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Table of Contents
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, 2020
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________
Commission File Number: 1-13245
______________________________ 
PIONEER NATURAL RESOURCES COMPANY
(Exact name of Registrant as specified in its charter)
______________________________
Delaware 75-2702753
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
777 Hidden Ridge
Irving, Texas 75038
(Address of principal executive offices and zip code)
(972) 444-9001
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $.01 per sharePXDNew York Stock Exchange
Not applicable
(Former name, former address and former fiscal year, if changed since last report) 
______________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
Yes       No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filerAccelerated filer
Non-accelerated filerSmaller 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 May 7, 2020     164,863,215


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PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS 


  Page
Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

2

Table of Contents
PIONEER NATURAL RESOURCES COMPANY
Cautionary Statement Concerning Forward-Looking Statements
The information in this Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate" or the negative of such terms and similar expressions as they relate to Pioneer Natural Resources Company ("Pioneer" or the "Company") are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control.
These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity, competition, the ability to obtain environmental and other permits and the timing thereof, 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, NGL and gas production, uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, 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 the Company's Annual Report on Form 10-K, this and other Quarterly Reports on Form 10-Q and other filings with the United States Securities and Exchange Commission. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part 1, Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition, Markets and Regulations," "Part I, Item 1A. Risk Factors," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no duty to publicly update these statements except as required by law.
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PIONEER NATURAL RESOURCES COMPANY
Definitions of Certain Terms and Conventions Used Herein
Within this Report, the following terms and conventions have specific meanings:
"Bbl" means a standard barrel containing 42 United States gallons.
"Bcf" means one billion cubic feet and is a measure of gas volume.
"BOE" means a barrel of oil equivalent and is a standard convention used to express oil and gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the relative energy content method by using the ratio of six thousand cubic feet of gas to one Bbl of oil or natural gas liquid.
"BOEPD" means BOE per day.
"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.
"DD&A" means depletion, depreciation and amortization.
"GAAP" means accounting principles generally accepted in the United States of America.
"HH" means Henry Hub, a distribution hub in Louisiana that serves as the delivery location for gas futures contracts on the NYMEX.
"MBbl" means one thousand Bbls.
"MBOE" means one thousand BOEs.
"Mcf" means one thousand cubic feet and is a measure of gas volume.
"MMBtu" means one million Btus.
"Mont Belvieu" means the daily average natural gas liquids components as priced in OPIS in the table "U.S. and Canada LP – Gas Weekly Averages" at Mont Belvieu, Texas.
"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.
"OPEC" means the Organization of Petroleum Exporting Countries.
"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.
"Proved reserves" mean those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons ("LKH") as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a highest known oil ("HKO") elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty.
(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.
(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.
"SEC" means the United States Securities and Exchange Commission.
"U.S." means United States.
"WTI" means West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil used as a benchmark in oil pricing.
With respect to information on the working interest in wells, drilling locations and acreage, "net" wells, drilling locations and acres are determined by multiplying "gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.
All currency amounts are expressed in U.S. dollars.
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PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions)
 
March 31, 2020December 31,
2019
 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$784  $631  
Restricted cash74  74  
Accounts receivable:
Trade, net555  1,032  
Due from affiliates  3  
Income taxes receivable9  7  
Inventories188  205  
Derivatives386  32  
Investment in affiliate42  187  
Other31  20  
Total current assets2,069  2,191  
Oil and gas properties, using the successful efforts method of accounting:
Proved properties23,029  22,444  
Unproved properties583  584  
Accumulated depletion, depreciation and amortization(8,987) (8,583) 
Total oil and gas properties, net14,625  14,445  
Other property and equipment, net1,629  1,632  
Operating lease right-of-use assets250  280  
Goodwill261  261  
Derivatives43    
Other assets
174  258  
$19,051  $19,067  







The financial information included as of March 31, 2020 has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
(in millions, except share data) 

