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Pioneer Natural Resources Company Reports First Quarter 2020 Financial and Operating Results

DALLAS--(BUSINESS WIRE)--May 6, 2020-- Pioneer Natural Resources Company (NYSE:PXD) ("Pioneer" or "the Company") today reported financial and operating results for the quarter ended March 31, 2020. Pioneer reported first quarter net income attributable to common stockholders of $289 million, or $1.74 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the first quarter was $190 million, or $1.15 per diluted share. Cash flow from operating activities for the first quarter was $825 million.

Highlights

  • Delivered strong first quarter free cash flow1 of $100 million
  • Averaged first quarter oil production of 223 thousand barrels of oil per day (MBOPD), in the upper half of guidance
  • Averaged first quarter production of 375 thousand barrels of oil equivalent per day (MBOEPD), at the top end of guidance
  • Capital expenditures2 of $620 million during the first quarter, significantly underspending planned capital budget
  • Further reducing 2020 capital budget by additional $300 million from March update; total reduction3 of approximately 55% when compared to original 2020 budget
  • Decreasing production costs by $60 million to $70 million in 2020
  • Reducing corporate overhead related costs by $80 million to $90 million in 2020
  • CEO, Officers and Board of Directors electing voluntary compensation reductions, including a greater than 70% reduction for CEO in total cash compensation

President and CEO Scott D. Sheffield stated, "Through these challenging times, Pioneer's primary focus will continue to be the health and safety of our employees and the communities within which we operate. Despite the macroeconomic headwinds during the first quarter, the team executed at a very high level, generating $100 million of free cash flow1.

“Drilling and completions efficiencies continued to improve, exceeding full-year 2020 targets in the first three months of the year, resulting in well cost reductions and greater capital efficiency than expected. This led to materially underspending our first quarter capital budget and underpins our revised full-year program that maintains similar production to 2019 levels while achieving a 55% reduction3 to our original capital budget.

“Pioneer entered this difficult environment with one of the strongest balance sheets in the sector and it is our plan to emerge from this downturn in a similar position. As evidenced by our additional capital reduction and other cost reduction initiatives, our business plan remains flexible and responsive to economic conditions. I am confident that our strong balance sheet, world-class assets and dedicated employees are competitive advantages that will continue to differentiate Pioneer.”

Financial Highlights

Pioneer maintains a strong balance sheet, with unrestricted cash on hand at the end of the first quarter of $784 million and net debt of $1.9 billion. The Company had $2.4 billion of liquidity as of March 31, 2020, comprised of $784 million of unrestricted cash, $700 million available on its unsecured credit facility and a $905 million 364-day credit facility.

During the first quarter, the Company’s drilling, completion and facilities capital expenditures totaled $591 million. The Company’s total capital expenditures2, including water infrastructure, totaled $620 million.

Cash flow from operating activities during the first quarter was $825 million, leading to free cash flow1 of $100 million for the quarter.

In December 2018, the Board of Directors authorized a $2 billion common stock repurchase program. During the first quarter, the Company repurchased $110 million of common stock under this program. To date, the Company has repurchased a total of 6.4 million shares for $859 million under this authorization. The Company evaluates many factors, including market conditions and corporate considerations, such as liquidity and capital needs, in assessing the Company’s ability to repurchase shares.

Financial Results

For the first quarter, the average realized price for oil was $45.60 per barrel. The average realized price for natural gas liquids (NGLs) was $14.52 per barrel, and the average realized price for gas was $1.61 per thousand cubic feet. These prices exclude the effects of derivatives.

Production costs, including taxes, averaged $7.31 per barrel of oil equivalent (BOE). Depreciation, depletion and amortization (DD&A) expense averaged $12.71 per BOE. Exploration and abandonment costs were $9 million. General and administrative (G&A) expense was $56 million. Interest expense was $27 million. Other expense was $85 million, or $8 million excluding unusual items4.

