires the selection of inputs, including oil and gas price assumptions, future operating and capital cost assumptions and tax rates by jurisdiction, among others. Because of the complexity involved in estimating oil and gas reserves, management used independent petroleum engineers to audit the estimates prepared by the ~~Company’s~~Company's engineers as of December 31, ~~2019.~~2020. Auditing the Company's DD&A calculation is especially complex because of the use of the work of the Company's engineers and the independent petroleum engineers and the evaluation of management's determination of the inputs described above used by the engineers in estimating proved oil and gas reserves.



	Auditing the Company’s DD&A calculation is especially complex because of the use of the work of the Company’s engineers and the independent petroleum engineers and the evaluation of management’s determination of the inputs described above used by the engineers in estimating proved oil and gas reserves.

How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of the ~~Company’s~~Company's controls over its process to calculate DD&A, including management’s controls over the completeness and accuracy of the financial data provided to the engineers for use in estimating proved oil and gas reserves.

	Our audit procedures included, among others, evaluating the professional qualifications and objectivity of the ~~Company’s~~Company's engineers responsible for the preparation of the reserve estimates and the independent petroleum engineers used to audit the estimates. In addition, in assessing whether we can use of the work of the engineers we evaluated the completeness and accuracy of the financial data and inputs described above used by the engineers in estimating proved oil and gas reserves by agreeing them to source documentation and we identified and evaluated corroborative and contrary evidence. For proved undeveloped reserves, we evaluated ~~management’s~~management's development plan for compliance with SEC requirements. We also tested the mathematical accuracy of the DD&A calculations, including comparing the proved oil and gas reserves amounts used to the Company’s reserve report.

	~~South Texas Divestiture~~Convertible Senior Notes

Description of the Matter	As ~~disclosed~~discussed in Note 3,7 to the consolidated financial statements, in May 2020, the Company ~~completed~~issued $1.3 billion convertible senior notes (the "Convertible Senior Notes"). Concurrent with the sale of its Eagle Ford assets and other remaining assets in South Texas (collectively, the South Texas assets) to an unaffiliated third party in exchange for total consideration having an estimated fair value of $210 million. The estimated fair valueissuance of the ~~consideration as~~Convertible Senior Notes, the Company entered into call transactions that are exercisable upon conversion of the date of the sale includes (i) net cash proceeds of $2 million, (ii) an estimated $136 million in contingent consideration based on commodity prices and (iii) $72 million in estimated reimbursements from the buyer associated with deficiency fees the Company is obligated to pay on minimum volume commitments related to the assets sold. The Company recorded an obligation of $348 million for the estimated fair value of the future obligation associatedConvertible Senior Notes (collectively with the ~~minimum volume commitments.~~Convertible Senior Notes referred to as the "Convertible Senior Notes Transactions"). The ~~Company recorded a $525 million loss in connection with the sale.~~