March 31, 2020December 31,
2019
 (Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade$973  $1,221  
Due to affiliates100  190  
Interest payable18  53  
Income taxes payable3  3  
Current portion of long-term debt499  450  
Derivatives3  12  
Operating leases128  136  
Other356  431  
Total current liabilities2,080  2,496  
Long-term debt2,140  1,839  
Derivatives3  8  
Deferred income taxes1,465  1,389  
Operating leases146  170  
Other liabilities1,006  1,046  
Equity:
Common stock, $0.01 par value; 500,000,000 shares authorized; 175,373,639 and 175,057,889 shares issued as of March 31, 2020 and December 31, 2019, respectively
2  2  
Additional paid-in capital9,176  9,161  
Treasury stock at cost: 10,510,424 and 9,511,248 shares as of March 31, 2020 and December 31, 2019, respectively
(1,190) (1,069) 
Retained earnings4,223  4,025  
Total equity12,211  12,119  
Commitments and contingencies
$19,051  $19,067  










The financial information included as of March 31, 2020 has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited) 
 Three Months Ended
March 31,
 20202019
Revenues and other income:
Oil and gas$1,095  $1,135  
Sales of purchased oil and gas915  1,109  
Interest and other income (loss), net(206) 191  
Derivative gain (loss), net453  (13) 
Loss on disposition of assets, net  (9) 
2,257  2,413  
Costs and expenses:
Oil and gas production176  221  
Production and ad valorem taxes75  68  
Depletion, depreciation and amortization434  421  
Purchased oil and gas1,028  957  
Exploration and abandonments9  20  
General and administrative56  94  
Accretion of discount on asset retirement obligations2  3  
Interest27  29  
Other85  147  
1,892  1,960  
Income before income taxes365  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 outstanding166  169  
Dividends declared per share$0.55  $0.32  















The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except share data and dividends per share)
(Unaudited)
 
  Equity Attributable To Common Stockholders 
 Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Total Equity
(in thousands)
Balance as of December 31, 2019165,547  $2  $9,161  $(1,069) $4,025  $12,119  
Dividends declared ($0.55 per share)
—  —  —  —  (91) (91) 
Exercise of long-term incentive stock options
8  —  (1) 1  —    
Purchases of treasury stock(1,007) —  —  (122) —  (122) 
Stock-based compensation costs:
Issued awards316  —  —  —  —    
Compensation costs included in net income—  —  16  —  —  16  
Net income—  —  —  —  289  289  
Balance as of March 31, 2020164,864  $2  $9,176  $(1,190) $4,223  $12,211  

  Equity Attributable To Common Stockholders 
 Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Total Equity
(in thousands)
Balance as of December 31, 2018169,499  $2  $9,062  $(423) $3,470  $12,111  
Dividends declared ($0.32 per share)
—  —  —  —  (54) (54) 
Exercise of long-term incentive stock options
10  —  (1) 1  —    
Purchases of treasury stock(1,594) —  —  (222) —  (222) 
Stock-based compensation costs:
Issued awards507  —  —  —  —    
Compensation costs included in net income—  —  24  —  —  24  
Net income—  —  —  —  350  350  
Balance as of March 31, 2019168,422  $2  $9,085  $(644) $3,766  $12,209  

The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
 Three Months Ended March 31,
 20202019
Cash flows from operating activities:
Net income  $289  $350  
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation and amortization434  421  
Impairment of inventory and other property and equipment  32  
Exploration expenses, including dry holes2  1  
Deferred income taxes76  103  
Loss on disposition of assets, net  9  
Accretion of discount on asset retirement obligations2  3  
Interest expense5  1  
Derivative related activity(412) 17  
Amortization of stock-based compensation16  24  
Investment in affiliate valuation adjustment145  (174) 
South Texas contingent consideration valuation adjustment63    
South Texas deficiency fee obligation69    
Other31  62  
Change in operating assets and liabilities:
Accounts receivable479  (69) 
Inventories16  (36) 
Other assets21  (15) 
Accounts payable(284) (74) 
Interest payable(35) (29) 
Other liabilities(92) (22) 
Net cash provided by operating activities825  604  
Cash flows from investing activities:
Proceeds from disposition of assets, net of cash sold1  6  
Proceeds from investments  112  
Additions to oil and gas properties(639) (741) 
Additions to other assets and other property and equipment(43) (72) 
Net cash used in investing activities(681) (695) 
Cash flows from financing activities:
Borrowing under credit facility800    
Principal payments on long-term debt(450)   
Payments of other liabilities(146) (1) 
Purchases of treasury stock(122) (222) 
Dividends paid(73)   
Net cash provided by (used in) financing activities9  (223) 
Net increase (decrease) in cash, cash equivalents and restricted cash153  (314) 
Cash, cash equivalents and restricted cash, beginning of period705  825  
Cash, cash equivalents and restricted cash, end of period$858  $511  