Operations Update

Pioneer continued to see strong efficiency gains during the first quarter, enabling the Company to place 85 horizontal wells on production. Drilling operations averaged greater than 1,100 feet per day and completions showed a similar trend, delivering greater than 1,750 completed feet per day, both surpassing full-year 2020 expectations within the first quarter. These accelerated efficiency gains, coupled with service cost deflation, are reducing well costs and significantly improving capital efficiency.

Additionally, the Company remains focused on lowering operating costs and expects a reduction of $60 million to $70 million in 2020 to be achieved through efficiency gains, reduced workover activity levels and service cost improvements. In addition, the Company is proactively curtailing lower-margin, higher-cost vertical well production in the current commodity price environment, further benefiting operating costs. The Company currently has approximately 7 MBOPD of net production curtailed. Any additional voluntary curtailments will generally be an economically driven decision evaluated on a well-by-well basis. Based on past experience, the Company does not expect any well performance issues when the curtailed wells are returned to production.

The Company continues to transport oil, NGLs and gas from the Permian Basin to demand centers. Prior to current market dislocations, firm transportation (FT) provided the Company incremental cash flow of $741 million during 2018 and 2019. FT contracts provide access to higher priced markets, which has improved cash margins. To minimize risk and provide greater diversity of sales, the Company maintains five different FT contracts that move oil on pipelines to three different destinations along the Gulf Coast, including Corpus Christi, Houston and Nederland. The Company has sold all of its April and May volumes and is in the process of selling its June volumes. These FT contracts are supplemented with firm contracts for oil storage and dock space, enabling Pioneer to export oil or sell oil into the domestic refinery market.

Full-Year 2020 Update

The Company expects its revised 2020 drilling, completions and facilities capital budget to range between $1.3 billion to $1.5 billion, with an additional $100 million budgeted for Pioneer's differentiated water infrastructure, resulting in a revised total 2020 capital budget2 range of $1.4 billion to $1.6 billion. This represents a reduction of approximately 55% when compared to the Company's original 2020 capital budget.

During the second quarter through the fourth quarter of 2020, the Company plans to operate an average of five to eight horizontal rigs in the Midland Basin, including averaging one horizontal rig in the southern joint venture area. Additionally, Pioneer plans to operate an average of two to three frac fleets during the same time period. Pioneer will continue to evaluate drilling and completion activity on an economic basis, with future activity levels assessed monthly.

The Company continues to monitor the fluid macroeconomic environment and remains flexible and responsive to changing market conditions to preserve its strong balance sheet. Pioneer expects revised 2020 oil production to average 198 to 208 MBOPD and total production of 341 to 359 MBOEPD, which includes current voluntary curtailments of approximately 7 MBOPD. The Company’s production outlook does not include the potential for any additional curtailments. Due to the unprecedented volatility and uncertainty in commodity markets, the Company's quarterly production guidance is suspended.

Pioneer continues to maintain substantial oil derivative coverage in order to protect the balance sheet, providing the Company with operational and financial flexibility throughout this period. The Company’s financial and derivative mark-to-market results and open derivatives positions are outlined in the attached schedules.

Second Quarter 2020 Guidance

Production costs are expected to average $6.50 per BOE to $8.00 per BOE. DD&A expense is expected to average $12.50 per BOE to $14.50 per BOE. Total exploration and abandonment expense is forecasted to be $5 million to $15 million. G&A expense is expected to be $52 million to $62 million. Interest expense is expected to be $25 million to $30 million. Other expense is forecasted to be $20 million to $30 million, including terminated and stacked drilling rig fees, idle frac fleet fees and other fees associated with reduced activity levels. Accretion of discount on asset retirement obligations is expected to be $2 million to $5 million. The cash flow impact related to purchases and sales of oil and gas, including firm transportation, is expected to be a loss of $10 million to $40 million, based on forward oil price estimates for the quarter. The Company’s effective income tax rate is expected to range from 21% to 25%. Current income taxes are expected to be nominal.

Environmental, Social & Governance

Pioneer views sustainability as a multidisciplinary focus that balances economic growth, environmental stewardship and social responsibility. The Company emphasizes developing natural resources in a manner that protects surrounding communities and preserves the environment.

