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

FORM 10-Q 
______________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
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)
______________________________
Delaware 75-2702753
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 
Yes  ☒    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☐
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  ☒
Number of shares of Common Stock outstanding as of November 3, 2021    244,133,701May 4, 2022    241,958,985

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PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS 

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PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets as of September 30, 2021March 31, 2022 and December 31, 20202021
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7
Consolidated Statements of Equity for the three and nine months ended September 30, 2021March 31, 2022 and 20202021
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Consolidated Statements of Cash Flows for the tninehree months ended September 30, 2021March 31, 2022 and 20202021
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3528
4941
5243
PART II. OTHER INFORMATION
5344
5344
5344
5445
5546

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PIONEER NATURAL RESOURCES COMPANY
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," "models," "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; the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity; competition; the ability to obtain environmental and other permits and the timing thereof; the effect of future regulatory or legislative actions on Pioneer or the industry in which it operates, including potential changes to tax laws and rates and the risk of new restrictions with respect to development activities; the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms; potential liability resulting from pending or future litigation; the costs and results of drilling and operations; availability of equipment, services, resources and personnel required to perform the Company's drilling and operating activities; access to and availability of transportation, processing, fractionation, refining, storage and export facilities; Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled; the risk that the Company will not fully or timely realize the expected synergies and accretion metrics from the Parsley Energy, Inc. and Double Eagle III Midco 1 LLC acquisitions; 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 Company's ability to achieve it's emissions reduction, flaring and other ESG goals; the assumptions underlying forecasts, including forecasts of production, capital expenditures, expenses, cash flow and cash flow from purchases and sales of oil and gas, net of firm transportation commitments; sources of funding; quality of technical data; environmental and weather risks, including the possible impacts of climate change; cybersecurity risks; the risks associated with the ownership and operation of the Company's water services business and acts of war or terrorism. These and other risks are described in Pioneer's Annual Report on Form 10-K for the year ended December 31, 2020, 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," "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, 2020 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.

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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.
•"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
•"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.
•"DD&A" means depletion, depreciation and amortization.
•"Dutch TTF" means Title Transfer Facility and is a virtual trading hub for gas in the Netherlands and is the primary gas pricing hub for the European gas market.
•"GAAP" means accounting principles generally accepted in the United States of America.
•"HH" means Henry Hub, a distribution hub in Louisiana that serves as the delivery location for gas futures contracts on the NYMEX.
•"Houston Ship Channel" is a benchmark pricing hub for South Texas gas.
•"MBbl" means one thousand Bbls.
•"MBOE" means one thousand BOEs.
•"Mcf" means one thousand cubic feet and is a measure of gas volume.
•"MMBbl" means one million Bbls.
•"MMBOE" means one million BOEs.
•"MMBtu" means one million Btus.
•"MMcf"means one million cubic feet.

Indices.
•"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
•"Dutch TTF" means Dutch Title Transfer Facility, a virtual trading hub for gas in the Netherlands and the primary gas pricing hub for the European gas market.
•"HH" means Henry Hub, a distribution hub in Louisiana that serves as the delivery location for gas futures contracts on the NYMEX.
•"Houston Ship Channel" is a benchmark pricing hub for South Texas gas.
•"MEH" means Magellan East Houston, an oil index benchmark price of WTI in Houston, Texas.at Magellan East Houston.
•"MMBtu"SoCal" is a benchmark pricing hub for Southern California gas.
•"WAHA" is a benchmark pricing hub for West Texas gas.
•"WTI" means one million Btus.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 gas being delivered to a sales point.
•"GAAP" means accounting principles generally accepted in the United States of America.
•"GHG" means greenhouse gases.
•"NGLs" means natural gas liquids, which are the heavier hydrocarbon liquids that are separated from the gas stream; such liquids include ethane, propane, isobutane, normal butane and natural gasoline.
•"NYMEX" means the New York Mercantile Exchange.
•"NYSE" means the New York Stock Exchange.
•"OPEC" means the Organization of Petroleum Exporting Countries.
•"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.
•"Proved developed reserves" meanmeans 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.
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•"Proved reserves" means those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons ("LKH") as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty.
(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.
•"SoCal" Standardized Measure"ismeans 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 benchmark pricing hub for Southern California gas.ten percent discount rate.
•"U.S." means United States.
•"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.
•With respect to information on the working interest in wells, drilling locations and acreage, "net" wells, drilling locations and acres are determined by multiplying "gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.
•"WASP" means weighted average sales price.
•All currency amounts are expressed in U.S. dollars.
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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," "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 a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity and oil and gas demand; the impact of armed conflict and 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 industries 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 increases due to supply chain disruptions, and results of drilling and operating activities; 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 drilling and operating activities; access to and availability of transportation, processing, fractionation, refining, storage and export facilities; Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled; the 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 to Pioneer's investment securities and (iii) purchasers of Pioneer's oil, NGL and gas production and downstream sales of purchased oil and gas; 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, 2021 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.
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PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions)
millions, except share data)
March 31, 2022December 31, 2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$2,385 $3,847 
Restricted cash9 37 
Accounts receivable, net2,397 1,685 
Inventories493 369 
Investment in affiliate231 135 
Short-term investments, net640 58 
Other94 42 
Total current assets6,249 6,173 
Oil and gas properties, using the successful efforts method of accounting:
Proved properties35,272 34,454 
Unproved properties5,924 6,063 
Accumulated depletion, depreciation and amortization(12,971)(12,335)
Total oil and gas properties, net28,225 28,182 
Other property and equipment, net1,692 1,694 
Operating lease right-of-use assets320 348 
Goodwill243 243 
Other assets131 171 
$36,860 $36,811 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade$2,608 $2,380 
Due to affiliates116 179 
Interest payable23 53 
Income taxes payable62 45 
Current portion of long-term debt244 244 
Derivatives556 538 
Operating leases113 121 
Other334 513 
Total current liabilities4,056 4,073 
Long-term debt5,446 6,688 
Derivatives1 25 
Deferred income taxes2,571 2,038 
Operating leases222 243 
Other liabilities896 907 
Equity:
Common stock, $.01 par value; 500,000,000 shares authorized; 244,494,327 and
   244,144,444 shares issued as of March 31, 2022 and December 31, 2021, respectively
2 2 
Additional paid-in capital19,142 19,123 
Treasury stock, at cost; 2,535,342 and 1,366,610 shares as of March 31, 2022 and
   December 31, 2021, respectively
(523)(248)
Retained earnings5,047 3,960 
Total equity23,668 22,837 
Commitments and contingencies00
$36,860 $36,811 
September 30,
2021		December 31,
2020
 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$581 $1,442 
Restricted cash46 59 
Accounts receivable, net1,680 695 
Income taxes receivable1 4 
Inventories340 224 
Derivatives4 5 
Investment in affiliate144 123 
Other45 43 
Total current assets2,841 2,595 
Oil and gas properties, using the successful efforts method of accounting:
Proved properties35,582 23,934 
Unproved properties8,498 576 
Accumulated depletion, depreciation and amortization(11,836)(10,071)
Total oil and gas properties, net32,244 14,439 
Other property and equipment, net1,726 1,584 
Operating lease right-of-use assets319 197 
Goodwill261 261 
Derivatives1 3 
Other assets157 150 
$37,549 $19,229 









The financial information included as of September 30, 2021March 31, 2022 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 BALANCE SHEETS (continued)
(in millions, except share data)
September 30, 2021December 31,
2020
 (Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade$2,227 $928 
Due to affiliates168 102 
Interest payable30 35 
Income taxes payable29 4 
Current portion of long-term debt244 140 
Derivatives1,176 234 
Operating leases115 100 
Other546 363 
Total current liabilities4,535 1,906 
Long-term debt6,685 3,160 
Derivatives151 66 
Deferred income taxes1,833 1,366 
Operating leases220 110 
Other liabilities932 1,052 
Equity:
Common stock, $0.01 par value; 500,000,000 shares authorized; 244,122,575 and 175,525,268 shares issued as of September 30, 2021 and December 31, 2020, respectively2 2 
Additional paid-in capital19,104 9,323 
Treasury stock at cost: 139 and 11,047,856 shares as of September 30, 2021 and December 31, 2020, respectively— (1,234)
Retained earnings4,087 3,478 
Total equity23,193 11,569 
Commitments and contingencies00
$37,549 $19,229 









The financial information included as of September 30, 2021 has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenues and other income:
Oil and gas$3,282 $922 $7,787 $2,617 
Sales of purchased commodities1,679 935 4,507 2,391 
Interest and other income (loss), net2 13 42 (145)
Derivative loss, net(501)(141)(2,024)(41)
Gain on disposition of assets, net1 2 14 7 
4,463 1,731 10,326 4,829 
Costs and expenses:
Oil and gas production323 163 890 506 
Production and ad valorem taxes179 63 445 182 
Depletion, depreciation and amortization704 393 1,825 1,243 
Purchased commodities1,762 998 4,644 2,598 
Exploration and abandonments10 16 40 35 
General and administrative72 64 216 180 
Accretion of discount on asset retirement obligations2 2 5 7 
Interest41 34 122 94 
Other34 98 384 273 
3,127 1,831 8,571 5,118 
Income (loss) before income taxes1,336 (100)1,755 (289)
Income tax benefit (provision)(291)15 (400)46 
Net income (loss) attributable to common stockholders$1,045 $(85)$1,355 $(243)
Net income (loss) per share attributable to common stockholders:
Basic$4.27 $(0.52)$5.88 $(1.47)
Diluted$4.07 $(0.52)$5.60 $(1.47)
Weighted average shares outstanding:
Basic244 165 230 165 
Diluted257 165 242 165 
Dividends declared per share$2.07 $0.55 $3.19 $1.65 


 Three Months Ended March 31,
 20222021
Revenues and other income:
Oil and gas$3,930 $1,824 
Sales of purchased commodities2,217 1,240 
Interest and other income, net126 60 
Derivative loss, net(135)(691)
Gain on disposition of assets, net34 11 
6,172 2,444 
Costs and expenses:
Oil and gas production416 252 
Production and ad valorem taxes224 113 
Depletion, depreciation and amortization614 474 
Purchased commodities2,152 1,255 
Exploration and abandonments14 19 
General and administrative73 68 
Accretion of discount on asset retirement obligations4 1 
Interest37 39 
Other77 304 
3,611 2,525 
Income (loss) before income taxes2,561 (81)
Income tax benefit (provision)(552)11 
Net income (loss) attributable to common stockholders$2,009 $(70)
Net income (loss) per share attributable to common stockholders:
Basic$8.25 $(0.33)
Diluted$7.85 $(0.33)
Weighted average shares outstanding:
Basic243 210 
Diluted256 210 
Dividends declared per share$3.78 $0.56 







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 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, 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 costs:
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 

  Equity Attributable To Common Stockholders 
 Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Total Equity
(in thousands)
Balance as of December 31, 2020164,477 $2 $9,323 $(1,234)$3,478 $11,569 
Dividends declared ($0.56 per share)— — — — (122)(122)
Cumulative effect of accounting change on convertible senior notes:
Equity component— — (230)— 28 (202)
Deferred tax component— — 50 — (6)44 
Exercise of long-term incentive stock options55 — (2)8 — 6 
Purchases of treasury stock(99)— — (13)— (13)
Shares issued or reissued for Parsley Energy, Inc. ("Parsley") acquisition51,655 — 5,644 1,238 — 6,882 
Stock-based compensation costs:
Vested compensation awards, net623 — — — — — 
Compensation costs included in net loss— — 19 — — 19 
Compensation costs included in net loss associated with Parsley acquisition— — 33 — — 33 
Net loss— — — — (70)(70)
Balance as of March 31, 2021216,711 $2 $14,837 $(1)$3,308 $18,146 
Dividends declared ($0.56 per share)— — — — (138)(138)
Purchases of treasury stock(2)— — (1)— (1)
Shares issued or reissued for Double Eagle III Midco I LLC acquisition27,187 — 4,234 — — 4,234 
Stock-based compensation costs:
Vested compensation awards, net63��— — — — — 
Compensation costs included in net income— — 17 — — 17 
Net income— — — — 380 380 
Balance as of June 30, 2021243,959 $2 $19,088 $(2)$3,550 $22,638 
Dividends declared ($2.07 per share)— — — — (508)(508)
Employee stock purchases53 — (2)7 — 5 
Purchases of treasury stock(34)— — (5)— (5)
Stock-based compensation costs:
Vested compensation awards, net144 — — — — — 
Compensation costs included in net income— — 18 — — 18 
Net income— — — — 1,045 1,045 
Balance as of September 30, 2021244,122 $2 $19,104 $— $4,087 $23,193 












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 EQUITY (continued)
(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, 2020Balance as of December 31, 2020164,477 $2 $9,323 $(1,234)$3,478 $11,569 
Dividends declared ($0.56 per share)Dividends declared ($0.56 per share)— — — — (122)(122)
Cumulative effect of accounting change on convertible senior notes:Cumulative effect of accounting change on convertible senior notes:
Equity componentEquity component— — (230)— 28 (202)
Deferred tax componentDeferred tax component— — 50 — (6)44 
Exercise of long-term incentive stock optionsExercise of long-term incentive stock options55 — (2)8 — 6 
Purchases of treasury stockPurchases of treasury stock(99)— — (13)— (13)
Shares issued or reissued for Parsley Energy, Inc. ("Parsley") acquisitionShares issued or reissued for Parsley Energy, Inc. ("Parsley") acquisition51,655 — 5,644 1,238 — 6,882 
Stock-based compensation costs:Stock-based compensation costs:
Vested compensation awards, netVested compensation awards, net623 — — — — — 
Compensation costs included in net lossCompensation costs included in net loss— — 19 — — 19 
Compensation costs included in net loss associated with
Parsley acquisition		Compensation costs included in net loss associated with
Parsley acquisition		— — 33 — — 33 
Net lossNet loss— — — — (70)(70)
Balance as of March 31, 2021Balance as of March 31, 2021216,711 $2 $14,837 $(1)$3,308 $18,146 
 Equity Attributable To Common Stockholders 
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Total Equity
(in thousands)
Balance as of December 31, 2019165,547 $2 $9,161 $(1,069)$4,042 $12,136 
Dividends declared ($0.55 per share)— — — — (91)(91)
Exercise of long-term incentive stock options8 — (1)1 — — 
Purchases of treasury stock(1,007)— — (122)— (122)
Stock-based compensation costs:
Vested compensation awards, net316 — — — — — 
Compensation costs included in net income— — 16 — — 16 
Net income— — — — 291 291 
Balance as of March 31, 2020164,864 $2 $9,176 $(1,190)$4,242 $12,230 
Dividends declared ($0.55 per share)— — — — (91)(91)
Convertible senior notes:
Equity component— — 230 — — 230 
Capped call— — (113)— — (113)
Deferred tax provision— — (25)— — (25)
Purchases of treasury stock(592)— — (50)— (50)
Stock-based compensation costs:
Vested compensation awards, net4 — — — — — 
Compensation costs included in net loss— — 17 — — 17 
Net loss— — — — (449)(449)
Balance as of June 30, 2020164,276 $2 $9,285 $(1,240)$3,702 $11,749 
Dividends declared ($0.55 per share)— — — — (91)(91)
Employee stock purchases62 — (1)7 — 6 
Purchases of treasury stock(19)— — (2)— (2)
Stock-based compensation costs:
Vested compensation awards, net84 — — — — — 
Compensation costs included in net loss— — 21 — — 21 
Net loss— — — — (85)(85)
Balance as of September 30, 2020164,403 $2 $9,305 $(1,235)$3,526 $11,598 














The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
 Nine Months Ended September 30,
 20212020
Cash flows from operating activities:
Net income (loss)$1,355 $(243)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization1,825 1,243 
Exploration expenses3 8 
Deferred income taxes371 (36)
Gain on disposition of assets, net(14)(7)
Loss on early extinguishment of debt, net2 27 
Accretion of discount on asset retirement obligations5 7 
Interest expense19 34 
Derivative-related activity636 129 
Amortization of stock-based compensation87 54 
Investment in affiliate valuation adjustment(21)119 
South Texas contingent consideration valuation adjustment— 42 
South Texas deficiency fee obligation— 69 
Other116 94 
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(601)371 
Inventories(93)13 
Other assets24 24 
Accounts payable515 (164)
Interest payable(76)(37)
Other liabilities(318)(201)
Net cash provided by operating activities3,835 1,546 
Cash flows from investing activities:
Proceeds from disposition of assets59 58 
Cash used in acquisitions, net of cash acquired(826)— 
Additions to oil and gas properties(2,191)(1,297)
Additions to other assets and other property and equipment(77)(103)
Net cash used in investing activities(3,035)(1,342)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net of discount3,247 1,091 
Proceeds from issuance of convertible senior notes— 1,323 
Purchase of derivatives related to issuance of convertible senior notes— (113)
Borrowings under credit facility650 800 
Repayment of credit facilities(1,287)(800)
Repayment of senior notes, including tender offer premiums(3,371)(1,198)
Payments of other liabilities(153)(162)
Payments of financing fees(32)(36)
Purchases of treasury stock(19)(174)
Exercise of long-term incentive plan stock options and employee stock purchases11 6 
Dividends paid(720)(255)
Net cash provided by (used in) financing activities(1,674)482 
Net increase (decrease) in cash, cash equivalents and restricted cash(874)686 
Cash, cash equivalents and restricted cash, beginning of period1,501 705 
Cash, cash equivalents and restricted cash, end of period$627 $1,391 



 Three Months Ended March 31,
 20222021
Cash flows from operating activities:
Net income (loss)$2,009 $(70)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization614 474 
Exploration expenses5 3 
Deferred income taxes532 (18)
Gain on disposition of assets, net(34)(11)
Loss on early extinguishment of debt47 5 
Accretion of discount on asset retirement obligations4 1 
Interest expense3 1 
Derivative-related activity67 370 
Amortization of stock-based compensation19 52 
Investment valuation adjustments(114)(54)
Other30 45 
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable(697)(330)
Inventories(126)(90)
Operating lease right-of-use assets28 30 
Other assets(28)(14)
Accounts payable178 265 
Interest payable(30)(57)
Income taxes payable17 7 
Operating leases(29)(31)
Other liabilities89 (201)
Net cash provided by operating activities2,584 377 
Cash flows from investing activities:
Proceeds from disposition of assets210 23 
Proceeds from investments75 — 
Purchase of investments(640)— 
Cash acquired, net of cash paid— 117 
Additions to oil and gas properties(917)(464)
Additions to other assets and other property and equipment(41)(24)
Net cash used in investing activities(1,313)(348)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net of discount— 2,497 
Repayment of credit facilities— (397)
Repayment of senior notes, including tender offer premiums(1,292)(2,640)
Payments of other liabilities(121)(140)
Payments of financing fees— (28)
Purchases of treasury stock(276)(13)
Exercise of long-term incentive plan stock options1 6 
Dividends paid(1,073)(91)
Net cash used in financing activities(2,761)(806)
Net decrease in cash, cash equivalents and restricted cash(1,490)(777)
Cash, cash equivalents and restricted cash, beginning of period3,884 1,501 
Cash, cash equivalents and restricted cash, end of period$2,394 $724 
The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)


NOTE 1. Organization and Nature of Operations
Pioneer Natural Resources Company ("Pioneer" or the "Company") is a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange (the "NYSE").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 in the PermianMidland Basin in West Texas.
NOTE 2. Basis of Presentation
Presentation. In the opinion of management, the unaudited interim consolidated financial statements of the Company as of September 30, 2021March 31, 2022 and for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 include all adjustments and accruals, consisting only of normal, recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods in conformity with generally accepted accounting principles in the United States ("GAAP").GAAP. The operating results for the three and nine months ended September 30, 2021March 31, 2022 are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in 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, 2020.
Correction of previously issued financial statements. During the Company's review of its marketing contracts during the fourth quarter of 2020, the Company identified two long-term marketing contracts that should have been accounted for as derivative contracts. The contracts were entered in October 2019, each with a January 1, 2021 contract commencement date and a December 31, 2026 contract termination date. In accordance with Staff Accounting Bulletin ("SAB") No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the misstatements and, based on an analysis of quantitative and qualitative factors, determined that the related impact of the misstatement was material to its consolidated financial statements for the interim period ended September 30, 2020. In accordance with Accounting Standards Codification 250, Accounting Changes and Error Corrections, the Company has corrected the misstatement for the three and nine months ended September 30, 2020 by restating the consolidated financial statements appearing herein. The net impact of these noncash corrections to the Company's previously reported consolidated financial statements for the three and nine months ended September 30, 2020 is as follows (in millions, except for per share data):
As ReportedAdjustmentsAs Restated
Three Months EndedNine Months EndedThree Months EndedNine Months EndedThree Months EndedNine Months Ended
Oil and gas revenues$922 $2,617 $— $— $922 $2,617 
Derivative gain (loss), net$(57)$60 $(84)$(101)$(141)$(41)
Total revenues and other income$1,815 $4,930 $(84)$(101)$1,731 $4,829 
Total costs and expenses1,831 5,118 — — 1,831 5,118 
Loss before income taxes(16)(188)(84)(101)(100)(289)
Income tax benefit (provision)(4)18 19 28 15 46 
Net loss$(20)$(170)$(65)$(73)$(85)$(243)
Basic and diluted net loss per share attributable to common stockholders$(0.12)$(1.03)$(0.40)$(0.44)$(0.52)$(1.47)
2021.
Use of estimates in the preparation of financial statements. Preparation of the Company's unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as ofat the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Depletion of oil and gas properties is calculateddetermined using estimates of proved oil and gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
expenditures. Similarly, evaluations for impairment of goodwill and proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of proved, probable and possiblefuture recoverable reserves, and commodity price outlooks.outlooks and estimates of development and production costs. Actual results could differ from the estimates and assumptions utilized.
Adoption of new accounting standards. In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. Additionally, ASU 2020-06 amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The if-converted method assumes the conversion of convertible instruments occurs at the beginning of the reporting period and diluted weighted average shares outstanding includes the common shares issuable upon conversion of the convertible instruments. The Company early adopted ASU 2020-06 on January 1, 2021.
Upon issuance of the Company's $1.3 billion principal amount of 0.250% convertible senior notes due 2025 (the "Convertible Notes") in May 2020, the Company bifurcated the debt and equity components of the Convertible Notes to long-term debt and additional paid-in capital in its consolidated balance sheet. The amount recorded to additional paid-in capital represented a debt discount that was being amortized to interest expense over the life of the Convertible Notes. As part of the adoption of ASU 2020-06, the Company (i) reversed the debt discount and related deferred income tax liability recorded to additional paid-in capital of $230 million and $50 million, respectively, (ii) recorded a cumulative effect of the adoption of ASU 2020-06 of $22 million to retained earnings, representing a reversal of $28 million of the debt discount that was amortized to interest expense, net of an associated deferred income tax impact of $6 million, in 2020 and (iii) recorded the respective offsets for items (i) and (ii) above, representing the unamortized debt discount attributable to the Convertible Notes of $202 million to long-term debt and the associated deferred tax impact of $44 million to deferred income tax liabilities. See Note 7 for additional information.
Additionally, upon adoption of ASU 2020-06, the treasury stock method utilized by the Company to calculate earnings per share through December 31, 2020 is no longer allowed. As such, the Company has transitioned to the if-converted method utilizing the modified retrospective approach, resulting in 12 million incremental shares being included in the Company's weighted-average diluted shares outstanding for the three and nine months ended September 30, 2021. See Note 16 for additional information.
NOTE 3. Acquisitions, DivestituresAcquisition and RestructuringDivestiture Activities
Acquisitions
DoublePoint Acquisition.Acquisitions. On May 4, 2021, theThe Company acquired Double Eagle III Midco 1 LLC ("DoublePoint") pursuant to a definitive membership interest purchase agreementregularly seeks to acquire DoublePoint dated April 1, 2021 (the "DoublePoint Acquisition") in exchange for 27 million sharesor trade acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of Pioneer common stockfuture horizontal wells and $1.0 billion of cash. The Pioneer stock consideration transferred had a fair value of $4.2 billion.provides superior returns on investment.
Parsley Acquisition.acquisition. On January 12, 2021, the Company acquired Parsley Energy, Inc., a Delaware corporation that previously traded on the NYSE under the symbol "PE" ("Parsley"), pursuant to the Agreement and Plan of Merger, dated as of October 20, 2020, among Pioneer, certain of its subsidiaries, Parsley and Parsley's subsidiary, Parsley Energy, LLC (the "Parsley Acquisition"). On the closing date of the Parsley Acquisition, Parsley merged into a newly formed wholly-owned subsidiary of the Company, and the subsidiaries of Parsley, including Jagged Peak Energy LLC ("Jagged Peak"), became indirect subsidiaries of the Company.
As part of the Parsley Acquisition, each eligible share of Parsley Class A common stock and each membership interest unit of Parsley Energy, LLC were automatically converted into the right to receive 0.1252 (the "Exchange Ratio") shares of Pioneer common stock. As a result, the Company issued 52 million shares of Pioneer common stock upon the consummation of the Parsley Acquisition, representing total stock consideration transferred of $6.9 billion.
Both theThe Parsley Acquisition and the DoublePoint Acquisition werewas accounted for using the acquisition method under ASC Topic 805, Business Combinations, which requires all assets acquired and liabilities assumed to be recorded at fair value at the acquisition date. Provisional fair value measurements were made
Divestitures.
•In February 2022, the Company completed the sale of its equity interest in certain gas gathering and processing systems in northern Martin County for acquired assets and liabilities, andcash proceeds of $125 million, after normal closing adjustments to("Martin County Gas Processing Divestiture"). The sale was treated as a recovery of investment from a partial sale of proved property resulting in no gain or loss being recognized.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
those measurements may be made in subsequent periods (up to one year from•During the acquisition date) as information necessary to completethree months ended March 31, 2022, the fair value analysis is obtained.
The following table summarizes the provisional fair values assigned to assets acquiredCompany divested certain undeveloped acres and liabilities assumed (presented in millions):
Parsley AcquisitionDoublePoint Acquisition
As of January 12, 2021As of May 4, 2021
Cash and cash equivalents (a)$118 $58 
Accounts receivable253 131 
Derivatives8 — 
Proved properties5,110 3,929 
Unproved properties5,636 2,406 
Other property and equipment118 72 
Operating lease right-of-use assets201 2 
Other assets22 11 
Total assets acquired11,466 6,609 
Accounts payable337 232 
Interest payable49 22 
Derivatives317 86 
Operating leases201 2 
Deferred income taxes140 — 
Long-term debt3,238 975 
Other liabilities301 58 
Total liabilities assumed4,583 1,375 
Net assets acquired$6,883 $5,234 
______________________
(a)Cash used in investing activities as a result of the Parsley Acquisition and DoublePoint Acquisition includes (i) $2 million of cash usedproducing wells in the settlementMidland Basin for (i) cash proceeds of partial shares related to the conversion of Parsley Class A common stock at the Exchange Ratio$85 million and (ii) $1 billioninterests in certain Midland Basin undeveloped acres and producing wells valued at $8 million. The Company recorded a gain on these sales of cash used to acquire DoublePoint, respectively.
The following unaudited pro forma summary presents$41 million, which is reflected in net gain on disposition of assets in the resultsconsolidated statements of operations as if the Parsley Acquisition and DoublePoint Acquisition had occurred on January 1, 2020. The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may have differed significantly from this pro forma financial information. The pro forma information does not reflect any synergy savings that might have been achieved from combining the operations and is not intended to reflect the actual results that would have occurred had the companies actually been combined during the periods presented.
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in millions)(in millions)
Revenues and other income$4,463 $2,168 $10,373 $6,797 
Net income (loss)$1,045 $(40)$1,210 $(3,870)
Divestituresoperations.
•In March 2021, the Company sold its well services business to a third party for (i) net cash proceeds of $20 million and (ii) up to $4 million of additional cash proceeds to be earned over the next three years.through March 2024. The Company recorded a gain on the sale of $9 million, which is reflected in net gain on disposition of assets in the consolidated statements of operations for the nine months ended September 30, 2021.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
•In May 2020, the Company completed the sale of certain vertical wells and approximately 1,500 undeveloped acres in Upton County of the Permian Basin to an unaffiliated third party for net cash proceeds of $6 million. The Company recorded a gain of $6 million associated with the sale which is reflected in net gain on disposition of assets in the consolidated statements of operations for the nine months ended September 30, 2020.
Restructuring
During 2020, the Company implemented changes to respond to a reduction in expected activity levels as a result of the COVID-19 pandemic. In October 2020, the Company initiated a corporate restructuring whereby approximately 300 employees were involuntarily separated from the Company. The Company recorded $74 million of employee-related charges, including $3 million of noncash stock-based compensation expense related to the accelerated vesting of certain equity awards, in other expense in the consolidated statements of operations during the three and nine months ended September 30, 2020. See Note 8 and Note 14 for additional information.
In June 2020, the Company implemented changes to its well services business, including a staffing reduction of approximately 50 employees.
The employee-related costs associated with restructuring activities were primarily recorded in other expense in the consolidated statements of operations. Obligations associated with employee-related charges are included in accounts payable - due to affiliates in the consolidated balance sheets. See Note 14 for additional information.
The changes in the Company's total employee-related obligations associated with divestiture and restructuring activities are as follows:
Nine Months Ended September 30,
20212020
(in millions)
Beginning employee-related obligations$3 $6 
Additions (a)1 75 
Less:
Noncash stock-based compensation— 3 
Cash payments3 7 
Ending employee-related obligations$1 $71 
______________________
(a)Additions for the nine months ended September 30, 2021 primarily represent employee-related charges associated with the divestiture of the Company's well services business in March 2021. Additions for the nine months ended September 30, 2020 primarily represent employee-related charges associated with the 2020 corporate restructuring of $74 million and the Company's staffing reduction in its well services business of $1 million. See Note 14 for additional information.
NOTE 4. Fair Value Measurements
The Company determines fair value based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company's own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.
The three input levels of the fair value hierarchy are as follows:
•Level 1 – quoted prices for identical assets or liabilities in active markets.
•Level 2 – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
(e.g. (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.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
Assets and liabilities measured at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows:
As of September 30, 2021
 Fair Value Measurement
 Quoted Prices in
Active Markets for Identical Assets
(Level 1)		Significant
Other Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
(in millions)
Assets:
Commodity price derivatives$— $5 $— $5 
Deferred compensation plan assets74 — — 74 
Investment in affiliate144 — — 144 
Total assets218 5 — 223 
Liabilities:
Commodity price derivatives— 1,239 — 1,239 
Marketing derivatives— — 88 88
Total liabilities— 1,239 88 1,327 
Total recurring fair value measurements$218 $(1,234)$(88)$(1,104)
As of March 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$231 $— $— $231 
Deferred compensation plan assets68 — — 68 
Marketing derivatives— — 5 5 
$299 $— $5 $304 
Liabilities:
Commodity price derivatives (a)$— $519 $— $519 
Marketing derivatives— — 38 38 
$— $519 $38 $557 
As of December 31, 2021
 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$135 $— $— $135 
Deferred compensation plan assets74 — — 74 
Short-term investment58 — — 58 
$267 $— $— $267 
Liabilities:
Commodity price derivatives (a)$— $486 $— $486 
Marketing derivatives— — 77 77 
$— $486 $77 $563 
As of December 31, 2020
 Fair Value Measurement
 Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant
Other Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
 (in millions)
Assets:
Commodity price derivatives$— $8 $— $8 
Deferred compensation plan assets72 — — 72 
Investment in affiliate123 — — 123 
Total assets195 8 — 203 
Liabilities:
Commodity price derivatives— 209 — 209 
Marketing derivatives— — 91 91 
Total liabilities— 209 91 300 
Total recurring fair value measurements$195 $(201)$(91)$(97)
______________________
(a)Includes $250 million and $328 million as of March 31, 2022 and December 31, 2021, respectively, of liabilities recorded in the fourth quarter of 2021 related to entering into equal and offsetting oil and gas commodity derivative trades that had the net effect of eliminating certain of the Company's 2022 derivative obligations.
Commodity price derivatives.The Company's commodity price derivatives primarily represent oil NGL and gas swap contracts, collar contracts, collar contracts with short puts, option contracts and basis swap contracts. The asset and liability measurements for the Company's commodity price derivative contracts are determined using Level 2 inputs. The Company utilizes discounted cash flow and option-pricing models for valuing its commodity price derivatives.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The asset and liability values attributable to the Company's commodity price derivatives were determined based on inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) the implied rate of volatility inherent in the collar contracts and collar contracts with short puts, and option contracts, which is based on active and independent market-quoted volatility factors.
Marketing derivatives. Under the contract terms of the marketing derivatives, the Company agreed to purchase and simultaneously sell 50 thousand barrels of oil per day at an oil terminal in Midland, Texas for a six-yearsix-year term that ends on
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
December 31, 2026. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland West Texas Intermediate ("WTI")oil price and the price the Company receives for the oil volumes sold is a weighted average sales price ("WASP")WASP that the non-affiliated counterparty receives for selling oil through theira Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the marketing contracts, the Company determined that the marketing contracts should be accounted for as derivative instruments not designated as hedges. The asset and liability measurements for the Company's marketing derivative contracts are determined using both Level 2 and 3 inputs. The Company utilizes a discounted cash flow model for valuing its marketing derivatives.
The asset and liability values attributable to the Company's marketing derivativesderivative were determined based on Level 2 inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) stated contractual rates. The Level 3 inputs attributable to the Company's marketing derivatives include the historical monthly differential between Brent oil prices and the corresponding WASP of the counterparty to the marketing derivatives ("WASP Differential Deduction") and, to a lesser extent, an estimated annual cost inflation rate. The average WASP Differential Deduction used in the fair value determination as of September 30,March 31, 2022 and 2021 was $2.03 per barrel and 2020 was $2.07 and $1.97$2.06 per barrel, respectively. The WASP Differential Deduction and the estimated annual cost inflation rate reflects management's best estimate of future results utilizing historical performance, but these estimates are not observable inputs by a market participant and contain a high degree of uncertainty. The Company could experience significant mark-to-market fluctuations in the fair value of its marketing derivatives based on changes in the WASP Differential Deduction if it deviates from historical levels. For example, a 10 percent increase or decrease in the WASP Differential Deduction would impact the fair value of the Company's marketing derivatives recorded by approximately $20 million as of September 30, 2021.March 31, 2022.
Deferred compensation plan assets. The Company's deferred compensation plan assets include investments in equity and mutual fund securities that are actively traded on major exchanges. The fair value of these investments is determined using Level 1 inputs based on observable prices on major exchanges.
Investment in affiliate.affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of itsthe Company's investment in ProPetro common stock is determined using Level 1 inputs based on observable prices on a major exchange. See Note 11 andNote 13 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. The shares were treated as an investment in equity securities 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 exchange. See Note 13 for additional information.
Assets and liabilities measured at fair value on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances. These assets and liabilities can include inventory,inventories, proved and unproved oil and gas properties, assets acquired and liabilities assumed in business combinations, goodwill and other long-lived assets that are written down to fair value when they are determined to be impaired or held for sale.
Parsley Acquisition and DoublePoint Acquisition. Both the Parsley Acquisition and DoublePoint Acquisition were accounted for using the acquisition method under ASC Topic 805, "Business Combinations", which requires all assets acquired and liabilities assumed in the acquisitions to be recorded at fair values at the acquisition date of each transaction. Oil and gas properties were valued based on income and market based approaches utilizing Level 3 inputs, including internally generated development and production profiles and price and cost assumptions. Debt assumed in the acquisitions was valued based on Level 2 inputs that included using observable market prices to determine fair value. Net derivative liabilities assumed in the acquisitions were valued based on Level 2 inputs similar to the Company's other commodity price derivatives. See Note 3for additional information.
South Texas Divestiture. The Company recorded a deficiency fee obligation and related deficiency fee receivable in conjunction with the divestiture of the Company's Eagle Ford assets and other remaining South Texas assets in May 2019 (the "South Texas Divestiture"). The fair value of the deficiency fee obligation and deficiency fee receivable was determined using Level 3 inputs based on a probability-weighted forecast that considers historical results, market conditions and various development plans to arrive at the estimated present value of the deficiency payments and corresponding receipts. Changes to
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
the Company's forecasted deficiency fee obligation resulted in the Company recording a charge of $69 million to other expense during the nine months ended September 30, 2020. The present value of the estimated future cash payments and expected cash receipts were determined using a 3.6 percent and 3.2 percent discount rate, respectively, based on the estimated timing of future payments and receipts and the Company's counterparty credit risk assessments. See Note 10andNote 14 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 consolidated balance sheets are as follows:
 As of September 30, 2021As of December 31, 2020
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
 (in millions)
Assets:
Cash and cash equivalents (a)$581 $581 $1,442 $1,442 
Restricted cash (a) (b)$46 $46 $59 $59 
Liabilities:
Current portion of long-term debt:
Senior notes (c)$244 $249 $140 $140 
Long-term debt:
Convertible Notes (c) (d)$1,305 $2,139 $1,100 $1,756 
Senior notes (c)$5,380 $5,469 $2,060 $2,230 
 As of March 31, 2022As of December 31, 2021
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
 (in millions)
Assets:
Cash and cash equivalents (a)$2,385 $2,385 $3,847 $3,847 
Restricted cash (a) (b)$9 $9 $37 $37 
Short-term investments, net (c)$640 $640 $— $— 
Liabilities:
Current portion of long-term debt:
Senior notes (d)$244 $245 $244 $247 
Long-term debt:
Convertible senior notes (d)$1,308 $3,142 $1,307 $2,359 
Senior notes (d)$4,138 $3,895 $5,381 $5,390 
______________________
(a)Fair value approximates carrying value due to the short-term nature of the instruments.
(b)Primarily relates toRepresents funds in escrow for use in future deficiency fee payments related toassociated with the Company's 2019 sale of its Eagle Ford assets and other remaining assets in South Texas Divestiture.(the "South Texas Divestiture"). Any remaining balance after the payment of the deficiency fees will revert to the Company on March 31, 2023. See Note 10 for additional information.
(c)Represents commercial paper investments that 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. Commercial paper is included in cash and cash equivalents if it has maturity dates that are less than 90 days at the date of purchase; otherwise, investments are reflected in short-term investments in the accompanying consolidated balance sheets based on their maturity dates. Fair value for the Company's commercial paper investments is determined using Level 2 inputs.
(d)Fair value is determined using Level 2 inputs. The Company's senior notes are quoted, but not actively traded on major exchanges; therefore, fair value is based on periodic values as quoted on major exchanges. See Note 7 for additional information.
(d)Upon issuance of the Convertible Notes, the debt discount and related deferred income tax liability were recorded to additional paid-in capital. As part of the Company's early adoption of ASU 2020-06 on January 1, 2021 (see Note 2), the Company reclassified the debt discount and related deferred income tax liability of $230 million and $50 million, respectively, from additional paid-in capital to the Convertible Notes reported in long-term debt and deferred income taxes, respectively, in the consolidated balance sheets.
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 5. Derivative Financial Instruments
The Company primarily utilizes commodity swapCompany's derivatives are accounted for as non-hedge derivatives and all changes in the fair values of its derivative contracts collar contracts, collar contracts with short puts and basis swap contracts to (i) reduceare recognized as gains or losses in the effectearnings of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's capital budgeting and expenditure plans and (iii) support the payment of contractual obligations and dividends.periods in which they occur.
Oil production derivatives. The Company sells its oil production at the lease and the sales contracts governing such oil production are tied directly to, or are correlated with, New York Mercantile Exchange ("NYMEX") WTI oil prices. The Company also enters into (i) pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from its areas of production and (ii) purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil pricing to Gulf Coast refineries or international export markets at prices that are highly correlated to Brent oil prices. As a result, the Company uses a combination of Brent, Magellan East Houstonperiodically enters into basis swap contracts to reduce basis risk between WTI index prices and Midland index prices at which the oil is sold.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
("MEH") and WTI derivative contracts to manage futureVolumes per day associated with outstanding oil price volatility.
The Company's outstanding oilbasis derivative contracts as of September 30, 2021March 31, 2022 and the weighted average oil prices per barrelprice differential for those contracts are as follows:
2021Year Ending December 31, 2022 (a)
Fourth Quarter
Brent swap contracts:
Volume per day (Bbl)17,000 — 
Price per Bbl$44.45 $— 
MEH swap contracts:
Volume per day (Bbl)43,000 2,055 
Price per Bbl$40.52 $42.80 
Midland WTI swap contracts:
Volume per day (Bbl)5,000 — 
Price per Bbl$40.50 $— 
NYMEX WTI swap contracts:
Volume per day (Bbl)15,000 — 
Price per Bbl$52.85 $— 
NYMEX rollfactor swap contracts:
Volume per day (Bbl)35,000 — 
Price per Bbl$0.17 $— 
Midland WTI basis swap contracts:
Volume per day (Bbl)37,000 26,000 
Price per Bbl$0.89 $0.50 
Brent call contracts sold:
Volume per day (Bbl) (b)20,000 — 
Price per Bbl$69.74 $— 
Brent collar contracts:
Volume per day (Bbl)— 10,000 
Price per Bbl:
Ceiling$— $60.32 
Floor$— $50.00 
NYMEX WTI collar contracts:
Volume per day (Bbl)6,000 — 
Price per Bbl:
Ceiling$55.54 $— 
Floor$50.00 $— 
Brent collar contracts with short puts:
Volume per day (Bbl)90,000 67,000 
Price per Bbl:
Ceiling$50.74 $66.02 
Floor$45.11 $52.39 
Short put$35.07 $39.25 
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
MEH collar contracts with short puts:
Volume per day (Bbl)9,446 — 
Price per Bbl:
Ceiling$51.29 $— 
Floor$41.55 $— 
Short put$31.55 $— 
NYMEX WTI collar contracts with short puts:
Volume per day (Bbl)— 12,000 
Price per Bbl:
Ceiling$— $65.86 
Floor$— $52.50 
Short put$— $40.00 
2022
Second QuarterThird QuarterFourth Quarter
Midland/WTI basis swap contracts:
Volume per day (Bbl) (a)26,000 26,000 26,000 
Price differential per Bbl$0.50 $0.50 $0.50 
______________________
(a)Between October 1, 2021 and November 1, 2021,The referenced basis swap contracts fix the basis differentials between the index price at which the Company liquidated certainsells a portion of its Midland Basin oil and the WTI index price.
Additionally, as of March 31, 2022, the Company has outstanding oil derivative contracts as follows (i) 8,152for 3,000 Bbls per day of MEHBrent/WTI basis swaps for January 2024 through December 2024 production. The basis swap contracts fix the basis differential between the WTI index price (the price at which the Company buys Midland Basin oil for January 2022 through March 2022 production withtransport to the Gulf Coast) and the Brent index price (the price at which the Midland Basin purchased oil is sold in the Gulf Coast market) at a weighted average swap pricedifferential of $42.80, (ii) 10,000 Bbls per day of Brent collar contracts for January 2022 through December 2022 production with a weighted average call price of $60.32 and a put price of $50.00 and (iii) 20,000 Bbls per day of Brent collar contracts with short puts for January 2022 through December 2022 production with a weighted average call price of $57.88, put price of $45.50 and short put price of $35.00.
(b)The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar contracts with short puts.
NGL production derivatives. All material physical sales contracts governing the Company's NGL production are tied directly or indirectly to Mont Belvieu, Texas NGL component product prices. The Company uses derivative contracts to manage the volatility of NGL component product prices. As of September 30, 2021, the Company did not have any NGL derivative contracts outstanding.$4.33.
Gas production derivatives. All material physical sales contracts governing the Company's gas production are tied directly or indirectly to NYMEX Henry Hub ("HH")HH gas prices or regional index prices (e.g. WAHA, SoCal and Houston Ship Channel) where the gas is sold. To diversify the gas prices it receives to international market prices, the Company sells a portion of its gas production at a price correlated to the Dutch Title Transfer Facility ("Dutch TTF") prices.TTF index price. 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.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The Company'sVolumes per day associated with outstanding gas derivative contracts as of September 30, 2021March 31, 2022 and the weighted average gas prices per MMBtu for those contracts are as follows:
2021Year Ending December 31, 2022
Fourth Quarter
NYMEX swap contracts:
Volume per day (MMBtu)160,000 — 
Price per MMBtu$3.63 $— 
Dutch TTF swap contracts:
Volume per day (MMBtu)30,000 30,000 
Price per MMBtu$5.07 $8.87 
WAHA swap contracts:
Volume per day (MMBtu)116,304 4,932 
Price per MMBtu$2.36 $2.46 
NYMEX collar contracts:
Volume per day (MMBtu)247,000 1,726 
Price per MMBtu:
Ceiling$3.20 $3.45 
Floor$2.60 $2.75 
NYMEX collar contracts with short puts:
Volume per day (MMBtu)— 100,000 
Price per MMBtu:
Ceiling$— $4.00 
Floor$— $3.20 
Short put$— $2.50 
Basis swap contracts:
Permian Basin index swap volume per day (MMBtu) (a)7,000 1,726 
Price differential ($/MMBtu)$(0.39)$(0.39)
____________________
(a)The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells a portion of its Permian Basin gas and the NYMEX index price used in swap contracts.
2022
Second QuarterThird QuarterFourth Quarter
Dutch TTF swap contracts:
Volume per day (MMBtu)30,000 30,000 30,000 
Price per MMBtu$7.80 $7.80 $7.80 
Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets.The Company's marketing derivatives reflect two long-term marketing contracts that were entered in October 2019 whereby the Company agreed to purchase and simultaneously sell 50 thousand barrels of oil per day at an oil terminal in Midland, Texas for a six-yearsix-year term that began on January 1, 2021 and ends on December 31, 2026. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland WTI price and the price the Company receives for the oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through theira Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the marketing contracts, the Company determined that the marketing contracts should be accounted for as derivative instruments. For the three and nine months ended September 30, 2021, the Company recorded noncash marketing derivative gains of $6 million and $3 million, respectively, and cash payments of $11 million and $31 million, respectively, as compared to noncash marketing derivative losses of $85 million and $100 million, respectively, and no cash payments or receipts for the same respective periods in 2020.
Derivative accounting. The Company's derivatives are accounted for as non-hedge derivatives 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 enters into commodity price derivatives under master netting arrangements, which, in an event of default, allows the Company to offset payables to and receivables from the defaulting counterparty.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
Contingent consideration. The Company's right to receive contingent consideration in conjunction with the South Texas Divestiture was determined to be a derivative financial instrument that is not designated as a hedging instrument. Prior to its settlement in July 2020, the contingent consideration was revalued using an option pricing model each reporting period based on forecasted oil and NGL prices during each of the five years from 2020 to 2024. See Note 13 for additional information.
Noncash gains and losses associated with the Company's (i) commodity price derivatives and marketing derivatives and (ii) contingent consideration are separately presented in operating activities within the consolidated statements of cash flows.
Fair value. The fair value of derivative financial instruments not designated as hedging instruments is as follows:
As of March 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:
Marketing derivativesOther assets - noncurrent$5 $— $5 
Liabilities:
Commodity price derivativesDerivatives - current$518 $— $518 
Marketing derivativesDerivatives - current$38 $— $38 
Commodity price derivativesDerivatives - noncurrent$1 $— $1 
As of September 30, 2021
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:
Commodity price derivativesDerivatives - current$4 $— $4 
Commodity price derivativesDerivatives - noncurrent$1 $— $1 
Liabilities:
Commodity price derivativesDerivatives - current$1,129 $— $1,129 
Marketing derivativesDerivatives - current$47 $— $47 
Commodity price derivativesDerivatives - noncurrent$110 $— $110 
Marketing derivativesDerivatives - noncurrent$41 $— $41 

As of December 31, 2020
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:
Commodity price derivativesDerivatives - current$5 $— $5 
Commodity price derivativesDerivatives - noncurrent$3 $— $3 
Liabilities:
Commodity price derivativesDerivatives - current$198 $— $198 
Marketing derivativesDerivatives - current$36 $— $36 
Commodity price derivativesDerivatives - noncurrent$11 $— $11 
Marketing derivativesDerivatives - noncurrent$55 $— $55 
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
As of December 31, 2021
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:
Commodity price derivativesDerivatives - current$486 $— $486 
Marketing derivativesDerivatives - current$52 $— $52 
Marketing derivativesDerivatives - noncurrent$25 $— $25 
Fair valuevalue.. Gains and losses recorded onto net derivative loss in the consolidated statements of operations related to derivative financial instruments not designated as hedging instruments are as follows:
Derivatives Not Designated 
as Hedging Instruments		Location of Gain/(Loss) Recognized
in Earnings on Derivatives		Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
  (in millions)
Commodity price derivativesDerivative loss, net$(496)$(56)$(1,996)$81 
Marketing derivativesDerivative loss, net$(5)$(85)$(28)$(100)
Interest rate derivativesDerivative loss, net$— $— $— $(22)
Contingent considerationInterest and other income (loss), net$— $22 $— $(42)
Three Months Ended March 31,
20222021
(in millions)
Commodity price derivatives:
Noncash derivative loss, net$(111)$(350)
Cash payments on settled derivatives, net (a)(57)(314)
Total commodity derivative loss, net(168)(664)
Marketing derivatives:
Noncash derivative gain (loss), net44 (20)
Cash payments on settled derivatives, net(11)(7)
Total marketing derivative gain (loss), net33 (27)
Derivative loss, net$(135)$(691)
_____________________
(a)Excludes cash payments of $78 million during the three months ended March 31, 2022 related to entering into equal and offsetting oil and gas commodity derivative trades in the fourth quarter of 2021, which had the net effect of eliminating certain of the Company's 2022 derivative obligations. Includes the effect from early settlement of certain of the Company's commodity derivative contracts for cash payments of $13 million during the three months ended March 31, 2021.
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.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
NOTE 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 included in proved properties in the 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.in the consolidated statements of operations.
The changes in capitalized exploratory well and project costs are as follows:
 NineThree Months Ended September 30, 2021March 31, 2022
 (in millions)
Beginning capitalized exploratory well and project costs$498632 
Additions to exploratory well and project costs pending the determination of proved reserves2,110819 
Additions to capitalized exploratory well costs from acquisitions235 
Reclassification due to determination of proved reserves(2,093)(728)
Ending capitalized exploratory well and project costs$750723 
Aging of capitalized exploratory costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year, based on the date of drilling was completed, are as follows:
 As of March 31, 2022As of December 31, 2021
 (in millions, except well counts)
Capitalized exploratory well costs that have been suspended:
One year or less$723 $621 
More than one year— 11 
$723 $632 
Number of projects with exploratory well costs that have been suspended for a period greater than one year (a)— 3 
______________________
(a)
As of
September 30, 2021		As of
December 31, 2020
(in millions, except well counts)
Capitalized exploratory well costs that have been suspended:
One year or less$750 $495 
More than one year— 3 
$750 $498 
Number of wells or projects with exploratory well costs that have been
   suspended for a period greater than one year		— 1 
The 3 exploratory wells that were suspended for a period greater than one year as of December 31, 2021 were completed during the first quarter of 2022.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
NOTE 7. Long-term Debt and Interest Expense
The components of long-term debt, including the effects of issuance costs and issuance discounts, are as follows:
 
As of
March 31, 2022
As of
December 31, 2021
 (in millions)
Outstanding debt principal balances:
3.950% senior notes due 2022$244 $244 
0.550% senior notes due 2023750 750 
0.750% senior callable notes due 2024— 750 
0.250% convertible senior notes due 20251,323 1,323 
1.125% senior notes due 2026750 750 
4.450% senior notes due 2026— 500 
5.625% senior notes due 2027179 179 
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 
5,725 6,975 
Issuance costs and discounts, net(35)(43)
Total debt5,690 6,932 
Less current portion of long-term debt244 244 
Long-term debt$5,446 $6,688 
 
As of
September 30, 2021
As of
December 31, 2020
 (in millions)
Outstanding debt principal balances:
3.450% senior notes due 2021$— $140 
3.950% senior notes due 2022244 244 
0.550% senior notes due 2023750 — 
0.750% senior callable notes due 2024750 — 
0.250% convertible senior notes due 20251,323 1,323 
1.125% senior notes due 2026750 — 
4.450% senior notes due 2026500 500 
5.625% senior notes due 2027179 — 
7.200% senior notes due 2028241 241 
4.125% senior notes due 2028138 — 
1.900% senior notes due 20301,100 1,100 
2.150% senior notes due 20311,000 — 
6,975 3,548 
Issuance costs and discounts, net(46)(248)
Total debt6,929 3,300 
Less current portion of long-term debt244 140 
Long-term debt$6,685 $3,160 

Credit facility. The Company maintains a revolving corporate credit facility (the "Credit Facility") with a syndicate of financial institutions and has aggregate loan commitments of $2.0 billion. OnThe Credit Facility has a maturity date in January 12, 2021, Pioneer entered into the First Amendment to Credit Agreement (the "Amendment") with Wells Fargo Bank, National Association, as Administrative Agent, and the other agents and lenders party thereto. The primary changes attributable to the Amendment were to increase the aggregate loan commitments from $1.5 billion to $2.0 billion, extend the maturity of the Credit Facility to January 12, 2026 and to nominally adjust the drawn and undrawn pricing.2026. As of September 30, 2021,March 31, 2022, the Company had no outstanding borrowings under the Credit Facility and was in compliance with its debt covenants.
Assumption of DoublePoint notes and payoff of DoublePoint credit facility. In connection with the completion of the DoublePoint Acquisition, the Company assumed DoublePoint's outstanding senior notes of $650 million in aggregate principal amount (with a fair value of $735 million) and DoublePoint's credit facility with an outstanding balance of $240 million. The Company repaid and terminated the DoublePoint credit facility agreement on May 4, 2021.
Assumption of Parsley notes and payoff of Parsley credit facility. In connection with the completion of the Parsley Acquisition, the Company assumed Parsley's outstanding senior notes of $2.7 billion in aggregate principal amount (with a fair value of $2.8 billion) and Parsley's credit facility with an outstanding balance of $397 million. The Company repaid and terminated the Parsley credit facility agreement on January 12, 2021.Facility.
Senior notes.Notes. In May 2021,February 2022, the Company issuedpaid $1.29 billion to redeem its outstanding 0.750% Senior Notes due 2024 and 4.450% Senior Notes due 2026, having aggregate principal amounts of $750 million of 0.550% senior notes that will mature May 15, 2023 (the "May 2021 Senior Notes Offering").and $500 million, respectively. The Company received proceeds, net of $4recorded a $47 million of issuance costs and discounts, of $746 million. Interestloss on the notes will be payable on May 15 and November 15 of each year. The senior notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.
The Company used $731 million of the proceeds from the May 2021 Senior Notes Offering to redeem DoublePoint's 7.750% senior notes due 2025. Associated with the redemption, the Company recognized a $3 million gain on the early extinguishment of debt.debt to other expense associated with the early redemptions. See Note 14 for additional information.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
In January 2021, the Company issued $750 million of 0.750% senior callable notes that will mature January 15, 2024, $750 million of 1.125% senior notes that will mature January 15, 2026 and $1.0 billion of 2.150% senior notes that will mature January 15, 2031 (the "January 2021 Senior Notes Offering"). The Company received proceeds, net of $24 million of issuance costs and discounts, of $2.5 billion. Interest on each of the new notes will be payable on January 15 and July 15 of each year. The senior notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.
The Company used the proceeds from the January 2021 Senior Notes Offering to pay (i) $1.6 billion to redeem Parsley's 5.250% senior notes due 2025, Parsley's 5.375% senior notes due 2025 and Jagged Peak's 5.875% senior notes due 2026 and (ii) $852 million to purchase a portion of Parsley's 5.625% senior notes due 2027 and Parsley's 4.125% senior notes due 2028 pursuant to a cash tender offer. In connection with the tender offers, the Company also obtained the requisite consents from holders of Parsley's 5.625% senior notes due 2027 and 4.125% senior notes due 2028 to amend the indentures pursuant to which the notes were issued to, among other things, (i) eliminate substantially all of the restrictive covenants and related provisions and certain events of default contained in each indenture and (ii) shorten the minimum notice requirement for optional redemptions to three days. Associated with the redemption and tenders, the Company recognized a $5 million loss on the early extinguishment of debt. See Note 14 for additional information.
The Company's 3.450% senior notes, with a debt principal balance of $140 million, matured and were repaid in January 2021. The Company funded the repayment with cash on hand.
The Company's 3.950% senior notes, with a debt principal balance of $244 million, will mature in July 2022. The 3.950% senior notes are recorded in the current portion of long-term debt in the consolidated balance sheetsheets as of September 30, 2021.March 31, 2022.
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 are senior in right of payment to all existing and future subordinated indebtedness of the Company. The Company is a holding company that conducts all of its operations through subsidiaries; consequently, the senior notes are structurally subordinated to all obligations of its subsidiaries. Interest on the Company's senior notes is payable semiannually.
Convertible senior notes. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025.2025 (the "Convertible Notes"). The Convertible Notes bear a fixed interest rate of 0.250% per year, with interest payable on May 15 and November 15 of each year. The Convertible Notes will mature on May 15, 2025, unless earlier redeemed, repurchased or converted. The Convertible Notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.
The Convertible Notes are convertible into shares of the Company's common stock at an adjusted conversion rate of 9.20559.5009 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes (subject to further adjustment pursuant to the terms of the notes indenture, the "Conversion Rate"), which represents an adjusted conversion price of $108.63$105.25 per share (subject to further adjustment pursuant to the terms of the notes indenture, the "Conversion Price"). Upon
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(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-day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the price of the Company's common stock times the Conversion Rate;
•upon notice of redemption by the Company; or
•upon the occurrence of specified corporate events, including certain consolidations or mergers.
On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. The Company may not redeem the Convertible Notes prior to May 20, 2023, and after such date, may redeem the Convertible Notes only if the last reported sale price of the Company's common stock has been at least 130 percent of the Conversion Price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the notice of redemption. The redemption price is equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
During the last 30 consecutive trading days of the thirdfirst quarter of 2021,2022, the last reported sales pricessale 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 become convertible at the option of the holders during the three month period ending December 31, 2021. As of SeptemberJune 30, 2021, if converted by the holder, the Company intends to settle the Convertible Notes in cash with cash on hand or through borrowings under its Credit Facility.2022. The Company reserves its right under the notes indenture to elect to settle the Convertible Notes in cash, shares of the Company's common stock or a combination of cash and common stock.
The Company early adopted ASU 2020-06 on January 1, 2021. Upon issuance of the Convertible Notes in May 2020, the Company bifurcated the debt and equity components of the Convertible Notes between long-term debt and additional paid-in capital in its consolidated balance sheet. The amount recorded to additional paid-in capital represented a debt discount that was being amortized to interest expense over the life of the Convertible Notes. As part of the adoption of ASU 2020-06, the Company (i) reversed the debt discount and related deferred income tax liability recorded to additional paid-in capital of $230 million and $50 million, respectively, (ii) recorded a cumulative effect of the adoption of ASU 2020-06 of $22 million to retained earnings, representing the reversal of the $28 million debt discount that was amortized to interest expense, net of an associated deferred income tax impact of $6 million, in 2020 and (iii) recorded the respective offsets for items (i) and (ii) above, representing the unamortized debt discount attributable to the Convertible Notes of $202 million to long-term debt and the associated deferred tax impact of $44 million to deferred income tax liabilities. See Note 2 for additional information.
As of September 30, 2021,March 31, 2022, the Convertible Notes had an outstanding principal balance of $1.3 billion and unamortized issuance costs of $17$15 million. The effective annual interest rate related to interest expense to be recorded over the life of the Convertible Notes is 0.6 percent. See Note 2 for additional information regarding the effect of the early adoption of ASU 2020-06 on the debt discount on the Company's Convertible Notes.
The interest costsInterest expense recognized on the Convertible Notes areis as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020Three Months Ended March 31,
20222021
(in millions)(in millions)
Contractual coupon interestContractual coupon interest$1 $1 $3 $1 Contractual coupon interest$1 $1 
Amortization of debt discount and issuance costs1 12 3 19 
$2 $13 $6 $20 
Amortization of capitalized loan feesAmortization of capitalized loan fees1 1 
$2 $2 
Capped call transactions.In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions with certain financial institution counterparties (the "Capped Call"), the purpose of which was to reduce the potential dilution to the Company's common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such converted notes, with such reduction and offset subject to a capped price. The Capped Call transactions have an adjusted strike price of $108.63$105.25 per share of common stock and an adjusted capped price of $154.59$149.78 per share of common stock. The net costs of $113 million incurred to purchase the Capped Call transactions were recorded as a reduction to additional paid-in capital.capital in the accompanying consolidated balance sheets.
NOTE 8. Incentive Plans
Long-Term Incentive Plan.The Company's Amended and Restated 2006 Long-Term Incentive Plan ("LTIP") provides for the granting of various forms of awards, including stock options, stock appreciation rights, performance units, restricted stock and restricted stock units to directors, officers and employees of the Company.
In connection with the Parsley Acquisition, the Company assumed all rights and obligations under the Amended and Restated Parsley Energy, Inc. 2014 Long TermLong-Term Incentive Plan (the "2014 Parsley Plan") and the Jagged Peak Energy Inc. 2017 Long TermLong-Term Incentive Plan (the "Jagged Peak Plan") and together with the 2014 Parsley Plan, (the "Parsley Plans"). The awards outstanding under the Parsley Plans were assumed by the Company and were automatically converted into an award with the
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
right to receive a number of shares of Pioneer common stock that is equal to the product of the number of shares of Parsley common stock subject to such award under the Parsley Plans as of the acquisition date and the Exchange Ratio (0.1252). As a result, 37,299 shares of Pioneer common stock are issuable by the Company upon settlement of the outstanding awards granted under the 2014 Parsley Plan and 1,166 shares of Pioneer common stock are issuable by the Company upon settlement of the outstanding awards granted under the Jagged Peak Plan.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The number of sharesShares available for future grant pursuant to the awards issued under the Company's Amended and Restated 2006 Long-Term Incentive Plan ("LTIP") isLTIP are as follows:
As of
September 30, 2021 March 31, 2022
Approved and authorized awards12,600,000 
2014 Parsley Plan awards available to the LTIP (a)879,575 
Awards issued under the plan(9,459,418)(9,552,217)
Awards available for future grant4,020,1573,927,358 
______________________
(a)Under New York Stock Exchange rules, the Company added the shares that were available under the 2014 Parsley Plan to the LTIP. These shares can only be used for grants to employees who were not employed or engaged by Pioneer or any of its subsidiaries immediately before the Parsley Acquisition and such awards may only be granted through May 22, 2024, the date that the 2014 Parsley Plan would have otherwise expired.
Stock-based compensation expense is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 Three Months Ended March 31,
20222021
(in millions) (in millions)
Restricted stock - equity awardsRestricted stock - equity awards$11 $15 $32 $37 Restricted stock - equity awards$11 $11 
Restricted stock - liability awards (a)Restricted stock - liability awards (a)3 4 12 7 Restricted stock - liability awards (a)9 6 
Restricted stock and performance units - Parsley awards (b)Restricted stock and performance units - Parsley awards (b)— — 33 — Restricted stock and performance units - Parsley awards (b)— 33 
Performance unit awardsPerformance unit awards6 6 20 15 Performance unit awards7 7 
Employee stock purchase plan1 — 2 2 
Employee Stock Purchase PlanEmployee Stock Purchase Plan1 1 
$21 $25 $99 $61 $28 $58 
______________________
(a)Liability Awards are expected to be settled on their vesting date in cash. As of September 30, 2021March 31, 2022 and December 31, 2020,2021, accounts payable – due to affiliates included $4$12 million and $7$9 million, respectively, of liabilities attributable to Liability Awards.
(b)Represents the accelerated vesting of Parsley restricted stock equity awards and performance units upon completion of the Parsley Acquisition, which was recorded to other expense in the consolidated statements of operations.
As of September 30, 2021,March 31, 2022, there was $105is $126 million of unrecognized stock-based compensation expense related to unvested share-based compensation awards, including $25$26 million attributable to stock-based awards that are expected to be settled on their vesting date in cash, rather than in equity shares. The unrecognized compensation expense will be recognized on a straight-line basis over the remaining vesting periods of the awards, which is a period of less than three years on a weighted average basis.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Activity for restricted stock awards, performance units and stock options is as follows:
Nine Months Ended September 30, 2021
Restricted
Stock Equity
Awards		Restricted
Stock Liability
Awards		Performance
Units		Stock Options
Beginning incentive compensation awards765,981 221,353 207,430 86,332 
Awards granted304,142 71,870 173,423 — 
Awards assumed (a) (c)255,379 — 100,056 — 
Awards forfeited(7,329)(5,848)— — 
Awards vested (b) (c)(562,752)(100,956)(100,056)— 
Options exercised— — — (55,173)
Options expired— — — (415)
Ending incentive compensation awards755,421 186,419 380,853 30,744 
Three Months Ended March 31, 2022
Restricted Stock Equity AwardsRestricted Stock Liability AwardsPerformance UnitsStock Options
Beginning incentive compensation awards741,892 182,278 304,686 6,039 
Awards granted99,577 2,724 114,066 — 
Awards forfeited(22,502)(4,370)(1,607)— 
Awards vested (a)(244,379)(23,402)— — 
Options exercised— — — (6,039)
Ending incentive compensation awards574,588 157,230 417,145 — 
______________________
(a)Awards assumed as a result of the Parsley Acquisition.
(b)Per the terms of award agreements and elections, the issuance of common stock may be deferred for certain restricted stock equity awards performance units and stock options that vest during the period.
21
(c)The amounts presented include the assumption and accelerated vestingTable of 216,914 Parsley restricted stock equity awards and 100,056 of Parsley performance units, both of which vested upon completion of the Parsley Acquisition.Contents
PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
NOTE 9. Asset Retirement Obligations
The changes inCompany's asset retirement obligations primarily relate to the future plugging and abandonment of wells and related facilities. Market 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 obligations.
Asset retirement obligations activity is as follows:
 NineThree Months Ended September 30, 2021March 31, 2022
 (in millions)
Beginning asset retirement obligations$282354 
Liabilities assumed in the Parsley Acquisition73 
Liabilities assumed in the DoublePoint Acquisition37 
New wells placed on production82 
Changes in estimates (a)(1)
Liabilities settled(27)(15)
Accretion of discount54 
Ending asset retirement obligations377345 
Less current portion of asset retirement obligations(61)(50)
Asset retirement obligations, - noncurrentlong-term$316295 
______________________
(a)Changes in estimates are determined based on several factors, including updating abandonment cost estimates using recent actual costs incurred to abandon wells, credit-adjusted risk-free discount rates, economic well life estimates and forecasted timing of abandoning wells.
NOTE 10. Commitments and Contingencies
Indemnifications. The Company has agreed to indemnify its directors and certain of its officers, employees and agents with respect to claims and damages arising from acts or omissions taken in such capacity, as well as with respect to certain litigation.
Legal actions. The Company is a 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. 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.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Indemnifications. The Company has agreed to indemnify its directors Significant judgement is required in making these estimates 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.the Company's final liabilities may ultimately be materially different.
EnvironmentalEnvironmental.. 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 life of the related property or mitigate or prevent future environmental contamination are capitalized. Liabilities for expenditures that will not qualify for capitalization are recorded when environmental assessment and/or remediation is probable and the 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 the remediation occurs.
Firm purchase, gathering, processing, transportation, fractionation and storage commitments.From time to time, the Company enters into, and as of September 30, 2021 was a party to, 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. These commitments are normal and customary for the Company's business activities.
Obligations following divestitures. In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified pre-closing matters, including matters of litigation, environmental contingencies, royaltiesroyalty and income taxes. Also associated with its divestiture transactions, the Company has issued and received guarantees to facilitate the transfer of contractual obligations, such as firm transportation agreements or gathering and processing arrangements. The Company does not recognize a liability if the fair value of the obligation is immaterial and the likelihood of making payments under these guarantees is remote.
South Texas Divestiture. In conjunction with the South Texas Divestiture, the Company transferred its long-term midstream agreements and associated minimum volume commitments ("MVC's"MVC") to the buyer. However, the Company retained the obligation to pay 100 percent of any deficiency fees associated with the MVC'sMVC from January 2019 through July 2022. The buyer is required to reimburse the Company for 18 percent of the deficiency fees paid by the Company from January 2019 through July 2022; such reimbursement will be paid by the buyer in installments beginning in 2023 through 2025. Assuming 100 percent of the MVC'sMVC are paid as deficiency fees, the maximum amount of future payments for this obligation would be approximately $260$92 million as of September 30, 2021. As of September 30, 2021, theMarch 31, 2022. The Company's estimated deficiency fee obligation as of $198March 31, 2022 of $72 million is included in other current liabilities in the consolidated balance sheets. The corresponding estimated deficiency fee receivable from the buyer of $77 million is included in current and noncurrent other assets in the consolidated balance sheets. The Company has credit support for the deficiency fee receivable of up to $100 million.
Raton transportation commitments. In July 2018, the Company completed the sale of its gas field assetssheets in the Raton Basin to an unaffiliated third party and transferred certain gas transportation commitments, which extend through 2032, to the buyer for which the Company has provided a guarantee. Assuming 100 percent of the remaining commitments are paid by the Company under its guarantee, the maximum amount of future payments would be approximately $72 million as of September 30, 2021. The Company has received credit support for the commitments of up to $50 million. The Company paid $2 million in gas transportation fees associated with the transferred commitment for the nine months ended September 30, 2021 and was fully reimbursed.
West Eagle Ford Shale commitments. In April 2018, the Company completed the sale of its West Eagle Ford Shale gas and liquids field to an unaffiliated third party and transferred certain gas and liquids transportation commitments, which extend through 2022, to the buyer for which the Company has provided a guarantee. Assuming 100 percent of the remaining commitments are paid by the Company under its guarantee, the maximum amount of future payments would be approximately $16 million as of September 30, 2021. The Company has received credit support for the commitments of up to $17 million.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
amounts of $43 million and $41 million, respectively, as of March 31, 2022. The Company has received credit support for the deficiency fee receivable of up to $100 million.
Certain contractual obligations were retained by the Company after somecertain divestitures, includingprimarily the aforementioned South Texas Divestiture. These contractual obligations are primarily related to firm transportation and storage agreements in which the Company is unlikely to realize any benefit. The estimated obligations are included in other current or noncurrent liabilities in the consolidated balance sheets. Thesheets and changes in contract obligations are as follows:
NineThree Months Ended September 30, 2021March 31, 2022
(in millions)
Beginning contractcontractual obligations$360199 
Liabilities settled(159)(118)
Accretion of discount61 
Changes in estimate (a)(2)(4)
Ending contractcontractual obligations$20578 
______________________
(a)RepresentsPrimarily represents differences between estimated and actual liabilities settled.
NOTE 11. Related Party Transactions
In December 2018, the Company completed the sale of its pressure pumping assets to ProPetro in exchange for 16.6 million shares of ProPetro common stock and $110 million of cash that was received during the first quarter of 2019. ProPetro is considered a related party as the shares received represent 16 percent of ProPetro's outstanding common stock. In addition to the sale of equipment and related facilities, the Company entered into a long-term agreement with ProPetro for it to provide pressure pumping and related services. In March 2022, the Company amended its agreement with ProPetro. The amended agreement provides for updated performance standards, operating procedures, pricing and term. The agreement covers the Company's 2022 pressure pumping and related services requirements. The costs of these services arewill be capitalized in oil and gas properties as incurred.
In October 2019, Phillip A. Gobe, a nonemployee member of the Company's board of directors, was appointed by the board of directors of ProPetro to serve as its Executive Chairman in October 2019 and Chief Executive Officer in March 2020, he was appointedand served as Chief Executive Officer and Chairman of the board of directors. In July 2021,directors of ProPetro announced that, effectivethrough August 31, 2021, at which point continued as ProPetro's Executive Chairman. In March 2022, Mr. Gobe would transition from ProPetro'stransitioned to non-executive Chairman and Chief Executive Officer to 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 5 percent or more of ProPetro's outstanding common stock.
TransactionsBased on the Company's ownership in ProPetro and balances withrepresentation on the ProPetro are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in millions)
Pressure pumping and related services charges (a)$130 $21 $297 $163 
____________________
(a)Includes no idle frac fleet fees for the three months ended September 30, 2021board of directors, ProPetro is considered an affiliate and $5 million of idle frac fleet fees for the nine months ended September 30, 2021, as compareddeemed to $6 million and $35 million of idle frac fleet fees for the three and nine months ended September 30, 2020, respectively.

As of
September 30, 2021
As of
December 31, 2020
(in millions)
Accounts payable - due to affiliate (a)$97 $45 
____________________
(a)Represents amounts payable for pressure pumping andbe a related services provided by ProPetro as part of a long-term agreement.party.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
Transactions and balances with ProPetro representing pressure pumping and related services as part of a long-term agreement are as follows:
Three Months Ended March 31,
20222021
(in millions)
Pressure pumping related services charges$112 $56 
As of March 31, 2022As of December 31, 2021
(in millions)
Accounts payable - due to affiliate$74 $66 
The Company discloses ProPetro's summarized financial information on a one-quarter lag as it enables the Company to report its quarterly results independent from the timing of when ProPetro reports its results. Summarized financial information for ProPetro is as follows:
Six Months Ended June 30,Year Ended December 31,
2021202020212020
(in millions)
(in millions)
Revenue - Service revenue$378 $501 
Revenue - service revenueRevenue - service revenue$875 $789 
Cost of services (exclusive of depreciation and amortization)Cost of services (exclusive of depreciation and amortization)$286 $369 Cost of services (exclusive of depreciation and amortization)$662 $584 
Net lossNet loss$(29)$(34)Net loss$(54)$(107)
NOTE 12. Revenue Recognition
The Company recognizes revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Disaggregated revenue from contracts with purchasers. Revenues on sales of oil, NGLs,NGL, gas and purchased oil, gas and diesel are recognized when control of the product is transferred to the purchaser and payment can be reasonably assured. Sales prices for oil, NGLs,NGL, gas and diesel are negotiated based on factors normally considered in the industry, such as an index or spot price, distance from the well to the pipeline or market, commodity quality and prevailing supply and demand conditions. Accordingly, the prices received by the Company for oil, NGLs,NGL, gas and diesel sales generally fluctuate similar to changes in the relevant market index prices.
Disaggregated revenue from contracts with purchasers by product type is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020Three Months Ended March 31,
20222021
(in millions) (in millions)
Oil salesOil sales$2,477 $724 $6,043 $2,101 Oil sales$3,025 $1,435 
NGL salesNGL sales515 129 1,135 344 NGL sales569 246 
Gas salesGas sales290 69 609 172 Gas sales336 143 
Total oil and gas revenuesTotal oil and gas revenues3,282 922 7,787 2,617 Total oil and gas revenues3,930 1,824 
Sales of purchased oilSales of purchased oil1,642 934 4,422 2,373 Sales of purchased oil2,215 1,221 
Sales of purchased gasSales of purchased gas22 1 38 18 Sales of purchased gas2 4 
Sales of purchased dieselSales of purchased diesel15 — 47 — Sales of purchased diesel— 15 
Total sales of purchased commoditiesTotal sales of purchased commodities1,679 935 4,507 2,391 Total sales of purchased commodities2,217 1,240 
Total revenue from contracts with purchasers$4,961 $1,857 $12,294 $5,008 
$6,147 $3,064 
AsPerformance obligations and contract balances. The majority of September 30, 2021 and December 31, 2020, the accounts receivable balance representing amounts dueCompany's product sale commitments are short-term in nature with a contract term of one year or billable under the termsless. The Company typically satisfies its performance obligations upon transfer of control as described above in Disaggregated revenue from contracts with purchasers was $1.6 billion and $661 million, respectively.records the related revenue in the month production is delivered to the purchaser. Settlement statements for sales of oil, NGL, gas and sales of purchased oil, gas and diesel 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
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
month that payment is received from the purchaser. As of March 31, 2022 and December 31, 2021, the accounts receivable balance representing amounts due or billable under the terms of contracts with purchasers is $2.3 billion and $1.6 billion, respectively.
NOTE 13. Interest and Other Income, (Loss), Net
The components of net interest and other income (loss) are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (in millions)
Investment in affiliate fair value adjustment (Note 4)
$(8)$(18)$21 $(119)
Deferred compensation plan income3 6 11 3 
Contingent consideration fair value adjustment (Note 5)
— 22 — (42)
Other7 3 10 13 
$2 $13 $42 $(145)
 Three Months Ended March 31,
 20222021
 (in millions)
Investment in affiliate valuation adjustment (Note 4)
$96 $54 
Short-term investment valuation adjustment (Note 4)
18 — 
Deferred compensation plan income (loss), net (Note 4)
(3)4 
Other15 2 
$126 $60 
NOTE 14. Other Expense
The components of other expense are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (in millions)
Parsley Acquisition transaction costs (a)$3 $— $209 $— 
Winter Storm Uri gas commitments (b)— — 80 — 
DoublePoint Acquisition transaction costs (c)5 — 32 — 
Unoccupied facility expense (d)10 — 26 (1)
Transportation commitment charges (e)5 4 15 12 
Termination and idle drilling and frac equipment charges (f)— 16 5 69 
Loss on early extinguishment of debt (Note 7)
— — 2 27 
Restructuring charges (Note 3)
— 74 1 75 
South Texas deficiency fee obligation (Note 4)
— — — 69 
Vertical integration services loss (income), net (g)2 (2)(4)(1)
Other9 6 18 23 
$34 $98 $384 $273 
 Three Months Ended March 31,
 20222021
(in millions)
Loss on early extinguishment of debt (Note 7)
$47 $5 
Unoccupied facility expense (a)16 10 
Idle frac equipment charges (b)6 4 
Transportation commitment charges (c)3 7 
Parsley Acquisition transaction costs (d)— 197 
Winter Storm Uri gas commitments (e)— 80 
Vertical integration services (income) loss (f)— (4)
Other5 5 
$77 $304 
____________________
____________________(a)Primarily represents facilities expense associated with certain acquired Parsley offices that are no longer occupied.
(a)(b)Includes idle frac equipment fees and frac reservation fees.
(c)Primarily represents firm transportation charges on excess pipeline capacity commitments.
(d)Represents costs associated with the Parsley Acquisition, which includes $90$88 million of employee-related costs and $119 million of transaction-related fees during the nine months ended September 30, 2021 and $3$109 million of transaction-related fees during the three months ended September 30,March 31, 2021. See Note 3 and Note 8for additional information.
(b)(e)Represents costs related to the Company's fulfillment of certain firm gas commitments during Winter Storm Uri in February 2021.
(c)(f)Represents transaction-related fees associated with the DoublePoint Acquisition. See Note 3 for additional information.
(d)Primarily facilities expense associated with certain acquired Parsley offices that are no longer occupied.
(e)Primarily represents firm transportation payments on excess pipeline capacity commitments.
(f)Includes idle frac fleet fees, stacked drilling rig charges and drilling rig early termination charges.
(g)Primarily represents net margins (attributable to third party working interest owners) that result from Company-provided vertically integrated services, which are ancillary to and supportive of the Company's oil and gas joint operating activities, and do not represent intercompany transactions. The components ofFor the three months ended March 31, 2022 and 2021, the vertical integration services net margins are as follows:included $8 million and $12 million of gross vertical integration revenues, respectively, and $8 million and $8 million of total vertical integration costs and expenses, respectively. During the three months ended March 31, 2021, the Company divested its well services business and continues to operate its water services business. See

Note 3 for additional information.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021March 31, 2022
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in millions)
Gross revenues$9 $11 $32 $36 
Gross costs and expenses$11 $9 $28 $35 
NOTE 15. Income Taxes
Income tax benefit (provision) and effective tax rate are as follows:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2021202020212020 20222021
(in millions)
(in millions)
Current tax benefit (provision)$(11)$(1)$(29)$10 
Current tax provisionCurrent tax provision$(20)$(7)
Deferred tax benefit (provision)Deferred tax benefit (provision)(280)16 (371)36 Deferred tax benefit (provision)(532)18 
Income tax benefit (provision)Income tax benefit (provision)$(291)$15 $(400)$46 Income tax benefit (provision)$(552)$11 
Effective tax rateEffective tax rate22 %15 %23 %16 %Effective tax rate22 %14 %
The Company evaluates and updates its annual effective income tax rate on an interim basis based on current and forecasted earnings and tax laws. The mix and timing of the Company's actual earnings compared to annual projections can cause interim effective tax rate fluctuations. The Company's interim effective tax rate for the three and nine months ended September 30, 2021March 31, 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 and various state and foreign jurisdictions. The Internal Revenue Service has closed examinations of the 2019 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 2014.2013. As of September 30, 2021,March 31, 2022, no adjustments had been proposed in any jurisdiction that would have a significant effect on the Company's liquidity, future results of operations or financial position.
DoublePoint Acquisition. The Company purchased all the membership interests of DoublePoint, a disregarded entity for federal income tax purposes. As a result, for tax purposes, the Company recorded the cost basis in the assets acquired equal to its purchase price (i.e. stepped-up basis).
Parsley Acquisition. For federal income tax purposes, the Parsley Acquisition qualified as a tax-free merger whereby the Company acquired carryover tax basis in Parsley's assets and liabilities. The Company recorded a deferred tax liability of $140 million associated with the acquired assets. Included in the deferred tax liability are deferred tax asset attributes acquired from Parsley, which primarily consist of net operating loss carryforwards of $2.2 billion that are subject to an annual limitation under Internal Revenue Code Section 382. The Company believes it is more likely than not that the acquired net operating loss carryforwards will be utilized before they expire. Offsetting the deferred tax assets attributes are deferred tax liability attributes, primarily related to the cost basis in oil and gas properties for tax purposes being less than the recorded book amounts.

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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 16. Net Income (Loss) Per Share
The components of basic and diluted net income (loss) per share attributable to common stockholders are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (in millions)
Net income (loss) attributable to common stockholders$1,045 $(85)$1,355 $(243)
Participating share-based earnings (a)(3)— (4)— 
Basic net income (loss) attributable to common stockholders1,042 (85)1,351 (243)
Adjustment to after-tax interest expense to reflect the dilutive impact attributable to Convertible Notes2 — 5 — 
Diluted net income (loss) attributable to common stockholders$1,044 $(85)$1,356 $(243)
Basic weighted average shares outstanding244 165 230 165 
Contingently issuable stock-based compensation1 — — — 
Convertible Notes (b)12 — 12 — 
Diluted weighted average shares outstanding257 165 242 165 
____________________
 Three Months Ended March 31,
 20222021
 (in millions)
Net income (loss) attributable to common stockholders$2,009 $(70)
Participating share-based earnings (a)(5)— 
Basic net income (loss) attributable to common stockholders2,004 (70)
Adjustment to after-tax interest expense to reflect the dilutive impact attributable to Convertible Notes1 — 
Diluted net income (loss) attributable to common stockholders$2,005 $(70)
Basic weighted average shares outstanding243 210 
Convertible Notes (b)13 — 
Diluted weighted average shares outstanding256 210 
______________________
(a)Unvested restricted stock awards represent participating securities because they participate in non-forfeitable dividends with the common equity owners of the Company. Participating share-based earnings represent the distributed and undistributed earnings of the Company attributable to the participating securities. Unvested restricted stock 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 (loss) attributable to common stockholders was negligible.
(b)Diluted weighted average common shares outstanding have been increased to reflectincludes the dilutive effect that would have resulted ifhad the Company's Convertible Notes had been converted atas of the beginning of the three and nine months ended September 30, 2021.March 31, 2022. If converted by the holder, the Company intends tomay settle in cash, shares of the Convertible Notes in cash.Company's common stock or a combination thereof, at the Company's election.
Stock repurchase program. In December 2018,February 2022, the Company's board of directors authorized a $4 billion common stock repurchase program. This authorization replaced the previously authorized $2 billion common stock repurchase program that had $841 million remaining in the program before bring replaced with the $4 billion common stock repurchase program. Under
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)
this stock repurchase program, the Company may repurchase shares at management's discretion in accordance with applicable securities laws. In addition, the Company may repurchase shareslaws or pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Act of 1934, which would permit the Company to repurchase shares at times that may otherwise be prohibited under the Company's insider trading policy. The stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the board of directors.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Expenditures to acquire shares under the share repurchase program are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in millions)
Share repurchases (a)$— $— $— $160 
____________________
Three Months Ended March 31,
20222021
(in millions)
Shares repurchased (a)$250 $— 
______________________
(a)During the three and nine months ended September 30, 2021, noMarch 31, 2022, 1,052,822 shares were repurchased under the share repurchase program. No shares were repurchased under the share repurchase program as compared to no shares repurchased and 1,511,930 shares repurchased forduring the three and nine months ended September 30, 2020, respectively.March 31, 2021.
As of September 30, 2021, $1.1March 31, 2022, $3.8 billion remainsremained available for use to repurchase shares under the Company's common stock repurchase program.
NOTE 17. Subsequent Events
Base Dividend.Dividends. In November 2021,On May 4, 2022, the board of directors declared a quarterly base dividend of $0.62$0.78 per share and a quarterly variable dividend of $6.60 per share on the Company's outstanding common stock, payable JanuaryJune 14, 2022 to stockholdersshareholders of record at the close of business on DecemberMay 31, 2021.2022.
Variable Dividend.Marketing derivatives. In November 2021, the board of directors declared a cash dividend of $3.02 per share on the Company's outstanding common stock, payable December 14, 2021Subsequent to stockholders of record at the close of business on November 30, 2021.
Divestitures
Delaware Divestiture. In November 2021,March 31, 2022, the Company entered into a definitive agreement with Continental Resources, Inc. to sell all2 long-term marketing contracts that will be accounted for as derivative instruments. The terms of its assets in the Delaware Basin for cash proceeds of $3.25 billion, subject to normal closing adjustments. The Company expects to recognize a pretax loss of $900 million to $1.1 billion.
For tax purposes2 marketing contracts commit the Company expects to recognize a gainpurchase and simultaneously sell 40 thousand barrels of $1.1 billion to $1.3 billion which is expected to be offset by the Company's existing federal net operating losses, resulting in no federal taxesoil per day beginning May 1, 2022 and $7 million to $11 millionending April 30, 2027 and 30 thousand barrels of state taxes expected to be paid associated with the divestiture.
oil per day beginning August 1, 2022 and ending July 31, 2027. The transaction is expected to close in late December 2021, subject to the satisfaction of customary closing conditions, including regulatory approval. The Delaware Basin assets did not meet the criteria to be considered held-for-sale at September 30, 2021.
Glasscock Divestiture. In October 2021,price the Company completedpays to purchase the saleoil volumes under these marketing contracts is based on a Midland oil price and the price the Company receives for the oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of approximately 20,000 net acres in western Glasscock County to Laredo Petroleum, Inc. ("Laredo") in exchange for approximately $160 million in cash and approximately 960 thousand shares of Laredo's common stock representing total consideration transferred of $230 million. The sale of these assets is expected to result in a pretax gain of approximately $5 million.the purchase.
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PIONEER NATURAL RESOURCES COMPANY
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ParsleyOF OPERATIONS
DoublePoint Acquisition and DoublePointParsley Acquisition
The Company regularly seeks to acquire or trade acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of future horizontal wells and provides superior returns on investment.
OnIn May 4, 2021, the Company completed the acquisition ofacquired Double Eagle III Midco 1 LLC ("DoublePoint"(the "DoublePoint Acquisition") in exchange for 27 million shares of Pioneer common stock representingand $1.0 billion of cash. The Pioneer stock consideration transferred of $4.2 billion, $1.0 billion of cash and the assumption of $890 million of debt (the "DoublePoint Acquisition"). The DoublePoint Acquisition was accounted for ashad a business combination, with the fair value of the acquisition consideration allocated to the acquisition date fair value of assets acquired and liabilities assumed. DoublePoint's results of operations were included in the Company's interim consolidated financial statements beginning in May 2021. See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.$4.2 billion.
OnIn January 12, 2021, the Company completed the acquisition ofacquired Parsley Energy Inc., a Delaware corporation that previously traded on the NYSE under the symbol "PE" ("Parsley"), pursuant to the Agreement and Plan of Merger, dated as of October 20, 2020, among Pioneer, certain of its subsidiaries, Parsley and Parsley's subsidiary, Parsley Energy, LLC (the "Parsley Acquisition"). The Parsley Acquisition was accounted in exchange for as a business combination, with the fair value of the acquisition consideration allocated to the acquisition date fair value of assets acquired and liabilities assumed. As acquisition consideration, the Company issued 52 million shares of Pioneer common stock (representingstock. The Pioneer stock consideration transferred had a fair value of $6.9 billion)billion.
Delaware Divestiture and assumed $3.2 billionGlasscock Divestiture
The Company regularly reviews its asset base to identify nonstrategic assets, the disposition of Parsley's debt. Parsley's post-acquisition date resultswhich would increase capital resources available for other activities, create organizational and operational efficiencies and further the Company's objective of operations were includedmaintaining a strong balance sheet to ensure financial flexibility.
In December 2021, the Company completed the sale of its assets in the Delaware Basin (the "Delaware Divestiture") to Continental Resources, Inc. ("Continental") for cash proceeds of $3.1 billion, after normal closing adjustments. The Company's interim consolidated financial statements beginning on January 12, 2021. See Note 3Delaware Basin assets were acquired as part of Notesthe Parsley Acquisition.
In October 2021, the Company completed the sale of 20,000 net acres in western Glasscock County to Consolidated Financial Statements includedLaredo Petroleum, Inc. ("Laredo") in "Item 1. Financial Statements"exchange for additional information.$137 million in cash and 960 thousand shares of Laredo's common stock representing total consideration transferred of $206 million, after normal closing adjustments.
Financial and Operating Performance
The Company's financial and operating performance for the three months ended September 30, 2021March 31, 2022 included the following highlights:
•Net income attributable to common stockholders for the three months ended September 30, 2021March 31, 2022 was $1.0$2.0 billion ($4.077.85 per diluted share), as compared to a net loss of $85$70 million ($0.520.33 per diluted share) for the same period in 2020.2021. The primary components of the $1.1$2.1 billion increase in earnings attributable to common stockholders include:
•a $2.4$2.1 billion increase in oil and gas revenues, primarily due to an 87(i) a 60 percent increase in average realized commodity prices per BOE as a result of improvedhigher commodity prices in 2022 due to the economiccontinued recovery in oil and gas demand, low worldwide inventory levels, OPEC supplies being below agreed quotas and the expected impact to global oil and gas supplies resulting from the COVID-19 pandemicsanctions against Russia related to their unprovoked invasion of Ukraine and (ii) a 9035 percent increase in daily sales volumes due to additional production from the Company's successful horizontal drilling program in the PermianMidland Basin combined with the incremental production added from the assets acquired in the DoublePoint Acquisition in May 2021, partially offset by the reduced production associated with the assets divested as part of the Delaware Divestiture in December 2021;
•a $556 million decrease in derivative losses, primarily due to a reduction in the Company's derivative positions;
•a $227 million decrease in other expense, primarily due to $197 million of transaction costs related to the Parsley Acquisition and $80 million of costs related to covering firm gas commitments due to Winter Storm Uri during the DoublePoint Acquisition;three months ended March 31, 2021, partially offset by $47 million in losses on early extinguishment of the Company's 0.750% Senior Notes due 2024 and the 4.450% Senior Notes due 2026 for the three months ended March 31, 2022;
•an $80 million increase in net sales of purchased commodities primarily attributable to increasing oil prices during the three months ended March 31, 2022, which resulted in purchased oil in transit or stored at the end of December 2021, January 2022 and February 2022 being sold in January 2022, February 2022 and March 2022, respectively, at higher prices; and
•a $66 million increase in net interest and other income, primarily due to noncash gains attributable to the increases in the fair value of (i) the Company's investment in affiliate of $96 million during the three months ended March 31, 2022 as compared to a noncash gain of $54 million for the same period in 2021 and (ii) the Company's short-term investment of $18 million during the three months ended March 31, 2022;
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PIONEER NATURAL RESOURCES COMPANY
partially offset by:
•a $360 million incremental net derivative loss, primarily due to changes in forward commodity prices and the cash settlement of derivative positions in accordance with their terms;
•a $311$563 million increase in DD&A expense,income taxes, primarily due to the aforementioned increase in oil and gas sales volumes;
•a $306 million increase in the Company's income tax provision due to the increase in earnings during the three months ended September 30, 2021 asin 2022 compared to the same period in 2020; and2021;
•a $276$275 million increase in production costs, including taxes, primarily attributable to (i) increased costs attributable to the Company's successful horizontal drilling program in the Midland Basin and production added from the Parsley Acquisition and the DoublePoint Acquisition and (ii) an increase in production taxes and ad valorem taxes as a result of the aforementioned 87 percent increase in average realized commodity prices.prices, partially offset by a decrease in costs attributable to the Delaware Divestiture; and
•a $140 million increase in DD&A expense, primarily due to the aforementioned increase in daily sales volumes.
•During the three months ended September 30, 2021,March 31, 2022, average daily sales volumes increased on a BOE basis by 9035 percent to 675,793637,756 BOEPD, as compared to 354,968473,937 BOEPD during the same period in 2020,2021, primarily due to additional production fromthe Company's successful horizontal drilling program and the incremental production added from the assets acquired in the Permian Basin,DoublePoint Acquisition, partially offset by the Parsley Acquisition andreduced production associated with the DoublePoint Acquisition.assets divested as part of the Company's Delaware Divestiture.
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PIONEER NATURAL RESOURCES COMPANY
•Average oil and NGL prices per Bbl and average gas prices per Mcf increased to $69.24, $35.66$94.60, $41.37 and $4.05,$4.81, respectively, during the three months ended September 30, 2021March 31, 2022, as compared to $39.22, $16.93$56.71, $25.90 and $1.74,$3.04, respectively, for the same period in 2020.2021.
•Cash provided by operating activities increased during the three months ended September 30, 2021March 31, 2022 to $2.0$2.6 billion, as compared to $391$377 million for the same period in 2020.2021. The increase wasin net cash flow provided by operating activities during the three months ended March 31, 2022, as compared to the same period in 2021, is primarily due to an(i) the aforementioned increase in oil and gas revenues due to the aforementioned increases inas a result of higher commodity prices and sales volumes partially offset by (i) additionaland (ii) a decrease in cash used in derivative activities, and (ii)partially offset by an increase in production costs, due to the aforementioned increase in production added from the Parsley Acquisition and the DoublePoint Acquisition and production taxes attributable to the increase in commodity prices.including taxes.
•As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company's net debt to book capitalization was 21 percent and 14 percent, respectively.12 percent.
Impact of the COVID-19 PandemicOil and Gas Industry Considerations
The COVID-19 pandemic resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil throughout the world, and created significant volatility, uncertainty and turmoil in the oil and gas industry. The decrease in demand for oil, combined with pressures on the global supply-demand balance forexcess supply of oil and related products, resulted in oil prices declining significantly beginning in late February 2020. Oil demand andSince mid-2020, oil prices have improved, with demand steadily increasing despite the uncertainties surrounding the COVID-19 variants that have continued to recover throughout 2021, but uncertainties remain regarding the recovery ofinhibit a full global demand recovery. In addition, worldwide oil inventories are, from a historical perspective, very low and supply increases from OPEC and other oil producing nations are not expected to be sufficient to meet forecasted oil demand growth in 2022 and 2023, with many OPEC countries not able to pre-COVID-19produce at their OPEC agreed upon quota levels whichdue to their lack of capital investments over the past few years in developing incremental oil supplies. Furthermore, sanctions and import bans on Russia have been implemented by various countries in response to the war in Ukraine, further impacting global oil supply. As a result of global supply and demand imbalances, oil and natural gas prices have increased significantly, with average NYMEX oil and NYMEX gas prices for the three months ended March 31, 2022 being $94.29 per Bbl and $4.95 per Mcf, respectively, as compared to $57.84 per Bbl and $2.71 per Mcf for the same period in 2021. In addition, in response to continued supply chain disruptions attributable to the pandemic and the Russia/Ukraine conflict, cost inflation is occurring. Specifically, the Company's 2022 capital program is primarily being impacted by inflation in steel, diesel and chemical prices.
Global oil price levels and inflationary pressures will ultimately depend on various factors and consequencesthat are beyond the Company's control, such as (i) the durationeffectiveness of responses to combat the COVID-19 virus and scope of the pandemic,their impact on domestic and worldwide demand, (ii) the ability of OPEC Russia and other oil producing nations to manage the global oil supply, additional actions by businesses(iii) the impact of sanctions and governments in response to the pandemic, the global supply chain constraints associated with manufacturing delays, and the speed and effectiveness of responses to combat the virus.
The Company continues to assess the global impacts of the COVID-19 pandemic and may modify its plans as the economic and health impacts of COVID-19 continue to evolve.
Divestitures
Delaware Divestiture. In November 2021, the Company entered into a definitive agreement with Continental Resources, Inc. to sell all of its assets in the Delaware Basin for cash proceeds of $3.25 billion, subject to normal closing adjustments. The Company expects to recognize a pretax loss of $900 million to $1.1 billion.
For tax purposes the Company expects to recognize a gain of $1.1 billion to $1.3 billion which is expected to be offset by the Company's existing federal net operating losses, resulting in no federal taxes and $7 million to $11 million of state taxes expected to be paid associated with the divestiture.
The transaction is expected to close in late December 2021, subject to the satisfaction of customary closing conditions, including regulatory approval. The Delaware Basin assets did not meet the criteria to be considered held-for-sale at September 30, 2021.
Glasscock Divestiture. In October 2021, the Company completed the sale of 20,000 net acres in western Glasscock County to Laredo Petroleum, Inc. ("Laredo") in exchange for $160 million in cash and approximately 960 thousand shares of Laredo's common stock representing total consideration transferred of $230 million. The sale of these assets is expected to result in a pretax gain of approximately $5 million.
The Delaware divestiture will result in the loss of netimport bans on production of approximately 50,000 BOE per day once the transaction is closed. The Glasscock divestiture closed in October 2021 resulting in a net loss of approximately 4,400 BOE per day. The cash received from the divestitures will be used to meet the Company's short-term and long-term liquidity requirements as discussed in Liquidity and Capital Resources.
Fourth Quarter 2021 Outlook
The Company's operating and financial results for the fourth quarter of 2021 and beyond are uncertain and will depend on various factors beyond the Company's control, such as: the duration of the COVID-19 pandemic and the speed and effectiveness of vaccine distributions to combat the virus; environmental and trade policies; fiscal challenges facing the United States federal government; geopolitical issues globally, especially in the Middle East; the extent to which OPEC members and some nonmembers, including Russia, adhere to and agree to extend cuts to their oil production quotas;(iv) the timing and supply impact of any Iranian sanction relief on Iran's ability to export oil, (v) additional actions by businesses and governments in response to the uncertainty in oil demand fundamentalspandemic, (vi) the global supply chain constraints associated with governmental policy aimed at redirecting fossil fuel consumption towards lower carbon energy.manufacturing delays, (vii) oilfield service demand and cost inflation, and (viii) political stability of oil consuming countries. The Company continues to assess and monitor the impact of these factors and consequences on the Company and its operations.
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Second Quarter 2022 Outlook
Based on current estimates, the Company expects the following operating and financial results for the fourthsecond quarter of 2021:
2022:
Three Months Ending December 31, 2021June 30, 2022
Guidance
($ in millions, except per BOE amounts)
Average daily production (MBOE) (a)670623 - 695648
Average daily oil production volume (MBbl)(MBbls) (a)388342 - 403357
Production costs per BOE$7.5011.00 - $9.00$12.50
DD&A per BOE$10.7510.50 - $12.75$12.00
Exploration and abandonments expense$10 - $20
General and administrative expense$6770 - $77$80
Accretion of discount on asset retirement obligations$2 - $5
Interest expense$3932 - $44$37
Other expense$1520 - $30$40
Cash flow impact from firm transportation (b)$(75)(55) - $(45)$(25)
Current income tax provision (c)$5120 - $15$140
Effective tax rate22% - 27%
___________________________________________
(a)ReflectsDuring the first quarter of 2022, the Company's contracted sand supply was disrupted by a third-party sand mine outage, impacting forecasted second quarter production. The sand mine outage was fully restored in late March 2022. The Company has temporarily added a frac fleet during the second quarter of 2022 to mitigate the impact ofto the Glasscock divestiture that closed during October 2021.Company's full-year production forecast.
(b)The cash flow impact from firm transportation is primarily based on the forecasted differential between WTI oil prices and Brent oil prices less the costs to transport purchased oil from the areas of the Company's production to the Gulf Coast. To the extent that the Company's Gulf Coast sales of purchased oil does not cover the purchase price and associated firm transport costs, the Company's results of operations will reflect the negative cash flow impact attributable to its firm transportation commitments.the shortfall.
(c)Reflects estimated state and federal cash taxes that will be paid during the second quarter based on full-year 2022 forecasted taxable earnings.
Operations and Drilling Highlights
Average daily oil, NGL and gas sales volumes are as follows:
NineThree Months Ended September 30, 2021March 31, 2022
Oil (Bbls)344,692355,270 
NGL (Bbls)136,749152,929 
Gas (Mcf)674,186777,343 
Total (BOE)593,805637,756 
The Company's liquids production was 8180 percent of total production, on a BOE basis, for the ninethree months ended September March 31, 2022.
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PIONEER NATURAL RESOURCES COMPANY
Costs incurred are as follows:
NineThree Months Ended September 30, 2021March 31, 2022
( in millions)
Proved property acquisition costs (a)$9,0393 
Unproved property acquisitions (a)8,091 (19)
Exploration/extension costs1,953730 
Development costs504109 
Asset retirement obligations72 
$19,594825 
_____________________
(a)Includes proved and unprovedDoublePoint Acquisition measurement period adjustments that resulted in a $28 million decrease in acquisition costs related to the Parsley Acquisition of $5.1 billion and $5.6 billion, respectively, and proved and unproved acquisition costs related to the DoublePoint Acquisition of $3.9 billion and $2.4 billion, respectively.incurred.
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PIONEER NATURAL RESOURCES COMPANY
Development and exploration/extension drilling activity is as follows:
Nine Months Ended September 30, 2021
DevelopmentExploration/Extension
Beginning wells in progress9 210 
Wells spud18 342 
Acquired wells in progress22 104 
Successful wells(28)(378)
Ending wells in progress21 278 
The Company is currently
Three Months Ended March 31, 2022
DevelopmentExploration/Extension
Beginning wells in progress26 270 
Wells spud3 121 
Successful wells(22)(122)
Ending wells in progress7 269 
As of March 31, 2022, the Company's drilling and completions program was operating 1923 drilling rigs and sevensix frac fleets in the Midland Basin, as well as three drilling rigs in the Delaware basin.Basin. The Company will continue to evaluate its drilling and completions program with future activity levels assessed regularly.
During the ninethree months ended September 30, 2021,March 31, 2022, the Company successfully completed 318106 horizontal wells and 6 vertical wells in the northern portion of the Midland Basin 71and 32 horizontal wells in the southern portion of the Midland Basin and 17 horizontal wells in the Delaware Basin. In the northern portion of the Midland Basin, 4030 percent of the horizontal wells placed on production were Wolfcamp AB interval wells, 3723 percent were primarily Wolfcamp BA interval wells and the remaining 2347 percent were Spraberry interval wells. In the southern portion of the Midland Basin, the majorityall of the wells placed on production were Wolfcamp A and B interval wells. In the Delaware Basin, approximately 65 percent were Wolfcamp A and B interval wells and the remaining 35 percent were in the Bone Spring interval.
Results of Operations
Oil and gas revenues. The Company's revenues are derived from sales of 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 will fluctuate due to supply and demand factors, availability of transportation, seasonality, geopolitical developments and economic factors, among other items.
Three Months Ended March 31,
20222021Change
(in millions)
Oil and gas revenues$3,930 $1,824 $2,106 
Average daily sales volumes are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 20212020% Change20212020% Change
Oil (Bbls)388,829 200,670 94 %344,692 212,718 62 %
NGL (Bbls)156,873 82,614 90 %136,749 85,707 60 %
Gas (Mcf)780,547 430,106 81 %674,186 418,547 61 %
Total (BOEs)675,793 354,968 90 %593,805 368,183 61 %
The increase in average
 Three Months Ended March 31,
 20222021% Change
Oil (Bbls)355,270 281,017 26 %
NGLs (Bbls)152,929 105,675 45 %
Gas (Mcf)777,343 523,467 48 %
Total (BOE)637,756 473,937 35 %
Average daily BOE sales volumes per BOE increased for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periods in 2020 wasperiod 2021, primarily due to the Company's successful Spraberry/Wolfcamp horizontal drilling program combined withand the incremental
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PIONEER NATURAL RESOURCES COMPANY
production added from the Parsley Acquisition andassets acquired in the DoublePoint Acquisition.Acquisition, partially offset by the reduced production associated with the assets divested as part of the Company's Delaware Divestiture.
The oil, NGL and gas prices thatreported by the Company reports are based on the market prices received for each commodity. Commodity prices for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same respective periodsperiod in 2020,2021, increased due to the continued recovery in oil, NGL and gas demand, low worldwide inventory levels, OPEC supplies being below agreed quotas and the expected impact to global oil and gas supplies resulting from the COVID-19 pandemic.sanctions against Russia related to their unprovoked invasion of Ukraine. The average prices are as follows:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended March 31,
20212020% Change20212020% Change 20222021% Change
Oil per BblOil per Bbl$69.24 $39.22 77 %$64.22 $36.05 78 %Oil per Bbl$94.60 $56.71 67 %
NGL per Bbl$35.66 $16.93 111 %$30.41 $14.64 108 %
NGLs per BblNGLs per Bbl$41.37 $25.90 60 %
Gas per McfGas per Mcf$4.05 $1.74 133 %$3.31 $1.50 121 %Gas per Mcf$4.81 $3.04 58 %
Total per BOETotal per BOE$52.79 $28.22 87 %$48.04 $25.94 85 %Total per BOE$68.48 $42.75 60 %
PurchasedNet sales of purchased commodities.
The Company enters into pipeline capacity commitments in order to secure available oil, NGLs and gas transportation capacity from the Company's areas of production and secure diesel supply from the Gulf Coast to the Company's operations in the PermianMidland Basin. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments.
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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 risks 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 commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production to downstream sales points. The transportation costs associated with sales of purchased commoditiesthese transactions are included in purchased commodities expense.
The net effectseffect of third party purchases and sales of commodities areis as follows:
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020ChangeThree Months Ended March 31,
20222021Change
(in millions)(in millions)
Sales of purchased commoditiesSales of purchased commodities$1,679 $935 $744 $4,507 $2,391 $2,116 Sales of purchased commodities$2,217 $1,240 $977 
Purchased commoditiesPurchased commodities1,762 998 764 4,644 2,598 2,046 Purchased commodities2,152 1,255 897 
$(83)$(63)$(20)$(137)$(207)$70 $65 $(15)$80 
The changeincrease in net sales of purchased commodities for the three months ended September 30, 2021,March 31, 2022, as compared to the same period in 2020, was primarily due to a decrease in 2021 downstream oil margins on the Company's Gulf Coast refinery and export sales. The change in net sales of purchased commodities for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to a $74 million loss during the first quarter of 2020is attributable to oil that was purchased and in transit via pipeline to the Gulf Coast or in Gulf Coast storage at the end of December 2021, January 2022 and February which was subsequently sold in February 2020 and March 2020, respectively, at lower prices.2022. This oil inventory is sold in the month following purchasemonth at contracted prices that are generally tied to monthly average index oil prices (typically Brent oil prices). As a result of increasing oil prices during the three months ended March 31, 2022, the oil inventory in transit or stored at the end of December 2021, January 2022 and February 2022 was sold in January 2022, February 2022 and March 2022, respectively, at higher prices.
Firm transportation payments on excess pipeline capacity are included in other expense in the accompanying consolidated statements of operations. See Note 14 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
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PIONEER NATURAL RESOURCES COMPANY
Interest and other income, (loss), net.net.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Interest and other income (loss), net$2 $13 $(11)$42 $(145)$187 
Three Months Ended March 31,
20222021Change
(in millions)
Interest and other income, net$126 $60 $66 
The decreaseincrease in net interest and other income (loss) for the three months ended September 30, 2021,March 31, 2022, as compared to the same period in 2020, was2021, is primarily due to a $22 million noncash gain in 2020gains attributable to the increase in fair value of contingent consideration associated with the South Texas Divestiture, partially offset by a $10 million reduction in noncash losses between periods attributable to the decreaseincreases in the fair value of the Company's investment in affiliate. The increase in net interest and other income (loss) for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to (i) a noncash gain of $21 million attributable to the change in fair value of the Company's investment in affiliate in 2021of $96 million during the three months ended March 31, 2022 as compared to a noncash lossgain of $119$54 million for the same period in 20202021 and (ii) a $42the Company's short-term investment of $18 million noncash loss in 2020 attributable toduring the decrease in fair value of contingent consideration associated with the South Texas Divestiture.three months ended March 31, 2022.
See Note 13 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
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Derivative loss, net.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Commodity derivatives:
Noncash derivative gain (loss), net$(10)$25 $(35)$(639)$(29)$(610)
Cash receipts (payments) on settled derivative instruments, net(486)(81)(405)(1,357)110 (1,467)
Total commodity derivative gain (loss), net(496)(56)(440)(1,996)81 (2,077)
Marketing derivatives:
Noncash derivative gain (loss), net6 (85)91 3 (100)103 
Cash payments on settled derivative instruments, net(11)— (11)(31)— (31)
Total marketing derivative loss, net(5)(85)80 (28)(100)72 
Interest rate derivatives:
Cash payments on settled derivative instruments, net— — — — (22)22 
Derivative loss, net$(501)$(141)$(360)$(2,024)$(41)$(1,983)
Three Months Ended March 31,
20222021Change
(in millions)
Commodity price derivatives:
Noncash derivative loss, net$(111)$(350)$239 
Cash payments on settled derivatives, net(57)(314)257 
Total commodity derivative loss, net(168)(664)496 
Marketing derivatives:
Noncash derivative gain (loss), net44 (20)64 
Cash payments on settled derivatives, net(11)(7)(4)
Total marketing derivative gain (loss), net33 (27)60 
Derivative loss, net$(135)$(691)$556 
The Company primarily utilizes commodity swapderivative contracts collar contracts, collar contracts with short puts and basis swap contracts to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's capital budgeting and expenditure plans and (iii) support the payment of contractual obligations and dividends.consumes. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets. The Company also, from time to time, utilizes interest rate contracts to reduce the effect of interest rate volatility on the Company's indebtedness.
Commodity derivative settlementsprice derivatives and the relatedrelative price impact (per Bbl or Mcf) are as follows:
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Net cash paymentsPrice impactNet cash paymentsPrice impact
(in millions)(in millions)
Oil derivative payments (a)$(427)$(11.96)per Bbl$(1,270)$(13.48)per Bbl
Gas derivative payments (b)(59)$(0.82)per Mcf(74)$(0.41)per Mcf
Total net commodity derivative payments$(486)$(1,344)
Three Months Ended March 31,
20222021
Net Cash PaymentsPrice ImpactNet Cash PaymentsPrice Impact
(in millions)(in millions)
Oil derivative payments, net (a)$(1)$(0.04)per Bbl$(293)$(11.58)per Bbl
Gas derivative payments, net(56)$(0.79)per Mcf(8)$(0.16)per Mcf
$(57)$(301)
_____________________
(a)Excludes cash payments of $78 million during the three months ended March 31, 2022 related to entering into equal and offsetting oil and gas commodity derivative trades in the fourth quarter of 2021, that had the net effect of liquidatingeliminating certain of the Company's 2022 WTI swapderivative obligations. Excludes the effect from early settlement of certain of the Company's commodity derivative contracts, forwhich resulted in cash payments of $13 million during the nine months ended September 30, 2021.
(b)Excludes the effect of liquidating certain of the Company's 2021 NYMEX swap contracts for cash receipts of $447 thousand for the nine months ended September 30, 2021.
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Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Net cash paymentsPrice impactNet cash receiptsPrice impact
(in millions)(in millions)
Oil derivative receipts (payments) (a)$(36)$(1.93)per Bbl$123 $2.12 per Bbl
Gas derivative payments(2)$(0.04)per Mcf(2)$(0.02)per Mcf
Total net commodity derivative receipts (payments)$(38)$121 
_____________________
(a)Excludes the effect of liquidating certain of the Company's 2021 Brent collar contracts with short puts and Brent swap contracts for cash payments of $43 million for the three months ended September 30, 2020 and certain of the Company's 2020 and 2021 Brent collar contracts with short puts for net cash payments of $11 million during the nine months ended September 30, 2020.March 31, 2021.
The Company's open derivative contracts are subject to continuing market risk. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" and Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
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PIONEER NATURAL RESOURCES COMPANY
Gain on disposition of assets, netnet.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Gain on disposition of assets, net$1 $2 $(1)$14 $7 $7 
Three Months Ended March 31,
20222021Change
(in millions)
Gain on disposition of assets, net$34 $11 $23 
The increase in net gain on disposition of assets for the ninethree months ended September 30, 2021,March 31, 2022, as compared to the same period in 2020,2021, was primarily due to recognizingthe divestment of certain undeveloped acres and producing wells in the Midland Basin for cash proceeds of $85 million, resulting in a gain on the sales of $41 million, as compared to a $9 million in 2021 associated withgain on the sale of the Company's well services business to a third partyduring for net cash proceeds of $20 million. the three months ended March 31, 2021.
See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Oil and gas production costs.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Oil and gas production costs$323 $163 $160 $890 $506 $384 
Three Months Ended March 31,
20222021Change
(in millions)
Oil and gas production costs$416 $252 $164 
The increase in oil and gas production costs for the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to (i) increased costs related to production increases from the Company's successful horizontal drilling program in the Midland Basin and production added from the assets acquired in the DoublePoint Acquisition, partially offset by the reduced production associated with assets divested as part of the Delaware Divestiture, (ii) increased gas and NGL prices during the three months ended March 31, 2022 that resulted in increased gas processing costs for those contractual volumes retained by the processor as payment for their services, (iii) increased labor, maintenance and fuel costs and (iv) increased workover activity as a result of improved commodity prices being realized in 2022, which increased the economic benefit of repairing certain of the Company's oil and gas wells.
Oil and gasTotal production costs per BOE are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 20212020% Change20212020% Change
Lease operating expense per BOE (a)$2.49 $3.00 (17 %)$2.95 $3.03 (3 %)
Gathering, processing and transportation expense per BOE (b)3.15 2.55 24 %2.95 2.48 19 %
Workover costs per BOE (a)0.56 0.19 195 %0.46 0.24 92 %
Net natural gas plant income per BOE (c)(1.02)(0.75)36 %(0.87)(0.74)18 %
$5.18 $4.99 4 %$5.49 $5.01 10 %
 Three Months Ended March 31,
 20222021% Change
Lease operating expense (a)$3.46 $3.47 — %
Gathering, processing and transportation expense (b)3.85 3.05 26 %
Workover costs (a)0.79 0.43 84 %
Net natural gas plant income (c)(0.86)(1.05)(18 %)
$7.24 $5.90 23 %
_____________________
(a)Lease operating expense and workover expensecosts represent the components of oil and gas production costs over which the Company has management control.
(b)Gathering, processing and transportation expense represents the costs to (i) gather, process, transport and fractionate the Company's gas and NGLs to a point of sale and, to a lesser extent, (ii) gather and transport for certain of the Company's oil production to a point of sale.
(c)Net natural gas plant income represents the earnings from the Company's ownership share of gas processing facilities that gather and process the Company's and third party gas.
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The Company recognized higherchange in the Company's production costs per BOE duringfor the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020,2021, is due to the following:
•Lease operating expense per BOE decreased for the three and nine months ended September 30, 2021, as compared to the same periods in 2020, primarily due to (i) operational synergies achieved from the Parsley Acquisition beginning in January 2021 and the DoublePoint Acquisition beginning in May 2021, (ii) an increase in daily sales volumes due to additional production from the Company's successful horizontal drilling program in the Permian Basin and (iii) realized electricity credits for the three months ended September 30, 2021 as a result of Winter Storm Uri in February 2021;
•Gathering, processing and transportation expense per BOE increased for the three months ended September 30, 2021,March 31, 2022, as compared to the same period in 20202021, primarily due to (i) transportation costs related to new pipeline takeaway capacity for the Company's gas production, (ii) increased gas and NGL prices during the third quarter of 2021three months ended March 31, 2022 that resulted in increased gas processing costs for those contractual volumes retained by the processor as payment for their services and (iii)(ii) the assumption of Parsley Acquisition andthe DoublePoint Acquisition marketing contracts that havehad higher marketing costs on a per BOE basis. Gathering,gathering, processing and transportation expense per BOE increased for the nine months ended September 30, 2021, as compared to the same period in 2020 primarily due to (i) transportation costs related to new pipeline takeaway capacity for the Company's gas production, (ii) increased gas processing and transportation costs as a result of higher electricity costs during Winter Storm Uri in February 2021, (iii) increased gas and NGL prices during 2021 that resulted in increased gas processing costs for those contractual volumes retained by the processor as payment for their services and (iv) the assumption of Parsley Acquisition and DoublePoint Acquisition marketing contracts that have higher marketing costs on a per BOE basis;
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PIONEER NATURAL RESOURCES COMPANY
•Workover costs per BOE increased for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020,2021, due to an increase in workover activity as a result of improved commodity prices being realized in 2021,2022, which increased the economic benefit of repairing certain of the Company's oil and gas wells; and
•Net natural gas plant income per BOE increaseddecreased for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020,2021, primarily due to the loss of net natural gas plant income associated with the Company's Martin County Gas Processing Divestiture, partially offset by improved gas and NGL prices.
Production and ad valorem taxes.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Production and ad valorem taxes$179 $63 $116 $445 $182 $263 
Three Months Ended March 31,
20222021Change
(in millions)
Production and ad valorem taxes$224 $113 $111 
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.
Production and ad valorem taxes per BOE are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 20212020% Change20212020% Change
Production taxes per BOE$2.53 $1.20 111 %$2.25 $1.11 103 %
Ad valorem taxes per BOE0.38 0.70 (46 %)0.50 0.69 (28 %)
$2.91 $1.90 53 %$2.75 $1.80 53 %
The increase in production
 Three Months Ended March 31,
 20222021% Change
Production taxes per BOE$3.25 $1.98 64 %
Ad valorem taxes per BOE0.65 0.66 (2 %)
$3.90 $2.64 48 %
Production taxes per BOE increased for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020, was2021, primarily due to increasesthe aforementioned increase in oil, NGL and gas commodity prices. The decrease in ad valorem taxes per BOE for the three and nine months ended September 30, 2021, as compared to the same periods in 2020, was primarily due to lower prior year commodity prices that are used to determine current year ad valorem taxes.
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Depletion, depreciation and amortization expense.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Depletion, depreciation and amortization$704 $393 $311 $1,825 $1,243 $582 
Three Months Ended March 31,
20222021Change
(in millions)
Depletion, depreciation and amortization$614 $474 $140 
Total DD&A and depletion expense per BOE is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
20212020% Change20212020% Change
DD&A per BOE$11.32 $12.04 (6 %)$11.26 $12.32 (9 %)
Depletion expense per BOE$11.13 $11.38 (2 %)$10.95 $11.68 (6 %)
 Three Months Ended March 31,
 20222021% Change
DD&A per BOE$10.69 $11.11 (4 %)
Depletion expense per BOE$10.48 $10.54 (1 %)
The decrease in DD&A per BOE and depletion expense per BOE for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020, was2021, is primarily due to incremental additions toof proved reserves attributable to (i) new wells placed on production from the Company'saforementioned successful Spraberry/Wolfcamp horizontal drilling program and (ii) improved commodity prices (which has the effect of extending the economic life of producing wells). In addition, the DD&A per BOE and depletion expense per BOE attributable to the Parsley Acquisition and the DoublePoint Acquisition were lower than the Company's respective 2020 per BOE amounts.
Exploration and abandonments expense. Geological and geophysical costs and lease abandonments and other exploration expenses are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change Three Months Ended March 31,
20222021Change
(in millions)(in millions)
Geological and geophysicalGeological and geophysical$10 $10 $— $36 $26 $10 Geological and geophysical$9 $16 $(7)
Leasehold abandonments and otherLeasehold abandonments and other— 6 (6)4 9 (5)Leasehold abandonments and other5 3 2 
$10 $16 $(6)$40 $35 $5 $14 $19 $(5)
The increasedecrease in geological and geophysical costs for the ninethree months ended September 30, 2021,March 31, 2022, was primarily due to the relicensing of certain Parsley seismic data in connection with the Parsley Acquisition during 2021.
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PIONEER NATURAL RESOURCES COMPANY
The increase in leasehold abandonments costs for the three months ended March 31, 2022, as compared to the same period in 2020, was primarily due to relicensing certain seismic data in connection with the Parsley Acquisition.
The decrease in leasehold abandonment costs for the three and nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the abandonment of certain unproved properties during 20202022 that the Company no longer planned to drill before the leases expired.
During the ninethree months ended September 30,March 31, 2022 and the same period in 2021, the Company drilled and evaluated 378 exploration/122 and 106 exploratory/extension wells, of whichrespectively, with 100 percent were successfully completed as discoveries. During the same period in 2020, the Company drilled and evaluated 191 exploration/extension wells, of which 100 percent were successfully completed as discoveries.
See Note 6 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
General and administrative expense.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Noncash general and administrative expense$13 $15 $(2)$37 $30 $7 
Cash general and administrative expense59 49 10 179 150 29 
$72 $64 $8 $216 $180 $36 
Three Months Ended March 31,
20222021Change
(in millions)
Noncash general and administrative expense$7 $12 $(5)
Cash general and administrative expense66 56 10 
$73 $68 $5 
The change in noncash general and administrative expense for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020,2021, was primarily due to market fluctuations in the Company's deferred compensation obligation as a result of mark-to-market valuation changes attributable to the Company's deferred compensation plan assets.
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The change in cash general and administrative expense for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020,2021, was primarily due to the reinstatement of certain employee benefits during 2021 that were temporarily suspended during 2020incremental general and administrative costs associated with an increase in responseheadcount due to the COVID-19 pandemic.Parsley Acquisition and DoublePoint Acquisition.
Total general and administrative expense per BOE is as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 20212020% Change20212020% Change
Noncash general and administrative expense per BOE$0.21 $0.47 (55 %)$0.23 $0.30 (23 %)
Cash general and administrative expense per BOE0.95 1.49 (36 %)1.10 1.49 (26 %)
$1.16 $1.96 (41 %)$1.33 $1.79 (26 %)
 Three Months Ended March 31,
 20222021% Change
Noncash general and administrative expense$0.12 $0.28 (57 %)
Cash general and administrative expense1.16 1.32 (12 %)
$1.28 $1.60 (20 %)
The decrease in general and administrative expense per BOE for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020, reflect2021, reflects the general and administrative synergies achieved from the Parsley Acquisition beginning in January 2021 and the DoublePoint Acquisition beginning in May 2021.Acquisition. The Company added the productionsignificant sales volumes from the acquisitions with limited associated incremental general and administrative costs.costs being added.
See Note 3 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Interest expense.
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
20212020Change20212020Change20222021Change
(in millions)(in millions)
Noncash interest expenseNoncash interest expense$7 $16 $(9)$19 $34 $(15)Noncash interest expense$3 $1 $2 
Cash interest expenseCash interest expense34 18 16 103 60 43 Cash interest expense34 38 (4)
$41 $34 $7 $122 $94 $28 $37 $39 $(2)
The Companydecrease in cash interest expense is primarily due to the early adopted ASU 2020-06 effective January 1, 2021. As a result of this early adoption, the Company reversed the debt discount recorded to additional paid-in capital upon issuanceextinguishment of the Company's $1.3 billion0.750% Senior Notes due 2024 and the 4.450% Senior Notes due 2026, having aggregate principal amountamounts of Convertible$750 million and $500 million, respectively, partially offset by the issuance in May 2021 of $750 million of 0.550% Senior Notes to long-term debt. Therefore, noncashdue 2023.
The weighted average cash interest expense duringrate on the Company's indebtedness for the three and nine months ended September 30, 2021March 31, 2022 decreased to 1.8 percent, as compared to 2.0 percent for the same respective periodsperiod in 2020, primarily due to $11 million and $18 million decreases, respectively, in amortization associated with the discount attributable to the issuance of the Convertible Notes prior to the adoption of ASU 2020-06. 2021.
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PIONEER NATURAL RESOURCES COMPANY
See Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
The increase in cash interest expense during the three and nine months ended September 30, 2021, as compared to the same respective periods in 2020, is primarily due to (i) the changes in long-term debt as a result of the Parsley Acquisition and DoublePoint Acquisition (see "Liquidity and Capital Resources" below for further information) and (ii) the issuance in May 2020 and August 2020, respectively, of $1.3 billion of the Convertible Notes and $1.1 billion of 1.90% senior notes due 2030, partially offset by (i) the partial repayment of $360 million of the Company's 3.45% senior notes due 2021, $356 million of its 3.95% senior notes due 2022 and $9 million of its 7.20% senior notes due 2028 as a result of the Company's tender offer for these notes in May 2020 and (ii) the repayment of its 3.45% senior notes that matured in January 2021.
The annual weighted average cash interest rate on the Company's indebtedness as of September 30, 2021 and 2020 was 1.9 percent and 2.2 percent, respectively. See Note 7 of Notes to Consolidated Financial Statements in "Item 1. Financial Statements" for additional information.
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Other expense.
Three Months Ended September 30,Nine Months Ended September 30,
20212020Change20212020Change
(in millions)
Other expense$34 $98 $(64)$384 $273 $111 
Three Months Ended March 31,
20222021Change
(in millions)
Other expense$77 $304 $(227)
The decrease in other expense for the three months and the increase for the nine months ended September 30, 2021,March 31, 2022, as compared to the same respective periodsperiod in 2020, was2021, is primarily duerelated to the following:
•$8 million and $241$197 million of transaction-relatedtransaction costs for the three and nine months ended September 30, 2021, respectively, associated withrelated to the Parsley Acquisition and DoublePoint Acquisition;
•$80$80 million of losses for the nine months ended September 30, 2021costs related to the Company's fulfillment of certaincovering firm gas purchase commitments duringdue to Winter Storm Uri during the three months ended March 31, 2021, partially offset by $47 million in February 2021;losses on early extinguishment of the Company's 0.750% Senior Notes due 2024 and
•$10 million and $26 million of costs primarily related to unoccupied facilities acquired through the Parsley Acquisition4.450% Senior Notes due 2026 for the three and nine months ended September 30, 2021, respectively; as compared to
•a $69 million charge for estimated deficiency payments related to the Company's South Texas Divestiture for the nine months ended September 30, 2020;
•$74 million and $75 million of employee-related charges associated with the 2020 corporate restructuring and the Company's staffing reduction in its well services for the three and nine months ended September 30, 2020, respectively;
•$16 million and $69 million of idle frac fleet fees, stacked drilling rig charges and drilling rig early termination charges for the three and nine months ended September 30, 2020, respectively; and
•$27 million of early extinguishment of debt charges for the nine months ended September 30, 2020 associated with the Company's refinancing activities during the second quarter of 2020.March 31, 2022.
See Note 14 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Income tax benefit (provision).
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
20212020Change20212020Change20222021Change
(in millions)(in millions)
Income tax benefit (provision)Income tax benefit (provision)$(291)$15 $(306)$(400)$46 $(446)Income tax benefit (provision)$(552)$11 $(563)
Effective tax rateEffective tax rate22 %15 %7 %23 %16 %7 %Effective tax rate22 %14 %8 %
The changeincrease in income tax benefit (provision) duringprovision for the three and nine months ended September 30, 2021,March 31, 2022, as compared to the same periodsperiod in 2020, was2021, is primarily due to a $1.4an increase of $2.6 billion and $2.0 billion increase, 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 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 nine months ended September 30, 2021March 31, 2022 differed from the U.S. statutory rate of 21 percent primarily due to forecasted state income taxes.
Based on the Company's forecasted earnings, the Company currently expects that its available tax attributes will not be sufficient to offset taxable U.S. federal income in 2022. As a result, the Company expects to start paying U.S. federal cash taxes in 2022. Forecasted cash taxes are expected to paid from operating cash flows and cash on hand.
See Note 15 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Liquidity and Capital Resources
Liquidity. The Company's primary sources of short-term liquidity are (i) cash and cash equivalents, (ii) net cash provided by operating activities, (iii) sales of investments, (iv) unused borrowing capacity under its Credit Facility, (v) issuances of debt or equity securities and (vi) other sources, such as sales of nonstrategic assets. In January 2021, Pioneer entered into the First Amendment to Credit Agreement, with the primary changes being to increase the aggregate loan commitments from $1.5 billion to $2.0 billion, extend the maturity of the Credit Facility to January 12, 2026 and to nominally adjust the drawn and undrawn pricing.
The Company's short-term and long-term liquidity requirements consist primarily of (i) capital expenditures, (ii) acquisitions of oil and gas properties, (iii) payments of contractual obligations, including debt maturities, (iv) dividends and
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share repurchases, (v) income taxes and (v)(vi) working capital obligations. Funding for these requirements may be provided by any combination of the Company's sources of liquidity. Although the Company expects that its sources of funding will be adequate to fund its 20212022 liquidity requirements, no assurance can be given that such funding sources will be adequate to meet the Company's future needs.
During the nine months ended September 30, 2021, the Company enhanced its liquidity position by refinancing a portion of the debt acquired in the Parsley Acquisition and the DoublePoint Acquisition, issuing new debt and increasing borrowing capacity under the Company's Credit Facility, with the combined objective of increasing liquidity, extending the Company's debt maturities and lowering the Company's future cash interest expense on long-term debt.
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2021 revised2022 capital budget. WithIncluding the completioneffects from the aforementioned temporary additional frac fleet during the second quarter of the Parsley Acquisition2022 and the DoublePoint Acquisition,Company's current inflation estimates, the Company's capital budget for 2021 was revised and2022 is expected to beremain in the range of $3.1$3.3 billion to $3.4$3.6 billion, consisting of $2.95 billion to $3.25 billion for drilling and completion related activities, including additional tank batteries and saltwater disposal facilities, and $85 million for water infrastructure additions and vehicles, and $150 million of estimated Parsley and DoublePoint integration costs.vehicles. The Company's capital expenditures for the nine months ended September 30, 2021 were $2.5 billion. The 20212022 capital budget and actual capital expenditures for the nine months ended September 30, 2021 excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical general and administrative expense and corporate facilities.
The 2022 capital budget is expected to be funded from operating cash flow, and, if necessary, from cash and cash equivalents on hand or borrowings under the Company's Credit Facility.
Capital resources. As of September 30, 2021,March 31, 2022, the Company had no outstanding borrowings under its Credit Facility, leaving $2.0 billion of unused borrowing capacity. The Company was in compliance with all of its debt covenants as of September 30, 2021.March 31, 2022. The Company also had unrestricted cash on hand of $581 million$2.4 billion as of September 30, 2021.March 31, 2022.
Cash flows from operating, investingSources and financing activitiesuses of cash during the three months ended March 31, 2022, as compared to the same period in 2021, are summarized below.as follows:
Nine Months Ended September 30,
20212020ChangeThree Months Ended March 31,
20222021Change
(in millions)(in millions)
Net cash provided by operating activitiesNet cash provided by operating activities$3,835 $1,546 $2,289 Net cash provided by operating activities$2,584 $377 $2,207 
Net cash used in investing activitiesNet cash used in investing activities$(3,035)$(1,342)$1,693 Net cash used in investing activities$(1,313)$(348)$965 
Net cash provided by (used in) financing activities$(1,674)$482 $2,156 
Net cash used in financing activitiesNet cash used in financing activities$(2,761)$(806)$1,955 
Operating activities. The increase in net cash flow provided by operating activities for the ninethree months ended September 30, 2021,March 31, 2022, as compared to the same period in 2020, was2021, is primarily due to (i) an increase in oil and gas revenues as a result of higher commodity prices and sales volumes partially offset by (i) additionalattributable to the Company's successful Spraberry/Wolfcamp horizontal drilling program and the incremental production added from the assets acquired in the DoublePoint Acquisition and (ii) a decrease in cash used in derivative activities, (ii)partially offset by an increase in production costs, due to an increaseincluding taxes, and a reduction in costs attributable tocash flow associated with the production added byassets divested as part of the Parsley Acquisition and the DoublePoint Acquisition and production taxes attributable to higher commodity prices , (iii) one-time Parsley Acquisition and DoublePoint Acquisition cash transaction-related costs and (iv) cash paid to fulfill certain gas commitments during Winter Storm Uri.Delaware Divestiture.
Investing activities. The increase in net cash flow used in investing activities for the ninethree months ended September 30, 2021,March 31, 2022, as compared to the same period in 2020,2021, was primarily a resultdue to (i) the Company's purchase of $943commercial paper for $640 million, net of $2 million of net cash used in the DoublePoint Acquisitiondiscounts, and (ii) an increase in additions to oil and gas properties of $894$453 million, partially offset by (i) an increase in proceeds from the disposition of assets of $187 million and proceeds from the sale of the Company's short-term investment in Laredo common stock for $75 million and (ii) $117 million of net cash acquired in the Parsley Acquisition and a decrease between periods in additions to other assets and other property and equipment of $26 million.during the three months ended March 31, 2021.
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Financing activities. The Company's significant financing activities are as follows:
•2022: The Company (i) 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, (ii) paid dividends of $1.1 billion, (iii) paid $121 million of other liabilities and (iv) repurchased $276 million of its common stock.
•2021: The Company (i) received proceeds from the May 2021 Senior Notes Offering, net of $4 million of issuance costs and discounts, of $746 million, (ii) received proceeds from the January 2021 Senior Notes Offering, net of $24 million of issuance costs and discounts, of $2.5 billion, (iii) borrowed and repaid $650 million on the Company's Credit Facility, (iv) repaid the Parsley and DoublePoint credit facilities, which had outstanding balances of $397 million and $240 million, respectively, (v)(ii) repaid $140 million associated with the maturity of its 3.450% senior notesSenior Notes due in January 2021, (vi)(iii) used the proceeds from the Maya January 2021 Senior Notes Offering to pay $731 million to redeem DoublePoint's 7.750% senior notes due 2025, (vii) used proceeds from the January 2021 Senior Notes Offeringoffering to pay $1.6 billion to redeem Parsley's 5.250% senior notesSenior Notes due 2025, Parsley's 5.375% senior notesSenior Notes due 2025 and Jagged Peak's 5.875% senior notesSenior Notes due 2026, (viii)(iv) paid $852 million to purchase a portion of Parsley's 5.625% senior notesSenior Notes due 2027 and Parsley's 4.125% senior notesSenior Notes due 2028 pursuant to a cash tender offer, (ix)(v) repaid Parsley's credit facility, which had an outstanding balance of $397 million, (vi) paid $153$140 million of other liabilities and (x)(vii) paid dividends of $720$91 million.
•2020: The Company (i) received $1.1 billion from the issuance of 1.900% senior notes, net of issuance costs and discounts, (ii) received $1.3 billion from the issuance of the Convertible Notes, net of issuance fees, (iii) paid $113 million to enter into the Capped Call transactions associated with the Convertible Notes issuance, (iv) repaid an aggregate total of $748 million associated with the early repayment of a portion of the 3.45% senior notes due 2021, 3.950% senior notes due 2022 and 7.200% senior notes due 2028, (v) repaid $450 million associated with the maturity of its 7.500% senior notes in January 2020, (vi) paid dividends of $255 million, (vii) purchased $174 million of treasury stock and (viii) paid $162 million of other liabilities.
Dividends/distributions. During the ninethe three months ended September 30, 2021,March 31, 2022, the Company paidCompany's board of directors authorized the payment of base dividends of $350$341 million, or $1.67$0.78 per share. In August 2021,common share, compared to $91 million, or $0.55 per common share, during the board of directors declared a quarterly cash dividend of $0.56 per share on the Company's outstanding common stock, payable on October 14, 2021, to stockholders of record on September 30,three months ended March 31, 2021.
In addition to its base dividend program, the Company has initiated a variable dividend strategy whereby the Company may paypays a quarterly variable dividend of up to 75 percent of the prior quarterquarter's free cash flow remaining after the payment of the base dividend. During the nine months ended September 30, 2021, the Company paid variable dividends of $370 million, or $1.51 per share. On November 3, 2021, the Company declared a quarterly base dividend of $0.62 per share for shareholders of record on December 31, 2021, with a payment date of January 14, 2022 and a quarterly variable dividend of $3.02 per share for shareholders of record on November 30, 2021, with a payment date of December 14, 2021.
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
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PIONEER NATURAL RESOURCES COMPANY
activities, adjusted for changes in operating assets and liabilities, and cash transaction costs associated with acquisitions, less capital expenditures. The Company believes this non-GAAP measure is a financial indicator of the Company'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 and additions to corporate facilities. During the three months ended March 31, 2022, the Company declared and paid variable dividends of $731 million, or $3.00 per common share.
On May 4, 2022, the board of directors of the Company declared a quarterly base dividend of $0.78 per share and a quarterly variable dividend of $6.60 per share for shareholders of record on May 31, 2022, with a payment date of June 14, 2022. Future base and variable dividends are at the discretion of the Company's board of directors, and, if declared, the board of directors may change the dividend amount based on the Company's outlook for commodity prices, liquidity, debt levels, capital resources, free cash flow andor other factors. 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. Any future variable dividends, if declared and paid, will by their nature fluctuate based on the Company's free cash flow, which will depend on a number of factors beyond the Company's control, including commodity prices.
Off-balance sheet arrangements.From time to time, the Company enters into arrangements and transactions that can give rise to material off-balance sheet obligations.obligations of the Company. As of September 30, 2021,March 31, 2022, the material off-balance sheet arrangements and transactions that the Company had entered into included (i) firm purchase, transportation, storage and fractionation commitments, (ii) open purchase commitments and (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 (a) derivative contracts that are sensitive to future changes in commodity prices or interest rates, (b) gathering, processing (primarily treating and fractionation) and transportation commitments on uncertain volumes of future throughput and (c) indemnification obligations following certain divestitures.
In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified pre-closing matters, including matters of litigation, environmental contingencies, royalty and income taxes. Also associated with its divestiture transactions, the Company has issued and received guarantees to facilitate the transfer of contractual obligations, such as firm transportation
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agreements or gathering and processing arrangements. The Company does not recognize a liability if the fair value of the obligation is immaterial andor the likelihood of making payments under these guarantees is remote.
Other than the off-balance sheet arrangements described above, the Company has no transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the Company's liquidity or availability of or requirements for capital resources. The Company expects to enter into similar contractual arrangements in the future including incremental derivative contracts and additional firm purchase, transportation, storage and fractionation arrangements, in order to support the Company's business plans. See "Contractual obligations" below and Note 10 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
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 on May 15 and November 15 of each year. The Convertible Notes will mature on May 15, 2025, unless earlier redeemed, repurchased or converted. The Convertible Notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.
The Convertible Notes are convertible into shares of the Company's common stock at an adjusted conversion rate of 9.20559.5009 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes (subject to further adjustment pursuant to the terms of the notes indenture), which represents an adjusted conversion price of $108.63$105.25 per share (subject to further adjustment pursuant to the terms of the notes indenture) as of September 30, 2021.March 31, 2022. As a result of the quarterly base and variable dividends declared through September 30, 2021,March 31, 2022, the Conversion Rate increased from the initial rate of 9.1098 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes and the Conversion Price decreased from $109.77. Future changes to the Company'sdeclarations of quarterly base dividend program or the declarationdividends in excess of a$0.55 per common share and declarations of future variable dividend,dividends, as previously described, will cause an adjustmentfurther 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.
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PIONEER NATURAL RESOURCES COMPANY
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-day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the price of the Company's common stock times the Conversion Rate;
•upon notice of redemption by the Company; or
•upon the occurrence of specified corporate events, including certain consolidations or mergers.
On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. The Company may not redeem the Convertible Notes prior to May 20, 2023, and after such date, may redeem the Convertible Notes only if the last reported sale price of the Company's common stock has been at least 130 percent of the Conversion Price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the notice of redemption. The redemption price is equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.
During the last 30 consecutive trading days of the thirdfirst quarter of 2021,2022, the last reported sales prices of the Company's common stock exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to become convertible at the option of the holders during the three month period ending December 31, 2021. As of SeptemberJune 30, 2021, if converted by the holder, the Company intends to settle the Convertible Notes in cash with cash on hand or through borrowings under its Credit Facility.2022. The Company reserves its right under the notes indenture to elect to settle the Convertible Notes in cash, shares of the Company's common stock or a combination of cash and common stock. 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 long-term debt, leases (primarily related to contracted drilling rigs, equipment and office facilities), capital funding obligations, derivative obligations, firm transportation, storage and fractionation commitments, minimum annual gathering, processing and transportation commitments and other liabilities (including retained obligations associated with divestitures and postretirement benefit obligations). Other joint owners in the properties operated by the Company could incur portions of the costs represented by these commitments.
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PIONEER NATURAL RESOURCES COMPANY
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 does not expect to be able to fulfill all of its short-term and long-term firm transportation volume obligations from projected production of available reserves; consequently, the Company plans to purchase third party volumes to satisfy its firm transportation commitments if it is economic to do so; otherwise, it will pay demand fees for any commitment shortfalls. The Company also has open purchase commitments for inventories, materials and other property and equipment ordered, but not received, as of March 31, 2022. See Note 10 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Derivative obligations. The Company's commodity and marketing derivative contracts are periodically measured and recorded at fair value and continue to be subject to market and credit risk. As of September 30, 2021,March 31, 2022, these contracts represented net liabilities of $1.3 billion.$552 million, which includes $250 million of obligations related to entering into equal and offsetting oil and gas commodity derivative trades during the fourth quarter of 2021 that had the net effect of eliminating future market risk related to certain of its 2022 derivatives. The ultimate liquidation value of the Company's commodity price derivatives will be dependent upon actual future commodity prices, which may differ materially from the inputs used to determine the derivatives' fair values as of September 30, 2021.March 31, 2022. See Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" and "Item"Item 3. Quantitative and Qualitative Disclosures About Market Risk"Risk" for additional information.
New Accounting Pronouncements
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The effects of new accounting pronouncements are discussed in Note 2 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements."
PIONEER NATURAL RESOURCES COMPANY
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company's financial position is routinely subject to a variety of risks, including market risks associated with changes in commodity prices, interest rate movements on outstanding debt and credit risks. These risks are mitigated through the Company's risk management program, which includes the use of derivative financial instruments and selling purchased oil and gas outside of the Permian Basin. The following quantitative and qualitative information is provided about financial instruments to which the Company was a party as of September 30, 2021,March 31, 2022, and from which the Company may incur future gains or losses from changes in commodity prices or interest rates. The Company does not enter into any financial instruments, including derivatives, for speculative or trading purposes.
Interest rate risk. As of September 30, 2021,March 31, 2022, the Company had no variable rate debt outstanding under the Credit Facility and, consequently, no related exposure to interest rate risk. As of September 30, 2021,March 31, 2022, the Company had $6.9$5.7 billion of fixed rate long-term debt outstanding with a weighted average cash interest rate of 1.91.8 percent. Although changes in interest rates may affect the fair value of the Company's fixed rate long-term debt, any changes would not impact earnings or expose the Company to the risk of earnings or cash flow losses. The Company did not have anyhas no interest rate derivative instruments outstanding as of September 30, 2021;outstanding; however, it may enter into suchderivative instruments in the future to mitigate interest rate risk. See Note 4 and Note 7 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information.
Commodity price risk. The Company's primary market risk exposure is related to the price it receives from the sale of its oil, NGLsNGL 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. Reducing the Company's exposure to price volatility helps secure funds to be used in its capital program and to fund general working capital needs, debt obligations, dividends and share repurchases, among other uses. The Company mitigates its commodity price risk through the use ofby (i) maintaining financial flexibility with a strong balance sheet, (ii) using derivative financial instruments and (iii) sales of purchased oil and gas.
Derivative financial instruments. The Company's decision on the quantity and price at which it executes 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 the commodity price forecast is expected to improve. Proceeds, if any, can be used for the purpose of funding the Company's capital program, general working capital needs, debt obligations, dividends and share repurchases, among other uses. While derivative positions limit the downside risk of adverse price movements, they also limit future revenues from upward price movements. The Company manages commodity price risk with the following types of commodity derivative contracts:
•Swaps. The Company receives a fixed price and pays a floating market price to the counterparty on a notional amount of sales volumes, thereby fixing the price for the commodity sold.
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•Collars. Collar contracts provide minimum ("floor" or "long put") and maximum ("ceiling") prices on a notional amount of sales volumes, thereby allowing some price participation if the relevant index price closes above the floor price but below the ceiling price.
•Collar contracts with short put options. Collar contracts with short put options differ from other collar contracts by virtue of the short put option price, below which the Company's realized price will exceed the variable market prices by the long put-to-short put price differential.
•Basis swaps. Basis swap contracts fix the basis differentials between the index price at which the Company sells its production and the index price used in swap or collar contracts.
•Rollfactor swaps. Rollfactor swaps are utilized to match the derivative contracts to the physical oil sales. Physical oil sales typically use trade month averages whereas derivative contracts utilize calendar month averages. The rollfactor swaps convert the calendar month into a trade month.
•Options. Selling individual call options can enhance the market price by the premium received or, alternatively, the premium received can be utilized to improve swap or collar contract prices. Purchased put options establish a minimum floor price (less any premiums paid) and allow participation in higher prices when prices close above the floor price.
The Company has entered into commodity derivative contracts for a portion of its forecasted 2021 and 2022 production; consequently, if commodity prices decline, the Company could realize lower prices for volumes not protected by the Company's derivative activities and could see a reduction in derivative contract prices on additional volumes in the future. As a result, the Company's internal cash flows will be negatively impacted by a reduction in commodity prices.
The average forward prices based on September 30, 2021 market quotes were as follows:
2021Year Ending December 31, 2022
Fourth
Quarter
Average forward Brent oil price$77.53 $73.07 
Average forward WTI Midland oil price$74.59 $69.97 
Average forward MEH oil price$75.08 $70.65 
Average forward NYMEX WTI oil price$74.87 $70.87 
Average forward NYMEX gas price$5.93 $4.41 
Average forward DUTCH TTF gas price$33.32 $19.70 
Average forward WAHA gas price$5.74 $4.14 
WTI Midland/Brent oil basis differentials:
Average forward basis differential price (a)$(2.94)$(3.10)
The average forward prices based on November 1, 2021March 31, 2022 market quotes are as follows:
2021Year Ending December 31, 2022
Fourth
Quarter
Average forward Brent oil price$84.04 $77.83 
Average forward WTI Midland oil price$81.73 $74.63 
Average forward MEH oil price$82.08 $75.22 
Average forward NYMEX WTI oil price$84.05 $76.12 
Average forward NYMEX gas price$5.19 $4.22 
Average forward DUTCH TTF gas price$22.31 $15.22 
Average forward WAHA gas price$5.27 $3.89 
WTI Midland/Brent oil basis differentials:
Average forward basis differential price (a)$(2.31)$(3.20)
2022Year Ending December 31, 2023Year Ending December 31, 2024
Second QuarterThird QuarterFourth Quarter
Average forward Midland oil price$97.68 $92.78 $89.42 $83.92 $77.78 
Average forward Brent oil price$102.81 $98.07 $94.40 $88.95 $82.77 
Average forward NYMEX WTI oil price$96.83 $91.93 $88.64 $83.16 $76.98 
Average forward DUTCH TTF gas price$41.07 $40.81 $38.81 $24.20 $16.08 
Permian Basin index swap contracts:
Average Midland/Brent forward basis oil price differential (a)$(5.13)$(5.29)$(4.98)$(5.03)$(4.99)
Average Midland/NYMEX WTI forward basis oil price differential (b)$0.85 $0.85 $0.78 $0.76 $0.80 
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PIONEER NATURAL RESOURCES COMPANY
2022Year Ending December 31, 2023Year Ending December 31, 2024
Second QuarterThird QuarterFourth Quarter
Average forward Midland oil price$96.56 $91.89 $88.22 $84.42 $76.44 
Average forward Brent oil price$100.56 $96.07 $92.60 $88.92 $80.95 
Average forward NYMEX WTI oil price$95.86 $91.32 $87.72 $83.94 $76.05 
Average forward DUTCH TTF gas price$30.81 $30.06 $29.12 $24.70 $20.35 
Permian Basin index swap contracts:
Average Midland/Brent forward basis oil price differential (a)$(4.00)$(4.18)$(4.38)$(4.50)$(4.51)
Average Midland/NYMEX WTI forward basis oil price differential (b)$0.70 $0.57 $0.50 $0.48 $0.39 
___________________
(a)Based on market quotes for basis differentials between the Midland oil index pricesprice and the Brent oil index price.prices.
(b)Based on market quotes for basis differentials between the Midland oil index price and NYMEX WTI oil index prices.
See Note 4 and Note 5 of Notes to Consolidated Financial Statements included in "Item 1. Financial Statements" for a description of the Company's open derivative positions and additional information.
Sales of purchased commodities.The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil and gas sales to (i) Gulf Coast refineries, (ii) Gulf Coast and West Coast gas markets and (iii) international oil markets, and to satisfy unused gas pipeline capacity commitments. The Company also enters into pipeline capacity commitments to secure diesel supply from the Gulf Coast to the Company's operations in the PermianMidland Basin. The Company periodically enters into separate sales transactions with third parties related to diesel volumes that exceed the Company's operational needs.
Marketing derivatives. The Company's marketing derivatives reflect two long-term marketing contracts that were entered in October 2019 whereby the Company agreed to purchase and simultaneously sell 50 thousand barrels of oil per day at an oil terminal in Midland, Texas for a six-year term that began on January 1, 2021 and ends on December 31, 2026. The price the Company pays to purchase the oil volumes under the purchase contractthese marketing contracts is based on a Midland WTIoil price and the price the Company receives for the oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through theira Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the marketing contracts, the Company determined that the marketing contracts should be accounted for as derivative instruments. Similar to sales of purchased commodities, these marketing derivatives allow the Company to diversify a portion of its oil pricingsales from its area of production to Gulf Coast and international markets.
Subsequent to March 31, 2022, the Company entered into two additional long-term marketing contracts that will be accounted for as derivative instruments. The average forward pricesterms of the two marketing contracts commit the Company to purchase and simultaneously sell 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and 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 these marketing contracts is based on September 30, 2021 market quotesa Midland oil price and the price the Company receives for the oil volumes sold is a WASP that a non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are as follows:highly correlated with Brent oil prices during the same month of the purchase.
Year Ending
December 31, 2021December 31, 2022December 31, 2023December 31, 2024December 31, 2025December 31, 2026
Average forward Brent oil price$77.53 $73.07 $68.03 $64.35 $61.68 $59.96 
Average forward WTI Midland oil price74.59 69.97 64.08 59.91 56.92 54.95 
Average forward basis differential price (a)$2.94 $3.10 $3.95 $4.44 $4.76 $5.01 
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PIONEER NATURAL RESOURCES COMPANY
The average forward prices based on November 1, 2021March 31, 2022 market quotes are as follows:
Year Ending
December 31, 2021December 31, 2022December 31, 2023December 31, 2024December 31, 2025December 31, 2026
Average forward Brent oil price$84.04 $77.83 $71.44 $67.20 $64.46 $62.96 
Average forward WTI Midland oil price81.73 74.63 67.76 63.21 60.12 58.12 
Average forward basis differential price (a)$2.31 $3.20 $3.68 $3.99 $4.34 $4.84 
Year Ending
December 31, 2022December 31, 2023December 31, 2024December 31, 2025December 31, 2026
Average forward Brent oil price$99.37 $88.95 $82.77 $78.79 $76.17 
Average forward Midland oil price$94.10 $83.92 $77.78 $73.44 $70.40 
Average forward basis oil price differential (a)$(5.27)$(5.03)$(4.99)$(5.35)$(5.77)
The average forward prices based on May 3, 2022 market quotes are as follows:
Year Ending
December 31, 2022December 31, 2023December 31, 2024December 31, 2025December 31, 2026
Average forward Brent oil price$99.82 $88.92 $80.95 $75.80 $72.64 
Average forward Midland oil price$95.87 $84.42 $76.44 $70.95 $67.33 
Average forward basis oil price differential (a)$(3.95)$(4.50)$(4.51)$(4.85)$(5.31)
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(a)Based on market quotes for basis differentials between Midland oil index prices and the Brent oil index price.
Credit risk. The Company's primary concentration of credit risks are associated with the collection of receivables resulting from the sale of oil and gas production and purchased oil and gas, 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 obtains assurances of payment, such as a guarantee by the parent company of the counterparty, a letter of credit or other credit support. Historically, the Company's credit losses on commoditiescommodity receivables have not been material.
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.
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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 additional information.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. The Company's management, with the participation of its principal executive officer and principal financial officer, have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act, of 1934 (the "Exchange Act"), the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based on that evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective, as of the end of the period covered by this Report, in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including that such information is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Changes 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 September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
The Company is party to various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on the Company's consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations. 
ITEM 1A.
RISK FACTORS
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, 2020,2021, under the headings "Part I, Item 1. Business – Competition," "Part I. Item 1. Business - Regulation," "Part I, Item 1A. Risk Factors," "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" as updated by the discussion in Part II of the Company's Quarterly Report on Form 10-Q for the quarter ended March, 31, 2021, 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 that were described in the Company's 20202021 Annual Report on Form 10-K except as updated by the referenced Form 10-Q.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.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Purchases of the Company's common stock are as follows:
Three Months Ended March 31, 2022
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)
January 1-31, 202244,675 $181.93 — $840,702,938 
February 1-28, 2022308,136 $228.67 230,864 $3,947,533,077 
March 1-31, 2022821,960 $240.30 821,958 $3,750,018,375 
1,174,771 1,052,822 
Three Months Ended September 30, 2021
PeriodTotal Number of
Shares Purchased (a)		Average Price 
Paid per Share		Total Number of
Shares 
Purchased As Part of
Publicly Announced
Plans or Programs		Approximate Dollar
Amount of Shares that
May Yet Be Purchased
under Plans or
Programs (b)
July 2021— $— — 1,090,693,887 
August 202134,016 $141.38 — 1,090,693,887 
September 2021139 $154.26 — 1,090,693,887 
34,155 — 
______________________________________
(a)Includes shares purchased from employees in order for employees to satisfy income tax withholding payments related to share-based awards that vested during the period.
(b)In December 2018,February 2022, the Company's board of directors authorized a $4 billion common stock repurchase program. This authorization replaced the previously authorized $2 billion common stock repurchase program that had $841 million remaining in the program before being replaced with the $4 billion common stock repurchase program. The stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the board of directors.
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ITEM 6.
EXHIBITS
Exhibit
Number		Description
10.1 (a)
Indemnification Agreement,dated as of September 21, 2021, between the CompanyEighth Amendment to Pioneer Natural Resources USA, Inc. 401 (k) and Maria S. Jelescu DreyfusMatching Plan..
31.1 (a)
Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.
31.2 (a)
Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.
32.1 (b)
Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.
32.2 (b)
Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.
101.INS (a)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.SCH (a)Inline XBRL Taxonomy Extension Schema Document.
101.CAL (a)Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF (a)Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB (a)Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE (a)Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
____________________
(a)Filed herewith.
(b)Furnished herewith.

*    Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the SEC a copy of any omitted schedule upon request.
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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
NovemberMay 5, 20212022By:/s/ Neal H. Shah
Neal H. Shah
Senior Vice President and Chief Financial Officer
NovemberMay 5, 20212022By:/s/ Margaret M. Montemayor
Margaret M. Montemayor
Vice President and Chief Accounting Officer
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