The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)

NOTE 1. Organization and Nature of Operations
Pioneer Natural Resources Company ("Pioneer" or the "Company") is a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. The Company is a large independent oil and gas exploration and production company that explores for, develops and produces oil, natural gas liquids ("NGLs") and gas in the Permian 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, 2020 and for the three months ended March 31, 2020 and 2019 include all adjustments and accruals, consisting only of normal, recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods in conformity with generally accepted accounting principles in the United States ("GAAP"). The operating results for the three months ended March 31, 2020 are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). 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, 2019.
Use of estimates in the preparation of financial statements. Preparation of the Company's unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Depletion of oil and gas properties and evaluations for impairment of goodwill and proved and unproved oil and gas properties, in part, is determined using estimates of proved, probable and possible oil and gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved, probable and possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves and commodity price outlooks. Actual results could differ from the estimates and assumptions utilized.
Impact of the COVID-19 Pandemic. A novel strain of the coronavirus ("COVID-19") surfaced in late 2019 and has spread around the world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic has significantly affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. In addition, the COVID-19 pandemic has resulted in travel restrictions, business closures and other restrictions that have disrupted the demand for oil throughout the world and when combined with the oil supply increase attributable to the battle for market share among OPEC, Russia and other oil producing nations, resulted in oil prices declining significantly beginning late February 2020. The length of this demand disruption is unknown, and there is significant uncertainty regarding the long-term impact to global oil demand, which is negatively impacting the Company's results of operations and planned 2020 capital activities.
Adoption of new accounting standards. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. The impact of the adoption of this ASU was not material.
The Company is exposed to credit losses primarily through sales of oil, NGLs, gas and purchased oil and gas. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted.
NOTE 3. Divestitures, Decommissioning and Restructuring Activities
Divestitures
In May 2019, the Company completed the sale of its Eagle Ford assets and other remaining assets in South Texas (the "South Texas Divestiture") to an unaffiliated third party in exchange for total consideration having an estimated fair value of $210 million, after normal closing adjustments. The fair value of the consideration included (i) net cash proceeds of $2 million, (ii) $136 million in contingent consideration and (iii) a $72 million receivable associated with estimated deficiency fees to be paid by the buyer.
Contingent Consideration. Per the terms of the purchase and sale agreement, the Company is entitled to receive contingent consideration of up to $450 million based on future annual oil and NGL prices during each of the five years from 2020 to 2024. The Company determined the fair value of the contingent consideration as of the date of the sale to be $136 million using an option pricing model. The fair value of the contingent consideration is included in noncurrent other assets in the consolidated balance sheets since, if earned, such consideration will be paid by the buyer in installments beginning in 2023 through 2025. The Company revalues the contingent consideration each reporting period and records the resulting valuation changes in net interest and other income (loss) in the consolidated statements of operations. The Company recorded a loss on valuation adjustment of $63 million for the three months ended March 31, 2020. The fair value of the contingent consideration was $28 million as of March 31, 2020. See Note 4, Note 5 and Note 13 for additional information.
Deficiency Fee Obligation. The Company transferred its long-term midstream agreements and associated minimum volume commitments ("MVC") to the buyer. However, the Company retained the obligation to pay 100 percent of any deficiency fees associated with the MVC from January 2019 through July 2022. The Company determined the fair value of the deficiency fee obligation as of the date of the sale to be $348 million using a probability weighted present value model. The deficiency fee obligation is included in current or noncurrent liabilities in the consolidated balance sheets, based on the timing of payments. In March 2020, the Company recorded a charge of $69 million in other expense for the three months ended March 31, 2020, due to changes in the Company's forecasted deficiency fee payments. The estimated remaining deficiency fee obligation was $323 million as of March 31, 2020. See Note 4, Note 10 and Note 14 for additional information.
Deficiency Fee Receivable. The buyer is required to reimburse the Company for 18 percent of the deficiency fees paid under the transferred midstream agreements from January 2019 through July 2022. Such reimbursement will be paid by the buyer in installments beginning in 2023 through 2025. The Company determined the fair value of the deficiency fee receivable as of the date of the sale to be $72 million using a credit risk-adjusted valuation model. The deficiency fee receivable is included in noncurrent other assets in the consolidated balance sheets. See Note 4 for additional information.
Restricted Cash. As of March 31, 2020, the Company has $74 million deposited in an escrow account to be used to fund future deficiency fee payments. The escrow account balance is included in restricted cash in the consolidated balance sheet as of March 31, 2020. Beginning in 2021, the required escrow balance will decline to $50 million and, to the extent that there is any remaining balance after the payment of deficiency fees, the balance will become unrestricted and revert to the Company on March 31, 2023.
Decommissioning
In November 2018, the Company announced plans to close its sand mine located in Brady, Texas and transition its proppant supply requirements to West Texas sand sources. During the three months ended March 31, 2019, the Company recorded $23 million of accelerated depreciation and $13 million of inventory and other property and equipment impairment charges associated with the sand mine closure. See Note 14 for additional information.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
Restructuring
During 2019, the Company implemented a corporate restructuring program to align its cost structure with the needs of a Permian Basin-focused company. The restructuring occurred in three phases (collectively, the "Corporate Restructuring Program") as follows:
In March 2019, the Company made certain changes to its leadership and organizational structure, which included the early retirement and departure of certain officers of the Company,
In April 2019, the Company adopted a voluntary separation program ("VSP") for certain eligible employees, and
In May 2019, the Company implemented an involuntary separation program ("ISP").
The employee-related costs associated with the restructuring were primarily recorded in other expense in the consolidated statements of operations. Obligations associated with employee-related charges are included in accounts payable - due to affiliates in the consolidated balance sheets. See Note 14 for additional information.
The changes in the Company's total employee-related obligations are as follows:
Three Months Ended March 31,
20202019
(in millions)
Beginning employee-related obligations$6  $27  
Additions (Note 14)
  13  
Cash payments(5) (10) 
Noncash changes  (4) 
Ending employee-related obligations$1  $26  

NOTE 4. Fair Value Measurements
The Company determines fair value based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company's own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.
The three input levels of the fair value hierarchy are as follows:
Level 1 – quoted prices for identical assets or liabilities in active markets.
Level 2 – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – unobservable inputs for the asset or liability, typically reflecting management's estimate of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore, determined using model-based techniques, including discounted cash flow models.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
Assets and liabilities measured at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows:
As of March 31, 2020
 Fair Value Measurement
 Quoted Prices in
Active Markets for Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
(in millions)
Assets:
Commodity price derivatives$  $429  $  $429  
Deferred compensation plan assets64      64  
Investment in affiliate42      42  
Contingent consideration  28    28  
Total assets106  457    563  
Liabilities:
Commodity price derivatives  6    6  
$106  $451  $  $557  

As of December 31, 2019
 Fair Value Measurement
 Quoted Prices in Active Markets for
Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
 (in millions)
Assets:
Commodity price derivatives$  $32  $  $32  
Deferred compensation plan assets85      85  
Investment in affiliate187      187  
Contingent consideration  91    91  
Total assets272  123    395  
Liabilities:
Commodity price derivatives  20    20  
$272  $103  $  $375  
Commodity price derivatives. The Company's commodity price derivatives represent oil, NGL and gas swap contracts, collar contracts, collar contracts with short puts and basis swap contracts. The asset and liability measurements for the Company's commodity price derivative contracts are determined using Level 2 inputs. The Company utilizes discounted cash flow and option-pricing models for valuing its commodity price derivatives.
The asset and liability values attributable to the Company's commodity price derivatives were determined based on inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
credit-adjusted risk-free rate yield curve and (iv) the implied rate of volatility inherent in the collar contracts and collar contracts with short puts, which is based on active and independent market-quoted volatility factors.
Deferred compensation plan assets. The Company's deferred compensation plan assets include investments in equity and mutual fund securities that are actively traded on major exchanges. The fair value of these investments is determined using Level 1 inputs based on observable prices on major exchanges.
Investment in affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of its investment in ProPetro is determined using Level 1 inputs based on observable prices on a major exchange. See Note 11 and Note 13 for additional information.
Contingent consideration. The Company has a right to receive contingent consideration in conjunction with the South Texas Divestiture of up to $450 million based on future oil and NGL prices during each of the five years from 2020 to 2024. The fair value of the contingent consideration is determined using Level 2 inputs based on an option pricing model using quoted future commodity prices based on active markets, implied volatility factors and counterparty credit risk assessments. See Note 3, Note 5 and Note 13 for additional information. 
Assets and liabilities measured at fair value on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances. These assets and liabilities can include inventory, proved and unproved oil and gas properties, goodwill and other long-lived assets that are written down to fair value when they are impaired or held for sale.
Other assets. During the three months ended March 31, 2019, the Company impaired $13 million of inventory and other property and equipment related to the decommissioning of the Company's Brady, Texas sand mine, as these assets had no remaining future economic value. In addition, the Company recognized a $15 million impairment charge related to pressure pumping assets that were excluded from the December 2018 sale of the Company's pumping services assets. See Note 14 for additional information.
South Texas Divestiture. The Company recorded a deficiency fee obligation and related deficiency fee receivable in conjunction with the 2019 South Texas Divestiture. The fair value of the deficiency fee obligation and deficiency fee receivable was determined using Level 3 inputs based on a probability-weighted forecast that considers historical results, market conditions and various development plans to arrive at the estimated present value of the deficiency payments and corresponding receipts. The change to the Company's forecasted deficiency fee obligation, as a result of the expected impact of the COVID-19 pandemic on the ability of the buyer to satisfy the MVC, resulted in the Company recording a charge of $69 million to other expense for the three months ended March 31, 2020. The present value of the future cash payments and expected cash receipts were determined using a 3.6 percent and 3.2 percent discount rate, respectively, based on the estimated timing of future payments and receipts and the Company's counterparty credit risk assessments. See Note 3, Note 10 and Note 14 for additional information.
Impact of the COVID-19 pandemic on certain assets and liabilities measured at fair value on a nonrecurring basis.
Proved Properties. The Company performs assessments of its proved oil and gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. An impairment loss is indicated if the sum of the expected future cash flows, including from vertical integrated services that are used in the development of the assets, is less than the carrying amount of the assets, including the carrying value of the vertical integrated services and operating lease right-of-use assets. In these circumstances, the Company recognizes an impairment charge for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.
Due to the decrease in management's commodity price outlooks during the first quarter of 2020, which represent longer-term outlooks that are developed based on third party longer term commodity price estimates as of a measurement date ("Management's Price Outlooks"), the Company performed an impairment assessment of its proved oil and gas properties as of March 31, 2020 and determined that its proved oil and gas properties were not impaired. The primary factors that may affect estimates of future cash flows for the Company's proved oil and gas properties are (i) future reserve adjustments, both positive and negative, to proved reserves and appropriate risk-adjusted probable and possible reserves, (ii) results of future drilling activities, (iii) Management's Price Outlooks and (iv) increases or decreases in production and capital costs. The average oil price per barrel and gas price per thousand cubic feet utilized in the respective Management's Price Outlooks are as follows:
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
As of March 31, 2020
OilGas
Management's Price Outlooks$42.84  $2.49  
Goodwill. Goodwill is assessed for impairment whenever it is likely that events or circumstances indicate the carrying value of a reporting unit exceeds its fair value, but no less often than annually. An impairment charge is recorded for the amount by which the carrying amount exceeds the fair value of a reporting unit in the period it is determined to be impaired.

During the three months ended March 31, 2020 the Company's market capitalization decreased from $25 billion at December 31, 2019 to $12 billion at March 31, 2020. The Company determined that the significant decline in its market capitalization during the first quarter of 2020 indicated that an impairment loss on the Company's $261 million carrying amount of goodwill may have been incurred. Based on the Company's assessment of the fair value of goodwill as of March 31, 2020, the Company determined that its goodwill was not impaired. The fair value of the Company's reporting unit, as of March 31, 2020, was $15.5 billion, calculated as the Company's market capitalization plus a control premium, which is 27 percent in excess of the March 31, 2020 carrying value of the Company's reporting unit. A further decline in the Company’s share price for a sustained period of time, or a significant decrease in the future cash flows from the Company's proved oil and gas reserves, among other factors, could significantly impact the impairment analysis and may result in future goodwill impairment charges.

There is significant uncertainty surrounding the long-term impact to global oil demand due to the effects of the COVID-19 pandemic, coupled with significant excess oil supply that is rapidly filling worldwide storage. These conditions are negatively impacting the Company's 2020 forecasted capital activities and production levels. It is reasonably possible that the carrying value of the Company's proved oil and gas properties or goodwill could exceed their estimated fair value resulting in the need to impair their carrying values in the future. If incurred, an impairment of the Company's proved oil and gas properties or goodwill could have a material adverse effect on the Company's financial condition and results of operation.

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, 2020As of December 31, 2019
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
 (in millions)
Assets:
Cash and cash equivalents:
Cash (a)$784  $784  $631  $631  
Restricted cash (a)$74  $74  $74  $74  
Liabilities:
Current portion of long-term debt:
Senior notes (b)$499  $500  $450  $451  
Long-term debt:
Credit facility (c)$796  $797  $  $  
Senior notes (b)1,344  1,397  1,839  1,995  
Total
$2,140  $2,194  $1,839  $1,995  
______________________
(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.
(c)Fair value is determined using Level 2 inputs.
The Company has other financial instruments consisting primarily of receivables, payables, other current assets and liabilities that approximate fair value due to the nature of the instrument and their relatively short maturities. Non-financial assets and liabilities initially measured at fair value include assets acquired and liabilities assumed in a business combination, goodwill and asset retirement obligations.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
NOTE 5. Derivative Financial Instruments
The Company primarily utilizes commodity swap contracts, collar contracts, collar contracts with short puts and basis swap contracts to (i) reduce the effect of price volatility on the commodities the Company produces and sells or consumes, (ii) support the Company's annual capital budgeting and expenditure plans and (iii) reduce commodity price risk associated with certain capital projects. The Company also, from time to time, utilizes interest rate contracts to reduce the effect of interest rate volatility on the Company's indebtedness.
Oil production derivatives. The Company sells its oil production at the lease and the sales contracts governing such oil production are tied directly to, or are highly correlated with, New York Mercantile Exchange ("NYMEX") West Texas Intermediate ("WTI") oil prices. The Company also enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from its areas of production. To diversify the oil prices it receives, the Company enters into third party purchase transactions in its area of production and separate third party transactions for the sales of such purchased oil to Gulf Coast refineries or international export markets at prices that are highly correlated to Brent oil prices. As a result, the Company will generally use Brent derivative contracts to manage future oil price volatility.
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PIONEER NATURAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
Volumes per day associated with the Company's outstanding oil derivative contracts as of March 31, 2020 and the weighted average oil prices for those contracts are as follows:
2020Year Ending December 31, 2021
Second QuarterThird QuarterFourth Quarter
Brent collar contracts with short puts: (a)
Volume per day (Bbl)135,500  115,500  115,500    
Price per Bbl:
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 per day (Bbl)98,911  177,900  160,900  57,750  
Price per Bbl$37.27  35.68  $36.43  $43.29  
Brent call contracts sold:
Volume per day (Bbl) (b)