Pioneer is focused on reducing emissions and emission intensities. Between 2016 and 2018, the Company's greenhouse gas (GHG) emissions have been reduced by 24%, total GHG emission intensity has decreased by 38% and methane intensity has declined by 41%. Additionally, between January 2018 and July 2019, the Company was able to limit Permian flaring to less than 2% of its produced gas, one of the lowest flaring percentages in the Permian Basin. The Company's proactive measures, including monitoring 100% of its Permian facilities aerially for leak detection and repair (LDAR) and only producing a well once it is fully connected to a gas line, help to make Pioneer a leader in environmental stewardship.

Socially, Pioneer maintains a proactive safety culture, supports a diverse workforce and inspires teamwork to drive innovation. The Board of Directors has a Health, Safety and Environment Committee and a Nominating and Corporate Governance Committee to provide director-level oversight of these activities. These committees help to promote a culture of continuous improvement in safety and environmental practices.

For more details, see Pioneer’s 2019 Sustainability Report at pxd.com/sustainability.

Earnings Conference Call

On Thursday, May 7, 2020, at 9:00 a.m. Central Time, Pioneer will discuss its financial and operating results for the quarter ended March 31, 2020, with an accompanying presentation. Instructions for listening to the call and viewing the accompanying presentation are shown below.

Internet: www.pxd.com
Select “Investors,” then “Earnings & Webcasts” to listen to the discussion, view the presentation and see other related material.

Telephone: Dial 800-949-2175 and enter confirmation code 6548030 five minutes before the call.

A replay of the webcast will be archived on Pioneer’s website. This replay will be available through June 5, 2020. Click here to register for the call-in audio replay and you will receive the dial-in information.

Pioneer is a large independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations in the United States. For more information, visit www.pxd.com.

Except for historical information contained herein, the statements in this news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and the business prospects of Pioneer are subject to a number of risks and uncertainties that may cause Pioneer’s actual results in future periods to differ materially from the forward-looking statements. 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, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company’s drilling and operating activities, access to and availability of transportation, processing, fractionation, refining, storage and export facilities, Pioneer’s ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer’s credit facilities, investment instruments and derivative contracts and purchasers of Pioneer’s oil, natural gas liquids and gas production, uncertainties about estimates of reserves and resource potential, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, cybersecurity risks, ability to implement planned stock repurchases, the risks associated with the ownership and operation of the Company’s oilfield services businesses 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, 2019, and other filings with the Securities and Exchange Commission. In addition, Pioneer may be subject to currently unforeseen risks that may have a materially adverse impact 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. Pioneer undertakes no duty to publicly update these statements except as required by law.

Footnote 1: Free cash flow is a non-GAAP measure, see reconciliation to comparable GAAP number in supplemental schedules.

Footnote 2: Excludes acquisitions, asset retirement obligations, capitalized interest, geological and geophysical G&A and corporate facilities.

Footnote 3: Reflects midpoints of capital guidance ranges.

Footnote 4: Unusual items include the following: (i) $69 million increase in the estimate of deficiency fee obligations associated with the 2019 sale of the Company's Eagle Ford and South Texas assets and (ii) $8 million of terminated drilling rig charges.

 
PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

 

March 31, 2020

 

December 31, 2019

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

784

 

 

 

$

631

 

 

Restricted cash

74

 

 

 

74

 

 

Accounts receivable, net

555

 

 

 

1,035

 

 

Income taxes receivable

9

 

 

 

7

 

 

Inventories

188

 

 

 

205

 

 

Derivatives

386

 

 

 

32

 

 

Investment in affiliate

42

 

 

 

187

 

 

Other

31

 

 

 

20

 

 

Total current assets

2,069

 

 

 

2,191

 

 

Oil and gas properties, successful efforts method of accounting

23,612

 

 

 

23,028

 

 

Accumulated depletion, depreciation and amortization

(8,987

)

 

 

(8,583

)

