Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

______________________________
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172023
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 1-13245
______________________________ 
PIONEER NATURAL RESOURCES COMPANY
(Exact name of Registrant as specified in its charter)

______________________________
Delaware75-2702753
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
5205 N. O'Connor Blvd., Suite 200, Irving, Texas75039
(Address of principal executive offices)(Zip Code)
777 Hidden Ridge
Irving, Texas 75038
(Address of principal executive offices and zip code)
(972) 444-9001
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $.01 per sharePXDNew York Stock Exchange
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  ý☒    No   ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company¨
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨☐    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   ¨☐    No  ý☒
Number of shares of Common Stock outstanding as of October 30, 2017                               170,165,265July 31, 2023    233,141,153

1


PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS

Page
Page
Cautionary Statement Concerning Forward-Looking Statements
3
Definitions of Certain Terms and Conventions Used Herein
43
Cautionary Statement Concerning Forward-Looking Statements
5
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets as of SeptemberJune 30, 20172023 and December 31, 2016
2022
56
Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20172023 and 2016
2022
7
Consolidated StatementStatements of Equity for the ninethree and six months ended SeptemberJune 30, 2017
2023 and 2022
8
Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172023 and 2016
2022
910
Notes to Consolidated Financial Statements
1011
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
2526
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
3537
Item 4.
Controls and Procedures
39
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
Legal Proceedings39
40
Item 1A.
Risk Factors
Risk Factors
40
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
40
Item 4.
5.		Other Information
Mine Safety Disclosures
40
Item 6.
Exhibits
Exhibits
41
Signatures
42

2
PIONEER NATURAL RESOURCES COMPANY
Table of Contents
Cautionary Statement Concerning Forward-Looking Statements
The information in this Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate" or the negative of such terms and similar expressions as they relate to Pioneer Natural Resources Company ("Pioneer" or the "Company") are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control.
These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company's drilling and operating activities, access to and availability of transportation, processing, fractionation and refining facilities, Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer's credit facility, investment instruments and derivative contracts and purchasers of Pioneer's oil, NGL and gas production, uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, the risks associated with the ownership and operation of the Company's industrial sand mining and oilfield services businesses, and acts of war or terrorism. These and other risks are described in the Company's Annual Report on Form 10-K, this and other Quarterly Reports on Form 10-Q and other filings with the United States Securities and Exchange Commission. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part 1, Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition, Markets and Regulations," "Part I, Item 1A. Risk Factors," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no duty to publicly update these statements except as required by law.

PIONEER NATURAL RESOURCES COMPANY
Definitions of Certain Terms and Conventions Used Herein
Within this Report, the following terms and conventions have specific meanings:
Measurements.
•"Bbl" means a standard barrel containing 42 United States gallons.
•"Bcf" means one billion cubic feet and is a measure of gas volume.
•"BOE" means a barrel of oil equivalent and is a standard convention used to express oil and gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the relative energy content method by using the ratio of six thousand cubic feet of gas to one Bbl of oil or natural gas liquid.
•"BOEPD"means BOE per day.
•"MMBOPD" means one million barrels of oil per day.
•"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.
•"Conway"MBbl" means the daily average natural gas liquids components as priced in Oil Price Information Service ("OPIS") in the table "U.S. and Canada LP – Gas Weekly Averages" at Conway, Kansas.
one thousand Bbls.
•"DD&A"MBOE" means depletion, depreciation and amortization.
one thousand BOEs.
"GAAP" means accounting principles that are generally accepted in the United States of America.
"LIBOR" means London Interbank Offered Rate, which is a market rate of interest.
•"Mcf" means one thousand cubic feet and is a measure of gas volume.
•"MMBtu"MMBbl" means one million Btus.
Bbls.
•"Mont Belvieu"MMBOE" means one million BOEs.
•"MMBtu" means one million Btus.
•"MMcf"means one million cubic feet.
Indices.
•"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
•"WAHA" is a benchmark pricing hub for West Texas gas.
•"WTI" means West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil used as a benchmark in oil pricing.
General terms and conventions.
•"DD&A" means depletion, depreciation and amortization.
•"ESG"means environmental, social and governance.
•"Field fuel" means gas consumed to operate field equipment (primarily compressors) prior to the daily averagegas being delivered to a sales point.
•"GAAP" means accounting principles generally accepted in the United States of America.
•"GHG" means greenhouse gases.
•"LNG" means liquefied natural gas.
•"NGLs" means natural gas liquids, components as priced in OPIS inwhich are the table "U.S.heavier hydrocarbon liquids that are separated from the gas stream; such liquids include ethane, propane, isobutane, normal butane and Canada LP – Gas Weekly Averages" at Mont Belvieu, Texas.
natural gasoline.
"NGL" means natural gas liquid.
•"NYMEX" means the New York Mercantile Exchange.
•"NYSE" means the New York Stock Exchange.
•"OPEC" means the Organization of Petroleum Exporting Countries.
•"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.
•"Proved developed reserves" means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.
•"Proved reserves" mean the means those quantities of oil and gas, which, by analysis of geosciencegeosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
3
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(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons ("LKH") as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a highest known oil ("HKO") elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty.
(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.
(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.
•"Proved undeveloped reserves"means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.
(ii) Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.
(iii) Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.
•"SEC" means the United States Securities and Exchange Commission.
•"Standardized Measure"means the after-tax present value of estimated future net cash flows of proved reserves, determined in accordance with the rules and regulations of the SEC, using prices and costs employed in the determination of proved reserves and a 10 percent discount rate.
•"U.S." means United States.
•With respect to information on the working interest in wells, drilling locations and acreage, "net"net" wells, drilling locations and acres are determined by multiplying "gross"gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.
Unless otherwise indicated, all•"WASP" means weighted average sales price.
•All currency amounts are expressed in U.S. dollars.

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Table of Contents
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This information in this Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "models," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate," or the negative of such terms and similar expressions as they relate to the Company are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.
These risks and uncertainties include, among other things, volatility of commodity prices; product supply and demand; the impact of armed conflict (including the war in Ukraine) and related political instability on economic activity and oil and gas supply and demand; competition; the ability to obtain drilling, environmental and other permits and the timing thereof; the effect of future regulatory or legislative actions on Pioneer or the industry in which it operates, including potential changes to tax laws; the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms; potential liability resulting from pending or future litigation; the costs, including the potential impact of cost increases due to inflation and supply chain disruptions, and results of development and operating activities; the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity, oil and gas demand, and global and U.S. supply chains; the risk of new restrictions with respect to development activities, including potential changes to regulations resulting in limitations on the Company's ability to dispose of produced water; availability of equipment, services, resources and personnel required to perform the Company's development and operating activities; access to and availability of transportation, processing, fractionation, refining, storage and export facilities; Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled; the Company's ability to achieve its emissions reductions, flaring and other ESG goals; access to and cost of capital; the financial strength of (i) counterparties to Pioneer's credit facility and derivative contracts, (ii) issuers of Pioneer's investment securities and (iii) purchasers of Pioneer's oil, NGL and gas production and downstream sales of purchased commodities; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying forecasts, including forecasts of production, operating cash flow, well costs, capital expenditures, rates of return, expenses, and cash flow from downstream purchases and sales of oil and gas, net of firm transportation commitments; tax rates; quality of technical data; environmental and weather risks, including the possible impacts of climate change on the Company's operations and demand for its products; cybersecurity risks; the risks associated with the ownership and operation of the Company's water services business and acts of war or terrorism. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.
Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part 1, Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition," "Part I, Item 1. Business —Regulation," "Part I, Item 1A. Risk Factors," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Pioneer undertakes no duty to publicly update these statements except as required by law.
5
Table of Contents
PART I. FINANCIAL INFORMATION
ItemITEM 1.Financial StatementsFINANCIAL STATEMENTS
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions)millions, except share data)
June 30, 2023December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$91 $1,032 
Accounts receivable, net1,513 1,853 
Inventories448 424 
Investment in affiliate137 172 
Prepaids and other153 245 
Total current assets2,342 3,726 
Oil and gas properties, using the successful efforts method of accounting:
Proved properties41,041 38,465 
Unproved properties5,883 6,008 
Accumulated depletion, depreciation and amortization(16,174)(14,843)
Total oil and gas properties, net30,750 29,630 
Other property and equipment, net1,624 1,658 
Operating lease right-of-use assets366 340 
Goodwill242 243 
Other assets170 143 
$35,494 $35,740 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade$2,298 $2,487 
Due to affiliates82 150 
Interest payable48 33 
Income taxes payable25 63 
Current portion of debt311 779 
Derivatives72 44 
Operating leases145 125 
Other218 206 
Total current liabilities3,199 3,887 
Long-term debt5,010 4,125 
Derivatives85 96 
Deferred income taxes4,102 3,867 
Operating leases243 236 
Other liabilities855 988 
Equity:
Common stock, $.01 par value; 500,000,000 shares authorized; 244,909,353 and
   244,703,342 shares issued as of June 30, 2023 and December 31, 2022, respectively
2 2 
Additional paid-in capital18,658 18,779 
Treasury stock, at cost; 11,769,028 and 8,667,824 shares as of June 30, 2023 and
   December 31, 2022, respectively
(2,571)(1,925)
Retained earnings5,911 5,685 
Total equity22,000 22,541 
Commitments and contingencies
$35,494 $35,740 

  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 SeptemberJune 30, 20172023 has been prepared by management
without audit by independent registered public accountants.

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

PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
(in millions, except share data)

6
  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 asTable of September 30, 2017 has been prepared by managementContents
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.

PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Revenues and other income:
Oil and gas$2,977 $4,639 $6,142 $8,570 
Sales of purchased commodities1,583 2,366 3,014 4,583 
Interest and other income (loss), net43 (56)7 69 
Derivative loss, net(1)(65)(45)(200)
Gain (loss) on disposition of assets, net(3)36 22 70 
4,599 6,920 9,140 13,092 
Costs and expenses:
Oil and gas production487 478 942 894 
Production and ad valorem taxes185 271 393 495 
Depletion, depreciation and amortization695 620 1,359 1,234 
Purchased commodities1,642 2,382 3,127 4,534 
Exploration and abandonments23 11 38 24 
General and administrative88 88 172 161 
Accretion of discount on asset retirement obligations4 4 8 8 
Interest41 33 70 70 
Other27 5 67 83 
3,192 3,892 6,176 7,503 
Income before income taxes1,407 3,028 2,964 5,589 
Income tax provision(305)(657)(640)(1,209)
Net income attributable to common stockholders$1,102 $2,371 $2,324 $4,380 
Net income per share attributable to common stockholders:
Basic$4.71 $9.78 $9.90 $18.03 
Diluted$4.55 $9.30 $9.55 $17.15 
Weighted average shares outstanding:
Basic234 242 234 242 
Diluted242 254 243 255 
Dividends declared per share$3.34 $7.38 $8.92 $11.16 
  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.

7
Table of Contents
PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTSTATEMENTS OF EQUITY
(in millions, except share data and dividends per share)
(Unaudited)
 Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Total Equity
(in thousands)
Balance as of December 31, 2022236,036 $2 $18,779 $(1,925)$5,685 $22,541 
Dividends declared ($5.58 per share)— — — — (1,314)(1,314)
Convertible senior note conversions:
Conversion premium— — (138)— — (138)
Capped call proceeds— — 31 — — 31 
Issuance fees and deferred taxes— — (7)— — (7)
Purchases of treasury stock(2,499)— — (520)— (520)
Stock-based compensation:
Vested compensation awards, net199 — — — — — 
Compensation costs included in net income— — 23 — — 23 
Net income— — — — 1,222 1,222 
Balance as of March 31, 2023233,736 2 18,688 (2,445)5,593 21,838 
Dividends declared ($3.34 per share)— — — (784)(784)
Convertible senior note conversions:
Conversion premium— — (77)— — (77)
Capped call proceeds— — 27 — — 27 
Issuance fees and deferred taxes— — (7)— — (7)
Purchases of treasury stock(602)— — (126)— (126)
Stock-based compensation:
Vested compensation awards, net6 — — — — — 
Compensation costs included in net income— — 27 — — 27 
Net income— — — — 1,102 1,102 
Balance as of June 30, 2023233,140 $2 $18,658 $(2,571)$5,911 $22,000 
    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 FLOWSEQUITY (continued)
(in millions)millions, except share data and dividends per share)
(Unaudited)
 Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Total Equity
(in thousands)
Balance as of December 31, 2021242,778 $2 $19,123 $(248)$3,960 $22,837 
Dividends declared ($3.78 per share)— — — — (922)(922)
Exercise of long-term incentive stock options6 — — 1 — 1 
Purchases of treasury stock(1,175)— — (276)— (276)
Stock-based compensation:
Vested compensation awards, net350 — — — — — 
Compensation costs included in net income— — 19 — — 19 
Net income— — — — 2,009 2,009 
Balance as of March 31, 2022241,959 2 19,142 (523)5,047 23,668 
Dividends declared ($7.38 per share)— — — — (1,788)(1,788)
Convertible senior note conversions:
Conversion premium— — (2)— — (2)
Capped call proceeds— — 26 — — 26 
Issuance fees and deferred taxes— — (6)— — (6)
Purchases of treasury stock(2,126)— — (499)— (499)
Stock-based compensation:
Vested compensation awards, net5 — — — — — 
Compensation costs included in net income— — 20 — — 20 
Net income— — — — 2,371 2,371 
Balance as of June 30, 2022239,838 $2 $19,180 $(1,022)$5,630 $23,790 
  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.