		~~Auditing the Company’s~~ accounting for the ~~sale of its South Texas assets~~Convertible Senior Notes Transactions was complex ~~because~~as it required assessment as to whether features in the Convertible Senior Notes required bifurcation and an evaluation of the ~~significant judgment used by management~~appropriate classification of those features in ~~accounting for~~ the ~~unique terms and conditions~~financial statements. Additionally, the Convertible Senior Notes Transactions were complex as valuation of the ~~agreement, including~~conversion feature in the accounting for the consideration expected to be received that is contingent on future oil and NGL prices and the minimum volume commitment obligation and related reimbursement. Additionally, significantConvertible Senior Notes involved estimation ~~by management was required to determine~~of the fair value of the ~~contingent consideration~~liability component of the Convertible Senior Notes on a stand-alone basis. Auditing management's evaluation of the Convertible Senior Notes Transactions involved addressing the complexity in assessing the components for separability and ~~minimum volume commitment obligation and related reimbursement, and~~assessing valuation of the ~~respective fair values were sensitive to the significant underlying assumptions.~~liability component on a stand-alone basis. The Company ~~used an option pricing model to determine~~estimated the fair value of the ~~contingent consideration.~~liability component of the Convertible Senior Notes using a discounted cash flow model. This model utilized inputs such as contractual interest rate and repayment terms, risk-free interest rate, benchmark forward yield curves and the average term-yield on the Company's existing non-convertible debt. The ~~significant assumptions used to estimate the~~ fair value of the ~~contingent consideration included~~liability component is sensitive to changes in the discount ~~rates, observable forward commodity prices, and implied volatility factors.~~rate. The Company ~~used~~also performed a ~~discounted cash flow model to determine the fair value~~detailed analysis of the ~~minimum volume commitment liability and related reimbursement. The significant assumptions used to estimate the fair value~~terms of the ~~minimum volume commitment obligation~~Convertible Senior Notes Transactions to identify whether there were any embedded derivatives that required separate identification and related reimbursement included discount rates and unobservable assumptions with respect to various development plans that form the basis of the projected volumes to be produced based on future drilling. These significant assumptions are forward looking and could be affected by future economic and market conditions.valuation under applicable accounting guidance.







How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its accounting for the ~~divestiture of~~Convertible Senior Notes Transactions, including its~~South Texas~~ ~~assets, including~~ controls over the ~~accounting and valuation models and the recognition and measurement~~estimation of the ~~contingent consideration~~fair value of the stand-alone liability component and evaluating the ~~minimum volume commitment obligation and related reimbursement. We also tested controls over management’s review~~existence of ~~underlying assumptions and inputs used in~~embedded derivatives. To test the ~~valuation models.~~

	~~Our audit~~initial accounting for the Convertible Senior Notes Transactions, our procedures included, among others, ~~evaluating management’s accounting~~inspection of the agreements for the ~~unique terms~~Convertible Senior Notes Transactions and ~~conditions~~assessing management’s application of the ~~purchase and sale agreement.~~relevant accounting guidance. We also evaluated the valuation methodologies and significant assumptions used by management, and performed procedures to assess the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For example, we compared the significant assumptions to third-party industry projections for future commodity prices and related differentials used in the valuation of the contingent consideration. With respect to the minimum volume commitment obligation and related reimbursement, we compared drilling plan assumptions to the agreed-upon drilling schedule between the buyer and working interest owners and compared anticipated production information to historical production information for similar properties. We involved our valuation specialists to assist ~~with~~in our evaluation of the ~~methodologies used by the Company and significant assumptions included in~~Company’s determination of the fair value ~~estimates.~~



/s/ Ernst & Young LLP
We have served as the Company's auditor since 1998.
Dallas, Texas
~~February 24, 2020~~						March 1, 2021


		December 31,							December 31,
		2019		2018			2020		2019
ASSETS	ASSETS									ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	631	$	825	Cash and cash equivalents	$	1,442	$	631
Restricted cash	Restricted cash	74		—		Restricted cash	59		74
Short-term investments		—		443

Accounts receivable:	Accounts receivable:					Accounts receivable:
Trade, net	Trade, net	1,032		694		Trade, net	695		1,032
Due from affiliates	Due from affiliates	3		120		Due from affiliates	0		3
Income taxes receivable	Income taxes receivable	7		7		Income taxes receivable	4		7
Inventories	Inventories	205		242		Inventories	224		205

Derivatives	Derivatives	32		52		Derivatives	5		32
Investment in affiliate	Investment in affiliate	187		172		Investment in affiliate	123		187
Other	Other	20		25		Other	43		20
Total current assets	Total current assets	2,191		2,580		Total current assets	2,595		2,191
Oil and gas properties, using the successful efforts method of accounting:	Oil and gas properties, using the successful efforts method of accounting:					Oil and gas properties, using the successful efforts method of accounting:
Proved properties	Proved properties	22,444		21,165		Proved properties	23,934		22,444
Unproved properties	Unproved properties	584		601		Unproved properties	576		584
Accumulated depletion, depreciation and amortization	Accumulated depletion, depreciation and amortization	(8,583)		(8,218)		Accumulated depletion, depreciation and amortization	(10,071)		(8,583)
Total oil and gas properties, net	Total oil and gas properties, net	14,445		13,548		Total oil and gas properties, net	14,439		14,445
Other property and equipment, net	Other property and equipment, net	1,632		1,291		Other property and equipment, net	1,584		1,632
Operating lease right-of-use assets	Operating lease right-of-use assets	280		—		Operating lease right-of-use assets	197		280

Long-term investments		—		125

Goodwill	Goodwill	261		264		Goodwill	261		261

Derivatives						Derivatives	3		21
Other assets	Other assets	258		95		Other assets	150		258
		$	19,067	$	17,903		$	19,229	$	19,088


	As of December 31, 2018
	Fair Value Measurements
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in millions)
Assets:

Commodity derivatives	$	—	$	52	$	—	$	52
Deferred compensation plan assets	82		—		—		82
Investment in affiliate	—		172		—		172
Total assets	82		224		—		306
Liabilities:
Commodity derivatives	—		27		—		27


Total recurring fair value measurements	$	82	$	197	$	—	$	279


		Fair Value		Fair Value Adjustment		Management's Price Outlooks
								Oil		Gas
		(in millions)
Raton Basin	March 2017	$	186	$	(285)	$	53.65	$	3.00


Derivatives Not Designated as Hedging Instruments	Location of Gain/(Loss) Recognized in Earnings on Derivatives	Year Ended December 31,
						2019		2018	2017
		(in millions)
Commodity price derivatives	Derivative gain (loss), net	$	34	$	(292)	$	(99)
Interest rate derivatives	Derivative gain (loss), net	$	—	$	—	$	(1)
Contingent consideration	Interest and other income	$	(45)	$	—	$	—


Derivatives Not Designated as Hedging Instruments	Location of Gain/(Loss) Recognized in Earnings on Derivatives	Year Ended December 31,
		2020		2019		2018
		(in millions)
Commodity price derivatives	Derivative gain (loss), net	$	(147)	$	34	$	(292)
Marketing derivatives	Derivative gain (loss), net	$	(112)	$	21	$	0
Interest rate derivatives	Derivative gain (loss), net	$	(22)	$	0	$	0
Contingent consideration	Interest and other income (loss), net	$	(42)	$	(45)	$	0


	As of December 31, ~~2019~~2020

	(in millions)
Citibank	$	49
Scotia Bank	25
JP Morgan Chase	20
Merrill Lynch	18
Wells Fargo Bank	17
J Aron & Company	16
Morgan Stanley Capital Group	16
Bank of Montreal	15
Macquarie Bank	15
Royal Bank of Canada	9
Toronto-Dominion	1






~~Wells Fargo Bank~~	$		15
~~JP Morgan Chase~~	5
~~Scotia Bank~~	3
~~Royal Bank of Canada~~	1
~~Bank of Montreal~~	~~(1)~~






~~J Aron & Company~~	~~(1)~~

~~Merrill Lynch~~	~~(1)~~
~~Nextera Energy Power Marketing~~	~~(2)~~



~~Citibank~~	~~(7)~~

	$	12201


	As of December 31, 2020
	(in millions)
Principal amount of Convertible Notes	$	1,323



Unamortized discount on Convertible Notes (a)	(206)
Unamortized issuance costs on Convertible Notes (b)	(17)
Net carrying value	$	1,100


			As of December 31, ~~2019~~2020
Approved and authorized awards			12,600,000
Awards ~~granted~~issued under plan			~~(8,371,882)~~(8,861,276)
Awards available for future grant			~~4,228,118~~3,738,724


			As of December 31, ~~2019~~2020
Approved and authorized shares			1,250,000
Shares issued			~~(1,056,938)~~(1,118,790)
Shares available for future issuance			~~193,062~~131,210