 

Total oil and gas properties, net

14,625

 

 

 

14,445

 

 

Other property and equipment, net

1,629

 

 

 

1,632

 

 

Operating lease right of use assets

250

 

 

 

280

 

 

Goodwill

261

 

 

 

261

 

 

Derivatives

43

 

 

 

 

 

Other assets

174

 

 

 

258

 

 

 

$

19,051

 

 

 

$

19,067

 

 

 

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

 

 

 

Accounts payable

$

1,073

 

 

 

$

1,411

 

 

Interest payable

18

 

 

 

53

 

 

Income taxes payable

3

 

 

 

3

 

 

Current portion of long-term debt

499

 

 

 

450

 

 

Derivatives

3

 

 

 

12

 

 

Operating leases

128

 

 

 

136

 

 

Other

356

 

 

 

431

 

 

Total current liabilities

2,080

 

 

 

2,496

 

 

Long-term debt

2,140

 

 

 

1,839

 

 

Derivatives

3

 

 

 

8

 

 

Deferred income taxes

1,465

 

 

 

1,389

 

 

Operating leases

146

 

 

 

170

 

 

Other liabilities

1,006

 

 

 

1,046

 

 

Equity

12,211

 

 

 

12,119

 

 

 

$

19,051

 

 

 

$

19,067

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

 

Three Months Ended March 31,

 

 

2020

 

 

 

 

2019

 

 

Revenues and other income:

 

 

 

Oil and gas

$

1,095

 

 

 

$

1,135

 

 

Sales of purchased oil and gas

915

 

 

 

1,109

 

 

Interest and other

(206

)

 

 

191

 

 

Derivative gain (loss), net

453

 

 

 

(13

)

 

Loss on disposition of assets, net

 

 

 

(9

)

 

 

2,257

 

 

 

2,413

 

 

Costs and expenses:

 

 

 

Oil and gas production

176

 

 

 

221

 

 

Production and ad valorem taxes

75

 

 

 

68

 

 

Depletion, depreciation and amortization

434

 

 

 

421

 

 

Purchased oil and gas

1,028

 

 

 

957

 

 

Exploration and abandonments

9

 

 

 

20

 

 

General and administrative

56

 

 

 

94

 

 

Accretion of discount on asset retirement obligations

2

 

 

 

3

 

 

Interest

27

 

 

 

29

 

 

Other

85

 

 

 

147

 

 

 

1,892

 

 

 

1,960

 

 

Income before income taxes

365

 

 

 

453

 

 

Income tax provision

(76

)

 

 

(103

)

 

Net income attributable to common stockholders

$

289

 

 

 

$

350

 

 

 

 

 

 

Basic and diluted net income per share attributable to common
stockholders

$

1.74

 

 

 

$

2.06

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

166

 

 

 

169

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

Three Months Ended March 31,

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

Net income

$

289

 

 

 

$

350

 

 

Adjustments to reconcile net income to net cash

provided by operating activities:

 

 

 

Depletion, depreciation and amortization

434

 

 

 

421

 

 

Impairment of inventory and other property and equipment

 

 

 

32

 

 

Exploration expenses, including dry holes

2

 

 

 

1

 

 

Deferred income taxes

76

 

 

 

103

 

 

Loss on disposition of assets

 

 

 

9

 

 

Accretion of discount on asset retirement obligations

2

 

 

 

3

 

 

Interest expense

5

 

 

 

1

 

 

Derivative-related activity

(412

)

 

 

17

 

 

Amortization of stock-based compensation

16

 

 

 

24

 

 

Investment in affiliate valuation adjustment

145

 

 

 

(174

)

 

South Texas contingent consideration valuation adjustment

63

 

 

 

 

 

South Texas deficiency fee obligation

69

 

 

 

 

 

Other

31

 

 

 

62

 

 

Change in operating assets and liabilities:

 

 

 

Accounts receivable

479

 

 

 

(69

)

 

Inventories

16

 

 

 

(36

)

 

Other assets

21

 

 

 

