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 March 31, 2023

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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	PXD	New 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 April 25, 2023    233,735,537

1

PIONEER NATURAL RESOURCES COMPANY

TABLE OF CONTENTS 

		Page
Definitions of Certain Terms and Conventions Used Herein		3
Cautionary Statement Concerning Forward-Looking Statements		5
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	6
	Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022	7
	Consolidated Statements of Equity for the three months ended March 31, 2023 and 2022	8
	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	10
	Notes to Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
Signatures		42

2

Definitions of Certain Terms and Conventions Used Herein

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

Measurements.

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

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

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

•"BOEPD" means BOE per day.

•"MMBOPD" means one million barrels of oil per day.

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

•"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.

•"WAHA" is a benchmark pricing hub for West Texas gas.

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

General terms and conventions.

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

•"ESG" means environmental, social and governance.

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

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

•"GHG" means greenhouse gases.

•"LNG" means liquefied natural gas.

•"NGLs" means natural gas liquids, 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" means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.

•"Proved reserves" 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.

3

(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 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 elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty.

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

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

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

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

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

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

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

•"Standardized Measure" means the after-tax present value of estimated future net cash flows of proved reserves, determined in accordance with the rules and regulations of the SEC, using prices and costs employed in the determination of proved reserves and a 10 percent discount rate.

•"U.S." means United States.

•With respect to information on the working interest in wells, drilling locations and acreage, "net" 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.

4

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

These risks and uncertainties include, among other things, volatility of commodity prices; product supply and demand; the impact of armed conflict (including the war in Ukraine) and political instability on economic activity and oil and gas supply and demand; competition; the ability to obtain drilling, environmental and other permits and the timing thereof; the effect of future regulatory or legislative actions on Pioneer or the industry in which it operates, including potential changes to tax laws; the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms; potential liability resulting from pending or future litigation; the costs, including the potential impact of cost increases due to inflation and supply chain disruptions, and results of development and operating activities; the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity, oil and gas demand, and global and U.S. supply chains; the risk of new restrictions with respect to development activities, including potential changes to regulations resulting in limitations on the Company's ability to dispose of produced water; availability of equipment, services, resources and personnel required to perform the Company's development and operating activities; access to and availability of transportation, processing, fractionation, refining, storage and export facilities; Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled; the Company's ability to achieve its emissions reductions, flaring and other ESG goals; access to and cost of capital; the financial strength of (i) counterparties to Pioneer's credit facility and derivative contracts, (ii) issuers of Pioneer's investment securities and (iii) purchasers of Pioneer's oil, NGL and gas production and downstream sales of purchased commodities; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying forecasts, including forecasts of production, operating cash flow, well costs, capital expenditures, rates of return, expenses, and cash flow from downstream purchases and sales of oil and gas, net of firm transportation commitments; tax rates; quality of technical data; environmental and weather risks, including the possible impacts of climate change on the Company's operations and demand for its products; cybersecurity risks; the risks associated with the ownership and operation of the Company's water services business and acts of war or terrorism. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.

Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part 1, Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition," "Part I, Item 1. Business —Regulation," "Part I, Item 1A. Risk Factors," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Pioneer undertakes no duty to publicly update these statements except as required by law.

5

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	March 31, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,192	$	1,032
Accounts receivable, net	1,392		1,853
Income taxes receivable	164		164
Inventories	487		424
Investment in affiliate	119		172
Other	117		81
Total current assets	3,471		3,726
Oil and gas properties, using the successful efforts method of accounting:
Proved properties	39,849		38,465
Unproved properties	5,861		6,008
Accumulated depletion, depreciation and amortization	(15,492)		(14,843)
Total oil and gas properties, net	30,218		29,630
Other property and equipment, net	1,640		1,658
Operating lease right-of-use assets	367		340
Goodwill	242		243
Other assets	171		143
	$	36,109	$	35,740
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade	$	2,265	$	2,487
Due to affiliates	81		150
Interest payable	17		33
Income taxes payable	287		63
Current portion of long-term debt	814		779
Derivatives	78		44
Operating leases	138		125
Other	255		206
Total current liabilities	3,935		3,887
Long-term debt	5,094		4,125
Derivatives	98		96
Deferred income taxes	3,984		3,867
Operating leases	252		236
Other liabilities	908		988
Equity:
Common stock, $.01 par value; 500,000,000 shares authorized; 244,902,719 and    244,703,342 shares issued as of March 31, 2023 and December 31, 2022, respectively	2		2
Additional paid-in capital	18,688		18,779
Treasury stock, at cost; 11,167,182 and 8,667,824 shares as of March 31, 2023 and    December 31, 2022, respectively	(2,445)		(1,925)
Retained earnings	5,593		5,685
Total equity	21,838		22,541
Commitments and contingencies
	$	36,109	$	35,740