9
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
 Six Months Ended June 30,
 20232022
Cash flows from operating activities:
Net income$2,324 $4,380 
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation and amortization1,359 1,234 
Exploration expenses1 6 
Deferred income taxes223 1,045 
Gain on disposition of assets, net(22)(70)
Loss on early extinguishments of debt— 47 
Accretion of discount on asset retirement obligations8 8 
Interest expense6 5 
Derivative-related activity18 40 
Amortization of stock-based compensation50 39 
Investment valuation adjustments35 (49)
Other84 41 
Changes in operating assets and liabilities:
Accounts receivable338 (659)
Inventories(24)(241)
Other assets51 (44)
Accounts payable(342)88 
Interest payable14 (13)
Income taxes payable(38)(8)
Other liabilities(58)(50)
Net cash provided by operating activities4,027 5,799 
Cash flows from investing activities:
Proceeds from disposition of assets23 253 
Proceeds from short-term investments— 221 
Purchases of short-term investments, net— (650)
Additions to oil and gas properties(2,420)(1,828)
Additions to other assets and other property and equipment(69)(61)
Net cash used in investing activities(2,466)(2,065)
Cash flows from financing activities:
Proceeds from issuance of debt, net of discount1,689 — 
Repayment of debt(1,488)(1,295)
Proceeds from capped call on convertible notes58 26 
Payments of other liabilities(8)(129)
Payments of financing fees(7)— 
Purchases of treasury stock(646)(775)
Exercise of long-term incentive plan stock options— 1 
Dividends paid(2,100)(2,861)
Net cash used in financing activities(2,502)(5,033)
Net decrease in cash, cash equivalents and restricted cash(941)(1,299)
Cash, cash equivalents and restricted cash, beginning of period1,032 3,884 
Cash, cash equivalents and restricted cash, end of period$91 $2,585 





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
SeptemberJune 30, 20172023
(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.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")NGLs and gas within the United States, with operations primarily in the PermianMidland 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 SeptemberJune 30, 20172023 and for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments which areand accruals necessary for a fair presentation of the results for the interim periods. These interimperiods in conformity with GAAP. The operating results for the three and six months ended June 30, 2023 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 toin accordance with the rules and regulations of the United States Securities and Exchange Commission (the "SEC").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, 2016.2022.
Certain reclassifications have been made to the 2016 financial statement and footnote amounts in order to conform to the 2017 presentation.
IssuanceUse of common stock. During the first and second quarters of 2016, 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 changesestimates in the statementpreparation of cash flows. The Company adopted this standard on January 1, 2017. See Note M for discussion on the impactfinancial statements. Preparation of the adoption to the Company's income tax provision.
In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires the recognition 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 adoption of ASU 2016-02 for its leasing arrangements will likely (i) increase the Company's recorded assets and liabilities, (ii) increase depreciation, depletion and amortization expense, (iii) increase interest expense and (iv) decrease lease/rental expense. The Company is currently evaluating each 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 the SEC on accounting for gas balancing arrangements and will eliminate the use 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 of purchased oil and gas. The Company's analysis of contracts with customers

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

in accordance with the requirements of Topic 606 is largely complete. The Company has not identified any changes to the timing of revenue recognition based upon the requirements of Topic 606 that would have a material impact on the Company's consolidated financial statements. The Company plansstatements in conformity with GAAP requires management to utilizemake estimates and assumptions that affect the modified approach to adopt the new standards upon their effective dates with a cumulative effect adjustment, if any, recorded to retained earnings asreported amounts of January 1, 2018. The Company's evaluation of the new disclosure requirements is ongoing.
NOTE C. Acquisitions and Divestitures
Permian Basin Acquisition. In August 2016, the Company acquired approximately 28,000 net acres in the Permian Basin, with net production of approximately 1,400 barrels of oil equivalent per day ("BOEPD"), from an unaffiliated third party for $428 million, including normal closing adjustments. The acquisition was accounted for using the acquisition method under ASC 805, "Business Combinations," which requires acquired assets and liabilities, to be recorded at fair value asthe disclosure 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 properties347
Other property and equipment5
Liabilities assumed: 
Asset retirement obligations(2)
Other liabilities(1)
Net assets acquired$428
The 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 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 acquiredcontingent assets and liabilities assumed are includedat the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates and assumptions utilized.
NOTE 3. Divestiture and Nonmonetary Activities
Divestitures. The Company regularly reviews its asset base to identify nonstrategic assets, the disposition of which would increase capital resources available for other activities, create organizational and operational efficiencies and further the Company's objective of maintaining a strong balance sheet to ensure financial flexibility.
•The Company had no material asset divestitures during the three and six months ended June 30, 2023.
•During the six months ended June 30, 2022, the Company divested certain undeveloped acreage and producing wells in the Company's accompanyingMidland Basin for cash proceeds of $126 million. The Company recorded a gain on these sales of $35 million and $76 million for the three and six months ended June 30, 2022, respectively, which is reflected in net gain on disposition of assets in the consolidated statements of operations since the date of acquisition.operations.
Divestitures. For the three and nine months endedSeptember 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,February 2022, the Company completed the sale of approximately 20,500 acresits equity interest in thecertain gas gathering and processing systems in northern 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$125 million before normal closing adjustments.(the "Martin County Gas Processing Divestiture"). The sale resultedwas treated as a recovery of investment from a partial sale of proved property resulting in no gain or loss being recognized.
Nonmonetary transactions. During the three and six months ended June 30, 2023, the Company's nonmonetary transactions included exchanges of both proved and unproved oil and gas properties in the Midland Basin with unaffiliated third parties. Certain of these transactions that were determined to have commercial substance were accounted for at fair value, resulting in the Company recording a loss of $4 million and a gain of $194 million. In conjunction with$20 million for the divestiture,three and six months ended June 30, 2023, respectively, to net gain (loss) on disposition of assets in the consolidated statements of operations and $148 million of noncash investing activities for the six months ended June 30, 2023. Nonmonetary transactions that the Company reduced the carrying value of goodwill by $2 million, reflecting the portion of the Company's goodwill relateddetermines to the assets sold.not have commercial substance are recorded at carryover basis.
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.

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

NOTE D.4. Fair Value Measurements
FairThe Company determines fair value is defined asbased on the price that would be received to sellfrom 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
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
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 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 presentsthree input levels of the Company'sfair 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 aremeasured 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 offollows:
As of June 30, 2023
 Fair Value Measurements
 Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
 (in millions)
Assets:
Investment in affiliate$137 $— $— $137 
Deferred compensation plan assets59 — — 59 
$196 $— $— $196 
Liabilities:
Conversion option derivatives$— $2 $— $2 
Marketing derivatives— — 155 155 
$— $2 $155 $157 
As of December 31, 2022
 Fair Value Measurements
 Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
 (in millions)
Assets:
Investment in affiliate$172 $— $— $172 
Deferred compensation plan assets65 — — 65 
Conversion option derivatives— 1 — 1 
$237 $1 $— $238 
Liabilities:
Marketing derivatives$— $— $140 $140 
Investment in affiliate. The Company elected the fair value hierarchy levels:option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of the Company's investment in ProPetro common stock is determined using Level 1 inputs based on observable prices on a major exchange and changes in fair value are recorded to net interest and other income (loss) in the consolidated statements of operations. The Company recorded a noncash gain of $18 million and a noncash loss of $35 million during the three and six months ended June 30, 2023, respectively, as compared to a noncash loss
12
 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 assets90
 —
 —
 90
Total assets90
 50
 —
 140
Liabilities:       
Commodity derivatives—
 29
 —
 29
Total liabilities—
 29
 —
 29
Total recurring fair value measurements$90
 $21
 $—
 $111

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172023
(Unaudited)

of $65 million and a noncash gain of $32 million for the same periods in 2022, respectively, representing the change in fair value of the Company's investment in ProPetro. See Note 11 for additional information.
 Fair Value Measurement as of December 31, 2016 Using  
 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Fair value as of December 31, 2016
 (in millions)
Assets:       
Commodity derivatives$—
 $8
 $—
 $8
Interest rate derivatives—
 6
 —
 6
Deferred compensation plan assets83
 —
 —
 83
Total assets83
 14
 —
 97
Liabilities:       
Commodity derivatives—
 84
 —
 84
Total liabilities—
 84
 —
 84
Total recurring fair value measurements$83
 $(70) $—
 $13
Commodity derivatives.Deferred compensation plan assets. The Company's commoditydeferred compensation plan assets include investments in equity and mutual fund securities that are actively traded on major exchanges. The fair value of these investments is determined using Level 1 inputs based on observable prices on major exchanges and changes in fair value are recorded to net interest and other income (loss) in the consolidated statements of operations.
Conversion option derivatives. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025 (the "Convertible Notes").Certain holders of the Convertible Notes have exercised their conversion options per the terms of the notes' indenture. The Company elected to settle the conversions in cash, with settlement occurring 25 trading days from the notice of conversion (the "Settlement Period"). The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as a derivative instrument not designated as a hedge. The change in fair value of the conversion option derivatives representduring the Settlement Period is primarily determined based on Level 2 inputs related to the daily volumetric weighted average prices of the Company's common stock during the Settlement Period. See Note 5 and Note 7 for additional information.
Marketing derivatives. The Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell barrels of oil NGLat an oil terminal in Midland, Texas. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland oil price and gas swapthe price the Company receives for the oil volumes sold is the WASP that the non-affiliated counterparty receives for selling oil through a 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 long-term marketing contracts, collarthe Company accounts for the contracts and collar contracts with short puts.as derivative instruments not designated as hedges. The asset and liability measurements for these derivativethe long-term marketing contracts representare determined using both Level 2 inputs in the hierarchy.and 3 inputs. The Company utilizes a discounted cash flow and option-pricing modelsmodel for valuing its commoditythe marketing derivatives.
The asset and liability values attributable to the Company's commoditymarketing derivatives werethat are 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 implied rateCompany's marketing derivatives include the historical monthly differential between Brent oil prices and the corresponding WASP of volatility inherentthe 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 collar contractsfair value determination as of June 30, 2023 and collar contracts with short puts, which isDecember 31, 2022 was $1.76 per barrel and $1.67 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 experiences mark-to-market fluctuations in the fair value of its marketing derivatives based on activechanges 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 $25 million as of June 30, 2023. See Note 5 for additional information.
Short-term investment. In October 2021, the Company acquired 960 thousand shares of Laredo Petroleum, Inc. ("Laredo") as partial consideration for its divestiture of certain acreage in western Glasscock County to Laredo. During the three months ended March 31, 2022, the Company sold the 960 thousand shares of Laredo common stock held by the Company and independent market-quoted volatility factors.
Deferred compensation plan assets.recorded a gain of $17 million to net interest and other income (loss) in the consolidated statements of operations. The Company's deferred compensation plan assets represent investmentsshares were treated as an investment in equity and mutual fund securities that are actively traded on major exchanges. These investments are measured at fair value. The fair value of the Company's investment in Laredo common stock was determined using Level 1 inputs based on observable prices on a major exchanges. As of September 30, 2017, the significant inputs to these asset values represented Level 1 independent active exchange market price inputs.exchange.
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 are based on (i) the contracted notional amounts, (ii) forward active market-quoted London Interbank Offered Rates ("LIBOR") 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.
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,inventories, proved and unproved oil and gas properties, assets acquired and liabilities assumed in business combinations or through nonmonetary transactions, goodwill and other long-lived assets or liabilities that are acquired or written down to fair value when they are determined to be impaired or held for sale. See Note C for information on the fair value of assets
Nonmonetary transactions. Oil and liabilitiesgas properties acquired in nonmonetary transactions that have commercial substance are valued as of the Permian Basin acquisition.
Proved oilacquisition date based on income and gas properties.market based approaches utilizing Level 3 inputs, including internally generated development and production profiles and price and cost assumptions. As a result of the Company's proved property impairment assessments,these valuations, the Company recognized noncash impairment charges to reduce the carrying values of the Raton 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 Level 3 assumptions associated with 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 developed based on third-party longer-term commodity futures price outlooks as of each measurement date. The expected future net cash flows were discounted using an annual rate of 10 percent to determine fair value.

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172023
(Unaudited)

The following table presents the fair valuerecorded a loss of $4 million and fair value adjustments (in millions) for 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") utilizeda gain of $20 million to net gain (loss) on disposition of assets in the respective Management's Price Outlooks:
       Management's Price Outlooks
 Impairment Date Fair Value Fair Value Adjustment Oil Gas
RatonMarch 2017 $186
 $(285) $53.65
 $3.00
West PanhandleMarch 2016 $33
 $(32) $49.77
 $3.24
It is reasonably possible that the estimate of undiscounted future net cash flows attributable to these or other properties may change in the future resulting in the need to impair their carrying values. The primary factors that may affect estimates of future cash flows are (i) future adjustments, both positive and negative, to proved and risk-adjusted probable and 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.
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)operations during the three and six months ended June 30, 2023, respectively. See Note 3 for additional information.
Other long-lived assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment charge is measured as the amount by which the carrying amount of the asset exceeds its estimated fair value determined using either a discounted future cash flow model or another appropriate fair value method. As a result of the operator curtailing operationsCompany's impairment assessments of other long-lived assets during the three and six months ended June 30, 2023, the Company recorded $11 million and $22 million, respectively, of noncash impairment charges to other expense in the area and Management's Price Outlooks.consolidated statements of operations. See Note 13 for additional information.
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, 2016are as follows:
 As of June 30, 2023As of December 31, 2022
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
 (in millions)
Assets:
Cash and cash equivalents (a)$91 $91 $1,032 $1,032 
Liabilities:
Current portion of debt:
Revolving corporate credit facility (a)$240 $240 $— $— 
Convertible senior notes (b)$71 $158 $29 $69 
Senior notes (b)$— $— $750 $738 
Long-term debt:
Convertible senior notes (b)$713 $1,585 $925 $2,184 
Senior notes (b)$4,297 $3,851 $3,200 $2,696 
 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 investmentsinstruments.
(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

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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. Theexchanges; therefore, fair values of the Company's senior notes arevalue 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,combinations, goodwill and asset retirement obligations.
NOTE E.5. Derivative Financial Instruments
The Company utilizes commodity swap contracts, collar contracts and collar contracts with short puts to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. The Company also, from time to time, utilizes interest rate contracts to reduce the effect of interest rate volatility on 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 oil production are tied directly to, or are highly correlated with, New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI") oil prices. The Company uses derivative contracts to manage 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.