(15

)

 

Accounts payable

(284

)

 

 

(74

)

 

Interest payable

(35

)

 

 

(29

)

 

Other liabilities

(92

)

 

 

(22

)

 

Net cash provided by operating activities

825

 

 

 

604

 

 

Net cash used in investing activities

(681

)

 

 

(695

)

 

Net cash provided by (used in) financing activities

9

 

 

 

(223

)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

153

 

 

 

(314

)

 

Cash, cash equivalents and restricted cash, beginning of period

705

 

 

 

825

 

 

Cash, cash equivalents and restricted cash, end of period

$

858

 

 

 

$

511

 

 

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUMMARY PRODUCTION, PRICE AND MARGIN DATA

 

Three Months Ended March 31,

 

2020

 

2019

Average Daily Sales Volume:

 

 

 

Oil (Bbls)

222,657

 

 

206,256

 

Natural gas liquids ("NGLs") (Bbls)

84,358

 

 

67,070

 

Gas (Mcf)

408,893

 

 

360,620

 

Total (BOE)

375,163

 

 

333,430

 

 

 

 

 

Average Price:

 

 

 

Oil per Bbl

$

45.60

 

 

$

49.38

 

NGL per Bbl

$

14.52

 

 

$

22.79

 

Gas per Mcf

$

1.61

 

 

$

2.50

 

Total per BOE

$

32.08

 

 

$

37.84

 

 

Three Months Ended
March 31, 2020

 

(in $ per BOE)

Margin Data:

 

Average price

$

32.08

 

 

Production costs

(5.14

)

 

Production and ad valorem taxes

(2.17

)

 

 

$

24.77

 

 

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTARY EARNINGS PER SHARE INFORMATION
(in millions)

The Company uses the two-class method of calculating basic and diluted earnings per share. Under the two-class method of calculating earnings per share, generally acceptable accounting principles ("GAAP") provide that share-based awards with guaranteed dividend or distribution participation rights qualify as "participating securities" during their vesting periods. During periods in which the Company realizes net income attributable to common shareholders, the Company's basic net income per share attributable to common shareholders is computed as (i) net income attributable to common stockholders, (ii) less participating share-based basic earnings (iii) divided by weighted average basic shares outstanding. The Company's diluted net income per share attributable to common stockholders is computed as (i) basic net income attributable to common stockholders, (ii) plus the reallocation of participating earnings, if any, (iii) divided by weighted average diluted shares outstanding. During periods in which the Company realizes a net loss attributable to common stockholders, securities or other contracts to issue common stock would be dilutive to loss per share; therefore, conversion into common stock is assumed not to occur.

The Company's net income attributable to common stockholders is reconciled to basic and diluted net income attributable to common stockholders as follows:

 

Three Months Ended March 31,

 

2020

 

 

2019

 

Net income attributable to common stockholders

$

289

 

 

 

$

350

 

 

Participating share-based basic earnings

(1

)

 

 

(2

)

 

Basic and diluted net income attributable to common stockholders

$

288

 

 

 

$

348

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

166

 

 

 

169

 

 

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(in millions)

EBITDAX, discretionary cash flow ("DCF") (as defined below) and net debt to trailing twelve months EBITDAX are presented herein, and reconciled to the GAAP measures of net income and net cash provided by operating activities, because of their wide acceptance by the investment community as financial indicators of a company's ability to internally fund exploration and development activities and to service or incur debt. The Company also views the non-GAAP measures of EBITDAX, DCF and net debt to trailing twelve months EBITDAX as useful tools for comparisons of the Company's financial indicators with those of peer companies that follow the full cost method of accounting. EBITDAX and DCF should not be considered as alternatives to net income or net cash provided by operating activities, as defined by GAAP.