The financial information included as of March 31, 2023 has been prepared by management

without audit by independent registered public accountants.

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

6

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Revenues and other income:
Oil and gas	$	3,166	$	3,930
Sales of purchased commodities	1,431		2,217
Interest and other income (loss), net	(37)		126
Derivative loss, net	(44)		(135)
Gain on disposition of assets, net	25		34
	4,541		6,172
Costs and expenses:
Oil and gas production	455		416
Production and ad valorem taxes	208		224
Depletion, depreciation and amortization	664		614
Purchased commodities	1,485		2,152
Exploration and abandonments	15		14
General and administrative	84		73
Accretion of discount on asset retirement obligations	4		4
Interest	28		37
Other	41		77
	2,984		3,611
Income before income taxes	1,557		2,561
Income tax provision	(335)		(552)
Net income attributable to common stockholders	$	1,222	$	2,009
Net income per share attributable to common stockholders:
Basic	$	5.19	$	8.25
Diluted	$	5.00	$	7.85
Weighted average shares outstanding:
Basic	235		243
Diluted	244		256
Dividends declared per share	$	5.58	$	3.78

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

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

7

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, 2022	236,036	$	2	$	18,779	$	(1,925)	$	5,685	$	22,541
Dividends declared ($5.58 per share)	—	—		—		—		(1,314)		(1,314)
Convertible senior note conversions:
Conversion premium	—	—		(138)		—		—		(138)
Capped call proceeds	—	—		31		—		—		31
Issuance fees and deferred taxes	—	—		(7)		—		—		(7)
Purchases of treasury stock	(2,499)	—		—		(520)		—		(520)
Stock-based compensation:
Vested compensation awards, net	199	—		—		—		—		—
Compensation costs included in net income		—		23		—		—		23
Net income	—	—		—		—		1,222		1,222
Balance as of March 31, 2023	233,736	$	2	$	18,688	$	(2,445)	$	5,593	$	21,838

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.

8

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, 2021	242,778	$	2	$	19,123	$	(248)	$	3,960	$	22,837
Dividends declared ($3.78 per share)	—	—		—		—		(922)		(922)
Exercise of long-term incentive stock options	6	—		—		1		—		1
Purchases of treasury stock	(1,175)	—		—		(276)		—		(276)
Stock-based compensation:
Vested compensation awards, net	350	—		—		—		—		—
Compensation costs included in net loss	—	—		19		—		—		19
Net income	—	—		—		—		2,009		2,009
Balance as of March 31, 2022	241,959	$	2	$	19,142	$	(523)	$	5,047	$	23,668

The financial information included herein has been prepared by management

without audit by independent registered public accountants.