15
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

The following table sets forth the volumes per day associated with the Company's outstanding oil derivative contracts as of September 30, 2017 and the weighted average oil prices for those contracts:
 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)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. 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 NGL component price volatility.

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

The following table sets forth the volumes per day associated with the Company's outstanding NGL derivative contracts as of September 30, 2017 and the weighted average NGL prices for those contracts:
 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. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to HH gas prices or regional index prices where the gas is sold. 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.

17
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

The following table sets forth the volumes per day associated with the Company's outstanding gas derivative contracts as of September 30, 2017 and the weighted average gas prices for those contracts:
 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, the Company enters 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 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.
Interest rate derivative activities. 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.
Tabular disclosure of derivative financial instruments. All of 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 commodity and counterparty. The Company enters into derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty.

18
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)

The aggregate fair value of the Company's derivative instruments reported in the accompanying consolidated balance sheets by type 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
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.
Marketing derivatives. The following table detailsCompany uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets.As of June 30, 2023, the locationCompany's marketing derivatives reflect long-term marketing contracts with Occidental Energy Marketing, Inc. ("Oxy") whereby the Company agreed to purchase and simultaneously sell, at an oil terminal in Midland, Texas, (i) 50 thousand barrels of gainsoil per day beginning January 1, 2021 and losses recognizedending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027. Based on the Company'sform of the long-term marketing contracts, the Company accounts for the contracts as derivative contracts in the accompanying consolidated statements of operations:instruments not designated as hedges. See Note 4 for additional information.
14
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)

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172023
(Unaudited)

Conversion option derivatives. The Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Period related to conversion options exercised by certain holders of the Convertible Notes. As of June 30, 2023 and December 31, 2022, $71 million and $29 million, respectively, of the principal amount of the Convertible Notes remained in the Settlement Period. See Note 4 and Note 7 for additional information.
Commodity derivatives.As of June 30, 2023, the Company has outstanding oil derivative contracts for three thousand Bbls per day of Brent/WTI basis swaps for January 2024 through December 2024. The basis swap contracts fix the basis differential between the WTI index price (the price at which the Company buys Midland Basin oil for transport to the Gulf Coast) and the Brent index price (the price at which a portion of the Midland Basin purchased oil is sold in the Gulf Coast market) at a weighted average differential of $4.33 in order to reduce the Company's basis risk. As of June 30, 2023 and December 31, 2022, the fair value of the Company's outstanding commodity derivative contracts were nominal.
Fair value. The fair value of derivative financial instruments not designated as hedging instruments are as follows:
As of June 30, 2023
TypeConsolidated
Balance Sheet
Location		Fair
Value		Gross Amounts
Offset in the
Consolidated
Balance Sheet		Net Fair Value
Presented in the
Consolidated
Balance Sheet
  (in millions)
Liabilities:
Marketing derivativesDerivatives - current$70 $— $70 
Conversion option derivativesDerivatives - current$2 $— $2 
Marketing derivativesDerivatives - noncurrent$85 $— $85 
As of December 31, 2022
TypeConsolidated
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:
Conversion option derivativesPrepaids and other$1 $— $1 
Liabilities:
Marketing derivativesDerivatives - current$44 $— $44 
Marketing derivativesDerivatives - noncurrent$96 $— $96 
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Table of Contents
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Gains and losses recorded to net derivative loss in the consolidated statements of operations related to derivative financial instruments not designated as hedging instruments are as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in millions)
Commodity price derivatives:
Noncash derivative gain (loss), net$— $72 $— $(39)
Cash payments on settled derivatives, net— (75)— (131)
Total commodity derivative loss, net— (3)— (170)
Marketing derivatives:
Noncash derivative gain (loss), net20 (68)(16)(24)
Cash payments on settled derivatives(16)(17)(31)(29)
Total marketing derivative gain (loss), net4 (85)(47)(53)
Conversion option derivatives:
Noncash derivative gain (loss), net(2)23 (2)23 
Cash receipts (payments) on settled derivatives, net(3)— 4 — 
Total conversion option derivative gain (loss), net(5)23 2 23 
Derivative loss, net$(1)$(65)$(45)$(200)
NOTE F.6. Exploratory Well and Project 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 presentedincluded 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 torecorded in exploration and abandonments expense.expense in the consolidated statements of operations.
The following table reflects the Company'schanges in capitalized exploratory well and project activity during the three and nine months ended September 30, 2017:costs are as follows:
Six Months Ended June 30, 2023
(in millions)
Beginning capitalized exploratory well and project costs$834 
Additions to exploratory well and project costs pending the determination of proved reserves2,115 
Reclassifications due to determination of proved reserves(1,861)
Ending capitalized exploratory well and project costs$1,088 
 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 reserves474
 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, 2016Aging 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 June 30, 2023As of December 31, 2022
 (in millions, except well counts)
One year or less$1,088 $834 
More than one year— — 
$1,088 $834 
Number of projects with exploratory well costs that have been suspended for a period greater than one year— — 
16
 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 year12
 5
 $434
 $323
Number of wells or projects with exploratory well costs that have been suspended for a period greater than one year7
 3
Table of Contents
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
NOTE 7. Debt and Interest Expense
The seven wells that were suspended for a period greater than one yearcomponents of debt, including the effects of issuance costs and net discounts, are as of September 30, 2017 are in the Eagle Ford Shale area. follows:
 
As of
June 30, 2023
As of
December 31, 2022
 (in millions)
Outstanding debt principal balances:
Revolving corporate credit facility$240 $— 
0.550% senior notes due 2023— 750 
0.250% convertible senior notes due 2025789 962 
5.100% senior notes due 20261,100 — 
1.125% senior notes due 2026750 750 
7.200% senior notes due 2028241 241 
4.125% senior notes due 2028138 138 
1.900% senior notes due 20301,100 1,100 
2.150% senior notes due 20311,000 1,000 
5,358 4,941 
Issuance costs and discounts, net(37)(37)
Total debt5,321 4,904 
Less current portion of debt311 779 
Long-term debt$5,010 $4,125 
Credit facility. The Company expects to complete all seven of these wells in 2018.
NOTE G. Long-term Debt
Credit facility. The Company's long-term debt consists of senior notes,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 $1.5 billion that expire in August 2020.$2.0 billion. On May 26, 2023, Pioneer entered into the Second Amendment to Credit Agreement (the "Second Amendment") with Wells Fargo Bank, National Association, as administrative agent, and the other agents and lenders party thereto. The Second Amendment replaced the London interbank offered rate with a term secured overnight financing rate ("SOFR") as the interest rate benchmark, with all other terms, conditions and covenants remaining substantially unchanged. The Credit Facility has a maturity date of January 12, 2026. As of SeptemberJune 30, 2017,2023, the Company had no$240 million of outstanding short-term borrowings under the Credit Facility. The Credit Facility andrequires the maintenance of a ratio of total debt to book capitalization, subject to certain adjustments, not to exceed 0.65 to 1.0. As of June 30, 2023, the Company was in compliance with its debt covenants.
Senior notes. In March 2023, the Company issued $1.1 billion of 5.100% senior notes that will mature March 29, 2026 (the "March 2023 Senior Notes Offering"). The Company received proceeds, net of $7 million of issuance costs and discounts, of $1.1 billion. Interest on the notes is payable semiannually on March 29 and September 29.
The Company's 6.65%0.550% senior notes, (the "6.65% Senior Notes") and 5.875% senior notes (the "5.875% Senior Notes")with a debt principal balance of $750 million, matured and were repaid in May 2023 with proceeds from the March 20172023 Senior Notes Offering.
The Company's senior notes are general unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company and July 2016, respectively.are senior in right of payment to all existing and future subordinated indebtedness of the Company. The Company funded bothis a holding company that conducts all of its operations through subsidiaries; consequently, the $485 million repaymentsenior notes are structurally subordinated to all obligations of its subsidiaries. Interest on the Company's senior notes is payable semiannually.
Convertible senior notes. The Convertible Notes bear a fixed interest rate of 0.250% per year, with interest payable semiannually on May 15 and November 15. 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 6.65% SeniorCompany.
The Convertible Notes and the $455 million repaymentare convertible into shares of the 5.875% SeniorCompany's common stock at an adjusted conversion rate of 10.6804 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes with cash on hand. The Company's 6.875% senior(subject to further adjustment pursuant to the terms of the notes (the "6.875% Senior Notes"indenture, the "Conversion Rate"), withwhich represents an outstanding debt principal balanceadjusted conversion price of $450 million, will mature in May 2018. The 6.875% Senior Notes are classified as current in$93.63 per share (subject to adjustment pursuant to the accompanying consolidated balance sheets asterms of September 30, 2017.

the notes indenture, the "Conversion Price"). Upon
20
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172023
(Unaudited)

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 for at least 20 of the last 30 consecutive trading days of such quarter exceeds 130 percent of the Conversion Price;
•during the five-business day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the product of the last reported sales price of the Company's common stock and 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. Effective May 20, 2023, the Company 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.
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 an adjusted strike price of $93.63 per share of common stock and an adjusted capped price of $133.24 per share of common stock.
As of June 30, 2023, the effective annual interest rate on the Convertible Notes is 0.6 percent after giving effect to deferred financing fees relating to the notes.
Convertible Note conversions.During the last 30 consecutive trading days subsequent to the third quarter of 2021 through the second quarter of 2023, the last reported sales price of the Company's common stock exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to be convertible at the option of the holders during the period from January 1, 2022 through September 30, 2023.
Certain holders of the Convertible Notes exercised their conversion option resulting in the Company recognizing the following cash payments and cash receipts associated with the conversions:
Six Months Ended June 30,
20232022
(in millions)
Cash payments:
Principal repayments$173 $1 
Conversion premiums215 2 
Cash payments$388 $3 
Cash receipts:
Capped Call proceeds$58 $26 
Conversion option derivative receipts, net4 — 
Cash receipts, net$62 $26 
The Company recorded the conversion premiums paid, Capped Call proceeds and associated issuance fees and deferred taxes attributable to the principal amount of the Convertible Notes converted in additional paid-in-capital.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
As of June 30, 2023, $71 million of the principal amount of the Convertible Notes remains in the Settlement Period. These Convertible Notes are recorded in the current portion of debt in the consolidated balance sheets as of June 30, 2023. The current portion of Convertible Notes will be cash settled at the end of their respective Settlement Periods during the third quarter of 2023.
See Note 4 and Note 5 for additional information.
NOTE H.8. Incentive Plans
Stock-based compensation. ForLong-Term Incentive Plan.The Company's Amended and Restated 2006 Long-Term Incentive Plan ("LTIP") provides for the threegranting of various forms of awards, including stock options, stock appreciation rights, performance units, restricted stock and nine months ended September 30, 2017,restricted stock units to directors, officers and employees of the Company recorded $21 million and $78 million, respectively, of stock-basedCompany.
Stock-based compensation expense for all plans,restricted stock awards and units expected to be settled in the Company's common stock ("Equity Awards"), restricted stock units expected to be settled in cash ("Liability Awards") and performance units ("Performance Awards") issued under both the LTIP and the Company's Employee Stock Purchase Plan ("ESPP") are as compared to $31 million and $84 millionfollows:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 (in millions)
Equity Awards (a)$16 $11 $29 $21 
Liability Awards (b)3 3 6 11 
Performance Awards (a)10 8 19 16 
ESPP1 1 2 2 
$30 $23 $56 $50 
Capitalized stock-based compensation expense$5 $4 $9 $9 
______________________
(a)In February 2023, the Company changed the retirement eligibility provisions for the same respective periods in 2016. As of September 30, 2017, there was $113 million of unrecognized2023 stock-based compensation awards issued to officers, which shortened the requisite service period over which the expense related to unvested share-based compensation plans, including $24 million attributable to stock-based awards thatis recognized.
(b)Liability Awards are expected to be settled on their vesting date in cash, rather than in equity shares ("cash. As of June 30, 2023 and December 31, 2022, accounts payable – due to affiliates included $12 million and $6 million, respectively, of liabilities attributable to Liability Awards").Awards.
As of June 30, 2023, there was $80 million of unrecognized stock-based compensation expense related to unvested stock-based compensation awards of which $12 million is attributable to Liability Awards. The unrecognized compensation expense will be recognized on a straight-line basis over the remaining vestingrequisite service periods of the awards, which is a period of less than three years on a weighted average basis. AsPerformance Awards granted to the Company's officers in 2023 will vest upon the achievement of September 30, 2017certain financial performance targets over a three year period. Expense for these awards is estimated based upon the achievement of the performance targets and December 31, 2016, accounts payable – due to affiliates included $13 millionwill be reassessed periodically. The cumulative impact of any change in estimate will be reflected in the period of the change.
Activity for Equity Awards, Liability Awards, and $22 million, respectively,Performance Awards is as follows:
Six Months Ended June 30, 2023
Equity AwardsLiability AwardsPerformance Awards
Beginning awards481,293 119,695 268,003 
Awards granted112,677 2,902 83,727 
Awards forfeited(4,585)(4,545)— 
Awards vested (a)(79,349)(1,875)(5,566)
Ending awards510,036 116,177 346,164 
______________________
(a)Per the terms of liabilities attributable to Liability Awards.
The following table summarizesaward agreements and elections, the activityissuance of common stock may be deferred for certain Equity Awards that occurredvest during the nine months ended Septemberperiod.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017 for restricted stock awards and performance units issued by Pioneer:2023
(Unaudited)
 
Restricted
Stock Equity
Awards
 
Restricted
Stock Liability
Awards
 
Performance
Units
Outstanding as of December 31, 20161,077,227
 290,552
 178,556
Awards granted332,635
 118,003
 59,044
Awards forfeited(31,426) (15,956) —
Awards vested(454,898) (134,381) —
Outstanding as of September 30, 2017923,538
 258,218
 237,600

As of September 30, 2017 and December 31, 2016, the Company also had 159,378 stock options outstanding and exercisable. There were no stock options exercised during the nine months ended September 30, 2017.
NOTE I.9. Asset Retirement Obligations
The Company's asset retirement obligations primarily relate to the future plugging and abandonment of wells and related facilities. The following table summarizesMarket risk premiums associated with asset retirement obligations are estimated to represent a component of the Company's credit-adjusted risk-free rate that is utilized in the calculations of asset retirement obligation activity during 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)
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 discount5
 5
 14
 14
Ending asset retirement obligations$292
 $281
 $292
 $281
obligations. The Company recordsincludes the current and noncurrent portions of asset retirement obligations in other current liabilities and other liabilities, respectively, in the accompanying consolidated balance sheets. Assheets and expenditures are included as cash used in operating activities in the consolidated statements of September 30, 2017cash flows.
Asset retirement obligations activity is as follows:
Six Months Ended June 30, 2023
(in millions)
Beginning asset retirement obligations$477 
Additions3 
Changes in estimates(45)
Liabilities settled(33)
Accretion of discount8 
Ending asset retirement obligations410 
Less current portion of asset retirement obligations(125)
Asset retirement obligations, long-term$285 
The Company's wells and December 31, 2016, the current portion of the Company'srelated facilities abandonment costs generally approximate their estimated asset retirement obligations was $42obligations. Incremental plugging and abandonment costs for individual wells and related facilities that exceed their estimated asset retirement obligation are recorded to exploration and abandonment expense in the consolidated statements of operations. The Company recorded $8 million and $39$10 million respectively.to exploration and abandonment expense for the three and six months ended June 30, 2023, respectively, related to certain vertical well abandonment costs exceeding their estimated asset retirement obligation.
NOTE J.10. Commitments and Contingencies
In additionIndemnifications. The Company has agreed to the legal action described below, theindemnify 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.
Legal actions. The Company is a party to othervarious 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 suchthese proceedings and claims will not have a material adverse effect on the Company's consolidated financial

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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.The Company has been advised by the EPA that the agency Significant judgement is considering an enforcement action against the Companyrequired in making these estimates and may seek monetary sanctions for alleged failures to prevent emissions occurring at the Company's Fain gas plant infinal liabilities may ultimately be materially different.
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 West Panhandle regionlife 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 sanctionsrelated property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will not exceed $45,000qualify for any single event, but could exceed $100,000 incapitalization are recorded when environmental assessment and/or remediation is probable and the aggregate.costs can be reasonably estimated. Such liabilities are undiscounted unless the timing of cash payments for the liability is fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision until settlement or remediation occurs.
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 obligationsroyalties and income taxes. The Company does not believe these obligations are probable of having a material impact on its liquidity, financial position or future results of operations.
Lease agreements. In June 2017, 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 beneficiary of the variable interest entity 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 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:
20
 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 refunds5
 —
 13
 —
Deferred compensation plan income1
 —
 3
 2
Other income2
 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
SeptemberJune 30, 20172023
(Unaudited)

The Company may also be subject to retained liabilities with respect to certain divested assets by operation of law. Upon divesting its assets, the Company may receive collateral or credit support for its exposure to such liabilities. The Company establishes reserves for the amount that exceeds the collateral or credit support received in the event that the obligation becomes likely to be paid by the Company. For example, the Company is exposed to the risk that owners and/or operators of assets purchased from the Company may become unable to satisfy plugging or abandonment obligations associated with those assets. In that event, due to operation of law, the Company may be required to assume all or part of the plugging or abandonment obligations for those assets. Although the Company may establish reserves for such liabilities, it could be required to pay additional amounts in the future and these amounts could be material.
The Company does not recognize a liability if the fair value of the obligation is immaterial or the likelihood of making payments is remote.
NOTE L. Other Expense11. 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. ProPetro is considered a related party as the shares received represent 14 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 that ended on December 31, 2022. The following table providesCompany continued to utilize ProPetro for pressure pumping and related services during the componentssix months ended June 30, 2023.
Phillip A. Gobe, a nonemployee member of the Company's Board of Directors (the "Board"), was appointed by the board of directors of ProPetro to serve as its Executive Chairman in October 2019 and Chief Executive Officer in March 2020, and served as Chief Executive Officer and Chairman of the board of directors of ProPetro through August 31, 2021, at which point he continued as ProPetro's Executive Chairman. In March 2022, Mr. Gobe transitioned to non-executive Chairman of the board of directors of ProPetro. Mark S. Berg, the Company's Executive Vice President, Corporate Operations, serves as a member of the ProPetro board of directors under the Company's right to designate a director to the board of directors of ProPetro so long as the Company owns five percent or more of ProPetro's outstanding common stock.
Based on the Company's ownership in ProPetro and representation on the ProPetro board of directors, ProPetro is considered an affiliate.
Transactions for ProPetro pressure pumping related services were capitalized in oil and gas properties or charged to other expense for the three and nine months ended September 30, 2017 and 2016:as incurred. ProPetro pressure pumping related service charges are as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in millions)
Pressure pumping related service charges$43 $95 $85 $207 
 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
Other13
 15
 38
 43
Total other expense$58
 $69
 $176
 $223
As of June 30, 2023As of December 31, 2022
(in millions)
Accounts payable - due to affiliate$11 $44 
 ____________________
(a)Primarily represents firm transportation payments on excess pipeline capacity commitments.
(b)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 $190 million of costs and expenses.
(c)Primarily represents expenses attributable to idle drilling rig fees that are not chargeable to joint operations and charges to terminate rig contracts that were not required to meet planned drilling activities.
NOTE M. Income Taxes12. Revenue Recognition
The Company's income tax benefit (provision) consistedDisaggregated revenue from contracts with purchasers.Revenues on sales of oil, NGLs, gas and purchased oil and gas are recognized when control of the followingproduct is transferred to the purchaser and payment can be reasonably assured. Sales prices for oil, NGLs and gas are negotiated based on factors normally considered in the three and nine months ended September 30, 2017 and 2016:
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
 (in millions)
Current tax benefit$—
 $22
 $—
 $22
Deferred tax benefit (provision)11
 56
 (79) 340
Income tax benefit (provision)$11
 $78
 $(79) $362
For the three and nine months ended September 30, 2017, the Company's effective tax rate, excluding income attributable to noncontrolling interests, was 34 percent and 32 percent, respectively,industry, such 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 differsindex or spot price, distance from the U.S. statutory rate of 35 percent primarily duewell to recognizing excess tax benefits of $8 million associated with the adoption of ASU 2016-09, "Improvementspipeline or market, commodity quality and prevailing supply and demand conditions. Accordingly, the prices received by the Company for oil, NGLs and gas generally fluctuate similar 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 benefitchanges 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 merits of the position. 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 in the period it is recognized. The Company expects to substantially resolve the uncertainties associated with the unrecognized tax benefit by December 2018.

relevant market index prices.
23
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172023
(Unaudited)

Disaggregated revenue from contracts with purchasers by product type is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
 (in millions)
Oil sales$2,448 $3,501 $4,892 $6,525 
NGL sales370 644 781 1,214 
Gas sales159 494 469 831 
Total oil and gas revenues2,977 4,639 6,142 8,570 
Sales of purchased oil1,582 2,337 3,011 4,551 
Sales of purchased gas1 29 3 32 
Total sales of purchased commodities1,583 2,366 3,014 4,583 
$4,560 $7,005 $9,156 $13,153 
Performance obligations and contract balances. The majority of the Company's product sale commitments are short-term in nature with a contract term of one year or less. The Company typically satisfies its performance obligations upon transfer of control as described above in Disaggregated revenue from contracts with purchasers and records the related revenue in the month production is delivered to the purchaser. Settlement statements for sales of oil, NGLs, gas and sales of purchased oil and gas may not be received for 30 to 60 days after the date the volumes are delivered, and as a result, the Company is required to estimate the amount of volumes delivered to the purchaser and the price that will be received for the sale of the product. The Company records the differences between estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. As of June 30, 2023 and December 31, 2022, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers was $1.4 billion and $1.8 billion, respectively.
NOTE 13. Other Expense
The components of other expense are as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
(in millions)
Impairment of long-lived assets (a) (Note 4)
$11 $— $22 $— 
Unoccupied facility expense (b)8 4 17 19 
Loss on early extinguishment of debt (Note 7)
— — — 47 
South Texas deficiency fee obligation, net (c)— (16)— (16)
Other8 17 28 33 
$27 $5 $67 $83 
____________________
(a)Impairment of long-lived assets represents the decrease in fair value of unoccupied field offices to their expected sales price or market value.
(b)Primarily represents facilities expense associated with certain offices acquired as part of business combinations that are no longer occupied by the Company.
(c)Represents changes to the Company's 2022 forecasted minimum volume commitment deficiency fee obligation and receivable associated with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
NOTE 14. Income Taxes
Enactment of the Inflation Reduction Act of 2022. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the "IRA"), which includes, among other things, a corporate alternative minimum tax (the "CAMT"). Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income of "applicable corporations," which is effective for tax years beginning after December 31, 2022. The CAMT generally treats a corporation as an "applicable corporation" in any taxable year in which the "average annual adjusted financial statement income" of the corporation and certain of its subsidiaries and affiliates for a three-taxable-year period ending prior to such taxable year exceeds $1 billion. The Company will continue to monitor and assess any impacts of the IRA on the Company's current year tax provision and the Company's consolidated financial statements.
The IRA also establishes a one percent excise tax on stock repurchases made by publicly traded U.S. corporations. The excise tax is effective for any stock repurchases after December 31, 2022. During the three and six months ended June 30, 2023, the Company recorded $1 million and $6 million, respectively, related to the IRA excise tax payable on stock repurchases.
Income tax provisions and effective tax rates are as follows:
Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
(in millions)
Current tax provision$(192)$(144)$(417)$(164)
Deferred tax provision(113)(513)(223)(1,045)
Income tax provision$(305)$(657)$(640)$(1,209)
Effective tax rate22 %22 %22 %22 %
The Company evaluates and updates its annual effective income tax rate on an interim basis based on current and forecasted earnings and enacted 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 and six months ended June 30, 2023 and 2022 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 jurisdiction and various state and foreign jurisdictions. The Internal Revenue Service has closed examinations of the 2012 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. As of SeptemberJune 30, 2017,2023, there are no proposed 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.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
NOTE N.15. Net Income (Loss) Per Share and Stockholders' Equity
Net income per share.The following table reconciles the Company's net income (loss) attributable to common stockholders tocomponents of basic and diluted net income (loss)per share attributable to common stockholders forare as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 (in millions, except per share data)
Net income attributable to common stockholders$1,102 $2,371 $2,324 $4,380 
Participating share-based earnings (a)(2)(6)(5)(11)
Basic net income attributable to common stockholders1,100 2,365 2,319 4,369 
Adjustment to after-tax interest expense to reflect the dilutive impact attributable to Convertible Notes1 1 2 3 
Diluted net income attributable to common stockholders$1,101 $2,366 $2,321 $4,372 
Basic weighted average shares outstanding234 242 234 242 
Convertible Notes (b)8 12 9 13 
Diluted weighted average shares outstanding242 254 243 255 
Net income per share attributable to common stockholders:
Basic$4.71 $9.78 $9.90 $18.03 
Diluted$4.55 $9.30 $9.55 $17.15 
______________________
(a)Unvested Equity Awards represent participating securities because they participate in non-forfeitable dividends with the threecommon equity owners of the Company. Participating share-based earnings represent the distributed and nine months ended September 30, 2017 and 2016:undistributed earnings of the Company attributable to the participating securities. Unvested Equity Awards do not participate in undistributed net losses as they are not contractually obligated to do so. The dilutive effect of the reallocation of participating share-based earnings to diluted net income attributable to common stockholders was negligible.
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
 (in millions)
Net income (loss) attributable to common stockholders$(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(b)Diluted weighted average common shares outstanding were 170 million for bothincludes the dilutive effect had the Company's Convertible Notes been converted as of the beginning of the three and ninesix months ended SeptemberJune 30, 2017,2023 and 2022, respectively. If converted by the holder, the Company may settle in cash, shares of the Company's common stock or a combination thereof, at the Company's election. See Note 7 for additional information.
Stockholders' equity. The Company's return of capital strategies include payments of base and variable dividends and a stock repurchase program. The Board, at its sole discretion, may change its dividend practices and/or the Company's stock repurchase program based on the Company's outlook for commodity prices, liquidity, debt levels, capital resources, quarterly operating cash flows or other factors. Dividends declared by the Board and stock repurchased during the period are presented in the Company's consolidated statements of equity as dividends declared and purchases of treasury stock, respectively. Dividends paid and stock repurchased during the period are presented as cash used in financing activities in the Company's consolidated statements of cash flows. Dividends that are declared and have not been paid, if any, are included in other current liabilities in the consolidated balance sheets. Stock repurchases are included as treasury stock in the consolidated balance sheets.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Dividends. Base and variable dividends declared by the Board during the three and six months ended June 30, 2023 and 2022 are as follows:
BaseVariableTotalTotal
(per share)(per share)(per share)(in millions)
2023:
First quarter$1.10 $4.48 $5.58 $1,314 
Second quarter1.25 2.09 3.34 784 
$2.35 $6.57 $8.92 $2,098 
2022:
First quarter$0.78 $3.00 $3.78 $922 
Second quarter0.78 6.60 7.38 1,788 
$1.56 $9.60 $11.16 $2,710 
The Company can provide no assurance that dividends will be authorized or declared in the future or as to the amount of any future dividends. See Note 16 for additional information.
Stock repurchase programs. In April 2023, the Board authorized a new $4 billion common stock repurchase program to replace the $4 billion common stock repurchase program authorized in February 2022. As was the case with the previous stock repurchase programs, the Company may repurchase shares in accordance with applicable securities laws or 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.
Expenditures to acquire shares under the stock repurchase program are as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in millions)
Shares repurchased (a)$124 $499 $624 $750 
______________________
(a)During the three and six months ended June 30, 2023, 601 thousand and 3.0 million shares, respectively, were repurchased under the stock repurchase program, as compared to 1702.1 million and 1653.2 million shares repurchased during the three and six months ended June 30, 2022, respectively. Expenditures for share repurchases during the same respective periods in 2016.three and six months ended June 30, 2023 exclude the one percent excise tax on all stock repurchases after December 31, 2022.


NOTE 16. Subsequent Events
Dividends. On August 1, 2023, the Board declared a quarterly base dividend of $1.25 per share and a quarterly variable dividend of $0.59 per share on the Company's outstanding common stock, payable September 21, 2023 to shareholders of record at the close of business on September 6, 2023.
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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
Item 2.Management's DiscussionOF OPERATIONS
Oil and AnalysisGas Industry Considerations
Supply and demand for oil throughout the world remains volatile. Over the past few years, global oil inventories have consistently been lower than historical levels due to reduced capital investments being directed towards developing incremental oil supplies. Sanctions, import bans and price caps on Russian oil and petroleum products were implemented by various countries in response to the war in Ukraine, further impacting global oil supply. In addition, the lingering impacts from the COVID-19 pandemic, combined with the Russia/Ukraine conflict, have resulted in global supply chain disruptions, which have led to significant cost inflation, rising interest rates and the potential for a global recession. Further, recent data from China points to a fragile economy as key indicators, such as consumer spending weakened and youth-unemployment hit record highs. China remains the world's second largest economy and represents a key component of Financial Conditionoil demand. These uncertainties led OPEC to reduce its oil demand outlook, which led to multiple cuts to its production quotas. As a result of the current global supply and Resultsdemand uncertainties, average NYMEX oil and NYMEX gas prices for the three months ended June 30, 2023 were $73.78 per Bbl and $2.09 per Mcf, respectively, as compared to $108.41 per Bbl and $6.76 per Mcf, respectively, for the same period in 2022.
Global oil price levels and general inflationary pressures will ultimately depend on various factors that are beyond the Company's control, such as (i) the ability of OperationsOPEC and other oil producing nations to manage the global oil supply, (ii) the impact of sanctions and import bans on production from Russia, (iii) the timing and supply impact of any Iranian sanction relief on their ability to export oil, (iv) the global supply chain constraints associated with manufacturing and distribution delays, (v) oilfield services demand, (vi) political stability of oil consuming countries and (vii) increasing expectations that the world may be heading into a global recession. The Company continues to assess and monitor the impact of these factors and consequences on the Company and its operations.
Financial and Operating Performance
The Company's financial and operating performance for the three months ended SeptemberJune 30, 20172023 included the following highlights:
•Net lossincome attributable to common stockholders for the three months ended SeptemberJune 30, 20172023 was $23 million$1.1 billion ($0.134.55 per diluted share), as compared to net income of $22 million$2.4 billion ($0.139.30 per diluted share) for the same period in 2016.2022. The primary components of the decrease in net incomeearnings attributable to common stockholders include:
•a $224 million$1.7 billion decrease in net derivative gains, primarily as a result of changes in forward commodity prices and the Company's portfolio of derivatives;
a $67 million decrease in the Company's income tax benefit, primarily as a result of the tax credits recognized during the three months ended September 30, 2016 associated with research and experimental expenditures related to horizontal drilling and completions innovations; and
a $32 millionincrease in total oil and gas production costs and production and ad valorem taxes as a result of a 15 percent increase in sales volumes and a 15 percent increase in average realized commodity prices per BOE; offset by
a $212 million increase in oil and gas revenues, primarily due to a 42 percent decrease in average realized commodity prices per BOE in 2023 due to the aforementioned volatility in worldwide oil, NGL and gas demand, partially offset by an 11 percent increase in daily 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 of the Company's producing wells and (ii) additions to proved reserves attributabledue to the Company's successful Spraberry/Wolfcamp horizontal drilling program; and
partially offset by:
•a $13$352 million decrease in interest expense,income taxes, primarily due to the repaymentdecrease in earnings in 2023 compared to 2022;
•a $99 million increase in net interest and other income, primarily due to an increase in the fair value of both the Company's 6.65% senior notes, which maturedinvestment in March 2017,affiliate; and
•an $86 million decrease in production and ad valorem taxes, primarily attributable to the Company's 5.875% senior notes, which maturedaforementioned decrease in July 2016.commodity prices.
•During the three months ended SeptemberJune 30, 2017,2023, average daily sales volumes increased on a BOE basis by 1511 percent to 275,711710,678 BOEPD, as compared to 238,878642,844 BOEPD during the same period in 2016. The increase in2022.
•Average oil and NGL prices per Bbl and average daily sales volumes forgas prices per Mcf decreased to $72.90, $22.43 and $1.81, respectively, during the three months ended SeptemberJune 30, 2017,2023, as compared to $110.56, $44.21 and $6.72, respectively, during the same period in 2022.
•Net cash provided by operating activities decreased during the three months ended June 30, 2023 to $1.7 billion, as compared to $3.2 billion for the same period in 2022. The decrease in net cash provided by operating activities during the three months ended June 30, 2023, as compared to the same period in 2016,2022, is primarily due to the Company's successful Spraberry/Wolfcamp horizontal drilling program.
Averageaforementioned decrease in oil NGL and gas prices increased duringrevenues.
•During the three months ended SeptemberJune 30, 2017 to $45.352023, the Company declared a base and variable dividend of $1.25 per Bbl, $18.96share and $2.09 per Bblshare, respectively, and $2.58 per Mcf, respectively,paid dividends of $781 million, as compared to $41.44a declared base and variable dividend of $0.78 per Bbl, $12.46share and $6.60 per Bblshare, respectively, and $2.43 per Mcf, respectively, fordividend payments of $1.8 billion during the same period in 2016.2022.
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PIONEER NATURAL RESOURCES COMPANY
Net cash provided by operating activities increased to $455 million for•During the three months ended SeptemberJune 30, 2017,2023, the Company repurchased 601 thousand shares for $124 million under the Company's stock repurchase program, as compared to $441repurchases of 2.1 million shares for $499 million during the same period in 2016. 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 primarily due to increases in the Company's oil and gas revenues as a result of increases in commodity prices and sales volumes, partially offset by a $156 million reduction in cash provided by commodity derivatives.
2022.
•As of SeptemberJune 30, 2017,2023 and December 31, 2022, the Company's net debt to book capitalization was five19 percent as compared to twoand 15 percent, at December 31, 2016.respectively.
FourthThird Quarter 20172023 Outlook
Based on current estimates, the Company expects the following operating and financial results for the third quarter ending December 31, 2017:of 2023:
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 $9.50
Three Months Ending September 30, 2023
Guidance
($ in millions, except per BOE amounts)
Average daily production (MBOE)705 - 725
Average daily oil production (MBbls)367 - 377
Production costs per BOE$10.50 - $12.00
DD&A per BOE$10.50 - $12.00
Exploration and abandonments expense$10 - $20
General and administrative expense$80 - $90
Interest expense$40 - $45
Other expense$20 - $40
Cash flow impact from firm transportation (a)$(60) - $(20)
Current income tax provision$175 - $250
Effective tax rate22% - 27%
_____________________
(a)The expected cash flow impact from firm transportation is primarily based on current NYMEX strip commodity prices. DD&A expense is expected(i) the forecasted differential between Midland WTI oil prices and Brent oil prices less the costs to average $13.50transport purchased oil from the areas of the Company's production to $15.50 per BOE.
Total exploration and abandonment expense is expected to be $20 million to $30 million. General and administrative expense is expected to be $80 million to $85 million. Interest expense is expected to be $34 million to $39 million, 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

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with excess firm gathering and transportation commitmentsthe Gulf Coast and (ii) other miscellaneous charges. Accretionoil price fluctuations between the time the Company purchases the oil from its areas of discount on asset retirement obligationsoperation and when the oil is expecteddelivered and sold to be $4 millionGulf Coast refineries or exported to $7 million.international markets. 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 cash flow impact attributable to the shortfall.
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 summarizesAs of June 30, 2023, the Company's average daily oil, NGL, gasdrilling 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
The Company's liquids production increased to 78 percent of total production on a BOE basis for the nine 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 findingcompletions program included operating 22 drilling rigs and development costs incurred during the nine months ended September 30, 2017:
  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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Permian Basin area. During 2017, 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 (190 horizontal wellssix frac fleets in the northern portionMidland Basin. The Company will continue to evaluate its drilling and completions program with future activity levels assessed regularly.
Pioneer is the largest acreage holder in the Spraberry/Wolfcamp field in the Midland Basin of the play and 40 horizontal wells inWest Texas. In the southern portion of the play).Spraberry/Wolfcamp field, the Company has a joint venture ("JV") with Sinochem Petroleum USA LLC, a U.S. subsidiary of the Sinochem Group. During 2017, approximately 55the six months ended June 30, 2023, the Company successfully completed 226 horizontal wells in the non-JV portion of the Midland Basin and 26 horizontal wells in the JV portion of the Midland Basin. In the non-JV portion of the Midland Basin, 40 percent of the horizontal wells are planned to be drilled in the Wolfcamp B interval, 30 percent in the Wolfcamp A interval and 15 percent in the Lower Spraberry Shale interval. During the first nine months of 2017, the Company successfully completed 137 horizontal wells in the northern portion of the play and 19 horizontal wells in the southern portion of the play. In the northern portion of the play, approximately 45 percent of wells placed on production were Spraberry interval wells, 31 percent were Wolfcamp B interval wells, approximately 4027 percent were Wolfcamp A interval wells and the remaining 15two percent were Lower Spraberry ShaleWolfcamp D interval wells. The majorityIn the southern JV portion of the Midland Basin, all of the wells placed on production in the southern portion of the play were Wolfcamp A or B interval wells.
The Company continues to utilize its integrated services to control well costsDevelopment and operating costs in addition to supporting the execution of itsexploration/extension drilling and production activities in the Spraberry/Wolfcamp field. During 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)activity is supplying high-quality brown sand for proppant, which is being used to fracture stimulate horizontal wells in the Spraberry and Wolfcamp Shale intervals.as follows:
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 December 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.


Six Months Ended June 30, 2023
DevelopmentExploration/ExtensionTotal
Beginning wells in progress11 292 303 
Wells spud8 241 249 
Successful wells(10)(242)(252)
Ending wells in progress9 291 300 
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Costs incurred are as follows:
Six Months Ended June 30, 2023
( in millions)
Proved property acquisition costs (a)$173 
Unproved property acquisitions (a)82 
Exploration/extension costs2,046 
Development costs344 
Asset retirement obligations(43)
$2,602 
_____________________
(a)Includes $148 million of noncash acquisition costs related to nonmonetary transactions in which the Company exchanged both proved and unproved oil and gas properties in the Midland Basin with unaffiliated third parties. See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
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 inCompany's oil and gas revenues during the three months ended September 30, 2017, as compared to the same period in 2016, is primarily due to increasesare derived from sales of nine percent, 52 percent and six percent in oil, NGL and gas production. Increases or decreases in the Company's revenues, profitability and future production are highly dependent on commodity prices. Prices are market driven and future 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 primarilywill fluctuate due to increasessupply and demand factors, availability of 25 percent, 49 percenttransportation, seasonality, geopolitical developments 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.economic factors, among other items.
The following table provides average
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Oil and gas revenues$2,977 $4,639 $(1,662)$6,142 $8,570 $(2,428)
Average daily sales volumes for the three and nine months ended September 30, 2017 and 2016:are as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20232022Change20232022Change
Oil (Bbls)369,070 347,964 6 %365,214 351,597 4 %
NGLs (Bbls)181,098 160,183 13 %174,329 156,576 11 %
Gas (Mcf)963,064 808,181 19 %936,595 792,847 18 %
Total (BOE)710,678 642,844 11 %695,643 640,314 9 %
Liquids percentage of total production77 %79 %(2 %)78 %79 %(1 %)
  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 ninesix months ended SeptemberJune 30, 2017, respectively,2023, as compared to the same respective periods in 2016, principally2022, primarily due to the Company's successful Spraberry/Wolfcamp horizontal drilling program.
The oil, NGL and gas prices thatreported by the Company reports are based on the market prices received for each commodity. The following table provides the Company's averageCommodity prices for the three and ninesix months ended SeptemberJune 30, 20172023, as compared to the same periods in 2022, decreased due to the aforementioned volatility in worldwide oil, NGL and 2016:gas demand. The average prices are as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20232022Change20232022Change
Oil price per Bbl$72.90 $110.56 (34 %)$74.00 $102.54 (28 %)
NGL price per Bbl$22.43 $44.21 (49 %)$24.76 $42.83 (42 %)
Gas price per Mcf$1.81 $6.72 (73 %)$2.77 $5.79 (52 %)
Price per BOE$46.03 $79.31 (42 %)$48.78 $73.94 (34 %)
  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
SalesNet effect from sales of purchased oil and gas. commodities. The Company periodically enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company’sCompany's areas of production.production and to secure diesel supply from the Gulf Coast. The Company also enters into purchase commitments to secure sand supply for the Company's operations in the Midland 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 pricerefineries, (ii) Gulf Coast and West Coast gas
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PIONEER NATURAL RESOURCES COMPANY
markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments. The Company periodically sells diesel and sand to unaffiliated third parties in the Permian Basin if it has supply in excess of its operational needs. Revenues and expenses from these transactions are generally presented on a gross basis in sales of purchased commodities and purchased commodities expense in the accompanying consolidated statements of operations as the Company acts as a principal in the transaction by assuming both the riskrisks and rewards of ownership, including credit risk, of the commodities purchased and the responsibility to deliver the commodities sold. In conjunction with the Company's downstream sales, the Company also enters into pipeline capacity and storage commitments in order to secure available oil and gas transportation capacity from the Company's areas of production to downstream sales points and storage capacity at downstream sales points. The transportation and storage costs associated with these transactions are included in purchased commodities expense.
The net effect of third party purchases andfrom sales of oil and gaspurchased commodities is as follows:
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Sales of purchased commodities$1,583 $2,366 $(783)$3,014 $4,583 $(1,569)
Purchased commodities expense1,642 2,382 (740)3,127 4,534 (1,407)
$(59)$(16)$(43)$(113)$49 $(162)
The change in the net effect from sales of purchased commodities for the three and ninesix months ended SeptemberJune 30, 2017 was a loss of $14 million and $47 million, respectively,2023, as compared to a loss of $14 million and $51 million for the same respective periods in 2016.2022, is primarily attributable to rising oil prices in 2022, which resulted in oil that was purchased and in transit via pipeline to the Gulf Coast or in Gulf Coast storage being sold in the following month at higher oil prices. In contrast, oil prices have been declining during 2023 resulting in marginal losses on oil sold from storage in the following month.
Firm transportation payments on excess pipeline capacity commitments are included in other expense in the accompanying consolidated statements of operations. See Note L13 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Interest and other income (loss), net.
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Interest and other income (loss), net$43 $(56)$99 $7 $69 $(62)
The change in net interest and other income (loss) for the three and six months ended June 30, 2023, as compared to the same periods in 2022, is primarily due to changes in the fair value of the Company's investment in affiliate resulting in a noncash gain of $18 million and a noncash loss of $35 million, during the three and six months ended June 30, 2023, respectively, as compared to a noncash loss of $65 million and a noncash gain of $32 million for the same periods in 2022, respectively.
See Note 4 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information on transportation commitment charges.changes in fair value.
Interest
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PIONEER NATURAL RESOURCES COMPANY
Derivative loss, net.
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Commodity price derivatives:
Noncash derivative gain (loss), net$— $72 $(72)$— $(39)$39 
Cash payments on settled derivatives, net— (75)75 — (131)131 
Total commodity derivative loss, net— (3)3 — (170)170 
Marketing derivatives:
Noncash derivative gain (loss), net20 (68)88 (16)(24)8 
Cash payments on settled derivatives(16)(17)1 (31)(29)(2)
Total marketing derivative gain (loss), net4 (85)89 (47)(53)6 
Conversion option derivatives:
Noncash derivative gain (loss), net(2)23 (25)(2)23 (25)
Cash receipts (payments) on settled derivatives, net(3)— (3)4 — 4 
Total conversion option derivative gain (loss), net(5)23 (28)2 23 (21)
Derivative loss, net$(1)$(65)$64 $(45)$(200)$155 
Commodity price derivatives. The Company primarily utilizes derivative contracts to reduce the effect of price volatility on the commodities the Company produces and other income. Interestsells. As of June 30, 2023, the Company has outstanding oil derivative contracts for three thousand Bbls per day of Brent/WTI basis swaps for January 2024 through December 2024. The basis swap contracts fix the basis differential between the WTI index price (the price at which the Company buys Midland Basin oil for transport to the Gulf Coast) and other incomethe Brent index price (the price at which a portion of the Midland Basin purchased oil is sold in the Gulf Coast market) at a weighted average differential of $4.33.
Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets.As of June 30, 2023, the Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell, at an oil terminal in Midland, Texas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027.
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 threeoil volumes sold is the WASP that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and nine months ended September 30, 2017 was $17 million and $44 million, respectively, as compared to $7 million and $21 millionexport facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the same respective periods in 2016. The increase in interest and other incomecontracts as derivative instruments not designated as hedges.
Conversion option derivatives. Certain holders of the Company's Convertible Notes exercised their conversion options during the three and ninesix months ended SeptemberJune 30, 2017,2023 and 2022. Per the terms of the notes indenture, the Company elected to settle the conversions in cash at the end of the Settlement Period. The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as compareda derivative instrument not designated as a hedge. The Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Period related to conversion options exercised by certain holders of the same respective periods in 2016, was primarily dueCompany's Convertible Notes.
The Company's open derivative contracts are subject to (i) increases of $4 millionmarket risk. See "Item 3. Quantitative and $11 million for the threeQualitative Disclosures About Market Risk" and nine months ended September 30, 2017, respectively, in interest income on short-termNote 4 and long-term investments and (ii) severance and sales tax refunds of $5 million and $13 million for the three and nine months ended September 30, 2017, respectively. See Note K5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.

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Gain (loss) on disposition of assets, net.
Derivative gains (losses), net. The Company utilizes commodity swap contracts, collar contracts and collar contracts with short puts to (i) reduce the effect
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Gain (loss) on disposition of assets, net$(3)$36 $(39)$22 $70 $(48)
Net gain (loss) on disposition 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 the three and nine months ended September 30, 2017, the Company recorded $133 million of net 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 and the relative price impact (per Bbl or Mcf)assets for the three and ninesix months ended SeptemberJune 30, 20172023 primarily represents nonmonetary transactions in which the Company exchanged both proved and 2016:unproved oil and gas properties in the Midland Basin with unaffiliated third parties resulting in the Company recording a loss of $4 million and a gain of $20 million, respectively.
  Three Months Ended September 30, 2017Nine 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, 2016Nine 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.
GainNet gain (loss) on disposition of assets net. The Company recorded net gains on the disposition of assets of nil and $205 million for the three and ninesix months ended SeptemberJune 30, 2017, respectively, as compared to $12022 primarily represents the divestment of certain undeveloped acreage and producing wells in the Midland Basin for cash proceeds of $39 million and $4$126 million, for the same respective periodsrespectively, resulting in 2016. For the nine months ended September 30, 2017, the Company'sa gain on dispositionthe divestitures of assets is primarily due to a gain of $194$35 million recognized on the sale of approximately 20,500 acres in the Martin County region of the Permian Basin. and $76 million, respectively.
See Note C3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Company's gain on disposition of assets.information.
Oil and gas production costs. The Company recognized oil and gas
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Oil and gas production costs$487 $478 $9 $942 $894 $48 
Total 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 June 30,Six Months Ended June 30,
 20232022Change20232022Change
Lease operating expense (a)$4.04 $3.71 9 %$4.06 $3.59 13 %
Gathering, processing and transportation expense (b)2.97 4.53 (34 %)2.96 4.20 (30 %)
Workover costs (a)1.07 1.02 5 %1.11 0.90 23 %
Net natural gas plant income (c)(0.55)(1.08)(49 %)(0.66)(0.97)(32 %)
$7.53 $8.18 (8 %)$7.47 $7.72 (3 %)
____________________
(a)Lease operating expensesexpense and workover costs represent the components of oil and gas production costs over which the Company has management control, while third-partycontrol.
(b)Gathering, processing and transportation charges representexpense represents the costcosts to (i) gather, process, transport volumes producedand fractionate the Company's gas and NGLs to a sales point. point of sale and, to a lesser extent, (ii) gather and transport certain of the Company's oil production to a point of sale.
(c)Net natural gas plant/gathering charges representplant income represents the net costs toearnings 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 of third-party gasthird party gas.
The change in Company-owned facilities.
Total oil and gas production costs per BOE for the three and nine months ended September 30, 2017 decreased by six percent and 11 percent, respectively, as compared to the same respective periods in 2016. The decrease in lease operating expenses 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 a greater proportion of the Company's production coming from horizontal wells in Spraberry/Wolfcamp area that have lower per BOE lease operating costs and cost reduction initiatives. The decrease in third-party transportation costs per BOE during the three and ninesix months ended SeptemberJune 30, 2017,2023, as compared to the same respective periods in 2016, was2022, is due to the following:
•Lease operating expense per BOE increased primarily due to inflationary pressures on power, chemicals and maintenance costs;
•Gathering, processing and transportation expense per BOE decreased primarily due to decreased gas processing costs as a lower proportionresult of a decrease in gas and NGL prices, which are used to value contractual volumes retained by the Company's total production being subjectgas processor as payment for their services;
•Workover costs per BOE increased primarily due to higher Eagle Ford Shale transportation costs. The netinflationary pressures on oilfield services; and
•Net natural gas plant income per BOE during the threedecreased primarily due to decreases in gas 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

NGL prices.
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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, was primarily due to an increase in Permian vertical well workover activity due to the improvement in commodity 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
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Production and ad valorem taxes$185 $271 $(86)$393 $495 $(102)
Production and ad valorem taxes were $53 million and $152 million during the three and nine months ended September 30, 2017, respectively,per BOE are as compared to $32 million and $97 million for the same respective periods in 2016. follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20232022Change20232022Change
Production taxes per BOE$2.06 $3.75 (45 %)$2.26 $3.50 (35 %)
Ad valorem taxes per BOE0.80 0.88 (9 %)0.87 0.77 13 %
$2.86 $4.63 (38 %)$3.13 $4.27 (27 %)
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.
The increasechange in production taxes per BOE for the three and six months ended June 30, 2023, as compared to the same periods in 2022, is due to the aforementioned decrease in commodity prices. The change in ad valorem taxes per BOE for the three and nine months ended SeptemberJune 30, 2017,2023, as compared to the same respective periodsperiod in 2016, is primarily due2022, reflects the increasequarterly changes in commodity prices and, forestimated full year ad valorem tax purposes, the higher valuation attributable to the Company’s successful Spraberry/Wolfcamp horizontal drilling program.
taxes. The following table provides the Company's production andchange in ad valorem taxes per BOE for the three and ninesix months ended SeptemberJune 30, 2017 and 2016:
  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 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, 2017,2023, as compared to the same respective periodsperiod in 2016,2022, is primarily due to a decreasean increase in prior year commodity prices that are used to determine current year ad valorem taxes.
Depletion, depreciation and amortization expense.
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Depletion, depreciation and amortization$695 $620 $75 $1,359 $1,234 $125 
Total DD&A expense per BOE is as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20232022Change20232022Change
DD&A per BOE$10.75 $10.60 1 %$10.79 $10.64 1 %
Depletion expense per BOE$10.57 $10.40 2 %$10.60 $10.44 2 %
The change in DD&A and depletion expense per BOE on oil and gas properties.
Depletion expense on oil and gas properties was $13.55 and $13.99 per BOE duringfor the three and ninesix months ended SeptemberJune 30, 2017, respectively, as compared to $17.05 and $17.21 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, 2017,2023, as compared to the same respective periods in 2016,2022, is primarily due to (i) commodity price increaseshigher capital costs as a result of inflation, which marginally exceeded proved reserve additions.
Exploration and cost reduction initiatives, both of which hadabandonments expense.
 Three Months Ended June 30,Six Months Ended June 30,
 20232022Change20232022Change
(in millions)
Exploration and abandonments$23 $11 $12 $38 $24 $14 
The change in exploration and abandonments expense for the effect of adding proved reserves by lengthening the economic lives of the Company's producing wellsthree and (ii) additions to proved reserves attributablesix months ended June 30, 2023, as compared to the Company's successful Spraberry/Wolfcamp horizontal drilling program.
Impairmentsame periods in 2022, is primarily related to plugging and abandonment costs exceeding their estimated abandonment liability on certain vertical wells in 2023, partially offset by the abandonment of oil and gas properties. The Company performs assessments of its long-lived assets to be held and used, including oil and gascertain unproved properties whenever events or circumstances indicatein 2022 that the carrying value of those assets may not be recoverable. ToCompany no longer planned to drill before the extent such assessments indicate a reduction ofleases expired.
During the estimated useful life or estimated future cash flows of the Company's oilsix months ended June 30, 2023 and gas properties, the carrying value may not be recoverable and therefore an impairment charge would be required to reduce the carrying value of the proved properties to their fair value.
The cash flow model2022, the Company uses to assess proved properties for impairment includes numerous assumptions. The primary factors that may affect estimates of future cash flows are (i) future reserve adjustments, both positivedrilled and negative, to proved reservesevaluated 242 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 associated253 exploratory/extension wells, respectively, with those reserves. All inputs to the cash flow model are evaluated at each measurement date.

100 percent successfully completed as discoveries.
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As a result of the Company's proved property impairment assessments, the Company recognized noncash impairment charges to reduce the carrying values of (i) the Raton field during the three months ended March 31, 2017 ($285 million impairment charge)See Note 6 and (ii) its West Panhandle field during the three months ended March 31, 2016 ($32 million impairment charge) to their estimated fair values. See Note D9 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding the Company's proved oil and gas property impairment charges.information.
Exploration and abandonments expense. The following table provides 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, the Company incurred leasehold abandonments primarily related to the abandonment of unproved properties in the Permian Basin and unproved acreage in Alaska in which the Company held an overriding royalty interest.
During the nine months ended September 30, 2017, the Company drilled and evaluated 158 exploration/extension wells, 156 of which were successfully completed as discoveries. During the same period in 2016, the Company drilled and evaluated 150 exploration/extension wells, all of which were successfully completed as discoveries.
General and administrative expense. General and administrative expense for the three 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. The decrease in
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Cash general and administrative expense$70 $78 $(8)$140 $144 $(4)
Noncash general and administrative expense18 10 8 32 17 15 
$88 $88 $— $172 $161 $11 
Total general and administrative expense per BOE duringis as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20232022Change20232022Change
Cash general and administrative expense$1.07 $1.33 (20 %)$1.11 $1.25 (11 %)
Noncash general and administrative expense0.28 0.17 65 %0.25 0.14 79 %
$1.35 $1.50 (10 %)$1.36 $1.39 (2 %)
The change in cash general and administrative expense per BOE for the three and ninesix months ended SeptemberJune 30, 2017,2023, as compared to the same respective periods in 2016, was2022, is primarily due to increases of 15%(i) the aforementioned 11 percent and 13%nine percent increase in daily sales volumes, duringrespectively, due to the Company's successful Spraberry/Wolfcamp horizontal drilling program and (ii) $10 million of charitable contributions to various Ukraine humanitarian aid organizations in 2022 in response to the Russia/Ukraine conflict, partially offset by increases in labor costs. The change in noncash general and administrative expense per BOE for the three and ninesix months ended SeptemberJune 30, 2017,2023, 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, was2022, is primarily due to a change in the repaymentretirement eligibility provisions for stock-based compensation awards issued to officers in 2023, which shortened the requisite service period over which expense is recognized, and changes in the market value of bothinvestments underlying 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.deferred compensation obligation.
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 expense for the three months ended September 30, 2017, as compared to the same period in 2016, was primarily due to (i) a decrease of $17 million in net losses from Company-provided fracture stimulation and related service operations that are provided to third party working interest owners and (ii) a decrease of $10 million in idle drilling and well service equipment charges, partially offset by (iii) an increase of $18 million in unused firm transportation costs. The decrease in other expense for the nine months ended September 30, 2017, as compared to the same period in 2016, was primarily due to (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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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 L8 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Income tax benefit (provision).Interest expense.
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Interest expense$41 $33 $8 $70 $70 $— 
The Company recognized an income tax benefit of $11 million and provision of $79 millionchange in interest expense for the three and ninesix months ended SeptemberJune 30, 2017, respectively,2023, as compared to an income tax benefit of $78 million and $362 million for the same respective periods in 2016. 2022, is primarily a result of (i) the issuance of 5.100% senior notes due 2026 in March 2023, (ii) the repayment of the Company's 3.950% senior notes due 2022 that matured in July 2022, (iii) the early extinguishment of the Company's 5.625% senior notes due 2027 during October 2022 and (iv) the repayment of the Company's 0.550% senior notes that matured in May 2023.
The weighted average cash interest rate on the Company's effective tax rateindebtedness for the three and ninesix months ended SeptemberJune 30, 2017 was 342023 is 2.4 percent and 322.1 percent, respectively, as compared to 1401.8 percent and 411.6 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, 2016.2022, respectively.
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 in the period it is recognized. The Company expects to substantially resolve the uncertainties associated with the unrecognized tax benefit by December 2018. See Note M7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regardinginformation.
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PIONEER NATURAL RESOURCES COMPANY
Other expense.
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Other expense$27 $5 $22 $67 $83 $(16)
The change in other expense for the three and six months ended June 30, 2023, as compared to the same periods in 2022, is primarily due to the following:
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions)
Impairment of long-lived assets (a)$11 $— $11 $22 $— $22 
South Texas deficiency fee
  obligation (b)
$— $(16)$16 $— $(16)$16 
Loss on early extinguishment of debt$— $— $— $— $47 $(47)
____________________
(a)Impairment of long-lived assets represents the decrease in fair value of unoccupied field offices to their expected sales price or market value.
(b)Represents changes to the Company's 2022 forecasted minimum volume commitment deficiency fee obligation and receivable associated with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas.

See Note 4 and Note 13 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Income tax provision.
Three Months Ended June 30,Six Months Ended June 30,
20232022Change20232022Change
(in millions, except percentages)
Income tax provision$(305)$(657)$352 $(640)$(1,209)$569 
Effective tax rate22 %22 %— %22 %22 %— %
The change in income tax provision for the three and six months ended June 30, 2023, as compared to the same periods in 2022, is due to a decrease of $1.6 billion and $2.6 billion, respectively, 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 enacted 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 and six months ended June 30, 2023 and 2022 differed from the U.S. statutory rate of 21 percent primarily due to forecasted state income taxes.
On August 16, 2022, President Biden signed into law the IRA, which includes among other things, the CAMT. Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income of "applicable corporations," which is effective for tax years beginning after December 31, 2022. The CAMT generally treats a corporation as an "applicable corporation" in any taxable year in which the "average annual adjusted financial statement income" of the corporation and certain of its subsidiaries and affiliates for a three-taxable-year period ending prior to such taxable year exceeds $1 billion. The Company will continue to monitor and assess any impacts of the IRA on the Company's current year tax provision and the Company's consolidated financial statements.
Capital Commitments,See Note 14 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Liquidity and Capital Resources and Liquidity
Capital commitments.Liquidity. The Company's primary needs forsources of short-term liquidity are (i) cash are forand 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.
The Company's short-term and long-term liquidity requirements consist primarily of (i) capital expenditures, and acquisition expenditures on(ii) acquisitions of oil and gas properties, and related vertical integration assets and facilities, payment(iii) payments of contractual obligations, including debt maturities, (iv) dividends and
34

PIONEER NATURAL RESOURCES COMPANY
share repurchases, (v) income taxes and (vi) working capital obligations. Funding for these cash needsrequirements may be provided by any combination of internally-generated cash flow, cashthe Company's sources of liquidity. Although the Company expects that its sources of funding will be adequate to fund its 2023 liquidity requirements, no assurance can be given that such funding sources will be adequate to meet the Company's future needs.
2023 revised capital budget. In response to improved well performance, which allows for reduced activity, and cash equivalentsimproved pricing on hand, sales of short-term and long-term investments, proceeds from divestitures of nonstrategic assets or external financing sources as discussed in "Capital resources" below.
Thecertain well costs, the Company's capital budget for 2017 is $2.752023 was revised from an expected range of $4.45 billion (excludingto $4.75 billion to an expected range of $4.375 billion to $4.575 billion of development related capital, which includes drilling and completion related activities, and the construction of tank batteries, saltwater disposal facilities and water infrastructure. The Company maintains its expected range of $150 million to $200 million of exploration, environmental and other capital, principally related to drilling four Barnett/Woodford formation wells in the Midland Basin, additional testing of the Company's enhanced oil recovery project and adding electric power infrastructure for future drilling, completions and production operations. The 2023 capital budget excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative costs andexpense, corporate facilities, information technology system upgrades), consisting of $2.475 billion for drilling operations and $275 million for water infrastructure, vertical integration and field facilities. vehicles.
The Company's2023 capital expenditures during the nine months ended September 30, 2017 were $2.1 billion, consisting 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 for the nine months ended September 30, 2017 and Management's Price Outlook, the Company expects its net cash flowsbudget is expected to be funded from operating activities,cash flow and, if necessary, from cash and cash equivalents on hand sales of short-term and long-term investments, proceeds from divestitures of nonstrategic assets and, if necessary, availabilityor borrowings under the Company's Credit Facility.
Capital resources. As of June 30, 2023, the Company had $240 million of outstanding short-term borrowings under its Credit Facility, leaving $1.8 billion of unused borrowing capacity. The Credit Facility requires the maintenance of a ratio of total debt to be sufficientbook capitalization, subject to fundcertain adjustments, not to exceed 0.65 to 1.0. The Company was in compliance with all of its planned capital expenditures, acquisitionsdebt covenants as of June 30, 2023. The Company also had unrestricted cash on hand of $91 million as of June 30, 2023.
Sources and contractual obligations, including debt maturities.
Investing activities. Investing activities used $1.3 billionuses of cash during the ninesix months ended SeptemberJune 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, 2017,2023, as compared to the same period in 2016,2022, are as follows:
Six Months Ended June 30,
20232022Change
(in millions)
Net cash provided by operating activities$4,027 $5,799 $(1,772)
Net cash used in investing activities$(2,466)$(2,065)$401 
Net cash used in financing activities$(2,502)$(5,033)$(2,531)
Operating activities. The change in net cash flow provided by operating activities during the six months ended June 30, 2023, as compared to the same period in 2022, is primarily due to (i) a decrease in oil and gas revenues, as a result of a 34 percent decrease in average realized commodity prices per BOE in 2023 due to the aforementioned volatility in worldwide oil, NGL and gas demand and (ii) an increase in the current income tax provision, partially offset by a nine percent increase in daily sales volumes due to the Company's successful Spraberry/Wolfcamp horizontal drilling program.
Investing activities. The Company's significant investing activities for the six months ended June 30, 2023 and 2022 are as follows:
•2023: The Company (i) used $2.4 billion for additions to oil and gas properties, (ii) used $69 million for additions to other assets and other property, plant and equipment and (iii) received proceeds from the disposition of assets of $23 million.
•2022: The Company (i) used $1.8 billion for additions to oil and gas properties, (ii) purchased commercial paper for $650 million, net of $2 million of discounts, (iii) received proceeds from the disposition of assets of $253 million, (iv) received proceeds from the sale of the short-term investment in Laredo common stock of $221 million and (v) used $61 million for additions to other assets and other property, plant and equipment.
Financing activities. The Company's significant financing activities during the six months ended June 30, 2023 and 2022 are as follows:
•2023: The Company (i) paid dividends of $2.1 billion, (ii) received proceeds from the March 2023 Senior Notes Offering, net of $7 million of issuance costs and discounts, of $1.1 billion, (iii) repaid $750 million associated with the maturity of investments (commercial paper, corporate bondsits 0.550% senior notes due in May 2023, (iv) repurchased $646 million of its common stock, (v) borrowed $590 million and time deposits)repaid $350 million on its Credit Facility, (vi) paid $388 million to settle exercised
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PIONEER NATURAL RESOURCES COMPANY
conversion options related to the Company's Convertible Notes and (vii) received $58 million in Capped Call proceeds related to the aforementioned exercised conversion options.
•2022: The Company (i) paid dividends of $1.2$2.9 billion, during(ii) redeemed $1.3 billion of its outstanding 0.750% senior notes due 2024 and 4.450% senior notes due 2026, having aggregate principal amounts of $750 million and $500 million, respectively, (iii) repurchased $775 million of its common stock and (iv) paid $129 million of other liabilities.
Dividends. During the ninesix months ended SeptemberJune 30, 2017, as2023, the Company declared base dividends of $552 million, or $2.35 per share, compared to $255$379 million, or $1.56 per share, during the same period in 2016,2022.
Prior to April 2023, the Company had a variable dividend strategy, in addition to its base dividend program, whereby the Company paid a quarterly variable dividend of up to 75 percent of the prior quarter's free cash flow remaining after its base dividend. In April 2023, the Company modified its variable dividend strategy to return 75 percent of the prior quarter's free cash flow inclusive of its base dividend and investment purchasesshare repurchases. The modified variable dividend strategy is effective for variable dividends declared by the Board subsequent to April 2023. Free cash flow is a non-GAAP financial measure. As used by the Company, free cash flow is defined as net cash provided by operating activities, adjusted for changes in operating assets and liabilities, less capital expenditures. The Company believes this non-GAAP measure is a financial indicator of $845 million during the nineCompany's ability to internally fund acquisitions, debt maturities, dividends and share repurchases after capital expenditures. Capital expenditures exclude acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative expenses, information technology capital investments, vehicles and additions to corporate facilities. During the six months ended SeptemberJune 30, 2017, as2023, the Company declared variable dividends of $1.5 billion, or $6.57 per share, compared to $2.3 billion, or $9.60 per share, during the same period in 2016. During the nine months ended September 30, 2017, the Company's expenditures for investing activities were primarily funded by net cash provided by operating activities.2022.
Dividends/distributions. During February andOn August of 2017 and March and August of 2016,1, 2023, the Board declared semiannual dividendsa quarterly base dividend of $0.04$1.25 per common share.share and a quarterly variable dividend of $0.59 per share for shareholders of record on September 6, 2023, with a payment date of September 21, 2023. Future base and variable dividends are at the discretion of the Board, and, if declared, the Board may change the current dividend amount based on the Company's outlook for commodity prices, liquidity, anddebt levels, capital resources, atfree cash flow or other factors. The Company can provide no assurance that dividends will be authorized or declared in the time.future or as to the amount of any future dividends. Any future variable dividends, if declared and paid, will fluctuate based on the Company's free cash flow and share repurchases, which will depend on a number of factors beyond the Company's control, including commodity prices and the Company's share price.
Contractual obligations, including off-balanceOff-balance sheet obligations. The Company's contractual obligations include long-term debt, operating leases, drilling commitments (primarily relatedarrangements. From time to commitments to pay day rates for contracted drilling rigs), capital

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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. As of SeptemberJune 30, 2017,2023, 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)the Company's share price, (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, royalties and income taxes. The Company may also be subject to retained liabilities with respect to certain divested assets by operation of law. Upon divesting its assets, the Company may receive collateral or credit support for its exposure to such liabilities. The Company establishes reserves for the amount that exceeds the collateral or credit support received in the event that the obligation becomes likely to be paid by the Company. For example, the Company is exposed to the risk that owners and/or operators of assets purchased from the Company may become unable to satisfy plugging or abandonment obligations associated with those assets. In that event, due to operation of law, the Company may be required to assume all or part of the plugging or abandonment obligations for those assets. Although the Company may establish reserves for such liabilities, it could be required to pay additional amounts in the future and these amounts could be material. The Company does not recognize a liability if the fair value of the obligation is immaterial or the likelihood of making payments 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 partiespersons 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 transportationfractionation arrangements, in order to support the Company’sCompany'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 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 aboutinformation.
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PIONEER NATURAL RESOURCES COMPANY
Convertible senior notes.In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025. The Convertible Notes bear a fixed interest rate of 0.250% per year, with interest payable semiannually on May 15 and November 15. 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 operatingcommon stock at an adjusted Conversion Rate and adjusted Conversion Price. Future declarations of quarterly base and variable dividends in excess of $0.55 per common share will cause further adjustments to the Conversion Rate and the Conversion Price pursuant to the terms of the notes indenture. Upon conversion, the Convertible Notes may be settled in cash, shares of the Company's common stock or a combination thereof, at the Company's election.
During the last 30 consecutive trading days subsequent to the third quarter of 2021 through the second quarter of 2023, 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 be convertible at the option of the holders during the period from January 1, 2022 through September 30, 2023. During the six months ended June 30, 2023, the Company made total cash payments of $384 million (inclusive of settled conversion option derivatives) related to the settlement of exercised conversion options on its Convertible Notes. As of June 30, 2023, $789 million of the Convertible Notes principle balance is outstanding, of which $71 million of principal remains in the Settlement Period and will be cash settled during the third quarter of 2023. See Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Contractual obligations. The Company's contractual obligations include debt, leases (primarily related to contracted drilling rigs, office facilities and other equipment), capital funding obligations, derivative obligations, firm transportation, storage and fractionation commitments, minimum annual gathering, processing and transportation commitments and other liabilities. Other joint owners in the properties operated by the Company could incur portions of the costs represented by these commitments.
Firm 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 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 also has open purchase commitments for inventories, materials and other property and equipment ordered, but not received, as of June 30, 2023.
Debt. As of June 30, 2023, the Company's outstanding debt is comprised of borrowings under the Credit Facility, senior notes and convertible senior notes. The senior notes and convertible senior notes issued by the Company rank equally, but are structurally subordinated to all obligations of the Company's subsidiaries. See Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Operating leases. The Company's short-term and long-term lease for its new headquarters.obligations primarily relate to contracted drilling rigs, storage tanks, equipment and office facilities.
Derivative obligations. The Company's commodity, marketing and interest rate derivative contractsconversion option derivatives are periodically measured and recorded at fair value and continue to be subject to market andand/or credit risk. As of SeptemberJune 30, 2017,2023, these contracts represented net assetsliabilities of $21 million.$157 million. The ultimate liquidation value of the Company's commodity and interest ratemarketing 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 SeptemberJune 30, 2017.2023. The ultimate liquidation of the Company's conversion option derivatives will be dependent on the Company's daily volumetric weighted average share price during the Settlement Period. See Note E4 and Note 5 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 about the Company's derivative instruments and market risk.information.
Capital resources.Other liabilities. The Company's primary capital resourcesother liabilities represent current and noncurrent other liabilities that are cashprimarily comprised of litigation 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 fundenvironmental contingencies, asset retirement obligations, 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.
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 activitiesfinance lease for the nine months ended September 30, 2017, as compared tocorporate headquarters office building, deferred compensation retirement plan obligations and other obligations for which neither 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 assurancessettlement amounts nor their timings 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 factorsprecisely determined in determining the Company's ratings including: (i) production growth opportunities, (ii) liquidity, (iii) debt levels, (iv) asset compositionadvance. See Note 9 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 B10 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements."Statements" for additional information.

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ItemITEM 3.Quantitative and Qualitative Disclosures About Market RiskQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following quantitative and qualitative disclosures about market risk are supplementary toIn the quantitative and qualitative disclosures provided innormal course of business, 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 conjunctionfinancial position is routinely subject to a variety of risks, including market risks associated 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 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 of the Company, refers to the risk of loss arising from changes in commodity prices, and interest rates. These disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators regarding how the Company views and manages ongoing market risk exposures. None ofchanges in the Company's market risk sensitive instruments are entered into for speculative purposes.
The following table reconcilesshare price, which impacts the changes that occurred in the fair values of the Company's open derivative contracts during the nine months ended September 30, 2017:settlement
37
  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 rate sensitivity. See Note G of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and Capital Commitments, Capital Resources and Liquidity included in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information regarding the Company's long-term debt.

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value of convertible notes where holders have exercised their conversion option, interest rate movements on outstanding debt and credit risks. The following table providesquantitative and qualitative information is provided about financial instruments to which the Company was a party as of SeptemberJune 30, 20172023, and that are sensitive tofrom which the Company may incur future gains or losses from changes in interest rates. The table presents debt maturities by expected maturity dates, the weighted average interest rates expected to be paid on the debt given current contractual terms and market conditions and the aggregate estimated fair value ofcommodity prices, or the Company's outstanding debt. For fixed rate debt, the weighted average interest rates represent the contractual fixed rates that theshare price. 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 ratesdoes not enter into any financial instruments, including derivatives, for its Credit Facility (that matures in August 2020) projected forward proportionatespeculative or trading purposes.
Commodity price risk. The Company's primary market risk exposure is related to the forward yield curve for LIBOR on October 30, 2017 is presented inprice it receives from 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 rate5.31% 5.11% 5.00% 4.42% 4.72% 5.49%    
Average variable interest rate3.01% 3.28% 3.55% 3.71% 

 

    
Interest Rate Swaps:               
Notional debt amount (b)$100
 $—
 $—
 $—
 $—
 $—
   $5
Fixed rate payable (%)1.81%              
 ____________________
(a)Represents maturitiessale 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 production. Realized pricing is volatile and is determined by market prices that fluctuate with changes in supply and demand for these products throughout the world. The price the Company receives for its production depends on many factors outside of the control of the Company, including differences in commodity pricing at the point of sale versus market index prices. The Company's exposure to price volatility impacts the funds available to be used in its capital program and for general working capital needs, debt obligations, dividends and share repurchases, among other uses. The Company mitigates its commodity price risk by (i) maintaining financial flexibility with a strong balance sheet, (ii) using derivative financial instruments and (iii) sales of purchased commodities.
Commodity price derivatives. The Company primarily utilizes derivative contracts to reduce the effect of price volatility on the commodities the Company produces and sells. The Company's decision on the quantity and price at which it executes commodity derivative contracts, if it so chooses, 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 sensitivethe commodity price forecast is expected to changes in oil, NGL and gas prices asimprove. Proceeds, if any, can be used for the purpose of September 30, 2017. Although mitigated byfunding 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 reducepositions limit the Company's revenues.downside risk of adverse price movements, they also limit future revenues from upward price movements.
TheAs of June 30, 2023, the Company managesdid not have any material outstanding commodity price risk with derivative contracts, such as swap contracts, collar contracts and collar contracts with short put options. Swap contracts provide a fixed price for a notional amount of sales volumes. 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. 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.
contracts. See Notes D and ENote 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a description of the accounting procedures followed byCompany's open derivative positions and additional information.
Sales of purchased commodities. The Company enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production and to secure diesel supply from the Gulf Coast. The Company also enters into purchase commitments to secure sand supply for its derivative financial instrumentsthe Company's operations in the Midland Basin. The Company enters into purchase transactions with third parties and for specific information regarding the termsseparate sale transactions with third parties to diversify a portion of the Company's derivative financial instrumentsoil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments. The Company periodically sells diesel and sand to unaffiliated third parties in the Permian Basin if it has supply in excess of its operational needs.
Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets.As of June 30, 2023, the Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell, at an oil terminal in Midland, Texas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027.
The price the Company pays to purchase the oil volumes under the purchase contracts is based on a Midland WTI price and the price the Company receives for the oil volumes sold is the WASP that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are sensitivehighly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges.
The Company could experience mark-to-market fluctuations in the fair value of its marketing derivatives based on changes in (i) the differential between Midland WTI and Brent and (ii) the WASP Differential Deduction if it deviates from historical levels. For example, a 10 percent increase or decrease in the differential between Midland WTI and Brent would impact the fair value of the Company's marketing derivatives recorded by approximately $50 million and 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 $25 million as of June 30, 2023. See Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Company share price risk. When holders of the Company's Convertible Notes exercise their conversion option, the Company is subject to market risks related to changes in oil, NGL or gas prices.






the Company's share price that occur during the Settlement Period. See
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Note 4,Note 5 and Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
 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 puts300,000
 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)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.
(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,June 30, 2023, the Company enters into buyhad $240 million of variable rate debt outstanding under the Credit Facility and sell marketing arrangements$5.1 billion of fixed rate debt outstanding. The variable rate debt outstanding under the Company's Credit Facility is benchmarked to fulfill firm pipeline transportation commitments. Associated with these marketing arrangements,SOFR, and is therefore exposed to interest rate risk. Assuming no change in the amount of variable rate debt outstanding, a 100 basis point increase or decrease in the average interest rate would impact annual interest expense by approximately $2 million. The Company has no interest rate derivative instruments outstanding; however, it may enter into index swaps thatderivative instruments in the future to mitigate priceinterest rate risk. AsSee Note 4 and Note 7 of September 30, 2017,Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
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 production and purchased commodities, and the risk of a counterparty's failure to meet its obligations under derivative contracts with the Company.
The Company's commodities are sold to various purchasers who must be prequalified under the Company's credit risk policies and procedures. The Company monitors exposure to counterparties primarily by reviewing credit ratings, financial criteria and payment history. Where appropriate, the Company was partyobtains 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 commodity receivables have not been material.
The Company uses credit and other financial criteria to (i) oil index swap contracts for 10,000 Bbls per dayevaluate the credit standing 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 hadto select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the 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 BblCompany's credit risk policies and procedures.
The Company has entered into International Swap Dealers Association Master Agreements ("ISDA Agreements") with each of its commodity 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.


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ItemITEM 4.Controls and ProceduresCONTROLS 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 in internal control over financial reporting. There have been no changes into the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended SeptemberJune 30, 20172023 that have materially affected, or are 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
ItemITEM 1.Legal Proceedings

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. 
On May 18, 2023, the Company received a Notice of Violation and Opportunity to Confer from the Environmental Protection Agency ("EPA") alleging violations of the Clean Air Act at certain of its operated locations. The Company is engaged in discussions with the EPA regarding a resolution of the alleged violations. The Company does not believe that the
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PIONEER NATURAL RESOURCES COMPANY
resolution of this matter will have a material adverse impact on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future results of operations, but the resolution of the matter may result in penalties that exceed $300,000.
Item 1A. Risk FactorsITEM 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, 2016,2022, under the headings "Part I, Item 1. Business – Competition, Markets and Regulations," "Part I. Item 1. Business - Regulation," "Part I, Item 1A. Risk Factors" andFactors," "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 has been no material change in the Company's risk factors from thosethat were described in the Company's 2022 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.

ItemITEM 2.Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizesPurchases of the Company's purchases of treasurycommon stock under plans or programsare as follows:
Three Months Ended June 30, 2023
PeriodTotal Number of
Shares Purchased (a)		Average Price Paid per ShareTotal 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)
April 1-30, 2023906 $222.48 — $4,000,000,000 
May 1-31, 2023478,297 $207.91 478,232 $3,900,572,356 
June 1-30, 2023122,643 $204.04 122,510 $3,875,575,094 
601,846 600,742 
__________________
(a)Includes shares withheld from employees in order for employees to satisfy income tax withholding payments related to share-based awards that vested during the period.
(b)In April 2023, the Board authorized a new $4 billion common stock repurchase program to replace the prior $4 billion common stock repurchase program authorized in February 2022. The stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the Board.
ITEM 5.OTHER INFORMATION
The Company was not informed by any of its directors or officers of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408, during the three months ended SeptemberJune 30, 2017:2023.
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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
The Company's sand mines are subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act 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.

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PIONEER NATURAL RESOURCES COMPANY

ItemITEM 6.Exhibits
Exhibits
EXHIBITS
Exhibit
Number		Description
4.1
Sixth Supplemental Indenture, dated March 29, 2023, by and between Pioneer Natural Resources Company and Computershare Trust Company, N.A. (as successor to 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 March 29, 2023.
Exhibit
Number10.1		Description
10.1(a) —
EighthSecond Amendment dated as of May 26, 2023, to Pioneer USA 401(k)the Credit Agreement dated October 24, 2018, among the Company, as the Borrower, Wells Fargo Bank, National Association, as Administrative Agent, Wells Fargo Bank, National Association, Bank of America, N.A. and Matching Plan dated August 28, 2017.JPMorgan Chase Bank, N.A., as Syndication Agents, and certain 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 May 31, 2023).
12.131.1 (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.
95.1101.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.INS101.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)104Filed herewith.Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
____________________
(b)(a)Filed herewith.
(b)Furnished herewith.
HExecutive Compensation Plan or Arrangement.
*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.


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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
August 1, 2023PIONEER NATURAL RESOURCES COMPANYBy:/s/ Neal H. Shah
Neal H. Shah
Date: November 3, 2017By:/s/    RICHARD P. DEALY
Richard P. Dealy,
Executive Vice President and Chief Financial Officer
Date: November 3, 2017August 1, 2023By:/s/ MARGARET M. MONTEMAYORChristopher L. Washburn
Margaret M. Montemayor,Christopher L. Washburn
Vice President and Chief Accounting Officer

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