 

Three Months Ended March 31,

 

2020

 

2019

Net income

$

289

 

 

 

$

350

 

 

Depletion, depreciation and amortization

434

 

 

 

421

 

 

Exploration and abandonments

9

 

 

 

20

 

 

Impairment of inventory and other property and equipment

 

 

 

32

 

 

Accretion of discount on asset retirement obligations

2

 

 

 

3

 

 

Interest expense

27

 

 

 

29

 

 

Income tax provision

76

 

 

 

103

 

 

Loss on disposition of assets

 

 

 

9

 

 

Derivative-related activity

(412

)

 

 

17

 

 

Amortization of stock-based compensation

16

 

 

 

24

 

 

Investment in affiliate valuation adjustment

145

 

 

 

(174

)

 

South Texas contingent consideration valuation adjustment

63

 

 

 

 

 

South Texas deficiency fee obligation

69

 

 

 

 

 

Other

31

 

 

 

62

 

 

EBITDAX (a)

749

 

 

 

896

 

 

Cash interest expense

(22

)

 

 

(28

)

 

Discretionary cash flow (b)

727

 

 

 

868

 

 

Cash exploration expense

(7

)

 

 

(19

)

 

Changes in operating assets and liabilities

105

 

 

 

(245

)

 

Net cash provided by operating activities

$

825

 

 

 

$

604

 

 

_____________

(a)

“EBITDAX” represents earnings before depletion, depreciation and amortization expense; exploration and abandonments; impairment of inventory and other property and equipment; accretion of discount on asset retirement obligations; interest expense; income taxes; net loss on the disposition of assets; noncash derivative related activity; amortization of stock-based compensation; noncash valuation adjustments on investments, contingent consideration and deficiency fee obligations; and other noncash items.

(b)

Discretionary cash flow equals cash flows from operating activities before changes in operating assets and liabilities and cash exploration expense.

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

(in millions)

 

 

Trailing Twelve Months
Ended March 31, 2020

Net income

$

695

 

 

Depletion, depreciation and amortization

1,724

 

 

Exploration and abandonments

47

 

 

Impairment of inventory and other property and equipment

6

 

 

Accretion of discount on asset retirement obligations

9

 

 

Interest expense

119

 

 

Income tax provision

204

 

 

Loss on disposition of assets

468

 

 

Derivative-related activity

(416

)

 

Amortization of stock-based compensation

66

 

 

Investment in affiliate valuation adjustment

304

 

 

South Texas contingent consideration valuation adjustment

108

 

 

Restructuring charge (including stock-based compensation)

167

 

 

South Texas deficiency fee obligation

69

 

 

Other

74

 

 

EBITDAX before restructuring charge

3,644

 

 

Restructuring charge (excluding stock-based compensation)

(141

)

 

EBITDAX (a)

3,503

 

 

Cash interest expense

(106

)

 

Current income tax (provision) benefit

5

 

 

Discretionary cash flow (b)

3,402

 

 

Cash exploration expense

(38

)

 

Changes in operating assets and liabilities

(28

)

 

Net cash provided by operating activities

$

3,336

 

 

_____________

(a)

“EBITDAX” represents earnings before depletion, depreciation and amortization expense; exploration and abandonments; impairment of inventory and other property and equipment; accretion of discount on asset retirement obligations; interest expense; income taxes; net loss on the disposition of assets; noncash derivative related activity; amortization of stock-based compensation; noncash valuation adjustments on investments, contingent consideration and deficiency fee obligations; restructuring charges; and other noncash items.

(b)

Discretionary cash flow equals cash flows from operating activities before changes in operating assets and liabilities and cash exploration expense.

The Company's net debt to trailing twelve months EBITDAX is calculated as follows:

 

March 31, 2020

Current and long-term portion of long-term debt

$

2,639

 

Less: Cash and cash equivalents

784

 

Net debt

$

1,855

 

 

 

Net debt to trailing twelve months EBITDAX

 

0.5

 

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)
(in millions, except per share data)

Adjusted income attributable to common stockholders excluding noncash mark-to-market ("MTM") adjustments and income attributable to common stockholders excluding noncash MTM adjustments and unusual items are presented in this earnings release and reconciled to the Company's net income attributable to common stockholders (determined in accordance with GAAP), as the Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of the Company's business that, when viewed together with its GAAP financial results, provide a more complete understanding of factors and trends affecting its historical financial performance and future operating results, greater transparency of underlying trends and greater comparability of results across periods. In addition, management believes that these non-GAAP financial measures may enhance investors' ability to assess the Company's historical and future financial performance. These non-GAAP financial measures are not intended to be a substitute for the comparable GAAP financial measure and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Noncash MTM adjustments and unusual items may recur in future periods; however, the amount and frequency can vary significantly from period to period.