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

9

PIONEER NATURAL RESOURCES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income	$	1,222	$	2,009
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation and amortization	664		614
Exploration expenses	—		5
Deferred income taxes	110		532
Gain on disposition of assets, net	(25)		(34)
Loss on early extinguishments of debt	—		47
Accretion of discount on asset retirement obligations	4		4
Interest expense	3		3
Derivative-related activity	36		67
Amortization of stock-based compensation	23		19
Investment valuation adjustments	53		(114)
Other	51		27
Changes in operating assets and liabilities:
Accounts receivable	461		(697)
Income taxes receivable	—		1
Inventories	(63)		(126)
Other assets	(63)		(1)
Accounts payable	(380)		178
Interest payable	(16)		(30)
Income taxes payable	225		17
Other liabilities	9		60
Net cash provided by operating activities	2,314		2,581
Cash flows from investing activities:
Proceeds from disposition of assets	4		210
Proceeds from short-term investments	—		75
Purchases of short-term investments, net	—		(640)
Additions to oil and gas properties	(1,180)		(914)
Additions to other assets and other property and equipment	(28)		(41)
Net cash used in investing activities	(1,204)		(1,310)
Cash flows from financing activities:
Borrowings under credit facility	350		—
Repayment of credit facility	(350)		—
Proceeds from issuance of senior notes, net of discount	1,099		—
Repayment of long-term debt	(230)		(1,292)
Proceeds from capped call on convertible notes	31		—
Payments of other liabilities	(4)		(121)
Payments of financing fees	(7)		—
Purchases of treasury stock	(520)		(276)
Exercise of long-term incentive plan stock options	—		1
Dividends paid	(1,319)		(1,073)
Net cash used in financing activities	(950)		(2,761)
Net increase (decrease) in cash, cash equivalents and restricted cash	160		(1,490)
Cash, cash equivalents and restricted cash, beginning of period	1,032		3,884
Cash, cash equivalents and restricted cash, end of period	$	1,192	$	2,394

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.

10

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

NOTE 1. Organization and Nature of Operations

Pioneer is a Delaware corporation whose common stock is listed and traded on the NYSE. The Company is a large independent oil and gas exploration and production company that explores for, develops and produces oil, NGLs and gas in the Midland 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 March 31, 2023 and for the three months ended March 31, 2023 and 2022 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 GAAP. The operating results for the three months ended March 31, 2023 are not necessarily indicative of results for a full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the SEC. These unaudited interim consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Use of estimates in the preparation of financial statements. Preparation of the Company's 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates and assumptions utilized.

NOTE 3. Acquisition, Divestiture and Nonmonetary Activities

Acquisitions. The Company regularly seeks to acquire or trade for acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of future horizontal wells and provides superior returns on investment.

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

•During the three months ended March 31, 2022, the Company divested certain undeveloped acreage and producing wells in the Midland Basin for (i) cash proceeds of $85 million and (ii) ownership interests in certain Midland Basin undeveloped acreage and producing wells valued at $8 million. The Company recorded a gain on these sales of $41 million, which is reflected in net gain on disposition of assets in the consolidated statements of operations.

•In February 2022, the Company completed the sale of its equity interest in certain gas gathering and processing systems in northern Martin County for cash proceeds of $125 million (the "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.

Nonmonetary transactions. During the three months ended March 31, 2023, the Company's nonmonetary transactions included exchanges of both proved and unproved oil and gas properties in the Midland Basin with unaffiliated third parties. Certain of these transactions were accounted for at fair value, resulting in the Company recording a gain of $24 million to net gain on disposition of assets in the consolidated statements of operations and $162 million of noncash investing activities.

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

11

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

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

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

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

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

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

	As of March 31, 2023
	Fair Value Measurements
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in millions)
Assets:
Investment in affiliate	$	119	$	—	$	—	$	119
Deferred compensation plan assets	58		—		—		58
Conversion option derivatives	—		1		—		1
	$	177	$	1	$	—	$	178
Liabilities:
Marketing derivatives	$	—	$	—	$	176	$	176

	As of December 31, 2022
	Fair Value Measurements
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in millions)
Assets:
Investment in affiliate	$	172	$	—	$	—	$	172
Deferred compensation plan assets	65		—		—		65
Conversion option derivatives	—		1		—		1
	$	237	$	1	$	—	$	238
Liabilities:
Marketing derivatives	$	—	$	—	$	140	$	140

Investment in affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of the Company's investment in ProPetro common stock is determined using Level 1 inputs based on observable prices on a major exchange. The Company recorded a noncash loss of $53 million and a noncash gain of $96 million to net interest and other income (loss) in the consolidated statements of operations during the three months ended March 31, 2023 and 2022, respectively, representing the change in fair value of the Company's investment in ProPetro. See Note 11 for additional information.

12

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

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. The Company recorded losses of $1 million and $3 million to net interest and other income (loss) in the consolidated statements of operations during the three months ended March 31, 2023 and 2022, respectively, representing the change in fair value of deferred compensation plan assets.

