~~Item 1.Financial Statements~~


ITEM 1.			FINANCIAL STATEMENTS

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions)


	March 31, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	668	$	1,442
Restricted cash	56		59

Accounts receivable:
Trade, net	1,273		695

Income taxes receivable	1		4
Inventories	327		224


Derivatives	9		5
Investment in affiliate	177		123
Other	41		43
Total current assets	2,552		2,595
Oil and gas properties, using the successful efforts method of accounting:
Proved properties	29,655		23,934
Unproved properties	6,197		576
Accumulated depletion, depreciation and amortization	(10,520)		(10,071)
Total oil and gas properties, net	25,332		14,439
Other property and equipment, net	1,680		1,584
Operating lease right-of-use assets	369		197


Goodwill	261		261
Derivatives	3		3
Other assets	154		150
	$	30,351	$	19,229

September 30,
2017 December 31,
2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 636
$ 1,118
Short-term investments 1,357
1,441
Accounts receivable:
Trade, net 649
517
Due from affiliates —
1
Income taxes receivable 1
3
Inventories 187
181
Derivatives 43
14
Other 28
23
Total current assets 2,901
3,298
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of accounting:
Proved properties 19,630
18,566
Unproved properties 558
486
Accumulated depletion, depreciation and amortization (8,841 ) (8,211 )
Total property, plant and equipment 11,347
10,841
Long-term investments 151
420
Goodwill 270
272
Other property and equipment, net 1,683
1,529
Derivatives 7
—
Other assets, net 106
99
$ 16,465
$ 16,459

The financial information included as of ~~September 30, 2017~~March 31, 2021 has been prepared by management

without audit by independent registered public accountants.

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

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS (continued)

(in millions, except share data)


	March 31, 2021		December 31, 2020
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade	$	1,698	$	928
Due to affiliates	95		102
Interest payable	27		35
Income taxes payable	11		4
Current portion of long-term debt	0		140

Derivatives	871		234
Operating leases	125		100
Other	416		363
Total current liabilities	3,243		1,906
Long-term debt	6,177		3,160
Derivatives	111		66
Deferred income taxes	1,435		1,366
Operating leases	258		110
Other liabilities	981		1,052
Equity:
Common stock, $0.01 par value; 500,000,000 shares authorized; 216,721,541 and 175,525,268 shares issued as of March 31, 2021 and December 31, 2020, respectively	2		2
Additional paid-in capital	14,837		9,323
Treasury stock at cost: 10,601 and 11,047,856 shares as of March 31, 2021 and December 31, 2020, respectively	(1)		(1,234)
Retained earnings	3,308		3,478


Total equity	18,146		11,569
Commitments and contingencies	0		0
	$	30,351	$	19,229

September 30,
2017 December 31,
2016
(Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade $ 1,015
$ 741
Due to affiliates 90
134
Interest payable 38
68
Current portion of long-term debt 449
485
Derivatives 17
77
Other 106
61
Total current liabilities 1,715
1,566
Long-term debt 2,282
2,728
Derivatives 12
7
Deferred income taxes 1,475
1,397
Other liabilities 384
350
Equity:
Common stock, $.01 par value; 500,000,000 shares authorized; 173,794,108 and 173,221,845 shares issued as of September 30, 2017 and December 31, 2016, respectively 2
2
Additional paid-in capital 8,957
8,892
Treasury stock at cost: 3,628,843 and 3,497,742 shares as of September 30, 2017 and December 31, 2016, respectively (250 ) (218 )
Retained earnings 1,882
1,728
Total equity attributable to common stockholders 10,591
10,404
Noncontrolling interests in consolidated subsidiaries 6
7
Total equity 10,597
10,411
Commitments and contingencies

$ 16,465
$ 16,459

The financial information included as of ~~September 30, 2017~~March 31, 2021 has been prepared by management

without audit by independent registered public accountants.

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

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PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)


	Three Months Ended March 31,
		2021		Revised 2020
Revenues and other income:
Oil and gas		$	1,824	$	1,095
Sales of purchased commodities		1,240		915
Interest and other income (loss), net		60		(206)
Derivative gain (loss), net		(691)		456
Gain on disposition of assets, net		11		0
		2,444		2,260
Costs and expenses:
Oil and gas production		252		176
Production and ad valorem taxes		113		75
Depletion, depreciation and amortization		474		434
Purchased commodities		1,255		1,028

Exploration and abandonments		19		9
General and administrative		68		56
Accretion of discount on asset retirement obligations		1		2
Interest		39		27
Other		304		85
		2,525		1,892
Income (loss) before income taxes		(81)		368
Income tax benefit (provision)		11		(77)


Net income (loss) attributable to common stockholders		$	(70)	$	291


Basic and diluted net income (loss) per share attributable to common stockholders		$	(0.33)	$	1.75


Basic and diluted weighted average shares outstanding		210		166


Dividends declared per share		$	0.56	$	0.55

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues and other income:
Oil and gas $ 855
$ 643
$ 2,433
$ 1,665
Sales of purchased oil and gas 721
444
1,722
1,062
Interest and other 17
7
44
21
Derivative gains (losses), net (133 ) 91
153
(95 )
Gain on disposition of assets, net —
1
205
4
1,460
1,186
4,557
2,657
Costs and expenses:
Oil and gas production 152
141
440
438
Production and ad valorem taxes 53
32
152
97
Depletion, depreciation and amortization 355
386
1,033
1,123
Purchased oil and gas 735
458
1,769
1,113
Impairment of oil and gas properties —
—
285
32
Exploration and abandonments 18
19
78
96
General and administrative 81
82
245
235
Accretion of discount on asset retirement obligations 5
5
14
14
Interest 37
50
118
161
Other 58
69
176
223
1,494
1,242
4,310
3,532
Income (loss) before income taxes (34 ) (56 ) 247
(875 )
Income tax benefit (provision) 11
78
(79 ) 362
Net income (loss) attributable to common stockholders $ (23 ) $ 22
$ 168
$ (513 )

Basic and diluted net income (loss) per share attributable to common stockholders $ (0.13 ) $ 0.13
$ 0.98
$ (3.10 )

Basic and diluted weighted average shares outstanding 170
170
170
165

Dividends declared per share $ 0.04
$ 0.04
$ 0.08
$ 0.08

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

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

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PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF EQUITY

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

(Unaudited)


		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, 2020	164,477	$	2	$	9,323	$	(1,234)	$	3,478	$	11,569

Dividends declared ($0.56 per share)	—	—		—		—		(122)		(122)
Cumulative effect of accounting change on convertible senior notes:
Equity component	—	—		(230)		—		28		(202)
Deferred tax component	—	—		50		—		(6)		44
Exercise of long-term incentive stock options	55	—		(2)		8		—		6

Purchases of treasury stock	(99)	—		—		(13)		—		(13)


Shares issued or reissued for acquisition	51,655	—		5,644		1,238		—		6,882
Stock-based compensation costs:
Vested compensation awards, net	623	—		—		—		—		0
Compensation costs included in net loss	—	—		19		—		—		19
Compensation costs included in net loss associated with acquisition	—	—		33		—		—		33
Net loss	—	—		—		—		(70)		(70)
Balance as of March 31, 2021	216,711	$	2	$	14,837	$	(1)	$	3,308	$	18,146

Equity Attributable To Common Stockholders

Shares
Outstanding

Common
Stock

Additional
Paid-in
Capital

Treasury
Stock

Retained
Earnings

Noncontrolling
Interests
Total Equity
(in thousands)
Balance as of December 31, 2016 169,724
$ 2
$ 8,892
$ (218 ) $ 1,728
$ 7
$ 10,411
Dividends declared ($0.08 per share) —
—
—
—
(14 ) —
(14 )
Exercise of long-term incentive stock options and employee stock purchases 60
—
3
4
—
—
7
Purchases of treasury stock (191 ) —
—
(36 ) —
—
(36 )
Compensation costs:
Vested compensation awards 572
—
—
—
—
—
—
Compensation costs included in net income —
—
61
—
—
—
61
Purchase of noncontrolling interest —
—
1
—
—
(1 ) —
Net income —
—
—
—
168
—
168
Balance as of September 30, 2017 170,165
$ 2
$ 8,957
$ (250 ) $ 1,882
$ 6
$ 10,597

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

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~~EQUITY (continued)

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

(Unaudited)



	Shares Outstanding	Common Stock		Additional Paid-in Capital		Treasury Stock		Revised 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 ($0.55 per share)	—	—		—		—		(91)		(91)
Exercise of long-term incentive stock options	8	—		(1)		1		—		0
Purchases of treasury stock	(1,007)	—		—		(122)		—		(122)
Stock-based compensation costs:
Vested compensation awards, net	316	—		—		—		—		0
Compensation costs included in net income	—	—		16		—		—		16
Net income	—	—		—		—		291		291
Balance as of March 31, 2020	164,864	$	2	$	9,176	$	(1,190)	$	4,242	$	12,230

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities:
Net income (loss) $ 168
$ (513 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization 1,033
1,123
Impairment of oil and gas properties 285
32
Impairment of inventory and other property and equipment 1
6
Exploration expenses, including dry holes 19
41
Deferred income taxes 79
(340 )
Gain on disposition of assets, net (205 ) (4 )
Accretion of discount on asset retirement obligations 14
14
Interest expense 4
11
Derivative related activity (91 ) 628
Amortization of stock-based compensation 61
66
Other 48
50
Change in operating assets and liabilities:
Accounts receivable (131 ) (64 )
Income taxes receivable 2
17
Inventories (9 ) (7 )
Derivatives —
(24 )
Investments 5
—
Other current assets (4 ) (3 )
Accounts payable 82
(8 )
Interest payable (30 ) (26 )
Income taxes payable —
(2 )
Other current liabilities (33 ) (38 )
Net cash provided by operating activities 1,298
959
Cash flows from investing activities:
Proceeds from disposition of assets, net of cash sold 347
503
Payments for acquisitions —
(429 )
Proceeds from investments 1,194
255
Purchase of investments (845 ) (2,300 )
Additions to oil and gas properties (1,703 ) (1,387 )
Additions to other assets and other property and equipment, net (252 ) (156 )
Net cash used in investing activities (1,259 ) (3,514 )
Cash flows from financing activities:
Principal payments on long-term debt (485 ) (455 )
Proceeds from issuance of common stock, net of issuance costs —
2,534
Exercise of long-term incentive plan stock options and employee stock purchases 7
7
Purchases of treasury stock (36 ) (24 )
Dividends paid (7 ) (7 )
Net cash provided by (used in) financing activities (521 ) 2,055
Net decrease in cash and cash equivalents (482 ) (500 )
Cash and cash equivalents, beginning of period 1,118
1,391
Cash and cash equivalents, end of period $ 636
$ 891

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

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)

(Unaudited)


	Three Months Ended March 31,
	2021		Revised 2020
Cash flows from operating activities:
Net income (loss)	$	(70)	$	291
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization	474		434


Exploration expenses, including dry holes	3		2
Deferred income taxes	(18)		77
Gain on disposition of assets, net	(11)		0
Loss on early extinguishment of debt	5		0
Accretion of discount on asset retirement obligations	1		2
Interest expense	5		5
Derivative-related activity	370		(415)
Amortization of stock-based compensation	52		16
Investment in affiliate valuation adjustment	(54)		145
South Texas contingent consideration valuation adjustment	0		63
South Texas deficiency fee obligation	0		69
Other	45		31
Change in operating assets and liabilities, net of effects of acquisition:
Accounts receivable	(330)		479
Inventories	(90)		16



Other assets	16		21
Accounts payable	265		(284)
Interest payable	(57)		(35)
Other liabilities	(229)		(92)
Net cash provided by operating activities	377		825
Cash flows from investing activities:
Proceeds from disposition of assets	23		1
Cash acquired, net of cash paid	117		0


Additions to oil and gas properties	(464)		(639)
Additions to other assets and other property and equipment	(24)		(43)
Net cash used in investing activities	(348)		(681)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net of discount	2,497		0


Borrowings under credit facility	0		800
Repayment of credit facility	(397)		0
Repayment of senior notes, including tender offer premiums	(2,640)		(450)

Payments of other liabilities	(140)		(146)
Payments of financing fees, net	(28)		0
Purchases of treasury stock	(13)		(122)
Exercise of long-term incentive plan stock options and employee stock purchases	6		0
Dividends paid	(91)		(73)
Net cash provided by (used in) financing activities	(806)		9
Net increase (decrease) in cash, cash equivalents and restricted cash	(777)		153
Cash, cash equivalents and restricted cash, beginning of period	1,501		705
Cash, cash equivalents and restricted cash, end of period	$	724	$	858

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

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

~~September 30, 2017~~March 31, 2021

(Unaudited)

NOTE A.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.~~Exchange (the "NYSE"). 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 ~~within the United States, with operations primarily~~ in the Permian Basin in West ~~Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado and the West Panhandle field in the Texas Panhandle.~~Texas.

NOTE B.2. Basis of Presentation

Presentation. In the opinion of management, the unaudited interim consolidated financial statements of the Company as of ~~September 30, 2017~~March 31, 2021 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 include all adjustments and accruals, consisting only of normal, recurring ~~accrual~~ adjustments ~~which are~~and accruals necessary for a fair presentation of the results for the interim ~~periods. These interim~~periods in conformity with generally accepted accounting principles in the United States ("GAAP"). The operating results for the three months ended March 31, 2021 are not necessarily indicative of results for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~generally accepted accounting principles in the United States ("GAAP")~~GAAP have been condensed in or omitted ~~from this report pursuant to~~in accordance with the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). These unaudited interim consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2020.

~~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 ~~made~~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 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 ~~2016~~Company's March 31, 2020 consolidated financial ~~statement and footnote amounts in order to conform to the 2017 presentation.~~

~~Issuance of common stock.~~ ~~During the first and second quarters of 2016,~~statements; however, the Company issued 13.8 million and 6.0 million shares of common stock, respectively, and received cash proceeds of $1.6 billion and $937 million, respectively, net of associated underwriter discounts and offering expenses.

~~New accounting pronouncements.~~ In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as certain classification changes in the statement of cash flows. The Company adopted this standard on January 1, 2017. See Note M for discussion ondetermined that the impact of the ~~adoption~~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 immaterial misstatement for the quarter ended March 31, 2020 by revising the consolidated financial statements appearing herein. The net impact of these immaterial noncash corrections to the Company's ~~income tax provision.~~previously reported consolidated financial statements for the quarter ended March 31, 2020 is shown below (in millions, except for per share data):

~~In February 2016,~~


	March 31, 2020
	As Reported		Adjustments	As Revised
Oil and gas revenues	$	1,095			$	0	$	1,095
Derivative gain, net	$	453			$	3	$	456

Total revenues and other income	$	2,257			$	3	$	2,260
Total costs and expenses	1,892				0		1,892
Income before income taxes	365				3		368
Income tax provision	(76)				(1)		(77)

Net income	$	289			$	2	$	291
Basic and diluted net income attributable to common stockholders per share	$	1.74			$	0.01	$	1.75

Use of estimates in the ~~FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires the recognition~~preparation of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and makes certain changes to the accounting for lease expenses. This update is effective for fiscal years beginning after December 15, 2018 and for interim periods beginning the following year. This update should be applied using a modified retrospective approach, and early adoption is permitted. The Company anticipates that the adoptionfinancial statements. Preparation of ~~ASU 2016-02 for its leasing arrangements will likely (i) increase~~ the Company's ~~recorded~~unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, ~~(ii) increase depreciation, depletion~~the disclosure of contingent assets and ~~amortization expense, (iii) increase interest expense and (iv) decrease lease/rental expense. The Company is currently evaluating each~~liabilities as of ~~its lease arrangements and has not determined~~ the ~~aggregate amount of change expected for each category.~~

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, "Revenue Recognition," and most industry-specific guidance. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ~~ASU 2014-09 for one year to fiscal years beginning after December 15, 2017. Early adoption is permitted for fiscal years beginning after December 15, 2016. In addition, in May 2016,~~ the ~~FASB issued ASU 2016-11, which rescinds guidance from~~financial statements and the ~~SEC on accounting for gas balancing arrangements~~reported amounts of revenues and ~~will eliminate~~expenses during the ~~use~~reporting periods. Depletion of ~~the entitlements method.~~

~~The Company has been working through a project plan for the implementation of Topic 606 and has identified the following revenue streams:~~ oil ~~NGL~~ and gas ~~sales and sales~~properties is calculated using estimates of ~~purchased~~proved oil and ~~gas. The Company's analysis~~gas reserves. There are numerous uncertainties inherent in the estimation of ~~contracts with customers~~

quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of goodwill and proved and unproved oil and gas properties are subject to

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

numerous uncertainties including, among others, estimates of proved, probable and possible reserves and commodity price outlooks. Actual results could differ from the estimates and assumptions utilized.

Adoption of new accounting standards. In August 2020, the FASB issued ASU 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in ~~accordance~~Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. Additionally, ASU 2020-06 amends the ~~requirements~~diluted earnings per share calculation for convertible instruments by requiring the use of ~~Topic 606 is largely complete.~~the if-converted method. The if-converted method assumes the conversion of convertible instruments occurs at the beginning of the reporting period and diluted weighted average shares outstanding includes the common shares issuable upon conversion of the convertible instruments. The Company ~~has not identified any changes~~early adopted ASU 2020-06 on January 1, 2021.

Upon issuance of the Company's $1.3 billion principal amount of 0.25% convertible senior notes due 2025 (the "Convertible Notes") in May 2020, the Company bifurcated the debt and equity components of the Convertible Notes to long-term debt and additional paid-in capital in its consolidated balance sheet. The amount recorded to additional paid in capital represented a debt discount that was being amortized to interest expense over the life of the Convertible Notes. Upon adoption of ASU 2020-06 on January 1, 2021, the Company (i) reversed the debt discount and related deferred income tax liability recorded to additional paid in capital of $230 million and $50 million, respectively, (ii) recorded a cumulative effect of the adoption of ASU 2020-06 of $22 million to retained earnings, representing a reversal of $28 million of the debt discount that was amortized to interest expense, net of an associated deferred income tax impact of $6 million, in 2020 and (iii) recorded the respective offsets for items (i) and (ii) above, representing the unamortized debt discount attributable to the ~~timing~~Convertible Notes of ~~revenue recognition based~~$202 million to long-term debt and the associated deferred tax impact of $44 million to deferred income tax liabilities. See Note 7 for additional information.

Additionally, upon adoption of ASU 2020-06, the ~~requirements of Topic 606 that would have a material impact on~~treasury stock method utilized by the ~~Company's consolidated financial statements. The~~ Company ~~plans~~ to ~~utilize~~calculate earnings per share through December 31, 2020 will no longer be allowed. As such, the Company has transitioned to the if-converted method utilizing the modified retrospective approach, ~~to adopt the new standards upon their effective dates~~ with a cumulative effect ~~adjustment, if any, recorded~~from the change in accounting principle including the addition of 12 million of incremental shares to ~~retained earnings~~the Company's weighted-average diluted shares outstanding as of ~~January 1, 2018. The Company's evaluation of the new disclosure requirements is ongoing.~~March 31, 2021. See Note 16 for additional information.

NOTE ~~C. Acquisitions~~3. Acquisition and ~~Divestitures~~Divestiture

~~Permian Basin~~ Acquisition. ~~In August 2016,~~On January 12, 2021, the Company acquired ~~approximately 28,000 net acres in~~Parsley Energy, Inc., a Delaware corporation that previously traded on the ~~Permian Basin, with net production~~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"). On the closing date of the Parsley Acquisition, Parsley merged into a newly formed wholly-owned subsidiary of the Company, and the subsidiaries of Parsley, including Jagged Peak Energy LLC ("Jagged Peak"), became indirect subsidiaries of the Company.

As part of the Parsley Acquisition, each eligible share of Parsley Class A common stock and each membership interest unit of Parsley Energy, LLC were automatically converted into the right to receive 0.1252 (the "Exchange Ratio") shares of Pioneer common stock. As a result, the Company issued 52 million shares of Pioneer common stock upon the consummation of the Parsley Acquisition, representing total stock consideration transferred of approximately ~~1,400 barrels of oil equivalent per day ("BOEPD"), from an unaffiliated third party for $428 million, including normal closing adjustments.~~ $7 billion.

The ~~acquisition~~Parsley Acquisition was accounted for using the acquisition method under ASC Topic 805, ~~"Business~~Business Combinations," which requires all assets acquired ~~assets~~ and liabilities assumed in the Parsley Acquisition to be recorded at fair value asat the effective time of the ~~acquisition date.~~

~~The following table represents the allocation of the acquisition price to the assets acquired and the liabilities assumed based on their fair value at the acquisition date (in millions):~~

Assets acquired:
Proved properties $ 79
Unproved properties 347
Other property and equipment 5
Liabilities assumed:
Asset retirement obligations (2 )
Other liabilities (1 )
Net assets acquired $ 428

~~The~~acquisition. Provisional fair value measurements ~~of the net assets acquired are based on inputs that are not observable in the market and, therefore, represent Level 3 inputs in the fair value hierarchy (see Note D~~were made for a description of the input levels in the fair value hierarchy). The Company calculated the fair values of the acquired proved properties and asset retirement obligations using a discounted future cash flow model that utilizes management's estimates of (i) proved reserves, (ii) forecasted production rates, (iii) future operating, development and plugging and abandonment costs, (iv) future commodity prices and (v) a discount rate of 10 percent for proved properties and seven percent for asset retirement obligations. The Company calculated the fair values of the acquired unproved properties based on the average price per acre in comparable market transactions. The operating results attributable to the acquired assets and liabilities, ~~assumed are included~~and adjustments to those measurements may be made in subsequent periods (up to one year from the ~~Company's accompanying consolidated statements of operations since~~acquisition date) as information necessary to complete the ~~date of acquisition.~~

~~Divestitures.~~ ~~For the three and nine months ended~~September 30, 2017, the Company recorded net gains on the disposition of assets of nil and $205 million, respectively. For the three and nine months ended September 30, 2016, the Company recorded net gains on the disposition of assets of $1 million and $4 million, respectively.

In April 2017, the Company completed the sale of approximately 20,500 acres in the Martin County region of the Permian Basin, with net production of approximately 1,500 BOEPD, to an unaffiliated third party for cash proceeds of $266 million, before normal closing adjustments. The sale resulted in a gain of $194 million. In conjunction with the divestiture, the Company reduced the carryingfair value ~~of goodwill by $2 million, reflecting the portion of the Company's goodwill related to the assets sold.~~

During the nine months ended September 30, 2017, the Company also completed the sales of other nonstrategic proved and unproved properties in the Permian Basin for cash proceeds of $78 million, which resulted in a gain of $12 million.

analysis is obtained.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

The following table summarizes the provisional fair values assigned to assets acquired and liabilities assumed (presented in millions):


	As of January 12, 2021
Cash and cash equivalents	$	118
Accounts receivable	248
Derivatives	8
Proved properties	5,096
Unproved properties	5,647
Other property and equipment	127
Operating lease right-of-use assets	201
Other assets	22
Total assets acquired	11,467

Accounts payable	366
Interest payable	49
Derivatives	318
Operating leases	201
Deferred income taxes	130
Long-term debt	3,238
Other liabilities	282
Total liabilities assumed	4,584
Net assets acquired	$	6,883

The following unaudited pro forma summary presents the results of operations as if the Parsley Acquisition had occurred on January 1, 2020. The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may have differed significantly from this pro forma financial information. The pro forma information does not reflect any synergy savings that might have been achieved from combining the operations and is not intended to reflect the actual results that would have occurred had the companies actually been combined during the periods presented.


	Three Months Ended March 31,
	2021		2020
	(in millions)
Revenues and other income	$	2,414	$	3,441
Net loss	$	(136)	$	(3,201)

Divestiture. In March 2021, the Company sold its well services business to a third party for (i) net cash proceeds of $20 million and (ii) up to $4 million of additional cash proceeds to be earned over the next three years. The Company recorded a gain on sale of $9 million, which is reflected in net gains on disposition of assets in the consolidated statements of operations.

NOTE D.4. Fair Value Measurements

~~Fair~~The Company determines fair value ~~is defined as~~based on the price that would be received ~~to sell~~from selling an asset or ~~the price~~ 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 ~~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.

~~Level 3 – unobservable inputs for the asset or liability.~~

~~Assets and liabilities measured at fair value on a recurring basis.~~ ~~The~~ fair value input hierarchy level to which an

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

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 ~~following table presents~~three input levels of the ~~Company's~~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.

•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 ~~that are~~measured at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as ~~of September 30, 2017 and December 31, 2016 for each of the fair value hierarchy levels:~~follows:


	As of March 31, 2021
	Fair Value Measurement
	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 price derivatives	$	0	$	12	$	0	$	12
Deferred compensation plan assets	68		0		0		68
Investment in affiliate	177		0		0		177

Total assets	245		12		0		257
Liabilities:
Commodity price derivatives	0		871		0		871
Marketing derivatives	0		0		111		111
Total liabilities	0		871		111		982
Total recurring fair value measurements	$	245	$	(859)	$	(111)	$	(725)


	As of December 31, 2020
	Fair Value Measurement
	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 price derivatives	$	0	$	8	$	0	$	8
Deferred compensation plan assets	72		0		0		72
Investment in affiliate	123		0		0		123
Total assets	195		8		0		203
Liabilities:
Commodity price derivatives	0		209		0		209
Marketing derivatives	0		0		91		91
Total liabilities	0		209		91		300
Total recurring fair value measurements	$	195	$	(201)	$	(91)	$	(97)

Fair Value Measurement as of September 30, 2017 Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Fair Value as of September 30, 2017
(in millions)
Assets:
Commodity derivatives $ —
$ 45
$ —
$ 45
Interest rate derivatives —
5
—

5
Deferred compensation plan assets 90
—
—
90
Total assets 90
50
—
140
Liabilities:
Commodity derivatives —
29
—
29
Total liabilities —
29
—
29
Total recurring fair value measurements $ 90
$ 21
$ —
$ 111

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

Fair Value Measurement as of December 31, 2016 Using
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Fair value as of December 31, 2016
(in millions)
Assets:
Commodity derivatives $ —
$ 8
$ —
$ 8
Interest rate derivatives —
6
—
6
Deferred compensation plan assets 83
—
—
83
Total assets 83
14
—
97
Liabilities:
Commodity derivatives —
84
—
84
Total liabilities —
84
—
84
Total recurring fair value measurements $ 83
$ (70 ) $ —
$ 13

Commodity price derivatives. The Company's commodity price derivatives represent oil, NGL and gas swap contracts, collar contracts, ~~and~~ collar contracts with short ~~puts.~~puts, option contracts and basis swap contracts. The asset and liability measurements for ~~these~~the Company's commodity price derivative contracts ~~represent~~are determined using Level 2 ~~inputs in the hierarchy.~~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. Under the contract terms of the marketing derivatives 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 West Texas Intermediate ("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 derivatives 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 March 31, 2021 and 2020 was $2.06 and $1.90 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, 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 March 31, 2021.

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

Investment in affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of ~~September 30, 2017, the significant inputs to these asset values represented~~its investment in ProPetro is determined using Level 1 ~~independent active exchange market price inputs.~~

~~Interest rate derivatives.~~ The Company's interest rate derivative assets represent interest rate swap contracts. The Company utilizes discounted cash flow models for valuing its interest rate derivatives. The derivative values attributable to the Company's interest rate derivative contracts areinputs based on ~~(i) the contracted notional amounts, (ii) forward active market-quoted London Interbank Offered Rates ("LIBOR")~~observable prices on a major exchange. See Note 11 and ~~(iii) the applicable credit-adjusted risk-free rate yield curve. The Company's interest rate derivative fair value measurements represent Level 2 inputs in the hierarchy.~~Note 13 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, but are subject to fair value adjustments in certain circumstances. These assets and liabilities can include inventory, proved and unproved oil and gas properties, goodwill and other long-lived assets ~~or liabilities~~ that are ~~acquired or~~ written down to fair value when they are impaired or held for sale. ~~See Note C~~

Parsley Acquisition. The Parsley Acquisition was accounted for ~~information on~~using the ~~fair value of~~acquisition method under ASC Topic 805, "Business Combinations", which requires all assets acquired and liabilities ~~acquired~~assumed in the ~~Permian Basin~~Parsley Acquisition to be recorded at fair values at the effective time of the acquisition.

~~Proved oil~~ Oil and gas properties~~. As a result of the Company's proved property impairment assessments, the Company recognized noncash impairment charges to reduce the carrying values of the Raton~~ were valued based on income and ~~West Panhandle fields during the three months ended March 31, 2017 and 2016, respectively, to their estimated fair values.~~

~~The Company calculated the fair values of the Raton and West Panhandle fields using a discounted future cash flow model. Significant~~market based approaches utilizing Level 3 ~~assumptions associated with~~inputs including internally generated development and production profiles and price and cost assumptions. Debt assumed in the calculations included management's longer-term commodity price outlooks ("Management's Price Outlooks") and management's outlooks for (i) production, (ii) production costs, (iii) capital expenditures and (iv) estimated proved reserves and risk-adjusted probable reserves. Management's Price Outlooks are developedacquisition was valued based on ~~third-party longer-term commodity futures price outlooks as of each measurement date. The expected future net cash flows were discounted~~Level 2 inputs that included using ~~an annual rate of 10 percent~~observable market prices to determine fair value.

Net derivative liabilities assumed in the acquisition were valued based on Level 2 inputs similar to the Company's other commodity price derivatives. See Note 3for additional information.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

South Texas Divestiture. The ~~following table presents the~~Company recorded a deficiency fee obligation and related deficiency fee receivable in conjunction with its 2019 divestiture of its South Texas assets (the "South Texas Divestiture"). The fair value of the deficiency fee obligation and ~~fair~~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 ~~adjustments (in millions) for~~of the deficiency payments and corresponding receipts. The changes to the Company's ~~2017 and 2016 proved property impairments, as well as the average oil price per barrel ("Bbl") and gas price per British thermal unit ("MMBtu") utilized~~forecasted deficiency fee obligation resulted in the ~~respective Management's Price Outlooks:~~

Management's Price Outlooks
Impairment Date Fair Value Fair Value Adjustment Oil Gas
Raton March 2017 $ 186
$ (285 ) $ 53.65
$ 3.00
West Panhandle March 2016 $ 33
$ (32 ) $ 49.77
$ 3.24

~~It is reasonably possible that~~Company recording a charge of $69 million to other expense during the ~~estimate~~three months ended March 31, 2020. The present value of ~~undiscounted~~the estimated future ~~net~~ cash ~~flows attributable to these or other properties may change in~~payments and expected cash receipts were determined using a 3.6 percent and 3.2 percent discount rate, respectively, based on the ~~future resulting in the need to impair their carrying values. The primary factors that may affect estimates~~estimated timing of future ~~cash flows are (i) future adjustments, both positive~~payments and ~~negative, to proved~~receipts and ~~risk-adjusted probable~~ the Company's counterparty credit risk assessments. See Note 10and possible oil and gas reserves, (ii) results of future drilling activities, (iii) Management's Price Outlooks and (iv) increases or decreases in production and capital costs associated with these reserves.Note 14 for additional information.

~~Unproved oil and gas properties.~~ ~~During March 2016, the Company recorded an impairment charge of~~ ~~$32 million~~ to write-off the carrying value of its unproved royalty acreage in Alaska (reported in exploration and abandonments in the accompanying consolidated statements of operations) as a result of the operator curtailing operations in the area and Management's Price Outlooks.

Financial instruments not carried at fair value. Carrying values and fair values of financial instruments that are not carried at fair value in the ~~accompanying~~ consolidated balance sheets ~~as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~are as follows:


	As of March 31, 2021				As of December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value

	(in millions)
Assets:
Cash and cash equivalents (a)	$	668	$	668	$	1,442	$	1,442


Restricted cash (a)	$	56	$	56	$	59	$	59







Liabilities:
Current portion of long-term debt:
Senior notes (b)	$	0	$	0	$	140	$	140
Long-term debt:
Convertible senior notes (b)	$	1,303	$	2,068	$	1,100	$	1,756
Senior notes (b)	$	4,874	$	4,898	$	2,060	$	2,230

______________________

September 30, 2017 December 31, 2016

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
(in millions)
Commercial paper, corporate bonds and time deposits $ 1,508
$ 1,506
$ 1,906
$ 1,901
Current portion of long-term debt $ 449
$ 462
$ 485
$ 490
Long-term debt $ 2,282
$ 2,495
$ 2,728
$ 2,956

~~Commercial paper, corporate bonds and time deposits.~~ ~~Periodically,~~(a)Fair value approximates carrying value due to 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. The investments are carried at amortized cost and classified as held-to-maturity as the Company has the intent and ability to hold them until they mature. The carrying values of held-to-maturity investments are adjusted for amortization of premiums and accretion of discounts over the remaining lifeshort-term nature of the ~~investment. Income related to these investments~~instruments.

(b)Fair value is recorded in interest and other income in the Company's consolidated statements of operations. The Company's investments in corporate bonds represent Level 1 inputs in the hierarchy, while other investments representdetermined using Level 2 inputs in the hierarchy. 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 reflected in short-term investments or long-term investments in the accompanying consolidated balance sheets based on their maturity dates. The following table provides the components of the Company's cash and cash equivalents and investments as of September 30, 2017 and December 31, 2016:

September 30, 2017
Consolidated Balance Sheet Location Cash Commercial Paper Corporate Bonds
Time
Deposits
Total
(in millions)
Cash and cash equivalents $ 539
$ —
$ —
$ 97
$ 636
Short-term investments —
124
741
492
1,357
Long-term investments —
—
151
—
151
$ 539
$ 124
$ 892
$ 589
$ 2,144

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

December 31, 2016
Consolidated Balance Sheet Location Cash Commercial Paper Corporate Bonds Time
Deposits Total
(in millions)
Cash and cash equivalents $ 873
$ 45
$ —
$ 200
$ 1,118
Short-term investments —
368
691
382
1,441
Long-term investments —
—
420
—
420
$ 873
$ 413
$ 1,111
$ 582
$ 2,979

~~Debt obligations.~~ The Company's debt obligations are composed of its credit facility and senior notes. The fair value of the Company's debt obligations is determined utilizing inputs that are Level 2 measurements in the fair value hierarchy. The fair value of the Company's credit facility is calculated using a discounted cash flow model based on (i) forecasted contractual interest and fee payments, (ii) forward active market-quoted United States Treasury Bill rates and (iii) the applicable credit-adjustments.inputs. The Company's senior notes ~~represent debt securities that~~ are quoted, but not actively traded on major ~~exchanges. The~~exchanges; therefore, fair ~~values of the Company's senior notes are~~value is based on ~~their~~ periodic values as quoted on ~~the~~ major exchanges. See Note 7 for additional information.

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 E.5. Derivative Financial Instruments

Oil production derivatives. The Company ~~also, from time to time, utilizes interest rate contracts to reduce~~sells its oil production at the ~~effect of interest rate volatility on~~lease and the ~~Company's indebtedness.~~

Periodically, the Company may pay a premium to enter into commodity contracts. Premiums paid, if any, have been nominal in relation to the value of the underlying asset in the contract. The Company recognizes the nominal premium payments as an increase to the value of derivative assets when paid. All derivatives are adjusted to fair value as of each balance sheet date.

~~Oil production derivative activities.~~ ~~All material physical~~ sales contracts governing ~~the Company's~~such oil production are tied directly to, or are ~~highly~~ correlated with, ~~New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI")~~NYMEX WTI oil prices. The Company also enters into (i) pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from its areas of production and (ii) purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil sales to Gulf Coast refineries or international export markets at prices that are highly correlated to Brent oil prices. As a result, the Company uses a combination of Brent, Magellan East Houston ("MEH") and WTI derivative contracts to manage future oil price ~~volatility and basis swap contracts to reduce basis risk between NYMEX prices and the actual index prices at which the oil is sold.~~volatility.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

The ~~following table sets forth the volumes per day associated with the~~ Company's outstanding oil derivative contracts as of ~~September 30, 2017~~March 31, 2021 and the weighted average oil prices per barrel for those ~~contracts:~~contracts are as follows:


	2021						Year Ending December 31, 2022
	Second Quarter		Third Quarter		Fourth Quarter






Brent swap contracts:
Volume per day (Bbl)	102,000		17,000		17,000		0
Price per Bbl	$	46.48	$	44.45	$	44.45	$	0
MEH swap contracts:
Volume per day (Bbl)	54,000		43,000		43,000		2,055
Price per Bbl	$	41.85	$	40.52	$	40.52	$	42.80
Midland WTI swap contracts:
Volume per day (Bbl)	5,000		5,000		5,000		0
Price per Bbl	$	40.50	$	40.50	$	40.50	$	0
Brent call contracts sold:
Volume per Bbl (a)	20,000		20,000		20,000		0
Price per Bbl	$	69.74	$	69.74	$	69.74	$	0
Brent collar contracts:
Volume per day (Bbl)	—		—		—		10,000
Price per Bbl:
Ceiling	$	—	$	—	$	—	$	60.32
Floor	$	—	$	—	$	—	$	50.00
Brent collar contracts with short puts:
Volume per day (Bbl)	90,000		110,000		90,000		57,000
Price per Bbl:
Ceiling	$	50.74	$	54.46	$	50.74	$	64.41
Floor	$	45.11	$	47.82	$	45.11	$	50.18
Short put	$	35.07	$	36.87	$	35.07	$	38.25
MEH collar contracts with short puts:
Volume per day (Bbl)	20,187		9,446		9,446		0
Price per Bbl:
Ceiling	$	59.39	$	51.29	$	51.29	$	0
Floor	$	49.30	$	41.55	$	41.55	$	0
Short put	$	39.30	$	31.55	$	31.55	$	0

______________________

2017 Year Ending December 31, 2018
Fourth Quarter
Collar contracts (a):
Volume (Bbl) 6,000
—
Price per Bbl:
Ceiling $ 70.40
$ —
Floor $ 50.00
$ —
Collar contracts with short puts (b):
Volume (Bbl) 155,000
150,781
Price per Bbl:
Ceiling $ 62.12
$ 57.70
Floor $ 49.82
$ 47.39
Short put $ 41.02
$ 37.35
Basis swap contracts:
Midland-Cushing index swap volume (Bbl) 6,630
—
Price differential ($/Bbl) (c) $ (1.09 ) $ —
(a)The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar contracts with short puts.

~~____________________~~


~~(a)~~	Subsequent to September 30, 2017, the Company entered into additional collar contracts for 3,000 Bbls per day of 2018 production with a ceiling price of $58.05 per Bbl and a floor price of $45.00 per Bbl.


~~(b)~~	Subsequent to September 30, 2017, the Company entered into additional collar contracts with short puts for 2,000 Bbls per day of 2018 production with a ceiling price of $59.25 per Bbl, a floor price of $45.00 per Bbl and a short put price of $35.00 per Bbl.


~~(c)~~	~~Represents the basis differential between Midland, Texas oil prices and WTI oil prices at Cushing, Oklahoma.~~

NGL production ~~derivative activities.~~derivatives. All material physical sales contracts governing the Company's NGL production are tied directly or indirectly to ~~either~~ Mont Belvieu, Texas ~~or Conway, Kansas~~ NGL component product prices. The Company uses derivative contracts to manage the volatility of NGL component ~~price volatility.~~

~~Table~~product prices. As of ~~Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

~~The following table sets forth~~March 31, 2021, the ~~volumes per day associated with the Company's outstanding~~Company did not have any NGL derivative contracts ~~as of~~ ~~September 30, 2017~~ ~~and the weighted average NGL prices for those contracts:~~outstanding.

2017 Year Ending December 31,
Fourth Quarter 2018 2019
Ethane collar contracts (a):
Volume (Bbl) 3,000
—
—
Price per Bbl:
Ceiling $ 11.83
$ —
$ —
Floor $ 8.68
$ —
$ —
Ethane basis swap contracts (b):
Volume (MMBtu) 6,920
6,920
6,920
Price differential ($/MMBtu) $ 1.60
$ 1.60
$ 1.60

~~____________________~~


~~(a)~~	~~Represent collar contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.~~


~~(b)~~	Represent basis swap contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. The basis swap contracts fix the basis differential on a NYMEX Henry Hub ("HH") MMBtu equivalent basis. The Company will receive the HH price plus the price differential on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of ethane.

~~Subsequent to September 30, 2017, the Company entered into propane swap contracts for 2,500 Bbls per day of November and December 2017 production with a fixed price of $37.80 per Bbl.~~

Gas production ~~derivative activities.~~derivatives. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to HHNYMEX Henry Hub ("HH") gas prices or regional index prices (e.g. WAHA, SoCal and Houston Ship Channel) 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

~~September 30, 2017~~March 31, 2021

(Unaudited)

The ~~following table sets forth the volumes per day associated with the~~ Company's outstanding gas derivative contracts as of ~~September 30, 2017~~March 31, 2021 and the weighted average gas prices per MMBtu for those ~~contracts:~~contracts are as follows:


	2021						Year Ending December 31, 2022
	Second Quarter		Third Quarter		Fourth Quarter
NYMEX swap contracts:
Volume per day (MMBtu) (a)	20,000		20,000		20,000		0
Price per MMBtu	$	2.81	$	2.81	$	2.81	$	0


Dutch TTF swap contracts:
Volume per day (MMBtu)	30,000		30,000		30,000		0
Price per MMBtu	$	5.07	$	5.07	$	5.07	$	0
WAHA swap contracts:
Volume per day (MMBtu)	116,484		116,304		116,304		4,932
Price per MMBtu	$	2.36	$	2.36	$	2.36	$	2.46
NYMEX collar contracts:
Volume per day (MMBtu) (b)	200,000		200,000		200,000		0
Price per MMBtu:
Ceiling	$	3.18	$	3.18	$	3.18	$	0
Floor	$	2.56	$	2.56	$	2.56	$	0

______________________

2017 Year Ending December 31,
Fourth Quarter 2018 2019
Swap contracts:
Volume (MMBtu) (a) —
30,000
—
Price per MMBtu $ —
$ 3.08
$ —
Collar contracts with short puts:
Volume (MMBtu) 300,000
62,329
—
Price per MMBtu:
Ceiling $ 3.60
$ 3.56
$ —
Floor $ 2.96
$ 2.91
$ —
Short put $ 2.47
$ 2.37
$ —
Basis swap contracts:
Mid-Continent index swap volume (MMBtu) (b) 45,000
—
—
Price differential ($/MMBtu) $ (0.32 ) $ —
$ —
Permian Basin index swap volume (MMBtu) (c) 26,522
51,671
70,000
Price differential ($/MMBtu) $ 0.30
$ 0.30
$ 0.30

~~____________________~~


~~(a)~~	~~Subsequent to September 30, 2017, the Company entered into additional swap contracts for 70,000 MMBtu per day of April through December 2018 production with a price of $3.00 per MMBtu.~~


~~(b)~~	~~Represent swap contracts that fix the basis differentials between the index price at which the Company sells its Mid-Continent gas and the HH index price used in collar contracts with short puts.~~

~~(c)~~

Represent swap contracts that fix the basis differentials between Permian Basin index prices and southern California index prices for Permian Basin gas forecasted for sale in southern California. Subsequent to September 30, 2017, the Company entered into additional basis swap contracts for (i) 20,000 MMBtu per day of November 2017 through March 2018 production with a price of $0.49 per MMBtu and (ii) 10,000 MMBtu per day of 2019 production with a price of $0.32 per MMBtu.

~~Marketing derivatives.Periodically,~~(a)Subsequent to March 31, 2021, the Company ~~enters~~entered into buy and sell marketing arrangements to fulfill firm pipeline transportation commitments. Associated with these marketing arrangements, the Company may enter into index swaps that mitigate price risk. As of September 30, 2017, the Company was party to (i) oil indexadditional NYMEX swap contracts for ~~10,000 Bbls~~20,000 MMBtu per day of ~~November and~~June 2021 through December ~~2017 transportation commitments~~2021 production with aan average fixed price ~~differential~~ of ~~$4.18~~$3.01 per ~~Bbl between~~MMBtu.

(b)Subsequent to March 31, 2021, the Company entered into additional NYMEX ~~WTI and Louisiana Light Sweet oil ("LLS") and (ii) oil index swap~~collar contracts for ~~10,000 Bbls~~20,000 MMBtu per day of ~~January~~June 2021 through ~~August 2018 transportation commitments~~December 2021 production with a ceiling price ~~differential~~ of ~~$3.18~~$3.31 per ~~Bbl between NYMEX WTI~~MMBtu and ~~LLS.~~a floor price of $2.75 per MMBtu.

~~Interest rate derivative activities.~~ ~~As of September 30, 2017, the Company was party to interest rate derivative~~Marketing derivatives. The Company's marketing derivatives reflect two long-term marketing contracts that were entered in October 2019 whereby the Company ~~will receive~~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 began on January 1, 2021 and ends on December 31, 2026. The price the ~~three-month LIBOR rate~~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 ~~10-year period from December 2017~~oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through ~~December 2027 in exchange for paying a fixed interest rate~~their Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of ~~1.81 percent~~the purchase. Based on ~~a notional amount~~the form of ~~$100 million on December 15, 2017. Subsequent to September 30, 2017,~~the marketing contracts, the Company ~~liquidated~~determined that the marketing contracts should be accounted for as derivative instruments. For the three months ended March 31, 2021 and 2020, the Company recorded noncash derivative losses of $20 million and noncash derivative gains of $6 million, respectively, and cash payments of $7 million and no cash payments or receipts, respectively, related to its ~~interest rate derivative contracts for cash proceeds of $5 million.~~marketing derivatives.

~~Tabular disclosure of derivative financial instruments. All of the~~Derivative accounting. The Company's derivatives are accounted for as non-hedge derivatives ~~as of September 30, 2017 and December 31, 2016,~~ and therefore all changes in the fair values of its derivative contracts are recognized as gains or losses in the earnings of the periods in which they occur. The Company ~~classifies the fair value amounts of derivative assets and liabilities as net current or noncurrent derivative assets or net current or noncurrent derivative liabilities, whichever the case may be, by~~enters into commodity ~~and counterparty. The Company enters into~~price derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty.

Contingent consideration. The Company's right to receive contingent consideration in conjunction with the South Texas Divestiture was determined to be a derivative financial instrument that is not designated as a hedging instrument. Prior to its settlement in July 2020, the contingent consideration was revalued using an option pricing model each reporting period based on forecasted oil and NGL prices during each of the five years from 2020 to 2024. See Note 13 for additional information.

Noncash gains and losses associated with the Company's (i) commodity price derivatives and marketing derivatives and (ii) contingent consideration are separately presented in operating activities within the consolidated statements of cash flows.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

Fair value.The ~~aggregate~~ fair value of ~~the Company's~~ derivative financial instruments ~~reported in the accompanying consolidated balance sheets by type~~not designated as hedging instruments is as follows:


As of March 31, 2021
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet		Net Fair Value Presented in the Consolidated Balance Sheet


		(in millions)
Assets:
Commodity price derivatives	Derivatives - current	$	9	$	0	$	9
Commodity price derivatives	Derivatives - noncurrent	$	3	$	0	$	3

Liabilities:
Commodity price derivatives	Derivatives - current	$	829	$	0	$	829
Marketing derivatives	Derivatives - current	$	42	$	0	$	42
Commodity price derivatives	Derivatives - noncurrent	$	42	$	0	$	42
Marketing derivatives	Derivatives - noncurrent	$	69	$	0	$	69


As of December 31, 2020
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet		Net Fair Value Presented in the Consolidated Balance Sheet

		(in millions)
Assets:
Commodity price derivatives	Derivatives - current	$	5	$	0	$	5
Commodity price derivatives	Derivatives - noncurrent	$	3	$	0	$	3
Liabilities:
Commodity price derivatives	Derivatives - current	$	198	$	0	$	198
Marketing derivatives	Derivatives - current	$	36	$	0	$	36
Commodity price derivatives	Derivatives - noncurrent	$	11	$	0	$	11
Marketing derivatives	Derivatives - noncurrent	$	55	$	0	$	55

Fair value. Gains and ~~counterparty, including the classification between current and noncurrent assets and liabilities, consists of the following:~~

Fair Value of Derivative Instruments as of September 30, 2017
Type
Consolidated
Balance Sheet
Location

Fair
Value

Gross Amounts
Offset in the
Consolidated
Balance Sheet

Net Fair Value
Presented in the
Consolidated
Balance Sheet
(in millions)
Derivatives not designated as hedging instruments
Asset Derivatives:
Commodity price derivatives Derivatives - current $ 50
$ (12 ) $ 38
Interest rate derivatives Derivatives - current $ 5
$ —
5
Commodity price derivatives Derivatives - noncurrent $ 10
$ (3 ) 7
$ 50
Liability Derivatives:

Commodity price derivatives Derivatives - current $ 29
$ (12 ) $ 17
Commodity price derivatives Derivatives - noncurrent $ 15
$ (3 ) 12
$ 29

Fair Value of Derivative Instruments as of December 31, 2016
Type
Consolidated
Balance Sheet
Location

Fair
Value

Gross Amounts
Offset in the
Consolidated
Balance Sheet

Net Fair Value
Presented in the
Consolidated
Balance Sheet
(in millions)
Derivatives not designated as hedging instruments
Asset Derivatives:
Commodity price derivatives Derivatives - current $ 33
$ (25 ) $ 8
Interest rate derivatives Derivatives - current $ 6
$ —
6
$ 14
Liability Derivatives:
Commodity price derivatives Derivatives - current $ 102
$ (25 ) $ 77
Commodity price derivatives Derivatives - noncurrent $ 7
$ —
7
$ 84
losses recorded on derivative financial instruments not designated as hedging instruments are as follows:


Derivatives Not Designated as Hedging Instruments	Location of Gain/(Loss) Recognized in Earnings on Derivatives	Three Months Ended March 31,
			2021		2020

			(in millions)





Commodity price derivatives	Derivative gain (loss), net		$	(664)	$	472
Marketing derivatives	Derivative gain (loss), net		$	(27)	$	6
Interest rate derivatives	Derivative gain (loss), net		$	0	$	(22)
Contingent consideration	Interest and other income (loss), net		$	0	$	(63)

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 following table details the location of gains and losses recognized on the Company's derivative contracts in the accompanying consolidated statements of operations:~~

Derivatives Not Designated as Location of Gain / (Loss) Recognized in Earnings Three Months Ended
September 30, Nine Months Ended
September 30,
Hedging Instruments on Derivatives 2017 2016 2017 2016
(in millions)
Commodity price derivatives Derivative gains (losses), net $ (133 ) $ 91
$ 154
$ (87 )
Interest rate derivatives Derivative gains (losses), net —
—
(1 ) (8 )
Total $ (133 ) $ 91
$ 153
$ (95 )

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

NOTE F.6. Exploratory Costs

The Company capitalizes exploratory well and project costs until a determination is made that the well or project has either found proved reserves, is impaired or is sold. The Company's capitalized exploratory well and project costs are ~~presented~~ included

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

in proved properties in the ~~accompanying~~ consolidated balance sheets. If the exploratory well or project is determined to be impaired, the impaired costs are charged to exploration and abandonments expense.

The ~~following table reflects the Company's~~changes in capitalized exploratory well ~~and project activity during the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~:costs are as follows:


	Three Months Ended March 31, 2021

	(in millions)
Beginning capitalized exploratory well costs	$	498


Additions to exploratory well costs pending the determination of proved reserves	505
Additions to capitalized exploratory well costs from acquisitions	183
Reclassification due to determination of proved reserves	(544)



Ending capitalized exploratory well costs	$	642

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
(in millions)
Beginning capitalized exploratory well costs $ 443
$ 323
Additions to exploratory well costs pending the determination of proved reserves 474
1,369
Reclassification due to determination of proved reserves (482 ) (1,247 )
Exploratory well costs charged to exploration and abandonment expense (1 ) (11 )
Ending capitalized exploratory well costs $ 434
$ 434

~~The following table provides an aging as of September 30, 2017 and December 31, 2016~~Aging of capitalized exploratory costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year, based on the date drilling was ~~completed:~~completed, are as follows:


	As of March 31, 2021		As of December 31, 2020

	(in millions, except well counts)
Capitalized exploratory well costs that have been suspended:
One year or less	$	568	$	495
More than one year	74		3
	$	642	$	498
Number of wells or projects with exploratory well costs that have been suspended for a period greater than one year (a)	17		1

______________________

September 30, 2017 December 31, 2016
(in millions, except well counts)
Capitalized exploratory well costs that have been suspended:
One year or less $ 422
$ 318
More than one year 12
5
$ 434
$ 323
Number of wells or projects with exploratory well costs that have been suspended for a period greater than one year 7
3

~~The seven~~(a)13 of the 17 wells that ~~were~~have been suspended for a period greater than one year aswere acquired from Parsley and all suspended wells are scheduled to be completed by the end of ~~September 30, 2017 are in~~ the ~~Eagle Ford Shale area. The Company expects to complete all seven~~third quarter of ~~these wells in 2018.~~2021.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

NOTE G.7. Long-term Debt

The components of long-term debt, including the effects of issuance costs and issuance discounts, are as follows:


	As of March 31, 2021		As of December 31, 2020

	(in millions)
Outstanding debt principal balances:



3.45% senior notes due 2021	$	0	$	140
3.95% senior notes due 2022	244		244
0.75% senior callable notes due 2024	750		0
0.25% convertible senior notes due 2025	1,323		1,323
1.125% senior notes due 2026	750		0
4.45% senior notes due 2026	500		500
5.625% senior notes due 2027	179		0
7.20% senior notes due 2028	241		241
4.125% senior notes due 2028	138		0
1.90% senior notes due 2030	1,100		1,100
2.15% senior notes due 2031	1,000		0
	6,225		3,548


Issuance costs and discounts	(48)		(248)
Total debt	6,177		3,300

Less current portion of long-term debt	0		(140)
Long-term debt	$	6,177	$	3,160

Credit facility. The ~~Company's long-term debt consists of senior notes,~~Company maintains a revolving corporate credit facility (the "Credit Facility") ~~and the effects of issuance costs and discounts. The Credit Facility is maintained~~ with a syndicate of financial institutions and has aggregate loan commitments of $2.0 billion. On January 12, 2021, Pioneer entered into the First Amendment to Credit Agreement (the "Amendment") with Wells Fargo Bank, National Association, as Administrative Agent, and the other agents and lenders party thereto. The primary changes attributable to the Amendment were to increase the aggregate loan commitments from $1.5 billion ~~that expire in August 2020.~~to $2.0 billion, extend the maturity of the Credit Facility to January 12, 2026 and to nominally adjust the drawn and undrawn pricing. As of ~~September 30, 2017,~~March 31, 2021, the Company had no0 outstanding borrowings under the Credit Facility and was in compliance with its debt covenants.

Assumption of Parsley notes and payoff of Parsley revolving credit facility. In connection with the completion of the Parsley Acquisition, the Company assumed Parsley's long-term debt of $2.7 billion in aggregate principal amount (with a fair value of $2.8 billion), as well as Parsley's credit facility, which had an outstanding balance of $397 million. The Company repaid Parsley's revolving credit facility and terminated the Parsley revolving credit facility agreement on January 12, 2021.

Senior notes. In January 2021, the Company issued $750 million of 0.750% Senior Callable Notes that will mature January 15, 2024, $750 million of 1.125% Senior Notes that will mature January 15, 2026 and $1 billion of 2.150% Senior Notes that will mature January 15, 2031 (the "January 2021 Senior Notes Offering"). The ~~Company's 6.65%~~Company received proceeds, net of $24 million of issuance costs and discounts, of $2.5 billion. Interest on each of the new notes will be payable on January 15 and July 15 of each year. The senior notes ~~(the "6.65% Senior Notes") and 5.875%~~are unsecured obligations ranking equally in right of payment with all other senior ~~notes (the "5.875% Senior Notes") matured and were repaid in March 2017 and July 2016, respectively.~~ unsecured indebtedness of the Company.

The Company ~~funded both~~used the ~~$485 million repayment of~~proceeds from the ~~6.65%~~January 2021 Senior Notes Offering to pay (i) $1.6 billion to redeem Parsley's 5.250% Senior Notes due 2025, Parsley's 5.375% Senior Notes due 2025 and ~~the $455 million repayment of the~~Jagged Peak's 5.875% Senior Notes ~~with cash on hand. The Company's 6.875% senior notes (the "6.875% Senior Notes"), with an outstanding debt principal balance~~due 2026 and (ii) $852 million to purchase a portion of ~~$450 million, will mature in May 2018. The 6.875%~~Parsley's 5.625% Senior Notes ~~are classified as current in~~due 2027 and Parsley's 4.125% Senior Notes due 2028 pursuant to a cash tender offer. In connection with the ~~accompanying consolidated balance sheets as~~tender offers, the Company also obtained the requisite consents from holders of ~~September 30, 2017.~~

Parsley's 5.625% Senior Notes due 2027 and 4.125% Senior Notes due 2028 to amend the indentures pursuant to which the notes were issued to, among other things, (i) eliminate substantially all of the restrictive covenants and related

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

provisions and certain events of default contained in each indenture and (ii) shorten the minimum notice requirement for optional redemptions to three days.

The Company's 3.45% senior notes with a debt principal balance of $140 million matured and were repaid in January 2021. The Company funded the repayment with cash on hand.

Convertible senior notes. In May 2020, the Company issued $1.3 billion principal amount of 0.25% convertible senior notes due 2025. The Convertible Notes bear a fixed interest rate of 0.25% per year with interest payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2020. The Convertible Notes will mature on May 15, 2025, unless earlier redeemed, repurchased or converted. The Convertible Notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.

The Convertible Notes are convertible into shares of the Company's common stock at an initial conversion rate of 9.1098 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes (subject to adjustment pursuant to the terms of the notes indenture, the "Conversion Rate"), which represents an initial conversion price of $109.77 per share (subject to adjustment pursuant to the terms of the notes indenture, the "Conversion Price"). Upon conversion, the Convertible Notes will be settled in cash, shares of the Company's common stock or a combination thereof, at the Company's election.

Holders of the Convertible Notes may convert their notes at their option prior to February 15, 2025 under the following circumstances:

•during the quarter following any quarter during which the last reported sales price of the Company's common stock exceeds 130 percent of the Conversion Price for at least 20 trading days;

•during the five-day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the price of the Company's common stock times the Conversion Rate;

•upon notice of redemption by the Company; or

•upon the occurrence of specified corporate events, including certain consolidations or mergers.

On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. The Company may not redeem the Convertible Notes prior to May 20, 2023, and after such date, may redeem the Convertible Notes only if the last reported sale price of the Company's common stock has been at least 130 percent of the Conversion Price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the notice of redemption. The redemption price is equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.

During the first quarter of 2021, the last reported sales prices of the Company's common stock exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to become convertible at the option of the holders during the three month period ending June 30, 2021. If converted by the holder, upon conversion, the Convertible Notes will be settled in cash, shares of the Company's common stock or a combination thereof, at the Company's election.

The Company early adopted ASU 2020-06 on January 1, 2021. Upon issuance of the Convertible Notes in May 2020, the Company bifurcated the debt and equity components of the Convertible Notes between long-term debt and additional paid-in capital in its consolidated balance sheet. The amount recorded to additional paid-in capital represented a debt discount that was being amortized to interest expense over the life of the Convertible Notes. Upon adoption of ASU 2020-06 on January 1, 2021, the Company (i) reversed the debt discount and related deferred income tax liability recorded to additional paid-in capital of $230 million and $50 million, respectively, (ii) recorded a cumulative effect of the adoption of ASU 2020-06 of $22 million to retained earnings, representing the reversal of the $28 million debt discount that was amortized to interest expense, net of an associated deferred income tax impact of $6 million, in 2020 and (iii) recorded the respective offsets for items (i) and (ii) above, representing the unamortized debt discount attributable to the Convertible Notes of $202 million to long-term debt and the associated deferred tax impact of $44 million to deferred income tax liabilities. See Note 2 for additional information.

As of March 31, 2021, the Convertible Notes had an outstanding principal balance of $1.3 billion and unamortized issuance costs of $20 million. The issuance costs will be amortized to interest expense at an effective interest rate of 0.6 percent over five years. For the three months ended March 31, 2021, the Company recorded total interest expense related to the

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

Convertible Notes of $2 million comprised of contractual coupon interest of $1 million and the amortization of issuance costs of $1 million.

Capped call transactions. In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions with certain financial institution counterparties (the "Capped Call"), the purpose of which was to reduce the potential dilution to the Company's common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such converted notes, with such reduction and offset subject to a capped price. The Capped Call transactions have a strike price of $109.77 per share of common stock and a capped price of $156.21 per share of common stock. The net costs of $113 million incurred to purchase the Capped Call transactions were recorded as a reduction to additional paid-in capital. The closing price of the Company's common stock at March 31, 2021 was $158.82 which exceeded the capped price. Therefore, if the Convertible Notes were converted and settlement of the capped call transaction had occurred on March 31, 2021, the Company would have been entitled to receive $559 million in cash or approximately 3.5 million shares of the Company's common stock, or a combination thereof.

NOTE H.8. Incentive Plans

~~Stock-based compensation.~~ ~~For~~In connection with the ~~three and nine months ended September 30, 2017,~~Parsley Acquisition, the Company ~~recorded $21 million~~assumed all rights and ~~$78 million, respectively,~~obligations under the Amended and Restated Parsley Energy, Inc. 2014 Long Term Incentive Plan (the "2014 Parsley Plan") and the Jagged Peak Energy Inc. 2017 Long Term Incentive Plan (the "Jagged Peak Plan") and together with the 2014 Parsley Plan, (the "Parsley Plans"). The awards outstanding under the Parsley Plans were assumed by the Company and were automatically converted into an award with the right to receive a number of ~~stock-based~~shares of Pioneer common stock that is equal to the product of the number of shares of Parsley common stock subject to such award under the Parsley Plans as of the acquisition date and the Exchange Ratio (0.1252). As a result, 37,299 shares of Pioneer common stock are issuable by the Company upon settlement of the outstanding Parsley awards granted under the 2014 Parsley Plan and 1,166 shares of Pioneer common stock are issuable by the Company upon settlement of the outstanding Parsley awards granted under the Jagged Peak Plan.

The number of shares available for grant pursuant to the awards issued under the Company's Amended and Restated 2006 Long-Term Incentive Plan ("LTIP") is as follows:


			As of March 31, 2021
Approved and authorized awards			12,600,000
2014 Parsley Plan awards available to the LTIP (a)			879,575
Awards issued under the plan			(9,300,390)
Awards available for future grant			4,179,185

______________________

(a) Under New York Stock Exchange rules, the Company added shares that were available under the 2014 Parsley Plan to the LTIP. These shares can only be used for grants to employees who were not employed or engaged by Pioneer or any of its subsidiaries immediately before the Parsley Acquisition and such awards may only be granted through May 22, 2024, the date that the 2014 Parsley Plan would have otherwise expired.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

Stock-based compensation expense ~~for all plans,~~is as ~~compared~~follows:


	Three Months Ended March 31,
		2021		2020

		(in millions)
Restricted stock - equity awards		$	11	$	11
Restricted stock - liability awards (a)		6		0
Restricted stock and performance units - Parsley awards (b)		33		0
Performance unit awards		7		4
Employee stock purchase plan		1		1

		$	58	$	16

______________________

(a)Liability Awards are expected to ~~$31 million~~be settled on their vesting date in cash. As of March 31, 2021 and ~~$84~~December 31, 2020, accounts payable – due to affiliates included $7 million for each period of liabilities attributable to Liability Awards.

(b)Represents expense related to accelerated vesting of Parsley restricted stock equity awards and performance units upon completion of the ~~same respective periods~~Parsley Acquisition that was recorded to other expense in ~~2016.~~ the consolidated statements of operations.

As of ~~September 30, 2017,~~March 31, 2021, there was ~~$113~~$107 million of unrecognized stock-based compensation expense related to unvested share-based compensation ~~plans,~~awards, including ~~$24~~$21 million attributable to stock-based awards that are expected to be settled on their vesting date in cash, rather than in equity ~~shares ("Liability Awards").~~shares. The unrecognized compensation expense will be recognized on a straight-line basis over the remaining vesting periods of the awards, which is a period of less than three years on a weighted average basis. ~~As of September 30, 2017 and December 31, 2016, accounts payable – due to affiliates included $13 million and $22 million, respectively, of liabilities attributable to Liability Awards.~~

~~The following table summarizes the activity that occurred during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~Activity for restricted stock awards, ~~and~~ performance units ~~issued by Pioneer:~~

Restricted
Stock Equity
Awards

Restricted
Stock Liability
Awards

Performance
Units
Outstanding as of December 31, 2016 1,077,227
290,552
178,556
Awards granted 332,635
118,003
59,044
Awards forfeited (31,426 ) (15,956 ) —
Awards vested (454,898 ) (134,381 ) —
Outstanding as of September 30, 2017 923,538
258,218
237,600

~~As of September 30, 2017~~ and ~~December 31, 2016, the Company also had 159,378~~ stock options ~~outstanding~~is as follows:


	Three Months Ended March 31, 2021
	Restricted Stock Equity Awards	Restricted Stock Liability Awards	Performance Units	Stock Options
Beginning incentive compensation awards	765,981	221,353	207,430	86,332
Awards granted	107,967	3,085	173,423	0
Awards assumed (a) (c)	255,379	0	100,056	0
Awards forfeited	(1,484)	(2,055)	0	0
Awards vested (b) (c)	(410,987)	(42,499)	(100,056)	0
Options exercised	0	0	0	(55,173)
Options expired	—	—	—	(415)
Ending incentive compensation awards	716,856	179,884	380,853	30,744

______________________

(a)Awards assumed as a result of the Parsley Acquisition.

(b)Per the terms of award agreements and ~~exercisable. There were no~~elections, the issuance of common stock may be deferred for certain restricted stock equity awards, performance units and stock options ~~exercised~~that vest during the ~~nine months ended September 30, 2017.~~period.

(c)The amounts presented include the assumption and accelerated vesting of 216,914 Parsley restricted stock equity awards and 100,056 of Parsley performance units, both of which vested upon completion of the Parsley Acquisition.

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

NOTE I.9. Asset Retirement Obligations

The ~~Company's~~changes in asset retirement obligations ~~primarily relate~~are as follows:


	Three Months Ended March 31, 2021
	(in millions)
Beginning asset retirement obligations	$	282
Liabilities assumed in the Parsley Acquisition	73
New wells placed on production	2


Changes in estimates (a)	1




Liabilities settled	(6)
Accretion of discount	1



Ending asset retirement obligations	353

Less current portion of asset retirement obligations	(56)
Asset retirement obligations - noncurrent	$	297

______________________

(a)Changes in estimates are determined based on several factors, including updating abandonment cost estimates using recent actual costs incurred to ~~the future plugging~~abandon wells, credit-adjusted risk-free discount rates, economic well life estimates and ~~abandonment~~forecasted timing of ~~wells and related facilities. The following table summarizes the Company's asset retirement obligation activity during the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and 2016:~~abandoning wells.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(in millions)
Beginning asset retirement obligations $ 294
$ 281
$ 297
$ 285
Liabilities assumed in acquisitions —
3
—
3
New wells placed on production —
—
2
—
Changes in estimates —
—
7
—
Dispositions —
—
(7 ) —
Liabilities settled (7 ) (8 ) (21 ) (21 )
Accretion of discount 5
5
14
14
Ending asset retirement obligations $ 292
$ 281
$ 292
$ 281

The Company records the current and noncurrent portions of asset retirement obligations in other current liabilities and other liabilities, respectively, in the accompanying consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the current portion of the Company's asset retirement obligations was $42 million and $39 million, respectively.

NOTE J.10. Commitments and Contingencies

~~In addition to the legal action described below, the~~Legal actions. The Company is a party to ~~other~~various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to ~~such~~these proceedings and claims will not have a material adverse effect on the Company's consolidated financial

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

position as a whole or on its liquidity, capital resources or future annual results of operations. The Company records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated.

~~U.S. Environmental Protection Agency ("EPA") potential enforcement action.~~Indemnifications.The Company has ~~been advised~~agreed to indemnify its directors and certain of its officers, employees and agents with respect to claims and damages arising from acts or omissions taken in such capacity, as well as with respect to certain litigation.

Environmental. Environmental expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Environmental expenditures that extend the ~~EPA~~life of the related property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will not qualify for capitalization are recorded when environmental assessment and/or remediation is probable and the ~~agency~~costs can be reasonably estimated. Such liabilities are undiscounted unless the timing of cash payments for the liability is ~~considering an enforcement action against~~fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision until settlement or the remediation occurs.

Firm purchase, gathering, processing, transportation, fractionation and storage commitments.From time to time, the Company enters into, and ~~may seek monetary sanctions~~as of March 31, 2021 was a party to, take-or-pay agreements, which include contractual commitments (i) to purchase sand, water and diesel for ~~alleged failures to prevent emissions occurring at~~use in the Company's ~~Fain gas plant in~~drilling and completion operations, (ii) with midstream service companies and pipeline carriers for future gathering, processing, transportation, fractionation and storage and (iii) with oilfield services companies that provide drilling and pressure pumping services. These commitments are normal and customary for the West Panhandle region of Texas on five separate occasions. The Company has asserted defenses to the EPA's allegations and is in discussions with the EPA regarding these matters. Although the Company cannot predict the outcome of these discussions with any certainty, the Company believes such monetary sanctions will not exceed $45,000 for any single event, but could exceed $100,000 in the aggregate.Company's business activities.

Obligations following divestitures.In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified pre-closing matters, including matters of litigation, environmental contingencies, royalty ~~obligations~~ and income taxes. Also associated with its divestiture transactions, the Company has issued and received guarantees to facilitate the transfer of contractual obligations, such as firm transportation agreements or gathering and processing arrangements. The Company does not ~~believe these obligations are probable of having~~recognize a ~~material impact on its liquidity, financial position or future results of operations.~~

~~Lease agreements.~~ ~~In June 2017,~~liability if the Company entered into a 20-year operating lease for the Company's new corporate headquarters that is currently being constructed in Irving, Texas. Annual base rent is expected to be $33 million and lease payments are expected to commence once the building is complete, which is anticipated to occur during the second half of 2019. The Company has a variable equity interest in the entity that is constructing the building. The Company is not the primary beneficiaryfair value of the ~~variable interest entity~~obligation is immaterial and ~~only has a profit sharing interest after certain economic returns are achieved. The Company has no exposure to~~ the ~~variable interest entity's losses or future liabilities, if any. The Company~~likelihood of making payments under these guarantees is ~~the deemed owner of the building (for accounting purposes) during the construction period and is following the build-to-suit accounting guidance. Accordingly, as of~~ ~~September 30, 2017~~, the Company has capitalized $36 million of construction costs within other property and equipment and has recognized a corresponding build-to-suit lease liability. The recording of these assets and liabilities are considered noncash investing and financing items, respectively, for purposes of the consolidated statements of cash flows.

~~NOTE K. Interest and Other Income~~

~~The following table provides the components of the Company's interest and other income for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~:remote.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(in millions)
Interest income $ 9
$ 5
$ 25
$ 14
Severance and sales tax refunds 5
—
13
—
Deferred compensation plan income 1
—
3
2
Other income 2
2
3
5
Total interest and other income $ 17
$ 7
$ 44
$ 21

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

~~NOTE L. Other Expense~~

~~The following table provides~~South Texas Divestiture. In conjunction with the ~~components~~2019 divestiture of the Company's South Texas assets, the Company transferred its long-term midstream agreements and associated minimum volume commitments ("MVC's") to the buyer. However, the Company retained the obligation to pay 100 percent of any deficiency fees associated with the MVC's from January 2019 through July 2022. The buyer is required to reimburse the Company for 18 percent of the deficiency fees paid by the Company from January 2019 through July 2022; such reimbursement will be paid by the buyer in installments beginning in 2023 through 2025. Assuming 100 percent of the MVC's are paid as deficiency fees, the maximum amount of future payments for this obligation would be approximately $270 million as of March 31, 2021. The Company's estimated deficiency fee obligation as of March 31, 2021 is $201 million, of which $133 million is included in other ~~expense~~current liabilities in the consolidated balance sheets. The deficiency fee receivable from the buyer of $76 million is included in noncurrent other assets in the consolidated balance sheets. The Company has credit support for the ~~three~~deficiency fee receivable of up to $100 million.

Raton transportation commitments. In July 2018, the Company completed the sale of its gas field assets in the Raton Basin to an unaffiliated third party and ~~nine~~transferred certain gas transportation commitments, which extend through 2032, to the buyer for which the Company has provided a guarantee. Assuming 100 percent of the remaining commitments are paid by the Company under its guarantee, the maximum amount of future payments would be approximately $76 million as of March 31, 2021. The Company has received credit support for the commitments of up to $50 million. The Company paid $2 million in gas transportation fees associated with the transferred commitment for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~:was fully reimbursed.

West Eagle Ford Shale commitments. In April 2018, the Company completed the sale of its West Eagle Ford Shale gas and liquids field to an unaffiliated third party and transferred certain gas and liquids transportation commitments, which extend through 2022, to the buyer for which the Company has provided a guarantee. Assuming 100 percent of the remaining commitments are paid by the Company under its guarantee, the maximum amount of future payments would be approximately $19 million as of March 31, 2021. The Company has received credit support for the commitments of up to $19 million.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(in millions)
Transportation commitment charges (a) $ 45
$ 27
$ 127
$ 77
Loss from vertical integration services (b) —
17
11
46
Idle drilling and well service equipment charges (c) —
10
—
57
Other 13
15
38
43
Total other expense $ 58
$ 69
$ 176
$ 223
Certain contractual obligations were retained by the Company after the South Texas Divestiture, the Raton Basin asset sale, the divestiture of the Company's pressure pumping assets and the decommissioning of the Company's sand mine operations in Brady, Texas. These contracts were primarily related to firm transportation and storage agreements in which the Company is unlikely to realize any benefit. The estimated obligations are included in other current or noncurrent liabilities in the consolidated balance sheets. The changes in contract obligations are as follows:

~~____________________~~


	Three Months Ended March 31, 2021
	(in millions)
Beginning contract obligations	$	360

~~(a)~~Liabilities settled	~~Primarily represents firm transportation payments on excess pipeline capacity commitments.~~(142)

Accretion of discount			2

~~(b)~~Ending contract obligations			Loss from vertical integration services primarily represents net margins (attributable to third party working interest owners) that result from Company-provided fracture stimulation and well service operations, which are ancillary to and supportive of the Company's oil and gas joint operating activities, and do not represent intercompany transactions. For the three and nine months ended September 30, 2017, these vertical integration net margins included $42 million and $84 million, respectively, of revenues and $42 million and $95 million, respectively, of costs and expenses. For the same respective periods in 2016, these vertical integration net margins included $19 million and $144 million of revenues and $36 million and $190 million of costs and expenses.$

220
~~(c)~~	Primarily represents expenses attributable to idle drilling rig fees that are not chargeable to joint operations and charges to terminate rig contracts that were not required to meet planned drilling activities.

NOTE ~~M. Income Taxes~~11. Related Party Transactions

In December 2018, the Company completed the sale of its pressure pumping assets to ProPetro in exchange for 16.6 million shares of ProPetro common stock and $110 million of cash that was received during the first quarter of 2019. ProPetro is considered a related party as the shares received represent 16 percent of ProPetro's outstanding common stock. In addition to the sale of equipment and related facilities, the Company entered into a long-term agreement with ProPetro for it to provide pressure pumping and related services. The ~~Company's income tax benefit (provision) consisted~~ costs of these services are capitalized in oil and gas properties as incurred.

In October 2019, Phillip A. Gobe, a nonemployee member of the ~~following for~~Company's board of directors, was appointed by the ~~three~~board of directors of ProPetro to serve as its Executive Chairman, and ~~nine~~ ~~months ended September 30, 2017~~in March 2020 he was appointed as Chief Executive Officer and ~~2016~~:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(in millions)
Current tax benefit $ —
$ 22
$ —
$ 22
Deferred tax benefit (provision) 11
56
(79 ) 340
Income tax benefit (provision) $ 11
$ 78
$ (79 ) $ 362

~~For~~Chairman of the ~~three and nine months ended September 30, 2017,~~Board of Directors. Mark S. Berg, the Company's ~~effective tax rate, excluding income attributable to noncontrolling interests, was 34 percent and 32 percent, respectively,~~Executive Vice President, Corporate Operations, serves as compared to an effective rate of 140 percent and 41 percent for the same respective periods in 2016. The Company's effective tax rate for the nine months ended September 30, 2017 differs from the U.S. statutory rate of 35 percent primarily due to recognizing excess tax benefits of $8 million associated with the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which requires excess tax benefits or deficiencies associated with the vesting of long-term incentive awards to be recorded as income tax expense or benefit in the statement of operations rather than as an adjustment to additional paid-in capital in the balance sheet. The Company's effective tax rates for the three and nine months ended September 30, 2016 differ from the U.S. statutory rate of 35 percent primarily due to recognizing research and experimental expenditure credits of $59 million during the three months ended September 30, 2016.

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 meritsa member of the ~~position. As~~ProPetro board of ~~September 30, 2017 and December 31, 2016,~~directors under the Company's right to designate a director to the board of directors of ProPetro so long as the Company ~~had unrecognized tax benefits~~owns 5 percent or more of $123 million and $112 million, respectively, resulting from research and experimental expenditures related to horizontal drilling and completions innovations. 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. The Company expects to substantially resolve the uncertainties associated with the unrecognized tax benefit by December 2018.

ProPetro's outstanding common stock.

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PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2021

(Unaudited)

Transactions and balances with ProPetro are as follows:


	Three Months Ended March 31,
		2021		2020

		(in millions)
Pressure pumping and related services charges (a)		$	56	$	67

____________________

(a)Includes $4 million and $1 million of idle frac fleet fees for the three months ended March 31, 2021 and March 31, 2020, respectively.


	As of March 31, 2021		As of December 31, 2020

	(in millions)

Accounts payable - due to affiliate (a)	$	47	$	45

____________________

(a)Represents pressure pumping and related services provided by ProPetro as part of a long-term agreement.

The Company discloses ProPetro's summarized financial information on a one-quarter lag as it enables the Company to report its quarterly results independent from the timing of when ProPetro reports its results. Summarized financial information for ProPetro is as follows:


	Year Ended December 31,
	2020		2019

	(in millions)
Revenue - Service revenue	$	789	$	2,052
Cost of services (exclusive of depreciation and amortization)	$	584	$	1,470
Net income (loss)	$	(107)	$	163

NOTE 12. Revenue Recognition

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 entity expects to be entitled in exchange for those goods or services.

Disaggregated revenue from contracts with purchasers.Revenues on sales of oil, NGLs, gas and purchased oil, gas and diesel are recognized when control of the product is transferred to the purchaser and payment can be reasonably assured. Sales prices for oil, NGLs, gas and diesel are negotiated based on factors normally considered in the industry, such as an index or spot price, distance from the well to the pipeline or market, commodity quality and prevailing supply and demand conditions. Accordingly, the prices received by the Company for oil, NGLs, gas and diesel sales generally fluctuate similar to changes in the relevant market index prices.

Disaggregated revenue from contracts with purchasers by product type is as follows:


	Three Months Ended March 31,
		2021		2020

		(in millions)
Oil sales		$	1,435	$	924
NGL sales		246		111
Gas sales		143		60
Total commodities sales		1,824		1,095
Sales of purchased oil		1,221		902
Sales of purchased gas		4		13
Sales of purchased diesel		15		0
Total sales of purchased commodities		1,240		915
Total revenue from contracts with purchasers		$	3,064	$	2,010

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

As of March 31, 2021 and December 31, 2020, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers was $1.2 billion and $661 million, respectively.

NOTE 13. Interest and Other Income (Loss), Net

The components of net interest and other income (loss) are as follows:


	Three Months Ended March 31,
		2021		2020

		(in millions)
Investment in affiliate fair value adjustment (Note 4)		$	54	$	(145)
Deferred compensation plan income (loss)		4		(3)
Interest income		1		2


Contingent consideration fair value adjustment (Note 5)		0		(63)


Other		1		3
		$	60	$	(206)

NOTE 14. Other Expense

The components of other expense are as follows:


	Three Months Ended March 31,
		2021		2020

		(in millions)
Parsley Acquisition transaction costs (a)		$	197	$	0
Winter Storm Uri gas commitments (b)		80		0
Unoccupied facility expense (c)		8		0
Transportation commitment charges (d)		7		4
Loss on early extinguishment of debt (Note 7)		5		0
Termination and idle drilling and frac equipment charges (e)		4		8



South Texas deficiency fee obligation (Note 4)		0		69


Vertical integration services income, net (f)		(4)		(4)

Other		7		8
		$	304	$	85

____________________

(a)Represents costs associated with the Parsley Acquisition, which includes $121 million of employee-related costs and $76 million of transaction fees.

(b)Represents costs related to the Company's fulfillment of certain firm gas commitments during Winter Storm Uri in February 2021.

(c)Primarily includes certain acquired Parsley offices which are no longer occupied.

(d)Primarily represents firm transportation payments on excess pipeline capacity commitments.

(e)Includes idle frac fleet fees, stacked drilling rig charges and drilling rig early termination charges.

(f)Primarily represents net margins (attributable to third party working interest owners) that result from Company-provided vertically integrated services, which are ancillary to and supportive of the Company's oil and gas joint operating activities, and do not represent intercompany transactions. For the three months ended March 31, 2021 and March 31, 2020, these vertical integration net margins included $12 million and $11 million of gross vertical integration revenues, respectively, and $8 million and $7 million of total vertical integration costs and expenses, respectively.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

NOTE 15. Income Taxes

For federal income tax purposes, the Parsley Acquisition qualified as a tax-free merger whereby the Company acquired carryover tax basis in Parsley's assets and liabilities. The Company recorded a deferred tax liability of $130 million associated with the acquired assets. Included in the deferred tax liability are deferred tax asset attributes acquired from Parsley, which primarily consist of net operating loss carryforwards of $2 billion that are subject to an annual limitation under Internal Revenue Code Section 382. The Company believes it is more likely than not that the acquired net operating loss carryforwards will be utilized before they expire.

Enactment of the Consolidated Appropriations Act, 2021. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (the "Act"). The Act includes many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax relief provisions, among other things. The Act did not have a material impact on the Company's current or prior year tax provision or the Company's consolidated financial statements.

Enactment of the Coronavirus Aid, Relief and Economic Security Act. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act did not have a material impact on the Company's current or prior year tax provision or the Company's consolidated financial statements.

Income tax benefit (provision) and effective tax rate are as follows:


	Three Months Ended March 31,
		2021			2020

		(in millions)
Current tax provision		$	(7)		$	0
Deferred tax benefit (provision)		18			(77)
Income tax benefit (provision)		$	11		$	(77)
Effective tax rate		14		%	21		%

The Company evaluates and updates its annual effective income tax rate on an interim basis based on current and forecasted earnings and tax laws. The mix and timing of the Company's actual earnings compared to annual projections can cause interim effective tax rate fluctuations. The Company's interim effective tax rate for the three months ended March 31, 2021 differed from the U.S. statutory rate of 21 percent primarily due to forecasted state income taxes.

The Company files income tax returns in the U.S. federal and various state and foreign jurisdictions. The Internal Revenue Service has closed examinations of the ~~2012~~2018 and prior tax years and, with few exceptions, the Company believes that it is no longer subject to examinations by state and foreign tax authorities for years before ~~2011.~~2012. As of ~~September 30, 2017,~~March 31, 2021, no adjustments had been proposed in any jurisdiction that would have a significant effect on the Company's liquidity, future results of operations or financial position.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

NOTE N.16. Net Income (Loss) Per Share

The ~~following table reconciles the Company's net income (loss) attributable to common stockholders to~~components of basic and diluted net income (loss) per share attributable to common stockholders ~~for~~are as follows:


	Three Months Ended March 31,
		2021		2020

		(in millions)
Net income (loss) attributable to common stockholders		$	(70)	$	291
Participating share-based earnings		0		(1)
Basic and diluted net income (loss) attributable to common stockholders		$	(70)	$	290

Basic and diluted weighted average shares outstanding		210		166

The Convertible Notes were excluded from the ~~three and nine months ended September 30, 2017 and~~ ~~2016~~:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(in millions)
Net income (loss) attributable to common stockholders $ (23 ) $ 22
$ 168
$ (513 )
Participating share-based earnings —
—
(1 ) —
Basic and diluted net income (loss) attributable to common stockholders $ (23 ) $ 22
$ 167
$ (513 )

~~Basic and~~ diluted loss per share calculation because they would have been anti-dilutive to the calculation. However, had they not been anti-dilutive, the weighted average common shares outstanding ~~were 170~~would have increased by 12 million ~~for both~~shares to reflect the dilutive effect that would have resulted if the Convertible Notes had been converted during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021.

Stock repurchase program. In December 2018, the Company's board of directors authorized a $2 billion common stock repurchase program. Under this stock repurchase program, the Company may repurchase shares at management's discretion in accordance with applicable securities laws. In addition, the Company may repurchase shares pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Act of 1934, which would permit the Company to repurchase shares at times that may otherwise be prohibited under the Company's insider trading policy. The stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the board of directors. The Company repurchased 919,794 shares under the stock repurchase program for $110 million during the three months ended March 31, 2020. NaN shares were repurchased under the stock repurchase program during the three months ended March 31, 2021.

As of March 31, 2021, $1.1 billion remains available for use to repurchase shares under the Company's common stock repurchase program.

NOTE 17. Subsequent Events

DoublePoint Acquisition. On May 4, 2021, the Company acquired Double Eagle III Midco 1 LLC ("DoublePoint") pursuant to a definitive membership interest purchase agreement to acquire DoublePoint dated April 1, 2021 (the "DoublePoint Acquisition") in exchange for consideration valued at approximately $6.2 billion, which is comprised of 27.2 million shares of Pioneer common stock, $1 billion of cash and the assumption of approximately $890 million of debt.

The DoublePoint Acquisition will be accounted for as ~~compared~~a business combination, with the fair value of consideration allocated to ~~170 million~~the acquisition date fair value of assets and ~~165 million~~liabilities acquired. DoublePoint's post-acquisition date results of operations will be included in the Company's interim consolidated financial statements beginning in May 2021.

In conjunction with the DoublePoint Acquisition, the Company delivered a notice of conditional redemption for all of the outstanding 7.750% Senior Notes due 2025 (the "Notes") of Double Point and Double Eagle Finance Corporation (together, the "Issuers"). The redemption date for the ~~same respective periods~~Notes provided in ~~2016.~~

the notice of conditional redemption is expected to be on May 18, 2021 (the "Redemption Date"). The redemption of the Notes is conditioned upon the successful completion by Pioneer of an investment grade public debt financing transaction of at least $650 million by the Redemption Date; provided that at the discretion of the Issuers, the Redemption Date may be delayed until such time as any or all conditions shall be satisfied or waived (provided that in no event shall such Redemption Date be delayed to a date later than July 3, 2021).

~~Table of Contents~~

PIONEER NATURAL RESOURCES COMPANY


ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Item 2.Management's Discussion~~Parsley and ~~Analysis~~DoublePoint Acquisitions

The Company completed the Parsley Acquisition on January 12, 2021. The Parsley Acquisition was accounted for as a business combination, with the fair value of the acquisition consideration allocated to the acquisition date fair value of assets and liabilities acquired. Parsley's post-acquisition date results of operations were included in the Company's interim consolidated financial statements beginning on January 12, 2021. See Note 3 of Notes to Consolidated Financial ~~Condition~~Statements included in "Item 1. Financial Statements" for additional information.

On May 4, 2021, the Company completed the acquisition of DoublePoint for total consideration valued at approximately $6.2 billion, which was comprised of 27.2 million shares of Pioneer common stock, $1 billion of cash and ~~Results~~the assumption of ~~Operations~~approximately $890 million of debt. Although this Form 10-Q is being filed following the completion of the DoublePoint Acquisition, unless otherwise specifically noted, information set forth herein only relates to the period as of and for the quarter ended March 31, 2021 and therefore does not include information relating to DoublePoint 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 DoublePoint Acquisition and do not include DoublePoint or its subsidiaries.

The DoublePoint Acquisition will be accounted for as a business combination, with the fair value of the acquisition consideration allocated to the acquisition date fair value of assets and liabilities acquired. DoublePoint's post-acquisition date results of operations will be included in the Company's interim consolidated financial statements beginning in May 2021. See Note 17 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.

Financial and Operating Performance

The Company's financial and operating performance for the three months ended ~~September 30, 2017~~March 31, 2021 included the following highlights:

•Net loss attributable to common stockholders for the three months ended ~~September 30, 2017~~March 31, 2021 was ~~$23~~$70 million ($~~0.13~~0.33 per diluted share), as compared to net income of ~~$22~~$291 million ($~~0.13~~1.75 per diluted share) for the same period in ~~2016.~~2020. The primary components of the $361 million decrease in ~~net income~~earnings attributable to common stockholders include:

•a ~~$224 million~~$1.15 billion decrease in net derivative ~~gains,~~results, primarily ~~as a result of~~due to changes in forward commodity prices and the ~~Company's portfolio~~cash settlement of ~~derivatives;~~derivative positions in accordance with their terms;

•a ~~$67~~$219 million ~~decrease~~increase in other expense, primarily due to $197 million of transaction costs related to the Parsley Acquisition and $80 million of costs related to covering firm gas commitments during a winter weather event that brought abnormally cold temperatures, along with snow and icy conditions across the state of Texas in February 2021 known as Winter Storm Uri as compared to a $69 million noncash charge for estimated deficiency payments related to the Company's ~~income tax benefit, primarily as a result of the tax credits recognized~~2019 South Texas Divestiture during the three months ended ~~September 30, 2016 associated with research and experimental expenditures related to horizontal drilling and completions innovations; and~~March 31, 2020;

•a ~~$32~~$114 millionincrease in ~~total oil and gas~~ production costs, ~~and~~including taxes, primarily attributable to (i) an increase in production ~~and ad valorem~~ taxes as a result of a ~~15 percent increase in sales volumes and a 15~~33 percent increase in average realized commodity prices per ~~BOE;~~BOE and (ii) increased costs attributable to production added from the Parsley Acquisition;

•a $40 million increase in DD&A expense, primarily due to an increase in sales volumes from the Parsley Acquisition and the Company's successful horizontal drilling program in the Permian Basin;

•a $12 million increase in general and administrative expense primarily due to the reinstatement of certain employee benefits during 2021 that were suspended during 2020 in response to the COVID-19 pandemic;

partially offset by

by:

•a ~~$212~~$729 million increase in oil and gas revenues due to a 33 percent increase in average realized commodity prices per BOE and a 26 percent increase in daily sales volumes due to additional production from the Parsley Acquisition and the Company's successful horizontal drilling program in the Permian Basin;

•a $266 million increase in net interest and other income (loss), primarily due to (i) noncash gains attributable to the ~~aforementioned~~ increase in ~~sales volumes and commodity prices;~~

~~a $31 million decrease in DD&A expense, primarily attributable to (i) commodity price increases and~~ the ~~Company's cost reduction initiatives, both of which had the effect of adding proved reserves by lengthening the economic lives~~fair value of the Company's ~~producing wells and (ii) additions to proved reserves attributable to the Company's successful Spraberry/Wolfcamp horizontal drilling program; and~~

~~a $13~~investment in affiliate of $54 million ~~decrease in interest expense, primarily due to the repayment of both the Company's 6.65% senior notes, which matured in March 2017, and the Company's 5.875% senior notes, which matured in July 2016.~~

~~During~~during the three months ended ~~September 30, 2017, average daily sales volumes increased by~~ ~~15 percent~~ to ~~275,711~~ ~~BOEPD,~~March 31, 2021 as compared to ~~238,878~~ ~~BOEPD during~~a noncash loss of $145 million for the same period in ~~2016. The increase~~2020 and (ii) a $63 million noncash decrease in ~~average daily sales volumes~~the fair value of the divestiture contingent consideration associated with the South Texas Divestiture for the three months ended ~~September 30, 2017,~~March 31, 2020;

PIONEER NATURAL RESOURCES COMPANY

•a $98 million increase in net sales of purchased commodities primarily due to an increase during the first quarter of 2021 in downstream oil margins on the Company's Gulf Coast refinery and export sales; and

•an $88 million decrease in the Company's income tax provision due to the decrease in earnings during the three months ended March 31, 2021 as compared to the same period in ~~2016, is primarily~~2020.

•During the three months ended March 31, 2021, average daily sales volumes increased by 26 percent to 473,937 BOEPD, as compared to 375,163 BOEPD during the same period in 2020, due to additional production from the Parsley Acquisition and the Company's successful ~~Spraberry/Wolfcamp~~ horizontal drilling ~~program.~~

program in the Permian Basin, partially offset by a 45 MBOEPD loss in sales volumes due to Winter Storm Uri in February 2021.

•Average oil and NGL prices per Bbl and average gas prices per Mcf increased to $56.71, $25.90 and $3.04, respectively, during the three months ended ~~September 30, 2017 to $45.35 per Bbl, $18.96 per Bbl and $2.58 per Mcf, respectively,~~March 31, 2021 as compared to ~~$41.44 per Bbl, $12.46 per Bbl~~$45.60, $14.52 and ~~$2.43 per Mcf,~~$1.61, respectively, for the same period in ~~2016~~.

2020.

~~Net cash~~•Cash provided by operating activities ~~increased to $455 million for~~decreased during the three months ended ~~September 30, 2017,~~March 31, 2021 to $377 million as compared to ~~$441~~$825 million for the same period in ~~2016~~.2020. The ~~$14 million increase in net cash provided by operating activities for the three months ended September 30, 2017, as compared to the same period in~~ ~~2016, is~~decrease was primarily due to ~~increases~~(i) additional cash used in ~~the Company's~~derivative activities, (ii) increased accounts receivables and commodity inventories as a result of higher commodity prices, (iii) one-time cash Parsley transaction costs and (iv) cash paid to fulfill certain gas commitments during Winter Storm Uri, partially offset by an increase in accounts payable as a result of increased drilling and operational activity and an increase in oil and gas revenues ~~as a result of increases~~due to the aforementioned increase in commodity ~~prices and sales volumes, partially offset by a $156 million reduction in cash provided by commodity derivatives.~~

prices.

•As of ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, the Company's net debt to book capitalization was ~~five~~23 percent and 14 percent, respectively.

Winter Storm Uri

During February 2021, the Company's operations in West Texas were significantly impacted by Winter Storm Uri. The extreme winter weather impacted production operations, midstream infrastructure and power providers throughout the state, along with many other services. As a result, most of the Company's production was offline for about a week, which negatively impacted first quarter 2021 production by approximately 45 MBOEPD.

Early in the weather event, the Company attempted to perform or otherwise satisfy its firm gas sales commitments, but as ~~compared~~the impacts of the winter weather became clearer, the Company subsequently issued force majeure notices to ~~two percent~~its customers given the inability to perform such contracts for a variety of reasons, including significant production being offline, interruptions to midstream operations, the inability to flow gas to markets due to infrastructure downtime and compliance with government orders to direct any available gas volumes towards supporting power generation. Certain of the Company's customers have alleged that the Company's force majeure notices were improper under the applicable contracts. The Company incurred incremental cash costs of $80 million in connection with its firm gas sales commitments early in the weather event.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic has resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil throughout the world, and has created significant volatility, uncertainty and turmoil in the oil and gas industry. The decrease in demand for oil combined with pressures on the global supply-demand balance for oil and related products, resulted in oil prices declining significantly beginning in late February 2020. The length of this demand disruption is unknown, and there is significant uncertainty regarding the long-term impact to global oil demand, which will ultimately depend on various factors and consequences 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 economic downturn and the decrease in oil demand, the speed and effectiveness of responses to combat the virus, and the time necessary to balance oil supply and demand to restore oil pricing.

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.

Second Quarter 2021 Outlook

The Company's operating and financial results for the second quarter of 2021 and beyond are uncertain and will depend on various factors beyond the Company's control, such as: the duration of the COVID-19 pandemic and the speed and effectiveness of vaccine distributions to combat the virus; environmental and trade policies; fiscal challenges facing the United States federal government; geopolitical issues globally, especially in the Middle East; the extent to which OPEC members and some nonmembers, including Russia, adhere to and agree to extend cuts to their oil production quotas; uncertainty in oil

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PIONEER NATURAL RESOURCES COMPANY

demand fundamentals associated with governmental policy aimed at ~~December 31, 2016.~~redirecting fossil fuel consumption towards lower carbon energy, and the success of the integration of DoublePoint.

~~Fourth Quarter 2017 Outlook~~

Based on current estimates, the Company expects the following operating and financial results for the second quarter ~~ending~~ ~~December 31, 2017~~:of 2021, which includes the effects of theDoublePoint Acquisition from the date of acquisition:

~~Production is forecasted to average 292,000 to 302,000 BOEPD.~~

~~Production costs (including production and ad valorem taxes and transportation costs) are expected to average $7.50 to $9.50~~


			Three Months Ending June 30, 2021
			Guidance
			($ in millions, except per BOE amounts)
Average daily production (MBOE)			606 - 632
Average daily oil production (MBO)			352 - 367
Production costs per BOE			$6.75 - $8.25
DD&A per BOE			$10.75 - $12.75
Exploration and abandonments expense			$10 - $20
General and administrative expense			$67 - $77
Accretion of discount on asset retirement obligations			$2 - $5
Interest expense			$43 - $48
Other expense			$15 - $30
Cash flow impact from firm transportation (a)			$(70) - $(40)
Current income tax provision			$5 - $10
Effective tax rate			21% - 25%

______________________

(a)The cash flow impact from firm transportation is primarily based on ~~current NYMEX strip commodity prices. DD&A expense is~~the forecasted differential between WTI oil prices and Brent oil prices less the costs to transport purchased oil from the areas of the Company's production to the Gulf Coast. To the extent that the Company's Gulf Coast sales of purchased oil does not cover the purchase price and associated firm transport costs, the Company's results of operations will reflect the negative cashflow impact attributable to its firm transportation commitments. It also includes the expected ~~to average $13.50 to $15.50 per BOE.~~cash flow impact from the Company's firm transportation marketing contracts that are accounted for as derivatives.

~~Total exploration~~2021 Revised Capital Budget

With the completion of the DoublePoint Acquisition, the Company's capital budget for 2021 has been revised and ~~abandonment expense~~ is expected to be ~~$20~~in the range of $3.1 billion to $3.4 billion, consisting of $2.9 billion to $3.1 billion for drilling and completion related activities, including additional tank batteries and saltwater disposal facilities, $150 million ~~to $30~~of estimated Parsley and DoublePoint integration costs and $90 million for water infrastructure and vehicles. The Company's capital expenditures for the three months ended March 31, 2021 were $605 million. ~~General~~The 2021 capital budget and actual capital expenditures for the three months ended March 31, 2021 excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative expense and corporate facilities.

The 2021 capital budget is expected to be ~~$80 million to $85 million. Interest expense is expected to be $34 million to $39 million,~~funded from operating cash flow, and, ~~other expense is expected to be $60 million to $70 million. Other expense is expected to include (i) $45 million to $55 million of charges associated~~if necessary, from cash and cash equivalents on hand or borrowings under the Company's Credit Facility.

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~~PIONEER NATURAL RESOURCES COMPANY~~

~~with excess firm gathering and transportation commitments and (ii) other miscellaneous charges. Accretion of discount on asset retirement obligations is expected to be $4 million to $7 million.~~

~~The Company's effective income tax rate is expected to range from 35 percent to 40 percent. Current income taxes are expected to be less than $5 million.~~

Operations and Drilling Highlights

~~The following table summarizes the Company's average~~Average daily oil, NGL and gas ~~and total production by asset area during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~:

Oil (Bbls) NGLs (Bbls) Gas (Mcf) Total (BOE)
Permian Basin 141,428
42,168
188,587
215,027
South Texas - Eagle Ford Shale 7,033
6,758
41,776
20,753
Raton Basin —
—
89,220
14,870
West Panhandle 1,743
3,391
6,197
6,167
South Texas - Other 1,230
201
18,370
4,493
Other 4
1
56
15
Total 151,438
52,519
344,206
261,325
sales volumes are as follows:


						Three Months Ended March 31, 2021

Oil (Bbls)						281,017
NGL (Bbls)						105,675
Gas (Mcf)						523,467
Total (BOE)						473,937

The Company's liquids production ~~increased to 78~~was 82 percent of total production on a BOE basis for the ~~nine~~three months ended ~~September 30, 2017, as compared to 75 percent for the same period last year.~~

~~The following table summarizes by geographic area the Company's finding and development costs incurred during the nine months ended September 30, 2017:~~March 31, 2021.

Acquisition Costs
Exploration
Costs

Development
Costs
Total
Proved Unproved
(in millions)
Permian Basin $ 7
$ 125
$ 1,349
$ 403
$ 1,884
South Texas - Eagle Ford Shale —
—
67
26
93
Raton Basin —
—
—
2
2
West Panhandle —
—
1
6
7
South Texas - Other —
—
—
5
5
Other —
—
4
—
4
Total $ 7
$ 125
$ 1,421
$ 442
$ 1,995

~~The following table summarizes the Company's development and exploration/extension drilling activities for the nine months ended September 30, 2017:~~

Development Drilling

Beginning Wells
in Progress

Wells
Spud

Successful
Wells

Ending Wells
in Progress
Permian Basin 8
15
6
17
South Texas - Eagle Ford Shale 4
1
5
—
South Texas - Other —
2
—
2
Total 12
18
11
19

Exploration/Extension Drilling

Beginning Wells
in Progress

Wells
Spud

Successful
Wells

Unsuccessful
Wells

Ending Wells
in Progress
Permian Basin 119
163
150
1
131
South Texas - Eagle Ford Shale 14
10
6
1
17
Total 133
173
156
2
148

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PIONEER NATURAL RESOURCES COMPANY

Costs incurred are as follows:

~~Permian Basin area.~~


	Three Months Ended March 31, 2021
	(in millions)
Proved property acquisition costs (a)	$	5,096


Unproved property acquisitions (a)	5,659
Exploration/extension costs	480
Development costs	118
Asset retirement obligations	2
	$	11,355

_____________________

(a) Includes proved and unproved acquisition costs related to the Parsley Acquisition of $5.1 billion and $5.6 billion, respectively.

Development and exploration/extension drilling activity is as follows:


	Three Months Ended March 31, 2021
	Development	Exploration/Extension


Beginning wells in progress	9	210
Wells spud	11	96
Acquired wells in progress	—	59


Successful wells	—	(106)

Ending wells in progress	20	259

The Company is currently operating 26 drilling rigs and nine frac fleets in the Spraberry/Wolfcamp field. The Company will continue to evaluate its drilling and completions program with future activity levels assessed regularly.

During ~~2017,~~the three months ended March 31, 2021, the Company expected to place approximately 260 horizontal wells on production, weighted heavily to the second half of the year. However, due to unforeseen drilling delays during the first half of the year, the Company revised this forecast during the second quarter of 2017 and now expects to place approximately 230 horizontal wells on production (190successfully completed 77 horizontal wells in the northern portion of the ~~play and 40~~Midland Basin, 25 horizontal wells in the southern portion of the ~~play). During 2017, approximately 55 percent of the horizontal wells are planned to be drilled in the Wolfcamp B interval, 30 percent in the Wolfcamp A interval~~Midland Basin and ~~15 percent in the Lower Spraberry Shale interval. During the first nine months of 2017, the Company successfully completed 137~~four horizontal wells in the ~~northern portion of the play and 19 horizontal wells in the southern portion of the play.~~Delaware Basin. In the northern portion of the ~~play,~~Midland Basin, approximately 4546 percent of the horizontal wells placed on production were Wolfcamp BA interval wells, approximately 4035 percent were Wolfcamp AB interval wells and the remaining 1519 percent were ~~Lower~~primarily Spraberry ~~Shale~~and Wolfcamp D interval wells. ~~The majority of wells placed on production in~~In the southern portion of the ~~play~~Midland Basin, the majority of the wells placed on production were Wolfcamp A and B interval wells. In the Delaware Basin, approximately 75 percent were in the Bone Spring interval and the remaining 25 percent were in Wolfcamp A interval.

Results of Operations

Oil and gas revenues.

Average daily sales volumes are as follows:


	Three Months Ended March 31,
		2021	2020	% Change
Oil (Bbls)		281,017	222,657	26	%
NGL (Bbls)		105,675	84,358	25	%
Gas (Mcf)		523,467	408,893	28	%
Total (BOEs)		473,937	375,163	26	%

The ~~Company continues to utilize its integrated services to control well costs and operating costs~~increase in ~~addition to supporting the execution of its drilling and production activities in the Spraberry/Wolfcamp field. During~~average daily BOE sales volumes for the three months ended September 30, 2017, the Company utilized up to seven of its eight Company-owned fracture stimulation fleets to support its drilling operations in the Spraberry/Wolfcamp field. The Company also owns other 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. In addition, Pioneer Sands LLC (the Company's wholly-owned sand mining subsidiary) is supplying high-quality brown sand for proppant, which is being used to fracture stimulate horizontal wells in the Spraberry and Wolfcamp Shale intervals.

The Company has been and continues to pursue initiatives to improve drilling and completion efficiencies and reduce costs. The Company's long-term growth plan also continues to focus on optimizing the development of the field and addressing the future requirements for water sourcing and disposal, field infrastructure, gas processing, sand, pipeline takeaway capacity for its products, oilfield services, tubulars, electricity, buildings, roads and labor.

The Company is constructing a field-wide water distribution system to reduce the cost of water for drilling and completion activities and to ensure that adequate supplies of water are available to support the Company's long-term growth plan for the Spraberry/Wolfcamp field. During 2017 the Company has expanded its mainline system, subsystems and frac ponds to efficiently deliver water to Pioneer's drilling locations. The Company signed an agreement with the city of Midland to upgrade the city's wastewater treatment plant in return for a dedicated long-term supply of water from the plant. The 2017 program includes $10 million of engineering capital to begin work on this upgrade. Pioneer expects to spend approximately $110 million over the 2017 through 2019 period for the Midland plant upgrade. In return, the Company will receive 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 completion operations.

The Company's sand mine in Brady, Texas, which is strategically located within close proximity (approximately 190 miles) of the Spraberry/Wolfcamp field, provides a secure sand source for the Company's horizontal drilling program. During 2017 the Company completed an optimization project of its existing sand mining facilities that improved yields and reduced the Company's overall cost of sand supplies.

~~Eagle Ford Shale area~~. During 2017, the Company operated two rigs in the Eagle Ford Shale area and drilled 11 new Eagle Ford wells. The objective of this drilling program was to test longer laterals with wider spacing and higher intensity completions in the new wells. The Company's 2017 completion plans included completing the 11 new Eagle Ford Shale wells and nine wells that were drilled but not completed in 2016. All nine of the wells that were drilled but not completed in 2016 and two of the 11 wells drilled in 2017 were placed on production during the nine months ended September 30, 2017. The remaining nine wells are expected to be placed on production during the three months ended DecemberMarch 31, ~~2017.~~

~~West Panhandle area.~~ During the three months ended September 30, 2017, the Company experienced unplanned downtime due to a fire at a third-party gas processing plant, where liquids-rich gas from the Company's West Panhandle field is processed into gas and NGLs. As a result of the fire, West Panhandle field production was shut in. Repairs to the plant are underway, but it is expected to be several months before the plant can be placed back into service. As a result, the third party and Pioneer have made modifications to their respective facilities to enable field production to resume, with the gas volumes being rerouted to another gas processing facility operated by the third party. Production from the field resumed in late October.

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~~PIONEER NATURAL RESOURCES COMPANY~~

~~Results of Operations~~

~~Oil and gas revenues.~~ ~~Oil and gas revenues totaled $855 million and $2.4 billion for the three and nine months ended~~ ~~September 30, 2017, respectively, as compared to $643 million and $1.7 billion for the same respective periods in 2016.~~

~~The increase in oil and gas revenues during the three months ended September 30, 2017,~~2021, as compared to the same period in 2016, is primarily due to increases of nine percent, 52 percent and six percent in oil, NGL and gas prices, respectively, and increases of 20 percent, 16 percent and two percent in daily oil, NGL and gas sales volumes, respectively. The increase in oil and gas revenues during the nine months ended September 30, 2017, as compared to the same period in 2016, is primarily due to increases of 25 percent, 49 percent and 36 percent in oil, NGL and gas prices, respectively, and increases of 16 percent and 21 percent in daily oil and NGL sales volumes, respectively.

~~The following table provides average daily sales volumes for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Oil (Bbls) 161,634
134,240
151,438
130,602
NGLs (Bbls) 57,346
49,235
52,519
43,252
Gas (Mcf) 340,384
332,415
344,206
343,828
Total (BOEs) 275,711
238,878
261,325
231,158

~~Average daily BOE sales volumes increased by 15 percent and 13 percent for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017, respectively, as compared to the same respective periods in~~ ~~2016, principally~~2020 was due to the Company's successful Spraberry/Wolfcamp horizontal drilling ~~program.~~program and the Parsley Acquisition, partially offset by the 45 MBOEPD production loss due to Winter Storm Uri in February 2021.

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PIONEER NATURAL RESOURCES COMPANY

The oil, NGL and gas prices that the Company reports are based on the market prices received for each commodity. The ~~following table provides the Company's~~ average prices ~~for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~:are as follows:


	Three Months Ended March 31,
		2021		2020		% Change
Oil per Bbl		$	56.71	$	45.60	24	%
NGL per Bbl		$	25.90	$	14.52	78	%
Gas per Mcf		$	3.04	$	1.61	89	%
Total per BOE		$	42.75	$	32.08	33	%

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Oil (per Bbl) $ 45.35
$ 41.44
$ 46.41
$ 37.27
NGL (per Bbl) $ 18.96
$ 12.46
$ 18.38
$ 12.37
Gas (per Mcf) $ 2.58
$ 2.43
$ 2.66
$ 1.96
Total (per BOE) $ 33.72
$ 29.24
$ 34.10
$ 26.29

~~Sales of purchased oil and gas.~~ Purchased commodities. The Company ~~periodically~~ enters into pipeline capacity commitments in order to secure available oil, ~~NGL~~NGLs and gas transportation capacity from the ~~Company’s~~Company's areas of ~~production.~~production and secure diesel supply from the Gulf Coast to the Company's operations in the Permian Basin. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's ~~WTI~~ oil and gas sales to a(i) Gulf Coast ~~market price~~refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments.

Revenues and expenses from these transactions are generally presented on a gross basis in sales of purchased commodities and purchased commodities in the accompanying consolidated statements of operations 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. The Company has also entered into long-term marketing contracts, which are accounted for as derivatives, to similarly diversify its oil sales to Gulf Coast and international markets. The gains and losses associated with the Company's marketing derivatives are recognized in net ~~effect~~derivative gains (losses) in the consolidated statements of operations. 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 sales of purchased commodities are included in purchased commodities expense. See Consolidated Sta t ement s of Operations included in "Item 1. Financial Statements" for additional information.

The net effects of third party purchases and sales of ~~oil~~commodities and ~~gas~~associated marketing contracts are as follows:


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Sales of purchased commodities		$	1,240	$	915	$	325
Purchased commodities		1,255		1,028		227
Net effect		(15)		(113)		98


Realized marketing derivative losses		(7)		—		(7)
		$	(22)	$	(113)	$	91

The increase in net sales of purchased commodities for the three ~~and nine~~ months ended ~~September 30, 2017 was a loss of $14 million and $47 million, respectively,~~March 31, 2021, as compared to ~~a loss of $14 million and $51 million for~~ the same ~~respective~~ periods in ~~2016.~~2020, was primarily due to an increase in first quarter of 2021 downstream oil margins on the Company's Gulf Coast refinery and export sales.

Firm transportation payments on excess pipeline capacity ~~commitments~~ are included in other expense in the accompanying consolidated statements of operations. See Note L14 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional ~~information on transportation commitment charges.~~information.

~~Interest and other income~~.Interest and other income ~~for the three and nine months ended September 30, 2017 was $17 million and $44 million, respectively, as compared to $7 million and $21 million for the same respective periods in 2016.~~ (loss), net.


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Interest and other income (loss), net		$	60	$	(206)	$	266

The increase in net interest and other income ~~during~~(loss) for the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2021, as compared to the same ~~respective periods~~period in ~~2016,~~2020, was primarily due to ~~(i) increases~~a noncash gain of $4$54 million attributable to the increase in fair value of the Company's investment in affiliate during the three months ended March 31, 2021 compared to a noncash loss of $145 million attributable to the decrease in fair value of the Company's investment in affiliate and ~~$11~~a $63 million noncash loss attributable to the decrease in the fair value of divestiture contingent consideration associated with the South Texas Divestiture for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, in interest income on short-term and long-term investments and (ii) severance and sales tax refunds~~March 31, 2020.

Table of ~~$5 million and $13 million for the three and nine months ended September 30, 2017, respectively.~~ Contents

PIONEER NATURAL RESOURCES COMPANY

See Note K13 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.

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~~PIONEER NATURAL RESOURCES COMPANY~~

Derivative ~~gains (losses)~~gain (loss), net.


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Commodity derivatives:


Noncash derivative gain (loss), net		$	(350)	$	409	$	(759)




Cash receipts (payments) on settled derivative instruments, net		(314)		63		(377)
Total commodity derivative gain (loss), net		(664)		472		(1,136)

Marketing derivatives:
Noncash derivative gain (loss), net		(20)		6		(26)


Cash payments on settled derivative instruments, net		(7)		—		(7)
Total marketing derivative gain (loss), net		(27)		6		(33)

Interest rate derivatives:
Cash payments on settled derivative instruments, net		—		(22)		22
Total interest rate derivative gain (loss), net		—		(22)		22

Derivative gain (loss), net		$	(691)	$	456	$	(1,147)

The Company primarily utilizes commodity swap contracts, collar contracts, ~~and~~ 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. During~~support the ~~three~~payment of contractual obligations and ~~nine months ended~~ ~~September 30, 2017, the~~dividends. The Company ~~recorded $133 million of net~~also uses marketing derivatives to diversify its oil sales to Gulf Coast and international markets.

Commodity derivative losses and $153 million of net derivative gains, respectively, on commodity price, diesel price and interest rate derivatives, of which $28 million and $62 million, respectively, represented net cash receipts. During the three and nine months ended September 30, 2016, the Company recorded $91 million of net derivative gains and $95 million of net derivative losses, respectively, on commodity price, diesel price and interest rate derivatives, of which $184 million and $533 million, respectively, represented net cash receipts.

~~The following tables detail the net cash receipts (payments) on the Company's commodity derivatives~~settlements and the ~~relative~~related price impact (per Bbl or Mcf) are as follows:


	Three Months Ended March 31, 2021
	2020
		Net cash payments			Price impact
			(in millions)


Oil derivative payments (a)			$	(293)		$	(11.58)	per Bbl



Gas derivative payments			(8)			$	(0.16)	per Mcf
Total net commodity derivative payments			$	(301)

_____________________

(a)Excludes the effect of liquidating certain of the Company's 2022 WTI swap contracts for cash payments of $13 million during the three ~~and nine~~ months ended ~~September 30, 2017 and 2016:~~March 31, 2021.


	Three Months Ended March 31, 2020

		Net cash receipts			Price impact
			(in millions)
Oil derivative receipts			$	63		$	3.12	per Bbl

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Net cash receipts (payments) Price impact Net cash receipts (payments) Price impact
(in millions) (in millions)
Oil derivative receipts $ 29
$ 1.94
per Bbl $ 61
$ 1.48
per Bbl
NGL derivative payments (2 ) $ (0.27 ) per Bbl (1 ) $ (0.08 ) per Bbl
Gas derivative receipts 1
$ 0.04
per Mcf 1
$ 0.01
per Mcf
Total net commodity derivative receipts $ 28
$ 61

Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
Net cash receipts Price impact Net cash receipts Price impact
(in millions) (in millions)
Oil derivative receipts $ 168
$ 13.59
per Bbl $ 471
$ 13.16
per Bbl
NGL derivative receipts 2
$ 0.40
per Bbl 6
$ 0.54
per Bbl
Gas derivative receipts 14
$ 0.48
per Mcf 56
$ 0.59
per Mcf
Total net commodity derivative receipts $ 184
$ 533

The Company's open derivative contracts are subject to continuing market risk. See ~~Note E of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and~~ "Item 3. Quantitative and Qualitative Disclosures About Market Risk" ~~for additional information regarding the Company's derivative contracts.~~

~~Gain on disposition of assets, net.~~ ~~The Company recorded net gains on the disposition of assets of nil~~ and ~~$205 million for the three~~Note 4 and nine months ended September 30, 2017, respectively, as compared to $1 million and $4 million for the same respective periods in 2016. For the nine months ended September 30, 2017, the Company's gain on disposition of assets is primarily due to a gain of $194 million recognized on the sale of approximately 20,500 acres in the Martin County region of the Permian Basin. See Note C5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional ~~information regarding the Company's~~information.

Gain on disposition of assets, net.


	Three Months Ended March 31,
		2021		2020		Change
		(in millions)
Gain on disposition of assets, net		$	11	$	—	$	11

The increase in gain on disposition of ~~assets.~~assets for the three months ended March 31, 2021, as compared to the same periods in 2020, was primarily due to recognizing a gain of $9 million associated with the sale of the Company's well services

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PIONEER NATURAL RESOURCES COMPANY

business to a third party for (i) net cash proceeds of $20 million and (ii) an earnout of up to $4 million cash to be earned over the next three years.

Oil and gas production costs. ~~The Company recognized oil~~


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Oil and gas production costs		$	252	$	176	$	76

Oil and gas production costs ~~of $152 million and $440 million during the three and nine months ended~~ ~~September 30, 2017, respectively,~~per BOE are as ~~compared to $141 million and $438 million during the same respective periods in~~ ~~2016~~. follows:


	Three Months Ended March 31,
		2021		2020		% Change
Lease operating expense per BOE (a)		$	3.47	$	3.32	5	%
Gathering, processing and transportation expense per BOE (b)		3.05		2.52		21	%
Workover costs per BOE (a)		0.43		0.44		(2	%)
Net natural gas plant income per BOE (c)		(1.05)		(1.14)		(8	%)
		$	5.90	$	5.14	15	%

_____________________

(a)Lease operating ~~expenses~~expense and workover ~~costs~~expense represent the components of oil and gas production costs over which the Company has management ~~control, while third-party~~control.

(b)Gathering, processing and transportation ~~charges represent~~expense represents the ~~cost~~costs to gather, process, transport ~~volumes produced~~and fractionate the Company's gas and NGLs to a ~~sales point.~~ point of sale.

(c)Net natural gas ~~plant/gathering charges represent~~plant income represents the ~~net costs to~~earnings from the Company's ownership share of gas processing facilities that gather and process the Company's ~~gas, reduced by net revenues earned from gathering~~ and ~~processing~~third party gas.

Although the Company continues to realize the benefit of ~~third-party gas in Company-owned facilities.~~

~~Total oil and gas~~lower production costs ~~per BOE for~~in 2021 due to the Company's cost saving initiatives, the Company realized higher than expected production costs during the three ~~and nine~~ months ended ~~September 30, 2017 decreased by six percent and 11 percent, respectively, as~~March 31, 2021 compared to the same ~~respective periods~~period in ~~2016. The decrease in lease~~2020 due to the following:

•Lease operating ~~expenses~~expense per BOE ~~during~~increased due to an increase in electricity costs, increased maintenance and repair costs and lower production associated with the ~~three~~impact Winter Storm Uri had on the Company's operations in February 2021;

•Gathering, processing and ~~nine months ended September 30, 2017, as compared to the same respective periods in 2016, was~~transportation expense per BOE increased primarily due to ~~a greater proportion of~~(i) transportation costs related to new pipeline takeaway capacity for the Company's gas and NGL production, ~~coming from horizontal wells in Spraberry/Wolfcamp area that have lower per BOE lease operating costs~~(ii) increased gas processing and ~~cost reduction initiatives. The decrease in third-party~~ transportation costs ~~per BOE~~as a result of higher electricity costs during Winter Storm Uri in February 2021 and (iii) increased gas and NGL prices during the ~~three~~first quarter of 2021 that resulted in increased gas processing costs for those contractual volumes retained by the processor as payment for their services; and nine months ended September 30, 2017, as compared to the same respective periods in 2016, was due to a lower proportion of the Company's total production being subject to higher Eagle Ford Shale transportation costs. The net

•Net natural gas plant income per BOE during the three and nine months ended September 30, 2017, as compared to net natural gas plant charges for the same respective periods in 2016, is primarily reflective of increased earnings on third-party volumes that are

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~~PIONEER NATURAL RESOURCES COMPANY~~

processed in Company-owned facilities due to higher NGL and gas prices. The increase in workover costs per BOE during the three and nine months ended September 30, 2017, as compared to the same respective periods in 2016, wasdecreased primarily due to ~~an increase in Permian vertical well workover activity due to the improvement in commodity~~processing facility revenues being impacted by Winter Storm Uri, partially offset by improved gas and NGL prices.

~~The following table provides the components of the Company's oil and gas production costs per BOE for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Lease operating expenses $ 4.48
$ 4.72
$ 4.74
$ 5.03
Third-party transportation charges 0.80
1.31
0.87
1.51
Net natural gas plant (income) charges (0.29 ) 0.02
(0.25 ) 0.07
Workover costs 1.02
0.37
0.80
0.30
Total production costs $ 6.01
$ 6.42
$ 6.16
$ 6.91

Production and ad valorem taxes. ~~The Company's production and ad valorem taxes were $53 million and $152 million during the three and nine months ended~~ ~~September 30, 2017, respectively, as compared to $32 million and $97 million for the same respective periods in~~ ~~2016~~.


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Production and ad valorem taxes		$	113	$	75	$	38

In general, production taxes and ad valorem taxes are directly related to commodity price changes; however, Texas ad valorem taxes are based upon prior year commodity prices, whereas production taxes are based upon current year commodity prices.

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PIONEER NATURAL RESOURCES COMPANY

Production and ad valorem taxes per BOE are as follows:


	Three Months Ended March 31,
		2021		2020		% Change
Production taxes per BOE		$	1.98	$	1.44	38	%
Ad valorem taxes per BOE		0.66		0.73		(10	%)
		$	2.64	$	2.17	22	%

The increase in production taxes per BOE for the three months ended March 31, 2021, as compared to the same period in 2020, was primarily due to increases in oil, NGL and gas commodity prices. The decrease in ad valorem taxes per BOE for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, as compared to the same ~~respective periods~~period in ~~2016, is~~2020, was primarily due ~~the increase in~~to lower prior year commodity prices ~~and,~~ for ~~ad valorem tax purposes, the higher valuation attributable to the Company’s successful Spraberry/Wolfcamp horizontal drilling program.~~

~~The following table provides the Company's production and~~which ad valorem taxes ~~per BOE for the three and nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~:are based upon.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Production taxes $ 1.54
$ 1.07
$ 1.52
$ 1.03
Ad valorem taxes 0.56
0.36
0.61
0.50
Total production and ad valorem taxes $ 2.10
$ 1.43
$ 2.13

$ 1.53

Depletion, depreciation and amortization expense. ~~The Company's~~


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Depletion, depreciation and amortization		$	474	$	434	$	40

Total DD&A ~~expense was $355 million ($14.01 per BOE)~~ and $1.0 billion ($14.48 per BOE) for the three and nine months ended September 30, 2017, respectively, as compared to $386 million ($17.54 per BOE) and $1.1 billion ($17.73 per BOE) during the same respective periods in 2016. The change in per BOE DD&A expense during the three and nine months ended September 30, 2017, as compared to the same respective periods in 2016, is primarily due to a decrease in depletion expense per BOE ~~on oil and gas properties.~~is as follows:


	Three Months Ended March 31,
		2021		2020		% Change
DD&A per BOE		$	11.11	$	12.71	(13	%)
Depletion expense per BOE		$	10.54	$	12.09	(13	%)

~~Depletion expense on oil and gas properties was $13.55 and $13.99~~The decrease in DD&A per BOE ~~during the three~~ and ~~nine months ended September 30, 2017, respectively, as compared to $17.05 and $17.21~~depletion expense per BOE ~~during the same respective periods in 2016. The change in per BOE depletion expense during the three and nine months ended September 30, 2017, as compared to the same respective periods in 2016, is~~was primarily due to ~~(i) commodity price increases and cost reduction initiatives, both of which had the effect of adding proved reserves by lengthening the economic lives of the Company's producing wells and (ii)~~incremental additions to proved reserves ~~attributable~~due to new wells from the Company's successful Spraberry/Wolfcamp horizontal drilling ~~program.~~

~~Impairment of oil~~program, improved commodity prices and ~~gas properties.~~ The Company performs assessments of its long-lived assets to be held and used, including oil and gas properties, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. To the extent such assessments 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 ofrecognizing the proved ~~properties~~reserves attributable to ~~their fair value.~~the Parsley Acquisition.

Exploration and abandonments expense. Geological and geophysical costs and lease abandonments and other exploration expenses are as follows:


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Geological and geophysical		$	16	$	7	$	9

Leasehold abandonments and other		3		2		1
		$	19	$	9	$	10

The ~~cash flow model~~increase in geological and geophysical costs for the three months ended March 31, 2021, as compared to the same period in 2020, was primarily due to relicensing certain seismic data in connection with the Parsley Acquisition.

During the three months ended March 31, 2021, the Company ~~uses to assess proved properties for impairment includes numerous assumptions. The primary factors that may affect estimates~~drilled and evaluated 106 exploration/extension wells, of ~~future cash flows are (i) future reserve adjustments, both positive~~which 100 percent were successfully completed as discoveries. During the same period in 2020, the Company drilled and ~~negative, to proved reserves~~evaluated 83 exploration/extension wells, of which 100 percent were successfully completed as discoveries.

General and appropriate risk-adjusted probable and possible reserves, (ii) results of future drilling activities, (iii) Management's Price Outlook and (iv) increases or decreases in production costs and capital costs associated with those reserves. All inputs to the cash flow model are evaluated at each measurement date.

administrative expense.


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Noncash general and administrative expense		$	12	$	5	$	7
Cash general and administrative expense		56		51		5
		$	68	$	56	$	12

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Total general and administrative expense per BOE is as follows:


	Three Months Ended March 31,
		2021		2020		% Change



Noncash general and administrative expense per BOE		$	0.28	$	0.15	87	%
Cash general and administrative expense per BOE		1.32		1.50		(12	%)
		$	1.60	$	1.65	(3	%)

AsThe change in noncash general and administrative expense for the three months ended March 31, 2021, as compared to the same period in 2020, is primarily due to market fluctuations in the Company's deferred compensation obligation as a result of mark-to-market valuation changes attributable to the Company's ~~proved property impairment assessments,~~deferred compensation plan assets.

The increase in cash general and administrative expense for the ~~Company recognized noncash impairment charges~~three months ended March 31, 2021, as compared to ~~reduce~~ the ~~carrying values~~same period in 2020, was primarily due to the reinstatement of ~~(i)~~certain employee benefits during 2021 that were temporarily suspended during 2020 in response to the ~~Raton field~~COVID-19 pandemic.

Interest expense.


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)


Noncash interest expense		$	6	$	5	$	1


Cash interest expense		33		22		11
		$	39	$	27	$	12

The increase in cash interest expense during the three months ended March 31, ~~2017 ($285 million impairment charge)~~2021, as compared to the same respective period in 2020, is primarily due to (i) the changes in long-term debt as a result of the Parsley Acquisition (see "Liquidity and Capital Resources" below for further information) and (ii) the issuance in May 2020 and August 2020, respectively, of $1.3 billion of the Convertible Notes and $1.1 billion of 1.90% senior notes due 2030, partially offset by (a) the partial repayment of $360 million of the Company's 3.45% senior notes due 2021, $356 million of its ~~West Panhandle field~~3.95% senior notes due 2022 and $9 million of its 7.20% senior notes due 2028 as a result of the Company's tender offer for these notes in May 2020 and (b) the repayment of its 3.45% senior notes that matured in January 2021.

The weighted average cash interest rate on the Company's indebtedness for the three months ended March 31, 2021 was 2.0 percent, as compared to 4.4 percent for the same period in 2020. See Note 7 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information.

Other expense.


	Three Months Ended March 31,
		2021		2020		Change

		(in millions)
Other expense		$	304	$	85	$	219

The increase in other expense during the three months ended March 31, ~~2016 ($32~~2021, as compared to the same respective period in 2020, was primarily due to the following:

•$80 million ~~impairment charge)~~of losses related to ~~their~~the Company's fulfillment of certain firm gas purchase commitments during Winter Storm Uri in February 2021; and

•$197 million of one-time Parsley Acquisition related costs for the three months ended March 31, 2021; as compared to

•a $69 million charge for estimated ~~fair values.~~ deficiency payments related to the Company's South Texas Divestiture for the three months ended March 31, 2020.

See Note D14 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information.

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Income tax benefit (provision).


	Three Months Ended March 31,
		2021			2020			Change

		(in millions)
Income tax benefit (provision)		$	11		$	(77)		$	88

Effective tax rate		14		%	21		%	(7		%)

The change in income tax benefit (provision) during the three months ended March 31, 2021, as compared to the same period in 2020, was primarily due to a $449 million decrease in income before income taxes. The Company evaluates and updates its annual effective income tax rate on an interim basis based on current and forecasted earnings and tax laws. The mix and timing of the Company's actual earnings compared to annual projections can cause interim effective tax rate fluctuations. The Company's interim effective tax rate for the three months ended March 31, 2021 differed from the U.S. statutory rate of 21 percent primarily due to forecasted state income taxes. See Note 15 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional ~~information regarding~~information.

Liquidity and Capital Resources

Liquidity. The Company's primary sources of short-term liquidity are (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. In January 2021, Pioneer entered into the First Amendment to Credit Agreement, with the primary changes being to increase the aggregate loan commitments from $1.5 billion to $2.0 billion, extend the maturity of the Credit Facility to January 12, 2026 and to nominally adjust the drawn and undrawn pricing.

The Company's ~~proved~~short-term and long-term liquidity requirements consist primarily of (i) capital expenditures, (ii) acquisitions of oil and gas ~~property impairment charges.~~

~~Exploration~~properties, (iii) payments of contractual obligations, including debt maturities, (iv) dividends and ~~abandonments expense.~~ ~~The following table provides~~share repurchases, (v) working capital obligations and (vi) funding the cash portion of the consideration in the DoublePoint Acquisition and retiring the outstanding balance under the DoublePoint credit facility. Funding for these requirements may be provided by any combination of the Company's ~~geological and geophysical costs, exploratory dry holes expenses and lease abandonments and other exploration expenses for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(in millions)
Geological and geophysical $ 17
$ 18
$ 59
$ 55
Exploratory well costs 1
1
11
1
Leasehold abandonments and other —
—
8
40
$ 18
$ 19
$ 78
$ 96

The geological and geophysical expenses for the three and nine months ended September 30, 2017 and 2016 were primarily related to geological and geophysical personnel costs. During the nine months ended September 30, 2016,sources of liquidity. Although the Company ~~incurred leasehold abandonments primarily related~~expects that its sources of funding will be adequate to fund its 2021 liquidity requirements, no assurance can be given that such funding sources will be adequate to meet the ~~abandonment of unproved properties in the Permian Basin and unproved acreage in Alaska in which the Company held an overriding royalty interest.~~Company's future needs.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the Company ~~drilled~~enhanced its liquidity position by refinancing a portion of the debt acquired in the Parsley Acquisition, issuing new debt and ~~evaluated 158 exploration/extension wells, 156~~increasing borrowing capacity under the Company's Credit Facility with the combined objective of ~~which were successfully completed as discoveries. During~~increasing liquidity, extending the ~~same period in 2016,~~Company's debt maturities and lowering the Company's future cash interest expense on long-term debt.

The Company funded the purchase of DoublePoint with $1 billion of cash and by issuing 27.2 million shares of the Company's common stock. The Company also repaid DoublePoint's credit facility of $241 million on the acquisition date. In conjunction with the DoublePoint Acquisition, the Company ~~drilled and evaluated 150 exploration/extension wells,~~delivered a notice of conditional redemption for all of ~~which were successfully completed as discoveries.~~

~~General and administrative expense.~~ ~~General and administrative expense~~the Notes. The redemption date for the ~~three~~Notes provided in the notice of conditional redemption is expected to be on May 18, 2021 (the "Redemption Date"). The redemption of the Notes is conditioned upon the successful completion by Pioneer of an investment grade public debt financing transaction of at least $650 million by the Redemption Date; provided that at the discretion of the Issuers, the Redemption Date may be delayed until such time as any or all conditions shall be satisfied or waived (provided that in no event shall such Redemption Date be delayed to a date later than July 3, 2021).

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Capital resources. As of March 31, 2021, the Company had no outstanding borrowings under its Credit Facility, leaving $2.0 billion of unused borrowing capacity. The Company was in compliance with all of its debt covenants as of March 31, 2021. The Company also had unrestricted cash on hand of $668 million as of March 31, 2021.

Cash flows from operating, investing and nine months ended September 30, 2017 was $81 million ($3.18 per BOE) and $245 million ($3.44 per BOE), respectively, as compared to $82 million ($3.72 per BOE) and $235 million ($3.72 per BOE) for the same respective periods in 2016.financing activities are summarized below.


	Three Months Ended March 31,
	2021		2020		Change

	(in millions)
Net cash provided by operating activities	$	377	$	825	$	(448)
Net cash used in investing activities	$	(348)	$	(681)	$	(333)
Net cash provided by (used in) financing activities	$	(806)	$	9	$	815

Operating activities. The decrease in general and administrative expense per BOE during the three and nine months ended September 30, 2017, as compared to the same respective periods in 2016, was primarily due to increases of 15% and 13% in sales volumes during the three and nine months ended September 30, 2017, as compared to the same respective periods in 2016.

~~Accretion of discount on asset retirement obligations.~~ Accretion of discount on asset retirement obligations was $5 million and $14 million for the three and nine months ended September 30, 2017, respectively, as compared to $5 million and $14 million for the same respective periods in 2016. See Note I of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for information regarding the Company's asset retirement obligations.

~~Interest expense.~~ Interest expense was $37 million and $118 million for the three and nine months ended September 30, 2017, respectively, as compared to $50 million and $161 million for the same respective periods in 2016. The decrease in interest expense during the three and nine months ended September 30, 2017, as compared to the same respective periods in 2016, was primarily due to the repayment of both the Company's 6.65% Senior Notes, which matured in March 2017, and the Company's 5.875% Senior Notes that matured in July 2016. The weighted average interest rates on the Company's indebtedness for the three and nine months ended September 30, 2017, including the effects of capitalized interest, was 5.6 percent and 5.7 percent, respectively, as compared to 5.9 percent and 6.1 percent for the same respective periods in 2016.

~~Other expense.~~ Other expense was $58 million and $176 million for the three and nine months ended September 30, 2017, respectively, as compared to $69 million and $223 million during the same respective periods in 2016. The decrease in other expensenet cash flow provided by operating activities for the three months ended ~~September 30, 2017,~~March 31, 2021, as compared to the same period in ~~2016,~~2020, was primarily due to (i) additional cash used in derivative activities, (ii) increased accounts receivables and commodity inventories as a ~~decrease~~result of ~~$17 million in net losses from Company-provided fracture stimulation~~higher commodity prices, (iii) one-time cash Parsley transaction costs and ~~related service operations that are provided~~(iv) cash paid to ~~third party working interest owners and (ii) a decrease of $10 million in idle drilling and well service equipment charges,~~fulfill certain gas commitments during Winter Storm Uri, partially offset by ~~(iii)~~ an increase in accounts payable as a result of ~~$18 million~~increased drilling and operational activity and an increase in ~~unused firm transportation costs.~~oil and gas revenues due to the aforementioned increase in commodity prices.

Investing activities. The decrease in ~~other expense~~net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, as compared to the same period in ~~2016,~~2020, was primarily ~~due to~~a result of (i) a decrease of $57 million in idle drilling and well service equipment charges and (ii) a decrease of $35 million in net losses from Company-provided fracture stimulation and related service operations that are provided to third party working interest owners, partially offset by (iii) an increase of $50 million in unused firm transportation costs.

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~~PIONEER NATURAL RESOURCES COMPANY~~

The Company expects to continue to incur charges associated with excess firm gathering and transportation commitments until commodity prices improve, allowing the Company to increase its drilling activities, or the contractual obligations expire. Based on current drilling plans, the Company does not expect to incur any idle drilling rig charges. See Note L of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.

~~Income tax benefit (provision).~~ The Company recognized an income tax benefit of $11 million and provision of $79 million for the three and nine months ended September 30, 2017, respectively, as compared to an income tax benefit of $78 million and $362 million for the same respective periods in 2016. The Company's effective tax rate for the three and nine months ended September 30, 2017 was 34 percent and 32 percent, respectively, as compared to 140 percent and 41 percent for the same respective periods in 2016. The Company's effective tax rate for the nine months ended September 30, 2017 differs from the U.S. statutory rate of 35 percent primarily due to recognizing excess tax benefits of $8 million during the nine months ended September 30, 2017 associated with the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which requires excess tax benefits or deficiencies associated with the vesting of long-term incentive awards to be recorded as income tax expense or benefit in the statement of operations rather than as an adjustment to additional paid-in capital in the balance sheet. ~~The Company's effective tax rates for the~~ three and nine ended September 30, 2016 differ from the U.S. statutory rate of 35 percent primarily due to recognizing research and experimental expenditure credits of $59 million during the three months ended September 30, 2016.

As of September 30, 2017 and December 31, 2016, the Company had unrecognized tax benefits of $123 million and $112 million respectively, resulting from research and experimental expenditures related to horizontal drilling and completions innovations. 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~~cost reduction efforts with decreases in ~~the period it is recognized. The Company expects~~additions to substantially resolve the uncertainties associated with the unrecognized tax benefit by December 2018. See Note M of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Company's income taxes.

~~Capital Commitments, Capital Resources and Liquidity~~

~~Capital commitments.~~ ~~The Company's primary needs for cash are for capital expenditures and acquisition expenditures on~~ oil and gas properties and ~~related vertical integration~~additions to other assets and ~~facilities, payment~~other property and equipment of ~~contractual obligations, including debt maturities, dividends~~$175 million and ~~working capital obligations. Funding for these~~$19 million, respectively, (ii) $117 million of cash ~~needs may be provided by any combination of internally-generated cash flow, cash~~acquired in the Parsley Acquisition and ~~cash equivalents on hand, sales of short-term and long-term investments,~~(iii) an increase in proceeds from ~~divestitures~~disposition of ~~nonstrategic~~ assets ~~or external financing sources as discussed in "Capital resources" below.~~of $22 million primarily related to the sale of the Company's well services business.

Financing activities.The Company's ~~capital budget for 2017 is $2.75 billion (excluding acquisitions, asset retirement obligations, capitalized interest, geological and geophysical administrative~~significant financing activities are as follows:

•2021: The Company (i) received proceeds from the January 2021 Senior Notes Offering, net of $24 million of issuance costs and ~~information technology system upgrades), consisting~~discounts, of ~~$2.475~~$2.5 billion, ~~for drilling operations and $275~~(ii) repaid $140 million ~~for water infrastructure, vertical integration and field facilities. The Company's capital expenditures during~~associated with the ~~nine months ended September 30, 2017 were $2.1 billion, consisting~~maturity of $1.8 billion for drilling operations (excluding acquisitions, asset retirement obligations, capitalized interest and geological and geophysical administrative costs) and $245 million for water infrastructure, vertical integration, system upgrades and other plant and equipment additions. Based on results forits 3.45% senior notes due in January 2021, (iii) used the nine months ended September 30, 2017 and Management's Price Outlook, the Company expects its net cash flows from operating activities, cash and cash equivalents on hand, sales of short-term and long-term investments, proceeds from ~~divestitures~~the January 2021 Senior Notes Offering to pay $1.6 billion to redeem Parsley's 5.250% Senior Notes due 2025, Parsley's 5.375% Senior Notes due 2025 and Jagged Peak's 5.875% Senior Notes due 2026, (iv) paid $852 million to purchase a portion of ~~nonstrategic assets~~Parsley's 5.625% Senior Notes due 2027 and ~~if necessary, availability~~Parsley's 4.125% Senior Notes due 2028 pursuant to a cash tender offer, (v) repaid Parsley's credit facility, which had an outstanding balance of $397 million, (vi) paid $140 million of other liabilities and (vii) paid dividends of $91 million.

•2020: The Company (i) borrowed $800 million under the Credit Facility, ~~to be sufficient to fund its planned capital expenditures, acquisitions and contractual obligations, including debt maturities.~~

~~Investing activities.~~ Investing activities used $1.3 billion of cash during the nine months ended September 30, 2017, as compared to $3.5 billion during the nine months ended September 30, 2016. The decrease in cash used in investing activities during the nine months ended September 30, 2017, as compared to the same period in 2016, is primarily due to proceeds from(ii) repaid $450 million associated with the maturity of ~~investments (commercial paper, corporate bonds~~its 7.50% senior notes, (iii) paid $146 million of other liabilities, (iv) purchased $122 million of treasury stock and ~~time deposits)~~(v) paid dividends of ~~$1.2 billion during~~$73 million.

Dividends/distributions. During the ~~nine~~three months ended ~~September 30, 2017, as compared to $255~~March 31, 2021, the Company paid dividends of $91 million, ~~during~~or $0.55 per share. In February 2021, the ~~same period in 2016, and investment purchases~~board of ~~$845 million during the nine months ended September 30, 2017, as compared to $2.3 billion during the same period in 2016. During the nine months ended September 30, 2017,~~directors declared a quarterly cash dividend of $0.56 per share on the Company's ~~expenditures for investing activities were primarily funded by net cash provided by operating activities.~~

~~Dividends/distributions.~~ ~~During February and August~~outstanding common stock, payable on April 14, 2021, to stockholders of ~~2017~~ ~~and~~record on March ~~and August of~~ ~~2016, the Board declared semiannual dividends of $0.04 per common share.~~31, 2021. Future dividends are at the discretion of the ~~Board,~~Company's board of directors, and, if declared, the ~~Board~~board of directors may change the ~~current~~ dividend amount based on the Company's liquidity and capital resources at ~~the~~that time.

~~Contractual obligations, including off-balance~~Off-balance sheet ~~obligations.~~ ~~The Company's contractual obligations include long-term debt, operating leases, drilling commitments (primarily related~~arrangements. From time to ~~commitments to pay day rates for contracted drilling rigs), capital~~

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~~PIONEER NATURAL RESOURCES COMPANY~~

funding obligations, derivative obligations, firm transportation and fractionation commitments, minimum annual gathering, processing and transportation commitments and other liabilities (including postretirement benefit obligations).

~~From time-to-time,~~time, the Company enters into arrangements and transactions that can give rise to material off-balance sheet ~~obligations of the Company.~~obligations. As of ~~September 30, 2017~~,March 31, 2021, the material off-balance sheet arrangements and transactions that the Company had entered into included (i) ~~operating lease agreements, (ii) drilling commitments, (iii)~~ firm purchase, transportation, storage and fractionation commitments, ~~(iv)~~(ii) open purchase commitments and ~~(v)~~(iii) contractual obligations for which the ultimate settlement amounts are not fixed and determinable. The contractual obligations for which the ultimate settlement amounts are not fixed and determinable include ~~(i)~~(a) derivative contracts that are sensitive to future changes in commodity prices or interest rates, ~~(ii)~~(b) gathering, processing (primarily treating and fractionation) and transportation commitments on uncertain volumes of future throughput ~~(iii) open delivery commitments~~ and ~~(iv)~~(c) indemnification obligations following certain divestitures.

In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified pre-closing matters, including matters of litigation, environmental contingencies, royalty and income taxes. Also associated with its divestiture transactions, the

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PIONEER NATURAL RESOURCES COMPANY

Company has issued and received guarantees to facilitate the transfer of contractual obligations, such as firm transportation agreements or gathering and processing arrangements. The Company does not recognize a liability if the fair value of the obligation is immaterial and the likelihood of making payments under these guarantees is remote.

Other than the off-balance sheet arrangements described above, the Company has no transactions, arrangements or other relationships with unconsolidated entities or other ~~parties~~persons that are reasonably likely to materially affect the Company's liquidity or availability of or requirements for capital resources. The Company expects to enter into similar contractual arrangements in the future, including incremental derivative contracts and additional firm purchase, transportation, storage and ~~transportation~~fractionation arrangements, in order to support the ~~Company’s~~Company's business plans.

~~There were no material changes to the Company's contractual obligations during the first nine months of 2017 other than the repayment of the Company's 6.65% Senior Notes in March 2017~~ See "Contractual obligations" below and the commitment to a 20-year operating lease for the Company's new corporate headquarters in June 2017. Annual base rent is expected to be $33 million and lease payments are expected to commence once the building is complete, which is anticipated to occur during the second half of 2019. See Note J10 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional ~~information about~~information.

Contractual obligations. The Company's contractual obligations include long-term debt, leases (primarily related to contracted drilling rigs, equipment and office facilities), capital funding obligations, derivative obligations, firm transportation, storage and fractionation commitments, minimum annual gathering, processing and transportation commitments and other liabilities (including postretirement benefit obligations). Other joint owners in the properties operated by the Company could incur portions of the costs represented by these commitments.

The Company has short-term and long-term firm purchase, gathering, processing, transportation, fractionation and storage commitments representing take-or-pay agreements, which include contractual commitments (i) to purchase sand, water and diesel for use in the Company's ~~operating lease~~drilling and completion operations, (ii) with midstream service companies and pipeline carriers for future gathering, processing, transportation, fractionation and storage and (iii) with oilfield services companies that provide drilling and pressure pumping services. The Company does not expect to be able to fulfill all of its ~~new headquarters.~~short-term and long-term firm transportation volume obligations from projected production of available reserves; consequently, the Company plans to purchase third party volumes to satisfy its firm transportation commitments if it is economic to do so; otherwise, it will pay demand fees for any commitment shortfalls.

The Company's commodity and ~~interest rate~~marketing derivative contracts are periodically measured and recorded at fair value and continue to be subject to market and credit risk. As of ~~September 30, 2017~~,March 31, 2021, these contracts represented net ~~assets~~liabilities of ~~$21 million~~.$970 million. The ultimate liquidation value of the Company's commodity ~~and interest rate~~ derivatives will be dependent upon actual future commodity prices, ~~and interest rates,~~ which may differ materially from the inputs used to determine the derivatives' fair values as of ~~September 30, 2017~~.March 31, 2021. See Note E5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and ~~"Item~~"Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk"~~Risk" for additional ~~information about the Company's derivative instruments and market risk.~~information.

~~Capital resources.~~ The Company's primary capital resources are cash and cash equivalents, short-term and long-term investments, net cash provided by operating activities, proceeds from divestitures and proceeds from financing activities (principally borrowings under the Company's Credit Facility or issuances of debt or equity securities). If internal cash flows do not meet the Company's expectations, the Company may reduce its level of capital expenditures, and/or fund a portion of its capital expenditures (i) using cash on hand, (ii) through sales of short-term and long-term investments, (iii) with borrowings under the Company's Credit Facility, (iv) through issuances of debt or equity securities or (v) through other sources, such as sales of nonstrategic assets.New Accounting Pronouncements

~~Operating activities.~~ Net cash provided by operating activities during the nine months ended September 30, 2017 was $1.3 billion, as compared to $959 million during the same period in 2016. The increase in net cash provided by operating activities for the nine months ended September 30, 2017, as compared to the same period in 2016, is primarily due to increases in the Company's oil and gas revenues for the nine months ended September 30, 2017 as a result of increases in commodity prices and sales volumes, partially offset by a $472 million reduction in cash provided by commodity derivatives during the nine months ended September 30, 2017, as compared to the same period in 2016.

~~Financing activities.~~ Net cash used by financing activities during the nine months ended September 30, 2017 was $521 million, as compared to net cash provided by financing activities of $2.1 billion during the same period in 2016. The decrease in net cash provided by financing activities during the nine months ended September 30, 2017, as compared to the same period in 2016, is primarily due to the Company's issuance of 19.8 million shares of common stock during 2016 for cash proceeds of $2.5 billion.

As the Company pursues its strategy, it may utilize various financing sources, including fixed and floating rate debt, convertible securities, preferred stock or common stock. The Company cannot predict the timing or ultimate outcome of any such actions as they are subject to market conditions, among other factors. The Company may also issue securities in exchange for oil and gas properties, stock or other interests in other oil and gas companies or related assets. Additional securities may be of a class preferred to common stock with respect to such matters as dividends and liquidation rights and may also have other rights and preferences as determined by the Board.

~~Liquidity.~~ ~~The Company's principal sources of short-term liquidity are cash and cash equivalents, sales of short-term and long-term investments and unused borrowing capacity under its Credit Facility. As of~~ ~~September 30, 2017, the Company had no outstanding borrowings under its Credit Facility, leaving~~ ~~$1.5 billion~~ ~~of unused borrowing capacity. The Company was in~~

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~~compliance with all of its debt covenants as of~~ ~~September 30, 2017. The Company also had cash on hand of~~ ~~$636 million, short-term investments of $1.4 billion and long-term investments of $151 million as of~~ ~~September 30, 2017~~. If internal cash flows do not meet the Company's expectations, the Company may fund a portion of its capital expenditures using cash on hand, sales of short-term and long-term investments, availability under its Credit Facility, issuances of debt or equity securities or other sources, such as sales of nonstrategic assets and/or reduce its level of capital expenditures or reduce dividend payments. The Company cannot provide any assurance that needed short- term or long-term liquidity will be available on acceptable terms or at all. Although the Company expects that the combination of internal operating cash flows, cash and cash equivalents on hand, sales of short-term and long-term investments, proceeds from divestitures of nonstrategic assets and, if necessary, available capacity under the Company's Credit Facility will be adequate for the remainder of 2017 to fund planned capital expenditures, acquisitions, dividend payments and provide adequate liquidity to fund other needs, no assurances can be given that such funding sources will be adequate to meet the Company's future needs.

~~Debt ratings.~~ The Company is rated as mid-investment grade by three credit rating agencies. The Company receives debt credit ratings from several of the major ratings agencies, which are subject to regular reviews. The Company believes that each of the rating agencies considers many factors in determining the Company's ratings including: (i) production growth opportunities, (ii) liquidity, (iii) debt levels, (iv) asset composition and (v) proved reserve mix. A reduction in the Company's debt ratings could increase the interest rates that the Company incurs on Credit Facility borrowings and could negatively impact the Company's ability to obtain additional financing or the interest rate, fees and other terms associated with such additional financing.

~~Book capitalization and current ratio.~~ ~~The Company's net book capitalization as of~~ ~~September 30, 2017~~ was $11.2 billion, consisting of $636 million of cash and cash equivalents, short-term and long-term investments of $1.5 billion, debt of $2.7 billion and equity of $10.6 billion. The Company's net debt to net book capitalization increased to five percent as of September 30, 2017 from two percent as of December 31, 2016. The Company's ratio of current assets to current liabilities decreased to 1.69:1 as of September 30, 2017, as compared to 2.11:1 as of December 31, 2016, primarily due to the reclassification of the Company's 6.875% Senior Notes to a current liability.

~~New accounting pronouncements.~~The effects of new accounting pronouncements are discussed in Note B2 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements."

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ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Item 3.Quantitative~~In the normal course of business, the Company's financial position is routinely subject to a variety of risks, including market risks associated with changes in commodity prices, interest rate movements on outstanding debt and ~~Qualitative Disclosures About Market Risk~~

credit risks. These risks are mitigated through the Company's risk management program, which includes the use of derivative financial instruments and selling purchased oil and gas outside of the Permian Basin. The following quantitative and qualitative ~~disclosures about market risk are supplementary to the quantitative and qualitative disclosures provided in the Company's Annual Report on Form 10-K for the year ended~~ ~~December 31, 2016. As such, the information contained herein should be read in conjunction with the related disclosures in the Company's Annual Report on Form 10-K for the year ended~~ ~~December 31, 2016~~.

~~The primary objective of the following~~ information is provided about financial instruments to provide forward-looking quantitative and qualitative information about the Company's potential exposure to market risks. The term "market risks," insofar as it relates to currently anticipated transactions ofwhich the Company ~~refers to~~was a party as of March 31, 2021, and from which the ~~risk of loss arising~~Company may incur future gains or losses from changes in commodity prices ~~and~~or interest rates. ~~These disclosures are~~The Company does not ~~meant to be precise indicators~~enter into any financial instruments, including derivatives, for speculative or trading purposes.

Interest rate risk. As of ~~expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators regarding how~~March 31, 2021, the Company ~~views~~had no variable rate debt outstanding under the Credit Facility and, ~~manages ongoing market risk exposures. None~~consequently, no related exposure to interest rate risk. As of March 31, 2021, the Company had $6.2 billion of fixed rate long-term debt outstanding with a weighted average effective interest rate of 2.0 percent. Although changes in interest rates may affect the fair value of the Company's ~~market~~fixed rate long-term debt, any changes would not impact earnings or expose the Company to the risk ~~sensitive~~of cash flow losses. The Company did not have any interest rate derivative instruments ~~are entered~~outstanding as of March 31, 2021; however, it may enter into ~~for speculative purposes.~~

~~The following table reconciles the changes that occurred~~such instruments in the ~~fair values of the Company's open derivative contracts during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~:

Derivative Contract Net Assets
Commodities Interest Rates Total
(in millions)
Fair value of contracts outstanding as of December 31, 2016 $ (76 ) $ 6
$ (70 )
Changes in contract fair value 154
(1 ) 153
Contract maturity receipts (60 ) —
(60 )
Contract termination receipts (2 ) —
(2 )
Fair value of contracts outstanding as of September 30, 2017 $ 16
$ 5
$ 21

~~Interest~~future to mitigate interest rate ~~sensitivity.~~risk. See Note G4 and Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.

Commodity price risk. The Company's primary market risk exposure is related to the price it receives from the sale of its oil, NGLs and ~~Capital Commitments, Capital Resources~~gas production. Realized pricing is volatile and ~~Liquidity included~~is determined by market prices that fluctuate with changes in ~~"Item 2. Management's Discussion~~supply and ~~Analysis~~demand for these products throughout the world. The price the Company receives for its production depends on many factors outside of ~~Financial Condition and Results~~the control of ~~Operations" for information regarding~~ the ~~Company's long-term debt.~~

Company, including differences in commodity pricing at the point of sale versus

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~~The following table provides information about financial instruments~~market index prices. Reducing the Company's exposure to ~~which the Company was a party as of~~ ~~September 30, 2017~~ ~~and that are sensitive to changes in interest rates. The table presents debt maturities by expected maturity dates, the weighted average interest rates expected~~price volatility helps secure funds to be ~~paid on~~used in its capital program and to fund general working capital needs, debt obligations, dividends and share repurchases, among other uses. The Company mitigates its commodity price risk through the ~~debt given current contractual terms and market conditions and the aggregate estimated fair value~~use of ~~the Company's outstanding debt. For fixed rate debt, the weighted average interest rates represent the contractual fixed rates that the Company was obligated to periodically pay on the debt as of~~ ~~September 30, 2017~~. Although the Company had no outstanding variable rate debt as of September 30, 2017, the average variable contractual rates for its Credit Facility (that matures in August 2020) projected forward proportionate to the forward yield curve for LIBOR on October 30, 2017 is presented in the table below.

Three Months Ending December 31, Year Ending December 31, Asset (Liability) Fair Value at September 30,
2017 2018 2019 2020 2021 Thereafter Total 2017
(dollars in millions)
Total Debt:
Fixed rate principal maturities (a) $ —
$ 450
$ —
$ 450
$ 500
$ 1,350
$ 2,750
$ (2,957 )
Weighted average fixed interest rate 5.31 % 5.11 % 5.00 % 4.42 % 4.72 % 5.49 %
Average variable interest rate 3.01 % 3.28 % 3.55 % 3.71 %

Interest Rate Swaps:
Notional debt amount (b) $ 100
$ —
$ —
$ —
$ —
$ —
$ 5
Fixed rate payable (%) 1.81 %

~~____________________~~


~~(a)~~	~~Represents maturities of principal amounts, excluding debt issuance costs and debt issuance discounts.~~

~~(b)~~

As of September 30, 2017, the Company was party to interest rate derivative contracts whereby the Company will receive the three-month LIBOR rate for the 10-year period from December 2017 through December 2027 in exchange for paying a fixed interest rate of 1.81 percent on a notional amount of $100 million on December 15, 2017. Subsequent to September 30, 2017, the Company liquidated its interest rate derivative contracts for cash proceeds of $5 million.

~~Commodity derivative instruments and price sensitivity.~~ ~~The following table provides information about the Company's oil, NGL and gas~~ derivative financial instruments and sales of purchased oil and gas.

Derivative financial instruments. The Company's decision on the quantity and price at which it executes derivative contracts is based in part on its view of current and future market conditions. The Company may choose not to enter into derivative positions for expected production if the commodity price forecast for certain time periods is deemed to be unfavorable. Additionally, the Company may choose to liquidate existing derivative positions prior to the expiration of their contractual maturity in order to monetize gain positions or minimize loss positions if it is anticipated that ~~were sensitive~~the commodity price forecast is expected to ~~changes in oil, NGL and gas prices as~~improve. Proceeds, if any, can be used for the purpose of ~~September 30, 2017. Although mitigated by~~funding the Company's capital program, general working capital needs, debt obligations, dividends and share repurchases, among other uses. While derivative ~~activities, declines in oil, NGL and gas prices would reduce~~positions limit the ~~Company's revenues.~~

downside risk of adverse price movements, they also limit future revenues from upward price movements. The Company manages commodity price risk with the following types of commodity derivative ~~contracts, such as swap contracts, collar contracts and collar contracts with short put options. Swap contracts provide~~contracts:

•Swaps. The Company receives a fixed price ~~for~~and pays a floating market price to the counterparty on a notional amount of sales ~~volumes.~~ volumes, thereby fixing the price for the commodity sold.

•Collars. Collar contracts provide minimum ("floor" or "long put") and maximum ("ceiling") prices on a notional amount of sales volumes, thereby allowing some price participation if the relevant index price closes above the floor price but below the ceiling price.

•Collar contracts with short put options. Collar contracts with short put options differ from other collar contracts by virtue of the short put option price, below which the Company's realized price will exceed the variable market prices by the long put-to-short put price differential.

•Basis swaps. Basis swap contracts fix the basis differentials between the index price at which the Company sells its production and the index price used in swap or collar contracts.

•Options. Selling individual call options can enhance the market price by the premium received or, alternatively, the premium received can be utilized to improve swap or collar contract prices. Purchased put options establish a minimum floor price (less any premiums paid) and allow participation in higher prices when prices close above the floor price.

The Company has entered into commodity derivative contracts for a portion of forecasted 2021 and 2022 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 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.

The average forward prices based on March 31, 2021 market quotes were as follows:


	2021						Year Ending December 31, 2022
	Second Quarter		Third Quarter		Fourth Quarter
Average forward Brent oil price	$	62.32	$	61.06	$	59.86	$	57.92
Average forward WTI Midland oil price	$	59.70	$	58.56	$	57.26	$	54.90
Average forward MEH oil price	$	60.23	$	59.06	$	57.76	$	55.40
Average forward NYMEX gas price	$	2.64	$	2.74	$	2.85	$	2.64
Average forward DUTCH TTF gas price	$	6.54	$	6.54	$	6.91	$	6.30
Average forward WAHA gas price	$	2.46	$	2.67	$	2.76	$	2.42
WTI Midland/Brent oil basis differentials:


Average forward basis differential price (a)	$	(2.62)	$	(2.50)	$	(2.60)	$	(3.02)

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The average forward prices based on May 4, 2021 market quotes are as follows:


	2021						Year Ending December 31, 2022
	Second Quarter		Third Quarter		Fourth Quarter
Average forward Brent oil price	$	68.67	$	67.51	$	66.10	$	63.66
Average forward WTI Midland oil price	$	66.00	$	64.96	$	63.47	$	60.51
Average forward MEH oil price	$	66.52	$	65.59	$	64.08	$	61.09
Average forward NYMEX gas price	$	2.97	$	3.01	$	3.10	$	2.77
Average forward DUTCH TTF gas price	$	8.14	$	8.09	$	8.41	$	7.13
Average forward WAHA gas price	$	2.80	$	3.00	$	3.06	$	2.52
WTI Midland/Brent oil basis differentials:


Average forward basis differential price (a)	$	(2.67)	$	(2.55)	$	(2.63)	$	(3.15)

___________________

(a)Based on market quotes for basis differentials between Midland oil index prices and the Brent oil index price.

See ~~Notes D~~Note 4 and ENote 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a description of the ~~accounting procedures followed by the~~Company's open derivative positions and additional information.

Sales of purchased oil and gas. The Company ~~for its derivative financial instruments~~enters into purchase transactions with third parties and ~~for specific information regarding the terms~~separate sale transactions with third parties to diversify a portion of the Company's ~~derivative financial instruments~~oil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets and to satisfy unused gas pipeline capacity commitments.

Marketing derivatives. The Company's marketing derivatives reflect two long-term marketing contracts that were entered in October 2019 whereby 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 began on January 1, 2021 and 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 WASP that a non-affiliated counterparty receives for selling oil through their Gulf Coast storage and export facility at prices that are ~~sensitive~~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. Similar to ~~changes in~~sales of purchased commodities, these marketing derivatives allow the Company to diversify a portion of its oil ~~NGL or~~sales from its area of production to Gulf Coast and international markets.

The average forward prices based on March 31, 2021 market quotes are as follows:


	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	$	61.08	$	57.92	$	55.89	$	54.52	$	53.60	$	52.93
Average forward WTI Midland oil price	$	58.51	$	54.90	$	52.25	$	50.58	$	49.57	$	48.86
Average forward basis differential price (a)	$	(2.57)	$	(3.02)	$	(3.64)	$	(3.94)	$	(4.03)	$	(4.07)

The average forward prices based on May 4, 2021 market quotes are as follows:


	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	$	67.43	$	63.66	$	60.99	$	59.37	$	58.49	$	58.07
Average forward WTI Midland oil price	$	64.81	$	60.51	$	57.21	$	55.32	$	54.37	$	53.79
Average forward basis differential price (a)	$	(2.62)	$	(3.15)	$	(3.78)	$	(4.05)	$	(4.12)	$	(4.28)

___________________

(a)Based on market quotes for basis differentials between Midland oil index prices and the Brent oil index price.

Credit risk. The Company's primary concentration of credit risks are associated with the collection of receivables resulting from the sale of oil and gas ~~prices.~~

production and purchased oil and gas, and the risk of a counterparty's failure to meet its obligations under derivative contracts with the Company.

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2017 Year Ending December 31, Asset (Liability) Fair Value at September 30, 2017 (a)
Fourth Quarter 2018 2019
(in millions)
Oil Derivatives:
Average daily notional Bbl volumes:
Collar contracts (b) 6,000
—
—
$ 1
Weighted average ceiling price per Bbl $ 70.40
$ —
$ —

Weighted average floor price per Bbl $ 50.00
$ —
$ —

Collar contracts with short puts (c) 155,000
150,781
—
$ 14
Weighted average ceiling price per Bbl $ 62.12
$ 57.70
$ —

Weighted average floor price per Bbl $ 49.82
$ 47.39
$ —

Weighted average short put price per Bbl $ 41.02
$ 37.35
$ —

Average forward NYMEX oil prices (d) $ 54.15
$ 53.98
$ —

Midland-Cushing index swap contracts (e) 6,630
—
—
—
Weighted average price differential per Bbl $ (1.09 ) $ —
$ —

Average forward basis differential prices (f) $ 0.44
$ —
$ —

NGL Derivatives (g):
Ethane collar contracts (Bbl) (h) 3,000
—
—
$ —
Weighted average ceiling price per Bbl $ 11.83
$ —
$ —

Weighted average floor price per Bbl $ 8.68
$ —
$ —

Average forward ethane prices (d) $ 11.55
$ —
$ —

Ethane basis swap contracts (MMBtu) (i) 6,920
6,920
6,920
$ —
Weighted average price differential per MMBtu $ 1.60
$ 1.60
$ 1.60

Average forward NYMEX gas prices (d) $ 2.97
$ 3.00
$ 2.91

Gas Derivatives:
Average daily notional MMBtu volumes:
Swap contracts (j) —
30,000
—
$ —
Weighted average fixed price per MMBtu $ —
$ 3.08
$ —

Collar contracts with short puts 300,000
62,329
—
$ 2
Weighted average ceiling price per MMBtu $ 3.60
$ 3.56
$ —

Weighted average floor price per MMBtu $ 2.96
$ 2.91
$ —

Weighted average short put price per MMBtu $ 2.47
$ 2.37
$ —

Average forward NYMEX gas prices (d) $ 2.97
$ 3.00
$ —

Basis swap contracts: $ (1 )
Mid-Continent index swap contracts (k) 45,000
—
—

Weighted average fixed price per MMBtu $ (0.32 ) $ —
$ —

Average forward basis differential prices (l) $ (0.25 ) $ —
$ —

Permian Basin index swap contracts (m) 26,522
51,671
70,000

Weighted average fixed price per MMBtu $ 0.30
$ 0.30
$ 0.30

Average forward basis differential prices (n) $ 0.63
$ 0.38
$ 0.38

~~___________________~~

~~(a)~~

In accordance with Financial Accounting Standards Board ASC 210-20 and ASC 815-10, the Company classifies the fair value amounts of derivative assets and liabilities executed under master netting arrangements as net derivative assets or net derivative liabilities, as the case may be. The net asset and liability amounts shown above have been provided on a commodity contract-type basis, which may differ from their master netting arrangements classifications.


~~(b)~~	Subsequent to September 30, 2017, the Company entered into additional collar contracts for 3,000 Bbls per day of 2018 production with a ceiling price of $58.05 per Bbl and a floor price of $45.00 per Bbl.


~~(c)~~	Subsequent to September 30, 2017, the Company entered into additional collar contracts with short puts for 2,000 Bbls per day of 2018 production with a ceiling price of $59.25 per Bbl, a floor price of $45.00 per Bbl and a short put price of $35.00 per Bbl.


~~(d)~~	~~The average forward NYMEX oil, ethane and gas prices are based on October 30, 2017 market quotes.~~


~~(e)~~	~~Represents swap contracts that fix the basis differential between Midland, Texas oil prices and WTI oil prices at Cushing, Oklahoma.~~

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~~(f)~~	~~The average forward basis differential prices are based on October 30, 2017 market quotes for basis differentials between Midland, Texas oil prices and WTI prices at Cushing, Oklahoma.~~


~~(g)~~	~~Subsequent to September 30, 2017, the Company entered into propane swap contracts for 2,500 Bbls per day of November and December 2017 production with a fixed price of $37.80 per Bbl.~~


~~(h)~~	~~Represent collar contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.~~


~~(i)~~	Represent basis swap contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. The basis swap contracts fix the basis differential on a HH MMBtu equivalent basis. The Company will receive the HH price plus the price differential on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of ethane.


~~(j)~~	~~Subsequent to September 30, 2017, the Company entered into additional swap contracts for 70,000 MMBtu per day of April through December 2018 production with a price of $3.00 per MMBtu.~~


~~(k)~~	~~Represent swap contracts that fix the basis differentials between the index prices at which the Company sells its Mid-Continent gas and the HH index price used in collar contracts with short puts.~~


~~(l)~~	~~The average forward basis differential prices are based on October 30, 2017 market quotes for basis differentials between the Mid-Continent index prices and the NYMEX-quoted forward prices.~~

~~(m)~~


~~(n)~~	~~The average forward basis differential prices are based on October 30, 2017 market quotes for basis differentials between Permian Basin index prices and southern California index prices.~~

~~Marketing derivatives.~~ ~~Periodically,~~The Company's commodities are sold to various purchasers who must be prequalified under the Company's credit risk and procedures. The Company monitors exposure to counterparties primarily by reviewing credit ratings, financial criteria and payment history. Where appropriate, the Company ~~enters into buy~~obtains assurances of payment, such as a guarantee by the parent company of the counterparty, a letter of credit or other credit support. Historically, the Company's credit losses on commodities receivables have not been material.

The Company uses credit and ~~sell marketing arrangements~~other financial criteria to ~~fulfill firm pipeline transportation commitments. Associated with these marketing arrangements,~~evaluate the credit standing of, and to select, counterparties to its derivative instruments. Although the Company ~~may enter into index swaps that mitigate price risk. As of September 30, 2017,~~does not obtain collateral or otherwise secure the Company was party to (i) oil index swap contracts for 10,000 Bbls per day of November and December 2017 transportation commitments with a price differential of $4.18 per Bbl between NYMEX WTI and Louisiana Light Sweet oil ("LLS") and (ii) oil index swap contracts for 10,000 Bbls per day of January through August 2018 transportation commitments with a price differential of $3.18 per Bbl between NYMEX WTI and LLS. As of September 30, 2017, ~~these positions had~~ fair value of ~~nil. Based on October 30, 2017 market quotes,~~its derivative instruments, associated credit risk is mitigated by the ~~average forward basis differential price was $6.05 per Bbl~~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 right of set off upon the occurrence of defined acts of default by either the Company or a counterparty to a derivative contract, 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 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for ~~December 2017 and $4.50 per Bbl for January through August 2018 between the relevant quoted forward oil index prices.~~additional information.

~~Table of Contents~~

~~PIONEER NATURAL RESOURCES COMPANY~~

~~Item 4.Controls and Procedures~~


ITEM 4.			CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Company's management, with the participation of its principal executive officer and principal financial officer, have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"), the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based on that evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective, as of the end of the period covered by this Report, in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including that such information is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

~~Changes~~Remediation of Previously Disclosed Material Weakness in Internal Control over Financial Reporting. As previously disclosed in Item 9A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, management identified a material weakness as of such date. The identified material weakness was in connection with the Company's controls over the review of material marketing contracts that could have elements of a derivative. Management of the Company therefore concluded that the Company's disclosure controls and procedures were not effective at September 30, 2020 or December 31, 2020 and that the Company's internal control over financial ~~reporting.~~ ~~There have~~reporting was not effective at a reasonable assurance level at December 31, 2020.

In response to the material weakness referred to above, with the oversight of the Audit Committee of the Company's Board of Directors, the Company performed a second review of all material third-party marketing contracts and implemented changes to its internal control over financial reporting, which included the implementation of controls (i) to ensure that the Company has identified all new or amended marketing contracts for review on a monthly basis and (ii) to provide a structured procedure for review of new or amended marketing contracts for terms that may require derivative accounting by employees with the appropriate knowledge. Based on the evidence obtained in validating the effectiveness of the implemented controls, the Company has concluded that the previously disclosed material weakness has been ~~no changes~~remediated as of March 31, 2021.

Changes in Internal Control over Financial Reporting. The change described under "Remediation of Previously Disclosed Material Weakness in Internal Control over Financial Reporting" above represents a change in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) under the Exchange Act) ~~that occurred~~ during the three months ended ~~September 30, 2017~~March 31, 2021 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PIONEER NATURAL RESOURCES COMPANY

PART II. OTHER INFORMATION

~~Item 1.Legal Proceedings~~


ITEM 1.			LEGAL PROCEEDINGS

The Company is ~~party to the legal proceeding described in Note J of Notes to Consolidated Financial Statements included in "Part I, Item 1. Financial Statements." The Company is also~~ party to various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations.

~~Item 1A~~. ~~Risk Factors~~


ITEM 1A.			RISK FACTORS

In addition to the information set forth in this Report, the risks that are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, under the headings "Part I, Item 1. Business – Competition, ~~Markets and Regulations,~~" "Part I. Item 1. Business - Regulation," "Part I, Item 1A. Risk ~~Factors" and~~Factors," "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market ~~Risk,"~~Risk" should be carefully considered, as such risks could materially affect the Company's business, financial condition or future results. ~~There~~Other than described below, there has been no material change in the Company's risk factors ~~from those~~that were described in the Company's 2020 Annual Report on Form 10-K.

These risks are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may have a material adverse effect on the Company's business, financial condition or future results.

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

Pioneer may fail to realize the anticipated benefits and synergies expected from the DoublePoint Acquisition, which could adversely affect its business, financial condition and operating results. The success of the DoublePoint 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 DoublePoint 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, realization of the targeted cost synergies expected from the DoublePoint 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 revenue opportunities, if achieved at all, may be less significant than 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 DoublePoint Acquisition within the anticipated timing or at all, Pioneer's business, financial condition and operating results may be adversely affected.

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

The DoublePoint Acquisition involves the combination of companies that operated as independent companies. The combination of independent businesses is complex, costly and time consuming, and the Company will be required to devote significant management attention and resources to integrating the business practices and operations of DoublePoint 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 integrate DoublePoint 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 acquisition;

•complexities associated with managing the combined business, including difficulty addressing possible differences in operational philosophies and the challenge of 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 more restrictive terms;

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

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

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

PIONEER NATURAL RESOURCES COMPANY

Any of these issues could adversely affect the Company's ability to maintain relationships with customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the DoublePoint Acquisition, or could reduce the Company's earnings or otherwise adversely affect the Company's business and financial results.

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

As a result of the DoublePoint 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 manage this expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. The Company may also face increased scrutiny from governmental authorities as a result of the increase in the size of its business. There can be no assurances that the Company will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the DoublePoint Acquisition.

~~Item 2.Unregistered Sales of Equity Securities and Use of Proceeds~~


ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

~~The following table summarizes~~Purchases of the Company's ~~purchases of treasury~~common stock ~~under plans or programs~~are as follows:


	Three Months Ended March 31, 2021
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)
January 2021	33,682	$	114.38	—	$	1,090,693,887
February 2021	64,200	$	142.10	—	$	1,090,693,887
March 2021	1,509	$	162.85	—	$	1,090,693,887
	99,391			—

____________________

(a)Includes shares purchased from employees in order for employees to satisfy income tax withholding payments related to share-based awards that vested during the ~~three~~ ~~months ended~~ ~~September 30, 2017~~:period.

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
July 2017 225
$ 161.75
—

August 2017 2,216
$ 133.79
—

September 2017 139
$ 131.78
—

Total 2,580
$ 136.12
—
$ —

~~____________________~~


~~(a)~~	~~Consists of shares purchased from employees in order for the employee to satisfy tax withholding payments related to share-based awards that vested during the period.~~

~~Item 4.Mine Safety Disclosures~~

(b)In December 2018, the Company's board of directors authorized a $2 billion common stock repurchase program. The ~~Company's sand mines are subject to regulation~~stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the ~~Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act~~board of 1977, as amended by the Mine Improvement and New Emergency Response Act of 2006. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Report.

directors.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

~~Item 6.Exhibits~~

~~Exhibits~~


ITEM 6.			EXHIBITS

Exhibit
Number

Description

2.1

Membership Interest Purchase Agreement, dated as of April 1, 2021, by and among Pioneer Natural Resources Company, Pioneer Natural Resources USA, Inc. and Double Eagle III Midco 2, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on April 2, 2021).*

~~Exhibit~~
~~Number~~3.1

~~Description~~

Amended and Restated Certificate of Incorporation of the Company, dated June 26, 1997, and Certificate of Amendment of the Amended and Restated Certificate of Incorporation, effective May 18, 2012 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, File No. 1-13245).

~~10.1~~3.2

~~(a) —~~

~~Eighth~~Sixth Amended and Restated Bylaws of the Company, dated November 19, 2020 (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2020, File No. 1-13245).

4.1

Second Supplemental Indenture, dated January 26, 2021, by and among Parsley Energy, LLC, Parsley Finance Corp., the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, related to the 5.625% Senior Notes due 2027 (incorporated by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on January 29, 2021).

4.2

First Supplemental Indenture, dated January 26, 2021, among Parsley Energy, LLC, Parsley Finance Corp., the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, related to the 4.125% Senior Notes due 2028 (incorporated by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on January 29, 2021).

4.3

Fourth Supplemental Indenture, dated January 29, 2021, by and between Pioneer Natural Resources Company and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on January 29, 2021).

10.1

First Amendment to Credit Agreement, dated as of January 12, 2021, by and among the Company, as the Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and the other agents and lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on January 12, 2021).

10.2

Registration Rights Agreement dated as of May 4 , 2021, by and among the Company and each of the other parties listed on the signature pages attached thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 1-13245, filed with the SEC on May 4,, 2021).

10.3(a)

Fifth Amendment to Pioneer Natural Resources USA, ~~401(k)~~Inc. 401 (k) and Matching Plan ~~dated August 28, 2017.~~

~~12.1~~31.1 (a)

~~(a) —~~

~~Computation of Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends.~~

~~31.1~~

~~(a) —~~

Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

31.2 (a)

~~(a) —~~

Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

32.1 (b)

~~(b) —~~

Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

32.2 (b)

~~(b) —~~

Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

~~95.1~~101.INS (a)

~~(a) —~~

~~Mine Safety Disclosures.~~

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.INS~~101.SCH (a)

~~(a) —~~

~~XBRL Instance Document.~~

~~101.SCH~~

~~(a) —~~

Inline XBRL Taxonomy Extension ~~Schema.~~Schema Document.

101.CAL (a)

~~(a) —~~

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF (a)

~~(a) —~~

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB (a)

~~(a) —~~

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE (a)

~~(a) —~~

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

~~_____________~~

~~(a)~~104

~~Filed herewith.~~


~~(b)~~			~~Furnished herewith.~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

____________________

(a)Filed herewith.

(b)Furnished herewith.

* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the SEC a copy of any omitted schedule upon request.

Table of Contents

PIONEER NATURAL RESOURCES COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereto duly authorized.

PIONEER NATURAL RESOURCES COMPANY

May 7, 2021

~~PIONEER NATURAL RESOURCES COMPANY~~By:

/s/ Neal H. Shah

Neal H. Shah

~~Date: November 3, 2017~~

~~By:~~

~~/s/ RICHARD P. DEALY~~

~~Richard P. Dealy,~~

~~Executive~~Senior Vice President and Chief Financial Officer

~~Date: November 3, 2017~~May 7, 2021

By:

/s/ ~~MARGARET M. MONTEMAYOR~~

Margaret M. Montemayor

Vice President and Chief Accounting Officer

4250



Delaware		75-2702753
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~5205 N. O'Connor Blvd., Suite 200, Irving, Texas~~	~~75039~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~



			Page
Cautionary Statement Concerning Forward-Looking Statements			3

Definitions of Certain Terms and Conventions Used Herein			4

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

		Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020	5

		Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	7

		Consolidated ~~Statement~~Statements of Equity for the ~~nine~~ three months ended ~~September 30, 2017~~March 31, 2021 and 2020	8

		Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	910

		Notes to Consolidated Financial Statements	1011

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	2531

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	3542

Item 4.		Controls and Procedures	3945

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings	4046

Item 1A.		Risk Factors	4046

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	4047

Item 4.6.		~~Mine Safety Disclosures~~Exhibits	4048

~~Item 6.~~Signatures			~~Exhibits~~50	41

~~Signatures~~	42



ý☒			QUARTERLY 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



	September 30, 2017			December 31, 2016
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	636		$	1,118
Short-term investments	1,357			1,441
Accounts receivable:
Trade, net	649			517
Due from affiliates	—			1
Income taxes receivable	1			3
Inventories	187			181
Derivatives	43			14
Other	28			23
Total current assets	2,901			3,298
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of accounting:
Proved properties	19,630			18,566
Unproved properties	558			486
Accumulated depletion, depreciation and amortization	(8,841		)	(8,211		)
Total property, plant and equipment	11,347			10,841
Long-term investments	151			420
Goodwill	270			272
Other property and equipment, net	1,683			1,529
Derivatives	7			—
Other assets, net	106			99
	$	16,465		$	16,459



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues and other income:
Oil and gas	$	855		$	643		$	2,433		$	1,665
Sales of purchased oil and gas	721			444			1,722			1,062
Interest and other	17			7			44			21
Derivative gains (losses), net	(133		)	91			153			(95		)
Gain on disposition of assets, net	—			1			205			4
	1,460			1,186			4,557			2,657
Costs and expenses:
Oil and gas production	152			141			440			438
Production and ad valorem taxes	53			32			152			97
Depletion, depreciation and amortization	355			386			1,033			1,123
Purchased oil and gas	735			458			1,769			1,113
Impairment of oil and gas properties	—			—			285			32
Exploration and abandonments	18			19			78			96
General and administrative	81			82			245			235
Accretion of discount on asset retirement obligations	5			5			14			14
Interest	37			50			118			161
Other	58			69			176			223
	1,494			1,242			4,310			3,532
Income (loss) before income taxes	(34		)	(56		)	247			(875		)
Income tax benefit (provision)	11			78			(79		)	362
Net income (loss) attributable to common stockholders	$	(23	)	$	22		$	168		$	(513	)

Basic and diluted net income (loss) per share attributable to common stockholders	$	(0.13	)	$	0.13		$	0.98		$	(3.10	)

Basic and diluted weighted average shares outstanding	170			170			170			165

Dividends declared per share	$	0.04		$	0.04		$	0.08		$	0.08



Assets acquired:
Proved properties	$	79
Unproved properties	347
Other property and equipment	5
Liabilities assumed:
Asset retirement obligations	(2		)
Other liabilities	(1		)
Net assets acquired	$	428



	Fair Value Measurement as of September 30, 2017 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value as of September 30, 2017
	(in millions)
Assets:
Commodity derivatives	$	—	$	45	$	—	$	45
Interest rate derivatives	—		5		—		5
Deferred compensation plan assets	90		—		—		90
Total assets	90		50		—		140
Liabilities:
Commodity derivatives	—		29		—		29
Total liabilities	—		29		—		29
Total recurring fair value measurements	$	90	$	21	$	—	$	111



							Management's Price Outlooks
	Impairment Date	Fair Value		Fair Value Adjustment			Oil		Gas
Raton	March 2017	$	186	$	(285	)	$	53.65	$	3.00
West Panhandle	March 2016	$	33	$	(32	)	$	49.77	$	3.24



	September 30, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
Commercial paper, corporate bonds and time deposits	$	1,508	$	1,506	$	1,906	$	1,901
Current portion of long-term debt	$	449	$	462	$	485	$	490
Long-term debt	$	2,282	$	2,495	$	2,728	$	2,956



	September 30, 2017
Consolidated Balance Sheet Location	Cash		Commercial Paper		Corporate Bonds		Time Deposits		Total
	(in millions)
Cash and cash equivalents	$	539	$	—	$	—	$	97	$	636
Short-term investments	—		124		741		492		1,357
Long-term investments	—		—		151		—		151
	$	539	$	124	$	892	$	589	$	2,144



	2017			Year Ending December 31, 2018
	Fourth Quarter			Year Ending December 31, 2018
Collar contracts (a):
Volume (Bbl)	6,000			—
Price per Bbl:
Ceiling	$	70.40		$	—
Floor	$	50.00		$	—
Collar contracts with short puts (b):
Volume (Bbl)	155,000			150,781
Price per Bbl:
Ceiling	$	62.12		$	57.70
Floor	$	49.82		$	47.39
Short put	$	41.02		$	37.35
Basis swap contracts:
Midland-Cushing index swap volume (Bbl)	6,630			—
Price differential ($/Bbl) (c)	$	(1.09	)	$	—



	2017		Year Ending December 31,
	Fourth Quarter		2018		2019
Ethane collar contracts (a):
Volume (Bbl)	3,000		—		—
Price per Bbl:
Ceiling	$	11.83	$	—	$	—
Floor	$	8.68	$	—	$	—
Ethane basis swap contracts (b):
Volume (MMBtu)	6,920		6,920		6,920
Price differential ($/MMBtu)	$	1.60	$	1.60	$	1.60



Derivatives Not Designated as	Location of Gain / (Loss) Recognized in Earnings	Three Months Ended September 30,					Nine Months Ended September 30,
Hedging Instruments	on Derivatives	2017			2016		2017			2016
		(in millions)
Commodity price derivatives	Derivative gains (losses), net	$	(133	)	$	91	$	154		$	(87	)
Interest rate derivatives	Derivative gains (losses), net	—			—		(1		)	(8		)
Total		$	(133	)	$	91	$	153		$	(95	)



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
	(in millions)
Beginning capitalized exploratory well costs	$	443		$	323
Additions to exploratory well costs pending the determination of proved reserves	474			1,369
Reclassification due to determination of proved reserves	(482		)	(1,247		)
Exploratory well costs charged to exploration and abandonment expense	(1		)	(11		)
Ending capitalized exploratory well costs	$	434		$	434



	Oil (Bbls)	NGLs (Bbls)	Gas (Mcf)	Total (BOE)
Permian Basin	141,428	42,168	188,587	215,027
South Texas - Eagle Ford Shale	7,033	6,758	41,776	20,753
Raton Basin	—	—	89,220	14,870
West Panhandle	1,743	3,391	6,197	6,167
South Texas - Other	1,230	201	18,370	4,493
Other	4	1	56	15
Total	151,438	52,519	344,206	261,325



	Acquisition Costs				Exploration Costs		Development Costs		Total
	Proved		Unproved		Exploration Costs		Development Costs		Total
	(in millions)
Permian Basin	$	7	$	125	$	1,349	$	403	$	1,884
South Texas - Eagle Ford Shale	—		—		67		26		93
Raton Basin	—		—		—		2		2
West Panhandle	—		—		1		6		7
South Texas - Other	—		—		—		5		5
Other	—		—		4		—		4
Total	$	7	$	125	$	1,421	$	442	$	1,995



	Development Drilling
	Beginning Wells in Progress	Wells Spud	Successful Wells	Ending Wells in Progress
Permian Basin	8	15	6	17
South Texas - Eagle Ford Shale	4	1	5	—
South Texas - Other	—	2	—	2
Total	12	18	11	19



	Exploration/Extension Drilling
	Beginning Wells in Progress	Wells Spud	Successful Wells	Unsuccessful Wells	Ending Wells in Progress
Permian Basin	119	163	150	1	131
South Texas - Eagle Ford Shale	14	10	6	1	17
Total	133	173	156	2	148



	Three Months Ended September 30, 2017							Nine Months Ended September 30, 2017
	Net cash receipts (payments)			Price impact				Net cash receipts (payments)			Price impact
	(in millions)							(in millions)
Oil derivative receipts	$	29		$	1.94		per Bbl	$	61		$	1.48		per Bbl
NGL derivative payments	(2		)	$	(0.27	)	per Bbl	(1		)	$	(0.08	)	per Bbl
Gas derivative receipts	1			$	0.04		per Mcf	1			$	0.01		per Mcf
Total net commodity derivative receipts	$	28						$	61



	Three Months Ended September 30, 2016					Nine Months Ended September 30, 2016
	Net cash receipts		Price impact			Net cash receipts		Price impact
	(in millions)					(in millions)
Oil derivative receipts	$	168	$	13.59	per Bbl	$	471	$	13.16	per Bbl
NGL derivative receipts	2		$	0.40	per Bbl	6		$	0.54	per Bbl
Gas derivative receipts	14		$	0.48	per Mcf	56		$	0.59	per Mcf
Total net commodity derivative receipts	$	184				$	533



	Derivative Contract Net Assets
	Commodities			Interest Rates			Total
	(in millions)
Fair value of contracts outstanding as of December 31, 2016	$	(76	)	$	6		$	(70	)
Changes in contract fair value	154			(1		)	153
Contract maturity receipts	(60		)	—			(60		)
Contract termination receipts	(2		)	—			(2		)
Fair value of contracts outstanding as of September 30, 2017	$	16		$	5		$	21



	Three Months Ending December 31,			Year Ending December 31,																	Asset (Liability) Fair Value at September 30,
	2017			2018			2019			2020			2021			Thereafter			Total		2017
	(dollars in millions)
Total Debt:
Fixed rate principal maturities (a)	$	—		$	450		$	—		$	450		$	500		$	1,350		$	2,750	$	(2,957	)
Weighted average fixed interest rate	5.31		%	5.11		%	5.00		%	4.42		%	4.72		%	5.49		%
Average variable interest rate	3.01		%	3.28		%	3.55		%	3.71		%
Interest Rate Swaps:
Notional debt amount (b)	$	100		$	—		$	—		$	—		$	—		$	—				$	5
Fixed rate payable (%)	1.81		%