The Company's net income attributable to common stockholders as determined in accordance with GAAP is reconciled to income adjusted for noncash MTM adjustments including (i) the Company's derivative positions, (ii) contingent consideration attributable to the 2019 South Texas divestiture and (iii) the Company's equity investment in ProPetro Holding Corp. ("ProPetro") and unusual items is as follows:

 

 

 

Three Months Ended March 31, 2020

 

Ref

 

After-tax
Amounts

 

Per Diluted
Share

Net income attributable to common stockholders

 

 

$

289

 

 

 

$

1.74

 

 

Noncash MTM adjustments:

 

 

 

 

 

Derivative gain, net ($412 pretax)

 

 

(321

)

 

 

(1.93

)

 

South Texas contingent consideration loss ($63 pretax)

 

 

49

 

 

 

0.29

 

 

ProPetro stock loss ($145 pretax)

 

 

113

 

 

 

0.69

 

 

Adjusted income excluding noncash MTM adjustments

 

 

130

 

 

 

0.79

 

 

Unusual items:

 

 

 

 

 

COVID-19 related charges ($77 pretax)

(a)

 

60

 

 

 

0.36

 

 

Adjusted income excluding noncash MTM adjustments and unusual items

 

 

$

190

 

 

 

$

1.15

 

 

_____________

(a)

As a result of the recent economic events caused by the COVID-19 pandemic, the Company recognized (i) a noncash $69 million charge to increase its estimated deficiency fee obligations associated with the 2019 sale of the Company's Eagle Ford and South Texas assets and (ii) an $8 million charge for terminated drilling rigs.

PIONEER NATURAL RESOURCES COMPANY
UNAUDITED SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (continued)
(in millions)

Free cash flow ("FCF") is a non-GAAP financial measure. As used by the Company, FCF is defined as net cash provided by operating activities, adjusted for changes in operating assets and liabilities, less capital expenditures. The Company believes this non-GAAP measure is a financial indicator of the Company’s ability to internally fund acquisitions, debt maturities, dividends and share repurchases after capital expenditures.

 

Three Months Ended
March 31, 2020

Net cash provided by operating activities

$

825

 

 

Changes in operating assets and liabilities

(105

)

 

Less: Capital expenditures (a)

(620

)

 

Free cash flow

$

100

 

 

_____________

(a)

Capital expenditures are calculated as follows:

 

Three Months Ended
March 31, 2020

Costs incurred

$

596

 

Less: Excluded items (a)

5

 

Plus: Other property, plant and equipment capital (b)

29

 

Capital expenditures

$

620

 

_____________

(a)

Includes acquisition costs, asset retirement obligations and geological and geophysical general and

administrative costs.

(b)

Includes other property plant and equipment additions related to water infrastructure, well services and
vehicles.

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION

Open Commodity Derivative Positions as of May 4, 2020

(Volumes are average daily amounts)

 

 

2020

 

Year Ending
December 31,
2021

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Average daily oil production associated with
derivatives (Bbl):

 

 

 

 

 

 

 

Brent collar contracts with short puts: (a)

 

 

 

 

 

 

 

Volume

135,500

 

 

 

115,500

 

 

 

115,500

 

 

 

 

 

Price:

 

 

 

 

 

 

 

Ceiling

$

68.84

 

 

 

$

69.78

 

 

 

$

69.78

 

 

 

$

 

 

Floor

$

61.76

 

 

 

$

62.06

 

 

 

$

62.06

 

 

 

$

 

 