Conversion option derivatives. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025 (the "Convertible Notes"). Certain holders of the Convertible Notes exercised their conversion option during the three months ended March 31, 2023 and December 31, 2022. Per the terms of the notes indenture, the Company elected to settle the conversions in cash, with settlement occurring 25 trading days from the notice of conversion (the "Settlement Period"). The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as a derivative instrument not designated as a hedge. The change in fair value of the conversion option derivatives during the Settlement Period is primarily determined based on Level 2 inputs related to the daily volumetric weighted average prices of the Company's common stock during the Settlement Period. See Note 5 and Note 7 for additional information.

Commodity price derivatives. 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.

The 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 swap contracts, which is based on active and independent market-quoted volatility factors. The Company's commodity price derivatives represent oil basis swap contracts as of March 31, 2023 and December 31, 2022. Commodity price derivative assets and liabilities recorded in the consolidated balance sheets were less than $1 million as of March 31, 2023 and December 31, 2022. See Note 5 for additional information.

Marketing derivatives. The Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell barrels of oil at an oil terminal in Midland, Texas. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland oil price and the price the Company receives for the oil volumes sold is the WASP that the non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges. The asset and liability measurements for the long-term marketing contracts are determined using both Level 2 and 3 inputs. The Company utilizes a discounted cash flow model for valuing the marketing derivatives.

The values attributable to the Company's marketing derivatives that are determined based on Level 2 inputs include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) stated contractual rates. The Level 3 inputs attributable to the Company's marketing derivatives include the historical monthly differential between Brent oil prices and the corresponding WASP of the counterparty to the marketing derivatives ("WASP Differential Deduction") and, to a lesser extent, an estimated annual cost inflation rate. The average WASP Differential Deduction used in the fair value determination as of March 31, 2023 and December 31, 2022 was $1.81 per barrel and $1.67 per barrel, respectively. The WASP Differential Deduction and the estimated annual cost inflation rate reflects management's best estimate of future results utilizing historical performance, but these estimates are not observable inputs by a market participant and contain a high degree of uncertainty. The Company experiences mark-to-market fluctuations in the fair value of its marketing derivatives based on 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 $29 million as of March 31, 2023. See Note 5 for additional information.

Short-term investment. In October 2021, the Company acquired 960 thousand shares of Laredo Petroleum, Inc. ("Laredo") as partial consideration for its divestiture of certain acreage in western Glasscock County to Laredo. During the three months ended March 31, 2022, the Company sold the 960 thousand shares of Laredo common stock held by the Company and recorded a gain of $18 million to net interest and other income (loss) in the consolidated statements of operations. 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.

13

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

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 inventories, proved and unproved oil and gas properties, assets acquired and liabilities assumed in business combinations or through nonmonetary transactions, goodwill and other long-lived assets that are written down to fair value when they are determined to be impaired or held for sale.

Nonmonetary transactions. Oil and gas properties acquired in nonmonetary transactions that have commercial substance are valued based on income and market based approaches utilizing Level 3 inputs, including internally generated development and production profiles and price and cost assumptions. As a result of these valuations, the Company recorded a gain of $24 million to net gain on disposition of assets in the consolidated statements of operations during the three months ended March 31, 2023.

Other long-lived assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment charge is measured as the amount by which the carrying amount of the asset exceeds its estimated fair value determined using either a discounted future cash flow model or another appropriate fair value method. As a result of the Company's impairment assessments of other long-lived assets during the three months ended March 31, 2023, the Company recorded $11 million of noncash impairment charges to other expense in the consolidated statements of operations. See Note 13 for additional information.

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

	As of March 31, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
Assets:
Cash and cash equivalents (a)	$	1,192	$	1,192	$	1,032	$	1,032
Liabilities:
Current portion of long-term debt:
Convertible senior notes (b)	$	65	$	139	$	29	$	69
Senior notes (b)	$	749	$	746	$	750	$	738
Long-term debt:
Convertible senior notes (b)	$	798	$	1,718	$	925	$	2,184
Senior notes (b)	$	4,296	$	3,881	$	3,200	$	2,696

______________________

(a)Fair value approximates carrying value due to the short-term nature of the instruments.

(b)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.

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 business combinations, goodwill and asset retirement obligations.

NOTE 5. Derivative Financial Instruments

The Company's derivatives are accounted for as non-hedge derivatives and 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 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.

14

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Commodity derivatives. As of March 31, 2023, the Company has outstanding oil derivative contracts for three thousand Bbls per day of Brent/WTI basis swaps for January 2024 through December 2024. The basis swap contracts fix the basis differential between the WTI index price (the price at which the Company buys Midland Basin oil for transport to the Gulf Coast) and the Brent index price (the price at which a portion of the Midland Basin purchased oil is sold in the Gulf Coast market) at a weighted average differential of $4.33 in order to reduce the Company's basis risk.

Marketing derivatives. The Company uses marketing derivatives to diversify its oil pricing to Gulf Coast and international markets. As of March 31, 2023, the Company's marketing derivatives reflect long-term marketing contracts with Occidental Energy Marketing, Inc. ("Oxy") whereby the Company agreed to purchase and simultaneously sell, at an oil terminal in Midland, Texas, (i) 50 thousand barrels of oil per day beginning January 1, 2021 and ending December 31, 2026, (ii) 40 thousand barrels of oil per day beginning May 1, 2022 and ending April 30, 2027 and (iii) 30 thousand barrels of oil per day beginning August 1, 2022 and ending July 31, 2027. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges. See Note 4 for additional information.

Conversion option derivatives. The Company's conversion option derivatives represent the change in the cash settlement obligation that occurs during the Settlement Period related to conversion options exercised by certain holders of the Convertible Notes. As of March 31, 2023 and December 31, 2022, $65 million and $29 million, respectively, of the principal amount of the Convertible Notes remained in the Settlement Period. See Note 4 and Note 7 for additional information.

Fair value. The fair value of derivative financial instruments not designated as hedging instruments are as follows:

As of March 31, 2023
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet		Net Fair Value Presented in the Consolidated Balance Sheet
		(in millions)
Assets:
Conversion option derivatives	Other - current	$	1	$	—	$	1
Liabilities:
Marketing derivatives	Derivatives - current	$	78	$	—	$	78
Marketing derivatives	Derivatives - noncurrent	$	98	$	—	$	98

As of December 31, 2022
Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet		Net Fair Value Presented in the Consolidated Balance Sheet
		(in millions)
Assets:
Conversion option derivatives	Other - current	$	1	$	—	$	1
Liabilities:
Marketing derivatives	Derivatives - current	$	44	$	—	$	44
Marketing derivatives	Derivatives - noncurrent	$	96	$	—	$	96

15

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Gains and losses recorded to net derivative loss in the consolidated statements of operations related to derivative financial instruments not designated as hedging instruments are as follows:

	Three Months Ended March 31,
	2023		2022
	(in millions)
Commodity price derivatives:
Noncash derivative loss, net	$	—	$	(111)
Cash payments on settled derivatives, net	—		(57)
Total commodity derivative loss, net	—		(168)
Marketing derivatives:
Noncash derivative gain (loss), net	(36)		44
Cash payments on settled derivatives, net	(15)		(11)
Total marketing derivative gain (loss), net	(51)		33
Conversion option derivatives:
Cash receipts on settled derivatives, net	7		—
Derivative loss, net	$	(44)	$	(135)

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 recorded in exploration and abandonments expense in the consolidated statements of operations.

The changes in capitalized exploratory well and project costs are as follows:

	Three Months Ended March 31, 2023
	(in millions)
Beginning capitalized exploratory well and project costs	$	834
Additions to exploratory well and project costs pending the determination of proved reserves	1,071
Reclassifications due to determination of proved reserves	(878)
Ending capitalized exploratory well and project costs	$	1,027

Aging of capitalized exploratory costs and the number of projects for which exploratory well costs have been capitalized for a period of one year or less or more than one year, based on the date drilling was completed, are as follows:

	As of March 31, 2023		As of December 31, 2022
	(in millions, except well counts)
One year or less	$	1,027	$	834
More than one year	—		—
	$	1,027	$	834
Number of projects with exploratory well costs that have been suspended for a period greater than one year	—		—