Short put

$

53.48

 

 

 

$

53.56

 

 

 

$

53.56

 

 

 

$

 

 

Brent swap contracts:

 

 

 

 

 

 

 

Volume

98,911

 

 

 

177,900

 

 

 

160,900

 

 

 

38,750

 

 

Price

$

37.27

 

 

 

$

35.68

 

 

 

$

36.43

 

 

 

$

44.92

 

 

WTI swap contracts:

 

 

 

 

 

 

 

Volume

42,033

 

 

 

 

 

 

 

 

 

 

 

Price

$

21.50

 

 

 

$

 

 

 

$

 

 

 

$

 

 

Brent call contracts sold:

 

 

 

 

 

 

 

Volume per day (Bbl) (b)

 

 

 

 

 

 

 

 

 

20,000

 

 

Price per Bbl

$

 

 

 

$

 

 

 

$

 

 

 

$

69.74

 

 

Brent collar contracts with short puts:

 

 

 

 

 

 

 

Volume

120,000

 

 

 

30,000

 

 

 

30,000

 

 

 

96,000

 

 

Price:

 

 

 

 

 

 

 

Ceiling

$

36.53

 

 

 

$

43.09

 

 

 

$

43.09

 

 

 

$

47.07

 

 

Floor

$

31.08

 

 

 

$

34.83

 

 

 

$

34.83

 

 

 

$

42.50

 

 

Short put

$

21.28

 

 

 

$

24.83

 

 

 

$

24.83

 

 

 

$

31.45

 

 

Average daily gas production associated with
Derivatives (MMBtu):

 

 

 

 

 

 

 

Swap contracts:

 

 

 

 

 

 

 

Volume

30,000

 

 

 

30,000

 

 

 

16,739

 

 

 

2,466

 

 

NYMEX price

$

2.41

 

 

 

$

2.41

 

 

 

$

2.43

 

 

 

$

2.46

 

 

Collar contracts:

 

 

 

 

 

 

 

Volume

 

 

 

 

 

 

 

 

 

80,000

 

 

NYMEX price:

 

 

 

 

 

 

 

Call

$

 

 

 

$

 

 

 

$

 

 

 

$

3.15

 

 

Put

$

 

 

 

$

 

 

 

$

 

 

 

$

2.50

 

 

Basis swap contracts:

 

 

 

 

 

 

 

Permian Basin index swap volume (c)

30,000

 

 

 

30,000

 

 

 

16,739

 

 

 

2,466

 

 

Price differential ($/MMBtu)

$

(1.68

)

 

 

$

(1.68

)

 

 

$

(1.59

)

 

 

$

(1.46

)

 

_____________

(a)

Represents collar contracts with short puts that were entered into prior to March 2020. During March 2020, the Company entered into incremental swap contracts and collar contracts with short puts to provide additional downside protection for the second quarter through fourth quarter 2020 volumes.

(b)

The referenced call contracts were sold in exchange for higher ceiling prices on certain 2020 collar contracts.

(c)

The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells its Permian Basin gas and the NYMEX index price used in swap contracts.

PIONEER NATURAL RESOURCES COMPANY

UNAUDITED SUPPLEMENTAL INFORMATION (continued)

Derivative Gain, Net

(in millions)

 

 

Three Months Ended
March 31, 2020

Noncash changes in fair value:

 

Oil derivative gain, net

$

415

 

 

Gas derivative loss, net

(3

)

 

Total noncash derivative gain, net

412

 

 

 

 

Net cash receipts on settled derivative instruments:

 

Oil derivative receipts

63

 

 

Interest rate derivative payments

(22

)

 

Total cash receipts on settled derivative instruments, net

41

 

 

Total derivative gain, net

$

453

 

 

 

Pioneer Natural Resources Company Contacts:
Investors
Neal Shah - 972-969-3900
Tom Fitter - 972-969-1821
Michael McNamara - 972-969-3592

Media and Public Affairs
Tadd Owens - 972-969-5760

Source: Pioneer Natural Resources Company

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