16

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

NOTE 7. Long-term Debt and Interest Expense

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

	As of March 31, 2023		As of December 31, 2022
	(in millions)
Outstanding debt principal balances:
0.550% senior notes due 2023	$	750	$	750
0.250% convertible senior notes due 2025	870		962
5.100% senior notes due 2026	1,100		—
1.125% senior notes due 2026	750		750
7.200% senior notes due 2028	241		241
4.125% senior notes due 2028	138		138
1.900% senior notes due 2030	1,100		1,100
2.150% senior notes due 2031	1,000		1,000
	5,949		4,941
Issuance costs and discounts, net	(41)		(37)
Total debt	5,908		4,904
Less current portion of long-term debt	814		779
Long-term debt	$	5,094	$	4,125

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. The Credit Facility has a maturity date of January 12, 2026. As of March 31, 2023, the Company had no outstanding borrowings under the Credit Facility. The Credit Facility requires the maintenance of a ratio of total debt to book capitalization, subject to certain adjustments, not to exceed 0.65 to 1.0. As of March 31, 2023, the Company was in compliance with its debt covenants.

Senior notes. In March 2023, the Company issued $1.1 billion of 5.100% senior notes that will mature March 29, 2026 (the "March 2023 Senior Notes Offering"). The Company received proceeds, net of $7 million of issuance costs and discounts, of $1.1 billion. Interest on the notes is payable on March 29 and September 29 of each year.

The Company's 0.550% senior notes, with a debt principal balance of $750 million, will mature in May 2023. The 0.550% senior notes are recorded in the current portion of long-term debt in the consolidated balance sheets as of March 31, 2023.

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. 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 10.5356 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 $94.92 per share (subject to adjustment pursuant to the terms of the notes indenture, the "Conversion Price"). Upon conversion, the Convertible Notes will be settled in cash, shares of the Company's common stock or a combination thereof, at the Company's election.

17

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

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

•during the quarter following any quarter during which the last reported sales price of the Company's common stock for at least 20 of the last 30 consecutive trading days of such quarter exceeds 130 percent of the Conversion Price;

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

•upon notice of redemption by the Company; or

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

On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. 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.

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 $94.92 per share of common stock and an adjusted capped price of $135.07 per share of common stock. The net cost of $113 million incurred to purchase the Capped Call transactions was recorded as a reduction to additional paid-in capital in the consolidated balance sheets.

As of March 31, 2023, the Convertible Notes have unamortized issuance costs of $7 million. The effective annual interest rate on the Convertible Notes is 0.6 percent.

Interest expense recognized on the Convertible Notes is as follows:

	Three Months Ended March 31,
	2023		2022
	(in millions)
Contractual coupon interest	$	1	$	1
Amortization of capitalized loan fees	1		1
	$	2	$	2

Convertible Note conversions. During the last 30 consecutive trading days subsequent to the third quarter of 2021 through the first quarter of 2023, the last reported sale 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 from January 1, 2022 through June 30, 2023.

18

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Certain holders of the Convertible Notes exercised their conversion option resulting in the Company recognizing the following cash payments and cash receipts associated with the conversions:

	Three Months Ended March 31,
	2023		2022
Cash payments:
Principal repayments	$	92	$	—
Conversion premiums	138		—
Cash payments	$	230	$	—
Cash receipts:
Capped Call proceeds	$	31	$	—
Conversion option derivative receipts, net	7		—
Cash receipts, net	$	38	$	—

The Company recorded the conversion premiums paid, Capped Call proceeds and $7 million of associated issuance fees and deferred taxes attributable to the principal amount of the Convertible Notes converted in additional paid-in-capital.

As of March 31, 2023, $65 million of the principal amount of the Convertible Notes remains in the Settlement Period. These Convertible Notes are recorded in the current portion of long-term debt in the consolidated balance sheets as of March 31, 2023. The current portion of Convertible Notes will be cash settled at the end of their respective Settlement Periods during the second quarter of 2023.

See Note 4 and Note 5 for additional information.

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.

Stock-based compensation expense for restricted stock awards and units expected to be settled in the Company's common stock ("Equity Awards"), restricted stock units expected to be settled in cash ("Liability Awards") and performance units ("Performance Awards") issued under both the LTIP and the Company's Employee Stock Purchase Plan ("ESPP") are as follows:

	Three Months Ended March 31,
	2023		2022
	(in millions)
Equity Awards	$	13	$	11
Liability Awards (a)	3		9
Performance Awards	9		7
ESPP	1		1
	$	26	$	28
Capitalized stock-based compensation expense	$	4	$	5

______________________

(a)Liability Awards are expected to be settled on their vesting date in cash. As of March 31, 2023 and December 31, 2022, accounts payable – due to affiliates included $9 million and $6 million, respectively, of liabilities attributable to Liability Awards.

19

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

As of March 31, 2023, there was $107 million of unrecognized stock-based compensation expense related to unvested stock-based compensation awards of which $15 million is attributable to Liability Awards. The unrecognized compensation expense will be recognized on a straight-line basis over the remaining requisite service periods of the awards, which is a period of less than three years on a weighted average basis. Performance Awards granted to the Company’s officers in 2023 will vest upon the achievement of certain financial performance targets over a three year period. Expense for these awards is estimated based upon the achievement of the performance targets and will be reassessed periodically. The cumulative impact of any change in estimate will be reflected in the period of the change.

Activity for Equity Awards, Liability Awards, and Performance Awards is as follows:

	Three Months Ended March 31, 2023
	Equity Awards	Liability Awards	Performance Awards
Beginning awards	481,293	119,695	268,003
Awards granted	98,301	2,902	83,727
Awards forfeited	(3,592)	(1,758)	—
Awards vested (a)	(75,019)	(1,875)	(5,566)
Ending awards	500,983	118,964	346,164

______________________

(a)Per the terms of award agreements and elections, the issuance of common stock may be deferred for certain Equity Awards that vest during the period.

NOTE 9. Asset Retirement Obligations

The Company'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:

	Three Months Ended March 31, 2023
	(in millions)
Beginning asset retirement obligations	$	477
New wells placed on production	1
Changes in estimates	(20)
Liabilities settled	(16)
Accretion of discount	4
Ending asset retirement obligations	446
Less current portion of asset retirement obligations	(125)
Asset retirement obligations, long-term	$	321

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 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. Significant judgement is required in making these estimates and the Company's final liabilities may ultimately be materially different.

20

PIONEER NATURAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

Environmental. Environmental expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Environmental expenditures that extend the 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 remediation occurs.

Obligations following divestitures. In connection with its divestiture transactions, the Company may retain certain liabilities and provide the purchaser certain indemnifications, subject to defined limitations, which may apply to identified pre-closing matters, including matters of litigation, environmental contingencies, royalties and income taxes. The Company does not recognize a liability if the fair value of the obligation is immaterial or the likelihood of making payments under these guarantees is remote.

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. ProPetro is considered a related party as the shares received represent 14 percent of ProPetro's outstanding common stock. In addition to the sale of equipment and related facilities, the Company entered into a long-term agreement with ProPetro for it to provide pressure pumping and related services that ended on December 31, 2022. The Company continues to utilize ProPetro for pressure pumping and related services during 2023.

Phillip A. Gobe, a nonemployee member of the Company's Board of Directors (the "Board"), was appointed by the board of directors of ProPetro to serve as its Executive Chairman in October 2019 and Chief Executive Officer in March 2020, and served as Chief Executive Officer and Chairman of the board of directors of ProPetro through August 31, 2021, at which point he continued as ProPetro's Executive Chairman. In March 2022, Mr. Gobe transitioned to non-executive Chairman of the board of directors of ProPetro. Mark S. Berg, the Company's Executive Vice President, Corporate Operations, serves as a member of the ProPetro board of directors under the Company's right to designate a director to the board of directors of ProPetro so long as the Company owns five percent or more of ProPetro's outstanding common stock.

Based on the Company's ownership in ProPetro and representation on the ProPetro board of directors, ProPetro is considered an affiliate.

Transactions for ProPetro pressure pumping related services were capitalized in oil and gas properties or charged to other expense as incurred. ProPetro pressure pumping related service charges are as follows: