S-4/A
Table of Contents

As filed with the Securities and Exchange Commission on December 2, 2020

Registration No. 333-250888

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 1

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Pioneer Natural Resources Company

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1311   75-2702753

(State or Other Jurisdiction of

Incorporation)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

777 Hidden Ridge

Irving, Texas 75038

(972) 444-9001

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

 

Mark H. Kleinman

Pioneer Natural Resources Company

777 Hidden Ridge

Irving, Texas 75038

(972) 444-9001

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

With copies to:

 

Jeffrey A. Chapman

Tull R. Florey

Gibson, Dunn & Crutcher LLP

2001 Ross Avenue, Suite 2100

Dallas, TX 75201

(214) 698-3100

 

Colin Roberts

Parsley Energy, Inc.

303 Colorado Street

Austin, TX 78701

(737) 704-2300

 

Douglas E. McWilliams

Lande A. Spottswood

Vinson & Elkins LLP

1001 Fannin Street, Suite 2500

Houston, TX 77002

(713) 758-2222

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective and upon completion of the mergers described in the enclosed document.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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 Securities Exchange Act of 1934, as amended (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 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date or dates as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this joint proxy statement/prospectus is not complete and may be changed. Pioneer may not issue the securities offered by this joint proxy statement/prospectus until the registration statement containing this joint proxy statement/prospectus has been declared effective by the Securities and Exchange Commission. This joint proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer or solicitation is not permitted.

 

SUBJECT TO COMPLETION, DATED DECEMBER 2, 2020

 

LOGO    LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

On behalf of the boards of directors of Pioneer Natural Resources Company (“Pioneer”) and Parsley Energy, Inc. (“Parsley”), we are pleased to enclose the accompanying joint proxy statement/prospectus relating to the acquisition of Parsley by Pioneer. We are requesting that you take certain actions as a Pioneer or Parsley stockholder.

On October 20, 2020, Pioneer and Parsley entered into an Agreement and Plan of Merger (as amended from time to time, the “merger agreement”) with certain subsidiaries of Pioneer and Parsley, providing for (i) the merger of a direct wholly-owned subsidiary of Pioneer with and into Parsley, with Parsley surviving the merger as a direct wholly-owned subsidiary of Pioneer (the “first merger” and the surviving entity, the “surviving corporation”), (ii) simultaneously with the first merger, the merger of another direct wholly-owned subsidiary of Pioneer (“Opco Merger Sub”) with and into Parsley Energy, LLC, a majority-owned subsidiary of Parsley (“Parsley LLC”), with Parsley LLC surviving the merger as a direct and indirect wholly-owned subsidiary of Pioneer (the “Opco merger”), and (iii) immediately following the first merger and the Opco merger, the merger of the surviving corporation with and into a third direct wholly-owned subsidiary of Pioneer (“Merger Sub LLC”), with Merger Sub LLC surviving the merger as a direct wholly-owned subsidiary of Pioneer (the “subsequent merger” and, together with the first merger, the “integrated mergers” and the integrated mergers and the Opco merger, collectively, the “mergers”).

If the mergers are completed, subject to certain exceptions, each holder of Class A common stock, par value $0.01 per share, of Parsley (the “Parsley Class A common stock”) will be entitled to receive 0.1252 shares of common stock, par value $0.01 per share, of Pioneer (the “Pioneer common stock”) for each of its shares of Parsley Class A common stock and each person or entity holding units representing membership interests in Parsley LLC (each, a “Parsley LLC unit”) will be entitled to receive 0.1252 shares of Pioneer common stock for each of its Parsley LLC units, and each corresponding share of Class B common stock, par value $0.01 per share, of Parsley (the “Parsley Class B common stock” and, together with the Parsley Class A common stock, the “Parsley common stock”) will be automatically cancelled for no additional consideration, subject to any statutory rights to appraisal pursuant to the Delaware General Corporation Law solely with respect to the Parsley Class B common stock.

Following the completion of the mergers, it is anticipated that persons who were stockholders of Pioneer and Parsley immediately prior to the mergers will own approximately 76% and 24% of the combined company, respectively.

Pioneer common stock is quoted on the New York Stock Exchange (“NYSE”) under the symbol “PXD”, and Parsley Class A common stock is quoted on the NYSE under the symbol “PE”. The market prices of both Pioneer common stock and Parsley Class A common stock will fluctuate before the mergers, and you should obtain current stock price quotations for the Pioneer common stock and Parsley Class A common stock.

Your vote is very important. We cannot complete the mergers unless the Pioneer stockholders vote to approve the issuance of Pioneer common stock pursuant to the merger agreement and the Parsley stockholders vote to adopt the merger agreement.

This document is a prospectus relating to the Pioneer common stock to be issued to Parsley Class A stockholders and Parsley LLC unitholders pursuant to the mergers and a joint proxy statement for Pioneer and Parsley to solicit proxies for their respective meetings of stockholders. It contains answers to frequently asked questions and a summary of the important terms of the mergers, the merger agreement and related transactions, followed by a more detailed discussion.

Please carefully read this entire document, including “Risk Factors” beginning on page 27, for a discussion of the risks relating to the mergers and Pioneer following the mergers.

Sincerely,

 

Scott D. Sheffield

President and Chief Executive Officer

Pioneer Natural Resources Company

  

Matt Gallagher

President and Chief Executive Officer

Parsley Energy, Inc.

Neither the Securities and Exchange Commission nor any state securities regulatory authority has approved or disapproved of the mergers or the securities to be issued under this joint proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The date of the accompanying joint proxy statement/prospectus is [                ], 2020, and it is first being mailed or otherwise delivered to Pioneer stockholders and Parsley stockholders on or about [                ], 2020.


Table of Contents

LOGO

Pioneer Natural Resources Company

777 Hidden Ridge

Irving, Texas 75038

(972) 444-9001

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY 12, 2021

To the Stockholders of Pioneer Natural Resources Company:

You are cordially invited to attend the virtual only special meeting of the stockholders of Pioneer Natural Resources Company (“Pioneer”), which will be held at 9:00 a.m., Central Time, on January 12, 2021 via live webcast at www.virtualshareholdermeeting.com/PXD21SM (the “Pioneer special meeting”), for the following purpose:

To vote on a proposal to approve the issuance of shares of Pioneer common stock, par value $0.01 per share (“Pioneer common stock”), pursuant to the terms of the Agreement and Plan of Merger, dated as of October 20, 2020 (as amended from time to time, the “merger agreement”), by and among Pioneer, Parsley Energy, Inc. (“Parsley”) and certain subsidiaries of Pioneer and Parsley, and other shares of Pioneer common stock reserved for issuance in connection with the transactions contemplated by the merger agreement (collectively, the “stock issuance” and such proposal, the “Pioneer stock issuance proposal”).

Virtual Only Pioneer Special Meeting Due to COVID-19: In light of ongoing public health impacts related to coronavirus (COVID-19), and taking into account the related protocols that federal, state and local governments have implemented, Pioneer’s board of directors (the “Pioneer board”) has determined that the Pioneer special meeting will be a virtual meeting conducted exclusively via live webcast. There will not be a physical location for the Pioneer special meeting and you will not be able to attend the meeting in person. The Pioneer board believes that this is the right choice for Pioneer and Pioneer’s stockholders at this time, as it permits stockholders to attend the Pioneer special meeting while safeguarding the health of Pioneer stockholders, the Pioneer board and the Pioneer management team.

How to Attend the Virtual Pioneer Special Meeting: You can attend the meeting online by visiting www.virtualshareholdermeeting.com/PXD21SM, where you will be able to listen to the meeting live and vote online. To attend, vote and be deemed present in person at the virtual meeting, you will need to log on to the virtual meeting website at www.virtualshareholdermeeting.com/PXD21SM and enter the 16-digit control number included on your proxy card or voting instruction form.

The meeting webcast will begin promptly at 9:00 a.m., Central Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 8:45 a.m., Central Time, and you should allow ample time for the check-in procedures. For additional information on how you can attend the virtual Pioneer special meeting, please see the instructions beginning on page 41 of this joint proxy statement/prospectus. Whether or not you plan to attend the virtual Pioneer special meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described on page 44 of this joint proxy statement/prospectus. You may also vote online and examine our stockholder list during the Pioneer special meeting by following instructions provided on the meeting website, which may be accessed using the above web address and the 16-digit control number included on your proxy card or voting instruction form, during the Pioneer special meeting.


Table of Contents

Meeting Agenda: Other than the Pioneer stock issuance proposal, Pioneer will transact no business at the Pioneer special meeting, except such business as may properly be brought before the Pioneer special meeting or any adjournments or postponements thereof by or at the direction of the Pioneer board in accordance with Pioneer’s bylaws. This joint proxy statement/prospectus, of which this notice is a part, describes the proposal listed above in more detail. Please refer to the attached documents, including the merger agreement and all other annexes and any documents incorporated by reference, for further information with respect to the business to be transacted at the Pioneer special meeting. You are encouraged to read the entire document carefully before voting. In particular, please see “The Mergers” beginning on page 56 for a description of the transactions contemplated by the merger agreement, including the stock issuance, and “Risk Factors” beginning on page 27 for an explanation of the risks associated with the mergers and the other transactions contemplated by the merger agreement, including the stock issuance.

Required Vote: Approval of the Pioneer stock issuance proposal by the affirmative vote of holders of a majority of the shares of Pioneer common stock (such holders, the “Pioneer stockholders”), present virtually during the Pioneer special meeting or represented by proxy at the Pioneer special meeting and entitled to vote thereon, is required to complete the mergers, as contemplated pursuant to the merger agreement.

Who Can Vote: The Pioneer board has fixed the close of business on December 7, 2020 as the record date for the determination of the Pioneer stockholders entitled to receive notice of, and to vote at, the Pioneer special meeting or any adjournments or postponements thereof. Only Pioneer stockholders of record on the record date are entitled to receive notice of, and to vote at, the Pioneer special meeting or any adjournments or postponements thereof. For additional information regarding the Pioneer special meeting, please see “Pioneer Special Meeting” beginning on page 41 of this joint proxy statement/prospectus.

The Pioneer board, at a meeting duly called and held, has by unanimous vote (i) determined that the mergers and the other transactions contemplated by the merger agreement were in the best interests of, and were advisable to, Pioneer and the Pioneer stockholders, (ii) approved, adopted and declared advisable the merger agreement and the transactions contemplated thereby, (iii) directed that the Pioneer stock issuance be submitted to Pioneer stockholders for approval and (iv) resolved to recommend that Pioneer stockholders approve the Pioneer stock issuance at a duly held meeting of Pioneer stockholders for such purpose. The Pioneer board unanimously recommends that Pioneer stockholders vote “FOR” the Pioneer stock issuance proposal.

As a Pioneer stockholder, you play an important role in our company by considering and taking action on these matters. We appreciate the time and attention you invest in making thoughtful decisions.

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the special meeting, please submit a proxy or voting instruction card as soon as possible. For specific instructions on voting, please refer to the joint proxy statement/prospectus accompanying this notice of meeting or the proxy card included with the proxy voting materials.

If you have any questions concerning the Pioneer stock issuance proposal, the mergers or this joint proxy statement/prospectus, would like additional copies, or need help voting your shares of Pioneer common stock, please contact Pioneer’s proxy solicitor:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call Collect: (212) 269-5550

All Others Call Toll-Free: (800) 859-8509

Email: pxd@dfking.com


Table of Contents
BY ORDER OF THE BOARD OF DIRECTORS,
  Thomas J. Murphy
  Corporate Secretary
  [                ], 2020


Table of Contents

LOGO

Parsley Energy, Inc.

303 Colorado Street

Austin, Texas 78701

(737) 704-2300

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY 12, 2021

To the Stockholders of Parsley Energy, Inc.:

You are cordially invited to attend the virtual only special meeting of the stockholders of Parsley Energy, Inc. (“Parsley”), which will be held at 9:00 a.m., Central Time, on January 12, 2021 via live webcast at www.virtualshareholdermeeting.com/PE21SM (the “Parsley special meeting”), for the following purposes:

 

  1.

To vote on a proposal to approve and adopt the terms of the Agreement and Plan of Merger, dated as of October 20, 2020 (as amended from time to time, the “merger agreement”), by and among Parsley, Pioneer Natural Resources Company (“Pioneer”) and certain subsidiaries of Parsley and Pioneer and the transactions contemplated thereby (the “Parsley merger proposal”).

 

  2.

To vote on a proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Parsley’s named executive officers that is based on or otherwise relates to the mergers (as defined below) (the “Parsley compensation proposal”).

Virtual Only Parsley Special Meeting Due to COVID-19: In light of ongoing public health impacts related to coronavirus (COVID-19), and taking into account the related protocols that federal, state and local governments have implemented, Parsley’s board of directors (the “Parsley board”) has determined that the Parsley special meeting will be a virtual meeting conducted exclusively via live webcast. There will not be a physical location for the Parsley special meeting and you will not be able to attend the meeting in person. The Parsley board and Parsley’s management team believe that this is the right choice for Parsley and Parsley’s stockholders at this time, as it permits stockholders to attend the Parsley special meeting while safeguarding the health of Parsley stockholders, the Parsley board and the Parsley management team.

How to Attend the Virtual Parsley Special Meeting: You can attend the meeting online by visiting www.virtualshareholdermeeting.com/PE21SM, where you will be able to listen to the meeting live and vote online. To attend, vote and be deemed present in person at the virtual meeting, you will need to log on to the virtual meeting website at www.virtualshareholdermeeting.com/PE21SM and enter the 16-digit control number included on your proxy card or voting instruction form.

The meeting webcast will begin promptly at 9:00 a.m., Central Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 8:45 a.m., Central Time, and you should allow ample time for the check-in procedures. For additional information on how you can attend the virtual Parsley special meeting, please see the instructions beginning on page 47 of this joint proxy statement/prospectus. Whether or not you plan to attend the virtual Parsley special meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described on pages 51 and 52 of this joint proxy statement/prospectus. You may also vote online and examine our stockholder list during the Parsley special meeting by following instructions provided on the meeting website, which may be accessed using the above web address and the 16-digit control number included on your proxy card or voting instruction form, during the Parsley special meeting.

Meeting Agenda: Other than the Parsley merger proposal and Parsley compensation proposal, Parsley will transact no business at the Parsley special meeting, except such business as may properly be brought before the


Table of Contents

Parsley special meeting or any adjournments or postponements thereof by or at the direction of the Parsley board in accordance with Parsley’s bylaws. This joint proxy statement/prospectus, of which this notice is a part, describes the proposals listed above in more detail. Please refer to the attached documents, including the merger agreement and all other annexes and any documents incorporated by reference, for further information with respect to the business to be transacted at the Parsley special meeting. You are encouraged to read the entire document carefully before voting. In particular, please see “The Mergers” beginning on page 56 for a description of the transactions contemplated by the merger agreement and “Risk Factors” beginning on page 27 for an explanation of the risks associated with the mergers and the other transactions contemplated by the merger agreement.

Required Vote: Approval of the Parsley merger proposal by the affirmative vote of the holders of a majority of the outstanding shares of Parsley common stock entitled to vote on the proposal (such holders, the “Parsley stockholders”) is required to complete the mergers, as contemplated pursuant to the merger agreement. Approval of the Parsley compensation proposal requires the affirmative vote of the holders of a majority of the shares of Parsley common stock present virtually during the Parsley special meeting or represented by proxy at the Parsley special meeting and entitled to vote thereon.

Who Can Vote: The Parsley board has fixed the close of business on December 7, 2020 as the record date for the determination of the Parsley stockholders entitled to receive notice of, and to vote at, the Parsley special meeting or any adjournments or postponements thereof. Only Parsley stockholders of record on the record date are entitled to receive notice of, and to vote at, the Parsley special meeting or any adjournments or postponements thereof. For additional information regarding the Parsley special meeting, please see “Parsley Special Meeting” beginning on page 47 of this joint proxy statement/prospectus.

The Parsley board, at a meeting duly called and held, has by unanimous vote (i) declared that the merger agreement and the transactions contemplated thereby (including the integrated mergers (as defined therein)) were fair to, and in the best interests of, Parsley, the Parsley stockholders and the Parsley LLC unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby (including the integrated mergers) and (iii) recommended that the Parsley stockholders approve and adopt the merger agreement and the transactions contemplated thereby (including the integrated mergers). The Parsley board unanimously recommends that Parsley stockholders vote FOR the Parsley merger proposal and FOR the Parsley compensation proposal.

As a Parsley stockholder, you play an important role in our company by considering and taking action on these matters. We appreciate the time and attention you invest in making thoughtful decisions.

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the special meeting, please submit a proxy or voting instruction card as soon as possible. For specific instructions on voting, please refer to the joint proxy statement/prospectus accompanying this notice of meeting or the proxy card included with the proxy voting materials.

If you have any questions concerning the Parsley merger proposal, the Parsley compensation proposal, the mergers or this joint proxy statement/prospectus, would like additional copies, or need help voting your shares of Parsley common stock, please contact Parsley’s proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Banks and Brokers Call Collect: (212) 929-5500

All Others Call Toll-Free: (800) 322-2885

Email: proxy@mackenziepartners.com


Table of Contents
BY ORDER OF THE BOARD OF DIRECTORS,
  Matt Gallagher
  President and Chief Executive Officer
  [                ], 2020


Table of Contents

ADDITIONAL INFORMATION

Both Pioneer and Parsley file annual, quarterly and current reports, proxy statements, and other business and financial information with the Securities and Exchange Commission (the “SEC”) electronically, and the SEC maintains a website located at www.sec.gov containing this information. You can also obtain these documents, free of charge, from Pioneer at www.pxd.com and from Parsley at www.parsleyenergy.com, as applicable. The information contained on, or that may be accessed through, Pioneer’s and Parsley’s websites is not incorporated by reference into, and is not a part of, this joint proxy statement/prospectus.

Pioneer has filed a registration statement on Form S-4 with respect to the shares of Pioneer common stock to be issued in the mergers or reserved for issuance in connection with the mergers, of which this joint proxy statement/prospectus forms a part. This joint proxy statement/prospectus constitutes the prospectus of Pioneer filed as part of the registration statement. As permitted by SEC rules, this joint proxy statement/prospectus does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules, and exhibits, at the SEC’s website mentioned above. Statements contained in this joint proxy statement/prospectus as to the contents of any contract or other documents referred to in this joint proxy statement/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable agreement or other document filed as an exhibit to the registration statement.

This joint proxy statement/prospectus incorporates important business and financial information about Pioneer and Parsley from documents that are not attached to this joint proxy statement/prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus, including copies of financial statements and management’s discussion and analysis, free of charge by requesting them in writing or by telephone from the appropriate company or its proxy solicitor at the following addresses and telephone numbers:

 

For Pioneer stockholders:    For Parsley stockholders:

 

Pioneer Natural Resources Company

Attn: Investor Relations

777 Hidden Ridge

Irving, Texas 75038

(972) 969-4019

 

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call Collect: (212) 269-5550

All Others Call Toll-Free: (800) 859-8509

Email: pxd@dfking.com

  

 

Parsley Energy, Inc.

Attn: Investor Relations

303 Colorado Street

Austin, Texas 78701

(737) 704-2300

 

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Banks and Brokers Call Collect: (212) 929-5500

All Others Call Toll-Free: (800) 322-2885

Email: proxy@mackenziepartners.com

If you would like to request any documents, please do so by January 5, 2021, which is five business days prior to the date of the Pioneer special meeting and the Parsley special meeting, in order to receive them before the applicable meeting.

For a more detailed description of the information incorporated by reference into this joint proxy statement/prospectus and how you may obtain it, please see “Where You Can Find More Information.”


Table of Contents

ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This joint proxy statement/prospectus, which forms part of the registration statement on Form S-4 filed with the SEC by Pioneer, constitutes a prospectus of Pioneer under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of Pioneer common stock issuable to Parsley Class A stockholders and Parsley LLC unitholders in connection with the mergers. This joint proxy statement/prospectus also constitutes a joint proxy statement for both Pioneer and Parsley under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This joint proxy statement/prospectus also constitutes a notice of meeting with respect to the Pioneer special meeting and a notice of meeting with respect to the Parsley special meeting.

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated [            ], 2020, and you should assume that the information contained in this joint proxy statement/prospectus is accurate only as of such date. You should also assume that the information incorporated by reference into this joint proxy statement/prospectus is only accurate as of the date of such information. Neither the mailing of this joint proxy statement/prospectus to Pioneer stockholders or Parsley stockholders nor the issuance by Pioneer of shares of Pioneer common stock pursuant to the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Pioneer has been provided by Pioneer, and information contained in this joint proxy statement/prospectus regarding Parsley has been provided by Parsley.


Table of Contents

GLOSSARY

The following terms have the following meanings in this joint proxy statement/prospectus:

 

   

“bylaws” means, with respect to Pioneer, the Sixth Amended and Restated Bylaws of Pioneer and, with respect to Parsley, the Amended and Restated Bylaws of Parsley, in each case as amended;

 

   

“certificate of incorporation” means, with respect to Pioneer, the Amended and Restated Certificate of Incorporation of Pioneer and, with respect to Parsley, the Amended and Restated Certificate of Incorporation of Parsley, in each case as amended;

 

   

“closing date” means the date on which the effective time occurs;

 

   

“effective time” means the effective time of the first merger;

 

   

“eligible Parsley LLC unit” means each Parsley LLC unit issued and outstanding immediately prior to the effective time that is eligible for conversion into Pioneer common stock in accordance with the terms of the merger agreement;

 

   

“eligible share of Parsley Class A common stock” means each share of Parsley Class A common stock issued and outstanding immediately prior to the effective time that is eligible for conversion into Pioneer common stock in accordance with the terms of the merger agreement;

 

   

“exchange ratio” means the ratio of 0.1252 shares of Pioneer common stock per issued and outstanding share of Parsley Class A common stock that will be issued to holders of eligible shares of Parsley Class A common stock in connection with the first merger and the ratio of 0.1252 shares of Pioneer common stock per issued and outstanding Parsley LLC unit that will be issued to holders of eligible Parsley LLC units in connection with the Opco merger;

 

   

“first merger” means the merger of Merger Sub Inc. with and into Parsley pursuant to the merger agreement, with Parsley surviving the merger as the surviving corporation;

 

   

“free cash flow,” a non-GAAP financial measure, means, except as otherwise noted herein, with respect to Pioneer, net cash provided by operating activities, adjusted for changes in operating assets and liabilities, less capital expenditures and, with respect to Parsley, net cash provided by operating activities before changes in operating assets and liabilities, net of acquisitions and acquisition and cash restructuring costs related to the acquisition of Jagged Peak Energy Inc. (“Jagged Peak”), less accrual-based development capital expenditures;

 

   

“GAAP” means accounting principles generally accepted in the United States of America;

 

   

“integrated mergers” means the first merger and the subsequent merger, collectively;

 

   

“merger agreement” means the Agreement and Plan of Merger, dated as of October 20, 2020, by and among Pioneer, Merger Sub Inc., Merger Sub LLC, Opco Merger Sub, Parsley and Parsley LLC, as amended from time to time;

 

   

“Merger Sub Inc.” means Pearl First Merger Sub Inc., a Delaware corporation and direct wholly-owned subsidiary of Pioneer;

 

   

“Merger Sub LLC” means Pearl Second Merger Sub LLC, a Delaware limited liability company and direct wholly-owned subsidiary of Pioneer;

 

   

“mergers” means the first merger, the Opco merger and the subsequent merger, collectively;

 

   

“Opco merger” means the merger of Opco Merger Sub with and into Parsley LLC pursuant to the merger agreement, with Parsley LLC surviving the merger as the surviving company;

 

   

“Opco Merger Sub” means Pearl Opco Merger Sub LLC, a Delaware limited liability company and direct wholly-owned subsidiary of Pioneer;

 

   

“Parsley” means Parsley Energy, Inc., a Delaware corporation;

 

   

“Parsley board” means the Parsley board of directors;


Table of Contents
   

“Parsley Class A common stock” means the Class A common stock, par value $0.01 per share, of Parsley;

 

   

“Parsley Class A stockholders” means the holders of Parsley Class A common stock;

 

   

“Parsley Class B common stock” means the Class B common stock, par value $0.01 per share, of Parsley;

 

   

“Parsley Class B stockholders” means the holders of Parsley Class B common stock;

 

   

“Parsley common stock” means Parsley Class A common stock and Parsley Class B common stock, collectively;

 

   

“Parsley LLC” means Parsley Energy, LLC, a majority-owned subsidiary of Parsley;

 

   

“Parsley LLC stapled unit” means each Parsley LLC unit, together with its corresponding share of Parsley Class B common stock;

 

   

“Parsley LLC units” means the units representing membership interests in Parsley LLC;

 

   

“Parsley LLC unitholders” means the holders of Parsley LLC units;

 

   

“Parsley special meeting” means the meeting of the Parsley stockholders in connection with the mergers, as may be adjourned or postponed from time to time;

 

   

“Parsley stockholders” means the holders of Parsley common stock;

 

   

“Pioneer” means Pioneer Natural Resources Company, a Delaware corporation;

 

   

“Pioneer board” means the Pioneer board of directors;

 

   

“Pioneer common stock” means the common stock, par value $0.01 per share, of Pioneer;

 

   

“Pioneer special meeting” means the meeting of the Pioneer stockholders in connection with the mergers, as may be adjourned or postponed from time to time;

 

   

“Pioneer stockholders” means the holders of Pioneer common stock;

 

   

“special meetings” means the Pioneer special meeting and the Parsley special meeting, collectively;

 

   

“subsequent merger” means the merger of Parsley with and into Merger Sub LLC pursuant to the merger agreement, with Merger Sub LLC surviving the merger as a direct wholly-owned subsidiary of Pioneer;

 

   

“surviving corporation” means Parsley as the surviving entity of the first merger;

 

   

“tax receivable agreement” or “TRA” means the Tax Receivable Agreement, dated May 29, 2014, among Parsley LLC and certain current or former members of Parsley LLC, as amended;

 

   

“TRA amendment” means that certain amendment to the tax receivable agreement, dated as of October 20, 2020, by and among Parsley, Bryan Sheffield and certain other TRA holders;

 

   

“TRA holders” means Messrs. Bryan Sheffield, Matt Gallagher, Ryan Dalton, Mike Hinson and certain other current or former members of Parsley LLC that are parties to the tax receivable agreement; and

 

   

“TRA termination payments” means the lump-sum payments due to the TRA holders in connection with a change of control event under the tax receivable agreement equal to the present value (determined by applying a discount rate of one-year LIBOR plus 3%) of the hypothetical future payments that could be required to be paid under the tax receivable agreement, which lump-sum payments will be calculated in a manner consistent with the methodology specified in the TRA amendment and paid to the TRA holders in connection with the termination of the tax receivable agreement immediately after the effective time.

All currency amounts referenced in this joint proxy statement/prospectus are in U.S. dollars.


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MEETINGS

     iv  

SUMMARY

     1  

The Parties

     1  

The Mergers

     2  

Pioneer Special Meeting

     2  

Parsley Special Meeting

     4  

Opinions of Pioneer’s Financial Advisors

     6  

Opinions of Parsley’s Financial Advisors

     7  

Interests of Certain Parsley Directors and Executive Officers in the Mergers

     8  

Board of Directors and Management of Pioneer Following Completion of the Mergers

     9  

Appraisal Rights or Dissenters’ Rights

     9  

Material U.S. Federal Income Tax Consequences

     9  

Accounting Treatment of the Mergers

     10  

Regulatory Approvals

     10  

Treatment of Parsley Equity-Based Awards

     11  

Listing of Pioneer Common Stock; Delisting and Deregistration of Parsley Class A Common Stock

     12  

No Solicitation; Recommendations

     12  

Conditions Precedent to the Mergers

     12  

Termination of the Merger Agreement

     13  

Termination Fees and Expense Reimbursement

     15  

Specific Performance

     16  

Closing and Effective Time of the Mergers

     16  

Comparison of Equityholder Rights

     17  

Risk Factors

     17  

Litigation Related to the Mergers

     17  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PIONEER

     19  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PARSLEY

     20  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     21  

SUMMARY PRO FORMA COMBINED OIL, NGL AND GAS RESERVE AND PRODUCTION DATA

     22  

UNAUDITED COMPARATIVE PER SHARE DATA

     23  

MARKET PRICE INFORMATION

     24  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     25  

RISK FACTORS

     27  

Risks Relating to the Mergers

     27  

Risks Relating to Pioneer Following the Mergers

     38  

Other Risks Relating to Pioneer and Parsley

     40  

PIONEER SPECIAL MEETING

     41  

General

     41  

Date, Time and Place of the Pioneer Special Meeting

     41  

Purpose of the Pioneer Special Meeting

     41  

Recommendation of the Pioneer Board

     41  

Voting by Directors and Executive Officers

     41  

Attendance at the Pioneer Special Meeting

     41  

Record Date

     42  

Participants in the Pioneer Natural Resources USA, Inc. 401(k) and Matching Plan

     42  

Outstanding Shares and Voting Rights of Pioneer Stockholders

     42  

Stockholder List

     42  

Quorum; Abstentions and Broker  Non-Votes

     43  

Adjournment

     43  

 

i


Table of Contents

Vote Required

     43  

How to Vote

     43  

Proxies and Revocation

     44  

Solicitation of Proxies

     45  

Other Matters

     45  

Questions and Additional Information

     45  

THE PIONEER STOCK ISSUANCE PROPOSAL

     46  

PARSLEY SPECIAL MEETING

     47  

General

     47  

Date, Time and Place of the Parsley Special Meeting

     47  

Purposes of the Parsley Special Meeting

     47  

Recommendation of the Parsley Board

     47  

The Parsley Compensation Proposal

     47  

Voting by Directors and Executive Officers

     48  

Voting and Support Agreement with Quantum

     48  

Voting and Support Agreement with Bryan Sheffield

     49  

Attendance at the Parsley Special Meeting

     49  

Record Date

     50  

Outstanding Shares and Voting Rights of Parsley Stockholders

     50  

Stockholder List

     50  

Quorum; Abstentions and Broker  Non-Votes

     50  

Adjournment

     50  

Vote Required

     51  

How to Vote

     51  

Proxies and Revocation

     52  

Solicitation of Proxies

     53  

Other Matters

     53  

Questions and Additional Information

     53  

THE PARSLEY MERGER PROPOSAL

     54  

THE PARSLEY COMPENSATION PROPOSAL

     55  

THE MERGERS

     56  

Background of the Mergers

     56  

Recommendation of the Pioneer Board and Reasons for the Mergers

     73  

Recommendation of the Parsley Board and Reasons for the Mergers

     77  

Certain Pioneer Unaudited Prospective Financial and Operating Information

     82  

Certain Parsley Unaudited Prospective Financial and Operating Information

     87  

Opinions of Pioneer’s Financial Advisors

     93  

Opinions of Parsley’s Financial Advisors

     114  

Interests of Certain Parsley Directors and Executive Officers in the Mergers

     130  

Share Ownership of Directors, Executive Officers and Certain Beneficial Owners of Parsley

     142  

Board of Directors and Management of Pioneer Following Completion of the Mergers

     145  

Material U.S. Federal Income Tax Consequences

     145  

Accounting Treatment of the Mergers

     150  

Regulatory Approvals

     150  

Exchange of Shares

     150  

Treatment of Indebtedness

     150  

Dividend Policy

     151  

Listing of Pioneer Common Stock; Delisting and Deregistration of Parsley Class A Common Stock

     152  

Appraisal Rights or Dissenters’ Rights

     152  

Litigation Related to the Mergers

     156  

THE MERGER AGREEMENT

     158  

Explanatory Note Regarding the Merger Agreement

     158  

 

ii


Table of Contents

Terms of the Mergers; Merger Consideration

     158  

Closing and Effective Time of the Mergers

     159  

Treatment of Parsley Equity-Based Awards

     159  

Exchange and Payment Procedures

     160  

Representations and Warranties

     161  

Definition of Material Adverse Effect

     163  

Conduct of Business

     164  

No Solicitation; Recommendations

     168  

Efforts to Hold the Pioneer and Parsley Special Meetings

     171  

Efforts to Close the Mergers

     173  

Indemnification, Exculpation and Insurance

     173  

Employee and Employment Benefit Matters

     173  

Other Covenants

     174  

Conditions Precedent to the Mergers

     175  

Termination of the Merger Agreement

     176  

Termination Fees and Expense Reimbursement

     177  

Amendments and Waivers

     179  

Specific Performance

     179  

Governing Law

     179  

INFORMATION ABOUT PIONEER

     180  

INFORMATION ABOUT PARSLEY

     181  

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     182  

COMPARISON OF EQUITYHOLDER RIGHTS

     197  

Rights of Parsley LLC Unitholders

     197  

Comparison of Stockholder Rights

     197  

LEGAL MATTERS

     207  

EXPERTS

     207  

Pioneer Natural Resources Company

     207  

Parsley Energy, Inc.

     207  

STOCKHOLDER PROPOSALS

     208  

Pioneer

     208  

Parsley

     210  

HOUSEHOLDING OF PROXY MATERIALS

     211  

WHERE YOU CAN FIND MORE INFORMATION

     211  

ANNEX A: AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B: OPINION OF GOLDMAN, SACHS & CO. LLC

     B-1  

ANNEX C: OPINION OF MORGAN STANLEY & CO. LLC

     C-1  

ANNEX D: OPINION OF CREDIT SUISSE SECURITIES (USA) LLC

     D-1  

ANNEX E: OPINION OF WELLS FARGO SECURITIES, LLC

     E-1  
ANNEX F: SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE      F-1  

ANNEX G: VOTING AND SUPPORT AGREEMENT (QUANTUM)

     G-1  

ANNEX H: VOTING AND SUPPORT AGREEMENT (BRYAN SHEFFIELD)

     H-1  

 

iii


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE MEETINGS

The following are some questions that you may have regarding the mergers, the issuance of shares of Pioneer common stock to Parsley Class A stockholders and Parsley LLC unitholders in connection with the mergers, and other matters being considered at the Parsley special meeting and the answers to those questions. Pioneer and Parsley urge you to carefully read the entirety of this joint proxy statement/prospectus, including the annexes hereto and the information incorporated by reference herein, because the information in this section does not provide all the information that might be important to you with respect to the mergers, the issuance of shares of Pioneer common stock in connection with the mergers, and the other matters being considered at the Parsley special meeting.

 

Q:

Why am I receiving this joint proxy statement/prospectus?

 

A:

You are receiving this joint proxy statement/prospectus because Pioneer and Parsley have entered into the merger agreement, pursuant to which, among other things, on the terms and subject to the conditions included in the merger agreement, Pioneer has agreed to acquire Parsley by means of (i) the merger of Merger Sub Inc. with and into Parsley, with Parsley surviving the merger as a direct wholly-owned subsidiary of Pioneer, (ii) simultaneously with the first merger, the merger of Opco Merger Sub with and into Parsley LLC, with Parsley LLC surviving the merger as a direct and indirect wholly-owned subsidiary of Pioneer, and (iii) immediately following the first merger and the Opco merger, the merger of the surviving corporation with and into Merger Sub LLC, with Merger Sub LLC surviving the merger as a direct wholly-owned subsidiary of Pioneer. Your vote is required in connection with the mergers. The merger agreement, which governs the terms of the mergers, is attached to this joint proxy statement/prospectus as Annex A.

In order to complete the mergers, and in accordance with the rules of the New York Stock Exchange (the “NYSE”), Pioneer stockholders must approve the issuance of shares of Pioneer common stock in the mergers and other shares of Pioneer common stock reserved for issuance in connection with the mergers, in each case pursuant to the terms of the merger agreement (the “stock issuance” and such proposal, the “Pioneer stock issuance proposal”). Approval of the Pioneer stock issuance proposal requires the affirmative vote of holders of a majority of the shares of Pioneer common stock present virtually during the Pioneer special meeting or represented by proxy at the Pioneer special meeting and entitled to vote thereon.

Also, in order to complete the mergers, and in accordance with the Delaware General Corporation Law (the “DGCL”), Parsley stockholders must approve and adopt the merger agreement and the transactions contemplated thereby (including the integrated mergers) (the “Parsley merger proposal”). Approval of the Parsley merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Parsley common stock entitled to vote on the proposal. In addition, Parsley’s stockholders will be asked to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Parsley’s named executive officers (“NEOs”) that is based on or otherwise relates to the mergers (the “Parsley compensation proposal”). Approval of the Parsley compensation proposal requires the affirmative vote of the holders of a majority of the shares of Parsley common stock present virtually during the Parsley special meeting or represented by proxy at the Parsley special meeting and entitled to vote thereon.

This joint proxy statement/prospectus, which you should read carefully, contains important information about the mergers, the stock issuance and other matters being considered at the Pioneer special meeting and the Parsley special meeting.

 

Q:

When and where is the Pioneer special meeting?

 

A:

The Pioneer special meeting will be a virtual only meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/PXD21SM starting at 9:00 a.m. Central Time (with log-in beginning at 8:45 a.m. Central Time) on January 12, 2021. You will be able to attend the Pioneer special meeting online

 

iv


Table of Contents
  and vote your shares electronically during the meeting by going to www.virtualshareholdermeeting.com/PXD21SM and entering the 16-digit control number included on the proxy card or voting instruction form that you received. Because the Pioneer special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.

 

Q:

When and where is the Parsley special meeting?

 

A:

The Parsley special meeting will be a virtual only meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/PE21SM starting at 9:00 a.m. Central Time (with log-in beginning at 8:45 a.m. Central Time) on January 12, 2021. You will be able to attend the Parsley special meeting online and vote your shares electronically during the meeting by going to www.virtualshareholdermeeting.com/PE21SM and entering the 16-digit control number included on the proxy card or voting instruction form that you received. Because the Parsley special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.

 

Q:

What will Parsley stockholders and Parsley LLC unitholders receive for their shares of Parsley common stock or Parsley LLC units, as applicable, in the mergers?

 

A:

Immediately following the effective time, subject to certain exceptions, each share of Parsley Class A common stock issued and outstanding immediately prior to the effective time that is eligible for conversion into Pioneer common stock in accordance with the terms of the merger agreement and each Parsley LLC unit issued and outstanding immediately prior to the effective time that is eligible for conversion into Pioneer common stock in accordance with the terms of the merger agreement will be converted automatically into the right to receive 0.1252 shares of Pioneer common stock, with cash paid in lieu of the issuance of fractional shares, if any (the “merger consideration”). In addition, at the effective time, each share of Parsley Class B common stock will be automatically cancelled for no additional consideration, subject to any statutory rights to appraisal pursuant to the DGCL solely with respect to the Parsley Class B common stock.

In addition, Parsley and Pioneer will take, or cause to be taken, all actions necessary so that, at the effective time, Parsley’s issued and outstanding time-based restricted stock unit awards, performance-based restricted stock unit awards, time-based restricted stock awards and performance-based restricted stock awards will be treated as described in “The Merger Agreement—Treatment of Parsley Equity-Based Awards.”

For additional information regarding the consideration to be received in the mergers, please see “The Merger Agreement—Terms of the Mergers; Merger Consideration.”

 

Q:

How will Parsley LLC units and Parsley Class B common stock be treated in the mergers?

 

A:

Until the effective time, pursuant to the Fourth Amended and Restated Limited Liability Company Agreement of Parsley LLC (the “Parsley LLC agreement”), each Parsley LLC unitholder (other than Parsley) generally has the right to exchange his, her or its Parsley LLC units (and a corresponding number of shares of Parsley Class B common stock) for shares of Parsley Class A common stock at an exchange ratio of one share of Parsley Class A common stock for each Parsley LLC unit (and corresponding share of Parsley Class B common stock) exchanged (subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications) or, if either Parsley or Parsley LLC so elects, cash. Immediately following the effective time, each Parsley LLC unit issued and outstanding immediately prior to the effective time that is eligible for conversion into Pioneer common stock in accordance with the terms of the merger agreement will be converted automatically into the right to receive the merger consideration. In addition, at the effective time, each share of Parsley Class B common stock will be automatically cancelled for no additional consideration, subject to any statutory rights to appraisal pursuant to the DGCL solely with respect to the Parsley Class B common stock.

 

v


Table of Contents

The merger consideration received by Parsley LLC unitholders and the cancellation of the Parsley Class B common stock will be subject to certain tax treatment as described in “The Mergers—Material U.S. Federal Income Tax Consequences.”

For additional information regarding the consideration to be received in the mergers, please see “The Merger Agreement—Terms of the Mergers; Merger Consideration.”

 

Q:

If I am a Parsley Class A stockholder or a Parsley LLC unitholder, how will I receive the merger consideration to which I am entitled?

 

A:

If you are a holder of certificates that represent eligible shares of Parsley Class A common stock (“Parsley Class A common stock certificates”), a holder of certificates that represent eligible Parsley LLC units (“Parsley LLC unit certificates”) or otherwise a holder of eligible Parsley LLC units, a notice advising you of the effectiveness of the mergers and a letter of transmittal and, if applicable, instructions for the surrender of your Parsley Class A common stock certificates or Parsley LLC unit certificates will be mailed to you as soon as practicable after the effective time. After receiving proper documentation from you, the exchange agent will send to you (i) a statement reflecting the aggregate whole number of shares of Pioneer common stock (which will be in uncertificated book-entry form) that you have a right to receive pursuant to the merger agreement and (ii) a check in the amount equal to the cash payable in lieu of any fractional shares of Pioneer common stock and dividends and other distributions on the shares of Pioneer common stock issuable to you as merger consideration.

If you are a holder of book-entry shares representing eligible shares of Parsley Class A common stock (“Parsley Class A book-entry shares”), the exchange agent will send you, as promptly as practicable (and in any event, within three business days) after the effective time, the merger consideration, cash in lieu of any fractional shares of Pioneer common stock and any dividends and other distributions on the shares of Pioneer common stock issuable as merger consideration, in each case, that such holder has the right to receive.

No interest will be paid or accrued on any amount payable for shares of Parsley Class A common stock or Parsley LLC units eligible to receive the merger consideration pursuant to the merger agreement.

For additional information on the exchange of Parsley Class A common stock and Parsley LLC units for the merger consideration (and on the corresponding cancellation of Parsley Class B common stock for no additional consideration), please see “The Merger Agreement—Exchange and Payment Procedures.”

 

Q:

What will holders of Parsley equity awards receive in the mergers?

 

A:

The merger agreement provides for the treatment set forth below with respect to the awards held by Parsley’s non-employee directors, executive officers and other employees at the effective time:

Parsley Time-Based Restricted Stock Unit Awards: Each vested Parsley time-based restricted stock unit award (including any Parsley time-based restricted stock unit award that vests by its terms as a result of the consummation of the mergers) that is issued and outstanding as of immediately prior to the effective time will, at the effective time, be cancelled and converted into the right to receive a number of shares of Pioneer common stock (to be issued within 30 days following the closing date in accordance with the terms of the applicable restricted stock unit award agreement), rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio. Any Parsley time-based restricted stock unit award held by a non-employee member of the Parsley board will become fully vested as a result of the consummation of the mergers and will be treated as a vested Parsley time-based restricted stock unit award entitled to the foregoing treatment. Each unvested Parsley time-based restricted stock unit award (excluding any Parsley time-based restricted stock unit award that vests by its terms as a result of the consummation of the mergers) that is issued and outstanding as of immediately prior to the effective time will, at the effective

 

vi


Table of Contents

time, be converted, on the same terms and conditions (including time-based vesting conditions) as were applicable to such award as of immediately prior to the effective time, into the right to receive a time-based award covering a number of shares of Pioneer common stock, rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio.

Parsley Time-Based Restricted Stock Awards: Each unvested Parsley time-based restricted stock award (excluding any Parsley time-based restricted stock award that vests by its terms as a result of the consummation of the mergers) that is issued and outstanding as of immediately prior to the effective time will, at the effective time, be converted, on the same terms and conditions (including time-based vesting conditions) as were applicable to such time-based restricted stock award as of immediately prior to the effective time, into the right to receive a time-based restricted stock award of Pioneer covering a number of shares of Pioneer common stock, rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio.

Parsley Performance-Based Restricted Stock Unit Awards and Performance-Based Restricted Stock Awards: Each Parsley performance-based restricted stock unit award and Parsley performance-based restricted stock award that is issued and outstanding as of immediately prior to the effective time will be deemed to have become vested pursuant to the terms of the merger agreement based on deemed achievement of the maximum level of performance applicable to such award as of the date immediately prior to the effective time. At the effective time, any such vested performance-based restricted stock unit award will automatically be cancelled and converted into the right to receive a number of shares of Pioneer common stock (to be issued within 30 days following the closing date in accordance with the terms of the applicable award agreement), rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio. At the effective time, any such vested performance-based restricted stock award will automatically be converted into the right to receive a number of shares of Pioneer common stock, rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio.

For additional information regarding the treatment of Parsley equity awards, please see “The Merger Agreement—Treatment of Parsley Equity-Based Awards.”

 

Q:

Who will own Pioneer immediately following the mergers?

 

A:

Pioneer and Parsley estimate that, upon completion of the mergers, Pioneer stockholders as of immediately prior to the mergers will hold approximately 76%, and Parsley stockholders as of immediately prior to the mergers will hold approximately 24%, of the issued and outstanding shares of Pioneer common stock (without giving effect to any shares of Pioneer common stock held by Parsley stockholders prior to the mergers). The exact equity stake of Parsley stockholders in Pioneer immediately following the effective time will depend on the number of shares of Pioneer common stock, shares of Parsley Class A common stock and Parsley LLC units issued and outstanding immediately prior to the effective time.

 

Q:

What will be the composition of the board of directors and management of Pioneer following the completion of the mergers?

 

A:

Upon completion of the mergers, the current directors and executive officers of Pioneer are expected to continue in their current positions, other than for changes previously announced by Pioneer or as may be publicly announced by Pioneer in the future in the normal course.

Additionally, pursuant to the merger agreement, Pioneer and Parsley have agreed that the Pioneer board will be expanded by two members as of the effective time and Matt Gallagher and A.R. Alameddine will be

 

vii


Table of Contents

appointed as directors of the Pioneer board. If either Mr. Gallagher and/or Mr. Alameddine is unwilling or unable to serve as a member of the Pioneer board at the effective time, then another member or members of the Parsley board that is determined by the Pioneer board in good faith to be independent with respect to his or her service on the Pioneer board and is mutually agreed between Pioneer and Parsley will instead be appointed to fill such vacancy or vacancies on the Pioneer board in lieu of Mr. Gallagher and/or Mr. Alameddine, as applicable. Any remuneration to be paid to these directors will be consistent with Pioneer’s remuneration policy for its directors. Pioneer has also agreed to take all action necessary to nominate the Parsley director designees for election to the Pioneer board in the proxy statement relating to the first annual meeting of Pioneer stockholders following the closing of the mergers. In addition, the Pioneer board (or a committee thereof) will appoint each Parsley director designee to a committee of the Pioneer board within 90 days following the closing date, in a manner consistent with its ordinary policies and practices. For additional information, please see “The MergersBoard of Directors and Management of Pioneer Following Completion of the Mergers.

 

Q:

How important is my vote?

 

A:

Your vote “FOR” each proposal presented at the Pioneer special meeting and the Parsley special meeting is very important and you are encouraged to submit a proxy as soon as possible. The mergers cannot be completed without, among other things, the approval of the Pioneer stock issuance proposal by Pioneer stockholders and the approval of the Parsley merger proposal by Parsley stockholders.

Pioneer. Approval of the Pioneer stock issuance proposal requires the affirmative vote of holders of a majority of the shares of Pioneer common stock present virtually during the Pioneer special meeting or represented by proxy at the Pioneer special meeting and entitled to vote thereon. Accordingly, a Pioneer stockholder’s abstention from voting will have the same effect as a vote “against” the Pioneer stock issuance proposal, while a broker non-vote or the failure of a Pioneer stockholder to attend the Pioneer special meeting, virtually or by proxy, and vote will have no effect on the outcome of the Pioneer stock issuance proposal.

Parsley. Approval of the Parsley merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Parsley common stock entitled to vote on the proposal. Accordingly, a Parsley stockholder’s abstention from voting, a broker non-vote, or the failure of a Parsley stockholder to attend the Parsley special meeting, virtually or by proxy, and vote will have the same effect as a vote “against” the Parsley merger proposal. Approval of the Parsley compensation proposal requires the affirmative vote of the holders of a majority of the shares of Parsley common stock present virtually during the Parsley special meeting or represented by proxy at the Parsley special meeting and entitled to vote thereon. Accordingly, a Parsley stockholder’s abstention from voting will have the same effect as a vote “against” the Parsley compensation proposal, while a broker non-vote or the failure of a Parsley stockholder to attend the Parsley special meeting, virtually or by proxy, and vote will have no effect on the outcome of the Parsley compensation proposal.

 

Q:

How do the Pioneer board and the Parsley board recommend that I vote?

 

A:

The Pioneer board unanimously recommends that Pioneer stockholders vote “FOR” the Pioneer stock issuance proposal. For additional information regarding how the Pioneer board recommends that Pioneer stockholders vote, see the section titled “The Mergers—Recommendation of the Pioneer Board and Reasons for the Mergers.”

The Parsley board unanimously recommends that Parsley stockholders vote “FOR” the Parsley merger proposal and “FOR” the Parsley compensation proposal. For additional information regarding how the Parsley board recommends that Parsley stockholders vote, see the section titled “The Mergers—Recommendation of the Parsley Board and Reasons for the Mergers.”

 

viii


Table of Contents
Q:

Will the shares of Pioneer common stock that I acquire in connection with the mergers receive a dividend?

 

A:

After the closing of the mergers, as a holder of Pioneer common stock, you will receive the same dividends on shares of Pioneer common stock, if and when declared, that all other holders of Pioneer common stock will receive for any dividend with a record date that occurs after the effective time.

 

Q:

Will I continue to receive dividends in respect of my shares of Parsley Class A common stock and distributions in respect of my Parsley LLC units?

 

A:

Prior to the closing of the mergers, Parsley and Pioneer will coordinate regarding the declaration and payment of dividends in respect of their common stock and distributions in respect of Parsley LLC units, and the record dates and payment dates relating thereto, so as to ensure that you do not receive two dividends (or a dividend and a distribution), or fail to receive one dividend or distribution, as applicable, in any quarter with respect to your shares of Parsley Class A common stock, Parsley LLC units and shares of Pioneer common stock that you receive in exchange therefor in the mergers.

After the closing of the mergers, former Parsley Class A stockholders and Parsley LLC unitholders who hold Parsley Class A common stock certificates or Parsley LLC unit certificates, or who otherwise hold eligible Parsley LLC units, as applicable, will not be entitled to be paid dividends otherwise payable on the shares of Pioneer common stock into which their shares of Parsley Class A common stock or Parsley LLC units are exchangeable until they surrender their Parsley Class A common stock certificates or Parsley LLC unit certificates, as applicable, and deliver an applicable letter of transmittal. Dividends will be accrued for these holders and they will receive the accrued dividends, without interest, when they surrender their Parsley Class A common stock certificates or Parsley LLC unit certificates, as applicable, and deliver an applicable letter of transmittal.

Parsley has declared a fourth quarter cash dividend of $0.05 per share of Parsley Class A common stock, payable on December 18, 2020 to holders of record on December 8, 2020. Pioneer has declared a quarterly dividend of $0.55 per share of Pioneer common stock, payable on January 14, 2021 to holders of record on December 31, 2020. After the closing of the mergers, all Pioneer dividends will remain subject to approval by the Pioneer board.

 

Q:

Will the shares of Pioneer common stock received at the time of completion of the mergers be traded on an exchange?

 

A:

Yes. It is a condition to the consummation of the mergers that the shares of Pioneer common stock issuable to Parsley Class A stockholders and Parsley LLC unitholders in connection with the mergers be approved for listing on the NYSE, upon official notice of issuance. Parsley Class A common stock currently trades on the NYSE under the stock symbol “PE”. When the mergers are completed, the Parsley Class A common stock will cease to be traded on the NYSE and will be deregistered under the Exchange Act.

 

Q:

How will Pioneer stockholders be affected by the mergers?

 

A:

Upon completion of the mergers, each Pioneer stockholder will hold the same number of shares of Pioneer common stock that such stockholder held immediately prior to completion of the mergers. As a result of the mergers, Pioneer stockholders will own shares in a larger company with more assets. However, because Pioneer will be issuing additional shares of Pioneer common stock to Parsley Class A stockholders and Parsley LLC unitholders in exchange for their eligible shares of Parsley Class A common stock and eligible Parsley LLC units, respectively, in connection with the mergers, each share of Pioneer common stock issued and outstanding immediately prior to the mergers will represent a smaller percentage of the aggregate number of shares of Pioneer common stock issued and outstanding after the mergers.

 

Q:

What are the material U.S. federal income tax consequences of the integrated mergers to Parsley Class A stockholders?

 

A:

Assuming that the integrated mergers are completed as currently contemplated, Pioneer and Parsley intend for the integrated mergers, taken together, to qualify as a “reorganization” within the meaning of

 

ix


Table of Contents
  Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). It is a condition to Parsley’s obligation to complete the mergers that it receive an opinion from Vinson & Elkins L.L.P. (“Vinson & Elkins”), counsel to Parsley, or another nationally recognized law firm reasonably satisfactory to Parsley, dated as of the closing date, to the effect that the integrated mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Provided that the integrated mergers, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder (as defined in “The Mergers—Material U.S. Federal Income Tax Consequences”) of Parsley Class A common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of Parsley Class A common stock for shares of Pioneer common stock pursuant to the integrated mergers, except with respect to any cash received in lieu of fractional shares of Pioneer common stock.

Please see “The Mergers—Material U.S. Federal Income Tax Consequences” for a more detailed discussion of the U.S. federal income tax consequences of the integrated mergers to U.S. holders of Parsley Class A common stock. Each Parsley Class A stockholder is strongly urged to consult with a tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the integrated mergers to it.

 

Q:

What are the material U.S. federal income tax consequences of the mergers to Parsley LLC unitholders who receive shares of Pioneer common stock in the Opco merger?

 

A:

The exchange of Parsley LLC units for shares of Pioneer common stock, and cash in lieu of fractional shares of Pioneer common stock, if any, in the Opco merger is intended to be a taxable event for U.S. holders (as defined in the section titled “The Mergers—Material U.S. Federal Income Tax Consequences”) of Parsley LLC units for U.S. federal income tax purposes, even though Parsley LLC unitholders will receive no cash consideration (other than any cash received in lieu of fractional shares of Pioneer common stock) in the Opco merger. A U.S. holder of Parsley LLC units generally will recognize gain or loss in an amount equal to the difference between (i) the sum of (A) the fair market value of the Pioneer common stock received, (B) any cash received (including any cash in lieu of fractional shares of Pioneer common stock and any portion of the TRA termination payments (as defined herein) that the parties to the TRA amendment have agreed to treat as additional consideration payable to such holder for the Parsley LLC units exchanged in the Opco merger) and (C) such U.S. holder’s share of Parsley LLC’s nonrecourse liabilities immediately prior to the Opco merger and (ii) such U.S. holder’s adjusted tax basis in the Parsley LLC units exchanged therefor (which will include such U.S. holder’s share of Parsley LLC’s nonrecourse liabilities immediately prior to the Opco merger). Such gain or loss generally will be capital gain or loss. However, a portion of such gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Parsley LLC and its subsidiaries. For U.S. holders subject to the passive loss rules, passive losses that were not deductible by a U.S. holder of Parsley LLC units in prior taxable periods may become available to offset a portion of any gain recognized by such holder in connection with the Opco merger.

Please see “The Mergers—Material U.S. Federal Income Tax Consequences” for a more detailed discussion of the U.S. federal income tax consequences of the Opco merger to U.S. holders of Parsley LLC units. Each Parsley LLC unitholder is strongly urged to consult with a tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the Opco merger to it.

 

Q:

When do Pioneer and Parsley expect to complete the mergers?

 

A:

Pioneer and Parsley currently expect to complete the mergers in the first quarter of 2021. However, neither Pioneer nor Parsley can predict the actual date on which the mergers will be completed, nor can the parties ensure that the mergers will be completed, because completion is subject to conditions beyond the control of either company. Please see “The Mergers—Regulatory Approvals” and “The Merger Agreement—Conditions Precedent to the Mergers.”

 

x


Table of Contents
Q:

What happens if the mergers are not completed?

 

A:

If the Parsley merger proposal is not approved by the Parsley stockholders, the Pioneer stock issuance proposal is not approved by Pioneer stockholders or the mergers are not completed for any other reason, Parsley Class A stockholders and Parsley LLC unitholders will not receive any payment for shares of Parsley Class A common stock or Parsley LLC units they own. Instead, Parsley will remain an independent public company, Parsley Class A common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and Parsley will continue to file periodic reports with the SEC.

Under specified circumstances, Pioneer or Parsley may be required to reimburse the other party’s expenses or pay a termination fee upon or subsequent to termination of the merger agreement, as described in “The Merger Agreement—Termination Fees and Expense Reimbursement.”

 

Q:

Who can vote at, and what are the record dates of, each of the Pioneer special meeting and the Parsley special meeting?

 

A:

All Pioneer stockholders who hold shares of Pioneer common stock of record at the close of business on December 7, 2020, the record date for the Pioneer special meeting (the “Pioneer record date”), are entitled to receive notice of and to vote at the Pioneer special meeting.

All Parsley stockholders who hold shares of Parsley common stock of record at the close of business on December 7, 2020, the record date for the Parsley special meeting (the “Parsley record date”), are entitled to receive notice of and to vote at the Parsley special meeting.

 

Q:

How many votes may I cast?

 

A:

Each issued and outstanding share of Pioneer common stock entitles its holder of record to one vote on each matter to be considered at the Pioneer special meeting. The Pioneer stockholders of record on the Pioneer record date are the only Pioneer stockholders that are entitled to receive notice of, and to vote at, the Pioneer special meeting or any adjournments or postponements thereof.

Each issued and outstanding share of Parsley Class A common stock and each issued and outstanding share of Parsley Class B common stock entitles its holder of record to one vote on each matter to be considered at the Parsley special meeting, and the Parsley Class A common stock and Parsley Class B common stock will vote together as a single class. The Parsley stockholders of record on the Parsley record date are the only Parsley stockholders that are entitled to receive notice of, and to vote at, the Parsley special meeting or any adjournments or postponements thereof.

 

Q:

What constitutes a quorum at each of the Pioneer special meeting and the Parsley special meeting?

 

A:

In order for business to be conducted at the Pioneer and Parsley special meetings, a quorum must be present.

A quorum at the Pioneer special meeting requires the presence of the holders of a majority of the total issued and outstanding shares of Pioneer common stock entitled to vote, present virtually or represented by proxy, at the Pioneer special meeting. A Pioneer stockholder will be considered present at the virtual meeting by logging into the Pioneer special meeting website using his, her or its unique 16-digit control number or by appointing a proxy. If you submit a properly executed proxy card, or submit a proxy via the internet or by telephone, even if you do not vote for the proposal or vote to “abstain” in respect of the proposal, your shares of Pioneer common stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Pioneer special meeting. Because it is expected that the only matter to be voted on at the Pioneer special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on the Pioneer stock issuance proposal; therefore, if you do not provide voting instructions to your broker, bank or other nominee, your shares will not count towards determining whether a quorum is present and your shares will not be voted on the Pioneer stock issuance proposal.

 

xi


Table of Contents

A quorum at the Parsley special meeting requires the presence of the holders of a majority of the total issued and outstanding shares of Parsley common stock entitled to vote, present virtually or represented by proxy, at the Parsley special meeting. A Parsley stockholder will be considered present at the virtual meeting by logging into the Parsley special meeting website using his, her or its unique 16-digit control number or by appointing a proxy. If you submit a properly executed proxy card, or submit a proxy via the internet or by telephone, even if you do not vote for the proposal or vote to “abstain” in respect of the proposal, your shares of Parsley common stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Parsley special meeting. Because it is expected that all of the matters to be voted on at the Parsley special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your broker, bank or other nominee, your shares will not count towards determining whether a quorum is present and your shares will not be voted on the Parsley merger proposal or the Parsley compensation proposal.

 

Q:

What do I need to do now?

 

A:

After you have carefully read and considered the information contained in or incorporated by reference into this joint proxy statement/prospectus, please submit your proxy via the internet or by telephone in accordance with the instructions set forth on the applicable proxy card or voting instruction form you received, or complete, sign, date, and return the applicable proxy card or voting instruction form in the self-addressed, stamped envelope provided as soon as possible so that your shares will be represented and voted at the Pioneer special meeting or the Parsley special meeting, as applicable.

For additional information on voting procedures, please see “Pioneer Special Meeting” and “Parsley Special Meeting.”

 

Q:

How will my proxy be voted?

 

A:

If you submit your proxy via the internet, by telephone, or by completing, signing, dating, and returning the applicable proxy card or voting instruction form, your proxy will be voted in accordance with your instructions. If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy card will be voted in accordance with the recommendation of the Pioneer board or the Parsley board, as applicable.

For additional information on voting procedures, please see “Pioneer Special Meeting” and “Parsley Special Meeting.”

 

Q:

Who will count the votes?

 

A:

The votes at the Pioneer special meeting will be tabulated and certified by the inspector of elections appointed by the Pioneer board.

The votes at the Parsley special meeting will be tabulated and certified by the inspector of elections appointed by the Parsley board.

 

Q:

How do I submit questions for the Pioneer virtual special meeting?

 

A:

Stockholders attending the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast. However, stockholders will be able to submit any questions by the close of business on January 11, 2021 in advance of the Pioneer special meeting by visiting www.proxyvote.com.

 

xii


Table of Contents
Q:

Who do I contact if I am encountering difficulties attending the Pioneer special meeting online?

 

A:

If you encounter any difficulties during the check-in process or during the meeting, please call the VSM Shareholder Meeting Support Line at (844) 986-0822 or (303) 562-9302 (International), and a technician will be ready to assist you starting at 8:45 a.m. Central Time and until the meeting has finished. Please give yourself sufficient time to log-in and ensure you can hear the streaming audio before the meeting starts.

 

Q:

How do I submit questions for the Parsley virtual special meeting?

 

A:

Stockholders attending the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast. However, stockholders will be able to submit any questions by the close of business on January 11, 2021 in advance of the Parsley special meeting by visiting www.proxyvote.com.

 

Q:

Who do I contact if I am encountering difficulties attending the Parsley special meeting online?

 

A:

If you encounter any difficulties during the check-in process or during the meeting, please call the VSM Shareholder Meeting Support Line at (844) 986-0822 or (303) 562-9302 (International), and a technician will be ready to assist you starting at 8:45 a.m. Central Time and until the meeting has finished. Please give yourself sufficient time to log-in and ensure you can hear the streaming audio before the meeting starts.

 

Q:

What should I do if I receive more than one set of voting materials for the Pioneer special meeting or the Parsley special meeting?

 

A:

You may receive more than one set of voting materials for the Pioneer special meeting, the Parsley special meeting, or both, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction forms. For example, if you hold your shares of Pioneer common stock or your shares of Parsley common stock in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please submit each separate proxy or voting instruction form that you receive by following the instructions set forth in each separate proxy or voting instruction form. If you fail to submit each separate proxy or voting instruction form that you receive, not all of your shares will be voted.

 

Q:

What is the difference between holding shares of record and holding shares as a beneficial owner of shares of Pioneer common stock or Parsley common stock?

 

A:

If your shares of Pioneer common stock are registered directly in your name with Pioneer’s registrar and transfer agent, Continental Stock Transfer & Trust Company (“Continental”), or your shares of Parsley common stock are registered directly in your name with Parsley’s registrar and transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, to be the stockholder of record. If you are a stockholder of record, then this joint proxy statement/prospectus and your proxy card have been sent directly to you by Pioneer or Parsley, as applicable.

If your shares of Pioneer common stock or Parsley common stock are held through a bank, broker or other nominee, you are considered, with respect to those shares, the beneficial owner, and those shares are held in “street name” by your bank, broker or other nominee. In that case, this joint proxy statement/prospectus has been forwarded to you by your bank, broker or other nominee. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting, and you are also invited to attend the Pioneer special meeting or the Parsley special meeting, as applicable. The proxy materials you received include the 16-digit control number that you will need to vote online during the Pioneer special meeting or the Parsley special meeting, as applicable.

 

xiii


Table of Contents
Q:

If my shares of Pioneer common stock or Parsley common stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares for me?

 

A:

No. If your shares of Pioneer common stock or Parsley common stock are held in the name of a bank, broker or other nominee, you will receive separate instructions from your bank, broker or other nominee describing how to vote your shares. The availability of internet or telephonic voting will depend on the nominee’s voting process. Please check with your bank, broker or other nominee and follow the voting procedures provided by your bank, broker or other nominee on your voting instruction form.

You should instruct your bank, broker or other nominee how to vote your shares of Pioneer common stock or Parsley common stock, as applicable. Under the rules applicable to broker-dealers, your bank, broker or other nominee does not have discretionary authority to vote your shares on any of the proposals scheduled to be voted on at the Pioneer special meeting or the Parsley special meeting. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Pioneer and Parsley do not expect any broker non-votes at the Pioneer special meeting or the Parsley special meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas each of the proposals to be presented at the Pioneer special meeting and the Parsley special meeting are considered non-routine under NYSE rules. As a result, no broker will be permitted to vote your shares of Pioneer common stock or Parsley common stock at the applicable special meeting without receiving instructions. Failure to instruct your broker on how to vote your shares will have (i) no effect on the Pioneer stock issuance proposal, for Pioneer stockholders, and (ii) the same effect as a vote “against” the Parsley merger proposal and no effect on the Parsley compensation proposal, for Parsley stockholders.

For additional information on voting procedures, please see “Pioneer Special Meeting” and “Parsley Special Meeting.”

 

Q:

What do I do if I am a Pioneer stockholder and I want to revoke my proxy?

 

A:

Pioneer stockholders of record may revoke or change a previously delivered proxy at any time before the meeting by (i) delivering another proxy with a later date to Pioneer’s corporate secretary at Pioneer’s principal executive offices at 777 Hidden Ridge, Irving, Texas 75038 no later than 10:59 p.m. Central Time on January 11, 2021, (ii) voting by proxy again via the internet or by telephone, or (iii) delivering written notice of revocation of the proxy to Pioneer’s corporate secretary at Pioneer’s principal executive offices at 777 Hidden Ridge, Irving, Texas 75038 no later than 10:59 p.m. Central Time on January 11, 2021.

All Pioneer stockholders may also revoke their proxies by attending the Pioneer special meeting virtually, using his, her or its unique 16-digit control number and voting their shares online during the meeting. Note that attendance at the virtual Pioneer special meeting will not, in and of itself, revoke a valid proxy that was previously delivered unless you give written notice of revocation to the Pioneer corporate secretary before the proxy is exercised or unless you vote your shares online during the Pioneer special meeting.

If a Pioneer stockholder holds shares through a bank, broker or other nominee, such stockholder may change or revoke his, her or its voting instructions before the Pioneer special meeting by providing instructions again through the means specified on his, her or its voting instruction form (with most having the option to do so by internet, telephone or mail), which must be received before 10:59 p.m. Central Time on January 11, 2021.

For additional information, please see “Pioneer Special Meeting.”

 

xiv


Table of Contents
Q:

What do I do if I am a Parsley stockholder and I want to revoke my proxy?

 

A:

Parsley stockholders of record may revoke or change a previously delivered proxy at any time before the meeting by (i) delivering another proxy with a later date to Parsley’s corporate secretary at Parsley’s principal executive offices at 303 Colorado Street, Austin, Texas 78701 no later than 10:59 p.m. Central Time on January 11, 2021, (ii) voting by proxy again via the internet or by telephone, or (iii) delivering written notice of revocation of the proxy to Parsley’s corporate secretary at Parsley’s principal executive offices at 303 Colorado Street, Austin, Texas 78701 before the beginning of the Parsley special meeting no later than 10:59 p.m. Central Time on January 11, 2021.

All Parsley stockholders may also revoke their proxies by attending the Parsley special meeting virtually, using his, her or its unique 16-digit control number and voting their shares online during the meeting. Note that attendance at the virtual Parsley special meeting will not, in and of itself, revoke a valid proxy that was previously delivered unless you give written notice of revocation to the Parsley corporate secretary before the proxy is exercised or unless you vote your shares online during the Parsley special meeting.

If a Parsley stockholder holds shares through a bank, broker or other nominee, such stockholder may change or revoke his, her or its voting instructions before the Parsley special meeting by providing instructions again through the means specified on his, her or its voting instruction form (with most having the option to do so by internet, telephone or mail), which must be received before 10:59 p.m. Central Time on January 11, 2021.

For additional information, please see “Parsley Special Meeting.”

 

Q:

Are there any risks that I should consider as a Pioneer stockholder or Parsley stockholder in deciding how to vote?

 

A:

Yes. You should read and carefully consider the risks set forth in “Risk Factors.” You also should read and carefully consider the risk factors of Pioneer and Parsley contained in the documents that are incorporated by reference into this joint proxy statement/prospectus.

 

Q:    What

happens if I sell or otherwise transfer my shares of Pioneer common stock before the Pioneer special meeting?

 

A:

The Pioneer record date is prior to the date of the Pioneer special meeting. If you sell or otherwise transfer your shares of Pioneer common stock after the Pioneer record date but before the Pioneer special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares of Pioneer common stock, you will retain your right to vote such shares at the Pioneer special meeting but will otherwise transfer ownership of and the economic interest in your shares of Pioneer common stock.

 

Q:

What happens if I sell or otherwise transfer my shares of Parsley common stock before the Parsley special meeting?

 

A:

The Parsley record date is prior to the date of the Parsley special meeting. If you sell or otherwise transfer your shares of Parsley common stock after the Parsley record date but before the Parsley special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares of Parsley common stock, you will retain your right to vote such shares at the Parsley special meeting but will otherwise transfer ownership of and the economic interest in your shares of Parsley common stock.

 

xv


Table of Contents
Q:

What happens if I sell or otherwise transfer my shares of Parsley Class A common stock or Parsley LLC units before the completion of the mergers?

 

A:

Only Parsley Class A stockholders and Parsley LLC unitholders as of immediately prior to the effective time will become entitled to receive the merger consideration. If you sell your shares of Parsley Class A common stock or Parsley LLC units prior to the completion of the mergers, you will not be entitled to receive the merger consideration by virtue of the mergers.

 

Q:

Do any of the officers or directors of Parsley have interests in the mergers that may differ from or be in addition to my interests as a Parsley stockholder?

 

A:

Yes. In considering the recommendation of the Parsley board that Parsley stockholders vote to approve the Parsley merger proposal and the Parsley compensation proposal, Parsley stockholders should be aware that, aside from their interests as stockholders of Parsley, some of Parsley’s directors and executive officers have interests in the mergers that may be different from, or in addition to, the interests of Parsley stockholders generally. The Parsley board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the transactions contemplated therein, in approving the mergers, and in recommending the approval of the Parsley merger proposal and the Parsley compensation proposal.

For more information on these interests and quantification of certain of these interests, please see “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers.”

 

Q:

If I am a Pioneer stockholder and I oppose the Pioneer stock issuance proposal or if I am a Parsley stockholder and I oppose the Parsley merger proposal, but all such proposals are approved, what are my rights?

 

A:

Under Delaware law, Pioneer stockholders are not entitled to dissenters’ or appraisal rights in connection with the issuance of shares of Pioneer common stock as contemplated by the merger agreement. Pioneer stockholders may vote against the Pioneer stock issuance proposal if they do not favor such proposal.

Because shares of Parsley Class A common stock are listed on the NYSE and holders of eligible shares of Parsley Class A common stock are not required to receive consideration other than shares of Pioneer common stock, which are listed on the NYSE, and any cash received in lieu of fractional shares of Pioneer common stock in the mergers, Parsley Class A stockholders are not entitled to exercise dissenters’ or appraisal rights under Delaware law in connection with the mergers. However, Parsley Class B stockholders who do not vote in favor of the Parsley merger proposal will be entitled to exercise appraisal rights under the DGCL, solely with respect to their shares of Parsley Class B common stock (and not, for the avoidance of doubt, with respect to any shares of Parsley Class A common stock or Parsley LLC units held by them), in connection with the mergers if they take certain actions and meet certain conditions set forth in Section 262 of the DGCL (“Section 262”). Failure to comply with Section 262 may result in a Parsley Class B stockholder waiving, or being unable to exercise, appraisal rights. Parsley stockholders may vote against the Parsley merger proposal if they do not favor the mergers.

For more information regarding appraisal rights, please see “The Mergers—Appraisal Rights or Dissenters’ Rights”. In addition, a copy of Section 262 is attached as Annex F to this joint proxy statement/prospectus.

 

Q:

Where can I find voting results of the Pioneer special meeting and the Parsley special meeting?

 

A:

Pioneer and Parsley intend to announce their respective preliminary voting results at each of the Pioneer and Parsley special meetings and disclose their respective final voting results in Current Reports on Form 8-K that will be filed with the SEC following the Pioneer and Parsley special meetings. All reports that Pioneer and Parsley file with the SEC are publicly available when filed. Please see “Where You Can Find More Information.”

 

xvi


Table of Contents
Q:

How can I find more information about Pioneer and Parsley?

 

A:

You can find more information about Pioneer and Parsley from various sources described in “Where You Can Find More Information.”

 

Q:

Who can answer any questions I may have about the Pioneer special meeting, the Parsley special meeting or the transactions contemplated by the merger agreement, including the mergers and the stock issuance?

 

A:

If you have any questions about the Pioneer special meeting, the Parsley special meeting, the mergers, the Pioneer stock issuance proposal, the Parsley merger proposal, the Parsley compensation proposal or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus or documents incorporated by reference herein, the applicable enclosed proxy card or voting instructions, you should contact:

 

For Pioneer stockholders:

 

Pioneer Natural Resources Company

Attn: Investor Relations

777 Hidden Ridge

Irving, Texas 75038

(972) 969-4019

 

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call Collect: (212) 269-5550

All Others Call Toll-Free: (800) 859-8509

Email: pxd@dfking.com

  

For Parsley stockholders:

 

Parsley Energy, Inc.

Attn: Investor Relations

303 Colorado Street

Austin, Texas 78701

(737) 704-2300

 

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Banks and Brokers Call Collect: (212) 929-5500

All Others Call Toll-Free: (800) 322-2885

Email: proxy@mackenziepartners.com

 

xvii


Table of Contents

SUMMARY

The following summary highlights selected information described in more detail elsewhere in this joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus and may not contain all the information that may be important to you. To understand the mergers and the matters being voted on by Pioneer and Parsley stockholders at their respective special meetings more fully, and to obtain a more complete description of the legal terms of the merger agreement and the agreements related thereto, you should carefully read this entire document, including the annexes and the documents incorporated by reference herein and to which Pioneer and Parsley refer you. Each item in this summary includes a page reference directing you to a more complete description of that topic. See “Where You Can Find More Information.”

The Parties

Pioneer Natural Resources Company

Pioneer is a large independent oil and gas exploration and production company that explores for, develops and produces oil, natural gas liquids (“NGL”) and gas in the Permian Basin in West Texas. Pioneer is a Delaware corporation, and its common stock has been listed and traded on the NYSE under the ticker symbol “PXD” since its formation in 1997. Pioneer’s principal executive office is located at 777 Hidden Ridge, Irving, Texas, 75038 and its telephone number is (972) 444-9001. Pioneer also maintains an office in Midland, Texas and field offices in its area of operation.

Additional information about Pioneer and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 211.

Pearl First Merger Sub Inc.

Merger Sub Inc., a direct wholly-owned subsidiary of Pioneer, is a Delaware corporation formed on October 16, 2020, for the purpose of effecting the first merger. Under the merger agreement, Merger Sub Inc. will merge with and into Parsley, with Parsley surviving the merger as the surviving corporation and a direct wholly-owned subsidiary of Pioneer. Merger Sub Inc. has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the mergers.

Pearl Opco Merger Sub LLC

Opco Merger Sub, a direct wholly-owned subsidiary of Pioneer, is a Delaware limited liability company formed on October 16, 2020, for the purpose of effecting the Opco merger. Under the merger agreement, Opco Merger Sub will merge with and into Parsley LLC, with Parsley LLC surviving the merger as the surviving company and a direct and indirect wholly-owned subsidiary of Pioneer. Opco Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the mergers.

Pearl Second Merger Sub LLC

Merger Sub LLC, a direct wholly-owned subsidiary of Pioneer, is a Delaware limited liability company formed on October 16, 2020, for the purpose of effecting the subsequent merger. Under the merger agreement, following the consummation of the first merger and the Opco merger, Parsley will merge with and into Merger



 

1


Table of Contents

Sub LLC, with Merger Sub LLC surviving the merger as the surviving company and a direct wholly-owned subsidiary of Pioneer. Merger Sub LLC has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the mergers.

Parsley Energy, Inc.

Parsley is an independent oil and natural gas company focused on the acquisition, development, exploration and production of unconventional oil and natural gas properties in the Permian Basin. The Permian Basin is located in west Texas and southeastern New Mexico and is characterized by high oil and liquids-rich natural gas content, multiple vertical and horizontal target horizons, extensive production histories, long-lived reserves and historically high drilling success rates. Parsley’s properties are located in two sub areas of the Permian Basin, the Midland and Delaware Basins, where, given the associated returns, it focuses predominantly on horizontal development drilling. Shares of Parsley Class A common stock are traded on the NYSE under the symbol “PE”. The principal executive offices of Parsley are located at 303 Colorado Street, Austin, Texas 78701 and its telephone number is (737) 704-2300.

Additional information about Parsley and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 211.

Parsley Energy, LLC

Parsley LLC is a Delaware limited liability company and majority-owned subsidiary of Parsley. Parsley’s sole material asset as of November 30, 2020 consisted of 386,803,883 Parsley LLC units and Parsley, as the sole managing member of Parsley LLC, holds a controlling equity interest in Parsley LLC and manages the business and affairs of Parsley LLC and its subsidiaries.

The Mergers (See page 56)

Upon satisfaction or waiver of the conditions to closing in the merger agreement, at the effective time, Merger Sub Inc. will merge with and into Parsley, with Parsley surviving the merger as the surviving corporation and a direct wholly-owned subsidiary of Pioneer. Simultaneously with the first merger, Opco Merger Sub will merge with and into Parsley LLC, with Parsley LLC surviving the merger as the surviving company and a direct and indirect wholly-owned subsidiary of Pioneer. Immediately following the effective time, Parsley, as the surviving corporation of the first merger, will merge with and into Merger Sub LLC, with Merger Sub LLC surviving the merger as a direct wholly-owned subsidiary of Pioneer. At the effective time, each eligible share of Parsley Class A common stock and each eligible Parsley LLC unit will be converted automatically into the right to receive 0.1252 shares of Pioneer common stock, with cash paid in lieu of the issuance of any fractional shares of Pioneer common stock, and each issued and outstanding share of Parsley Class B common stock will automatically be cancelled for no additional consideration. In addition, Parsley and Pioneer will take, or cause to be taken, all actions necessary so that at the effective time, Parsley’s issued and outstanding time-based restricted stock unit awards, performance-based restricted stock unit awards, time-based restricted stock awards and performance-based restricted stock awards will be treated as described in “The Merger Agreement—Treatment of Parsley Equity-Based Awards.”

Pioneer Special Meeting (See page 41)

The Pioneer special meeting will be a virtual meeting conducted exclusively via live webcast starting at 9:00 a.m. Central Time (with log-in beginning at 8:45 a.m. Central Time) on January 12, 2021. Pioneer stockholders will be able to attend the Pioneer special meeting online and vote shares electronically at the



 

2


Table of Contents

meeting by going to www.virtualshareholdermeeting.com/PXD21SM and entering the 16-digit control number included on the proxy card or voting instruction form you received. Because the Pioneer special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person. The Pioneer special meeting is being held to consider and vote on a proposal to approve the issuance of shares of Pioneer common stock in the mergers and other shares of Pioneer common stock reserved for issuance in connection with the mergers, in each case pursuant to the terms of the merger agreement, which is referred to as the Pioneer stock issuance proposal.

The record date for the determination of Pioneer stockholders entitled to notice of and to vote at the Pioneer special meeting is the close of business on December 7, 2020. Only Pioneer stockholders who held Pioneer common stock of record on the Pioneer record date are entitled to vote at the Pioneer special meeting or any adjournments or postponements of the Pioneer special meeting. Each issued and outstanding share of Pioneer common stock as of the record date entitles its holder of record to one vote on each matter to be considered at the Pioneer special meeting.

In order for business to be conducted at the Pioneer special meeting, a quorum must be present. A quorum at the Pioneer special meeting requires the presence of the holders of a majority of the total issued and outstanding shares of Pioneer common stock entitled to vote, present virtually or represented by proxy, at the Pioneer special meeting. Abstentions will be counted for purposes of determining whether there is a quorum at the Pioneer special meeting. Because it is expected that the only matter to be voted on at the Pioneer special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on the Pioneer stock issuance proposal; therefore, if you do not provide voting instructions to your broker, bank or other nominee, your shares will not count towards determining whether a quorum is present and your shares will not be voted on the Pioneer stock issuance proposal. If a quorum is not present or represented or if there are not sufficient votes for the approval of the Pioneer stock issuance proposal, Pioneer expects that the Pioneer special meeting will be adjourned by the chairman of the Pioneer special meeting to solicit additional proxies. At any subsequent reconvening of the Pioneer special meeting at which a quorum shall be present or represented, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Pioneer special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

Approval of the Pioneer stock issuance proposal requires the affirmative vote of holders of a majority of the shares of Pioneer common stock present virtually during the Pioneer special meeting or represented by proxy at the Pioneer special meeting and entitled to vote thereon. Accordingly, a Pioneer stockholder’s abstention from voting will have the same effect as a vote “against” the Pioneer stock issuance proposal, while a broker non-vote or the failure of a Pioneer stockholder to attend the Pioneer special meeting, virtually or by proxy, and vote will have no effect on the outcome of the Pioneer stock issuance proposal.

As of November 30, 2020, there were 164,418,493 shares of Pioneer common stock issued and outstanding. As of November 30, 2020, Pioneer directors and executive officers, and their affiliates, as a group, beneficially owned and were entitled to vote 1,044,372 shares of Pioneer common stock, or approximately 0.6% of the voting power of the issued and outstanding shares of Pioneer common stock.

The Pioneer board unanimously recommends that the Pioneer stockholders vote “FOR” the Pioneer stock issuance proposal.

For additional information on the recommendation of the Pioneer board, please see “The Mergers—Recommendation of the Pioneer Board and Reasons for the Mergers.”



 

3


Table of Contents

Parsley Special Meeting (See page 47)

The Parsley special meeting will be a virtual meeting conducted exclusively via live webcast starting at 9:00 a.m. Central Time (with log-in beginning at 8:45 a.m. Central Time) on January 12, 2021. Parsley stockholders will be able to attend the Parsley special meeting online and vote shares electronically at the meeting by going to www.virtualshareholdermeeting.com/PE21SM and entering the 16-digit control number included on the proxy card or voting instruction form you received. Because the Parsley special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person. The Parsley special meeting is being held to consider and vote on the following proposals:

 

   

Parsley Merger Proposal: To approve and adopt the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and the transactions contemplated thereby (including the integrated mergers), pursuant to which, among other things, upon consummation of the mergers (i) each eligible share of Parsley Class A common stock will be converted automatically into the right to receive a number of shares of Pioneer common stock equal to the exchange ratio, with cash paid in lieu of any fractional shares of Pioneer common stock, if any, (ii) each eligible Parsley LLC unit will be converted into the right to receive a number of shares of Pioneer common stock equal to the exchange ratio, with cash paid in lieu of any fractional shares of Pioneer common stock, if any, and (iii) each share of Parsley Class B common stock will automatically be cancelled for no additional consideration therefor.

 

   

Parsley Compensation Proposal: To approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Parsley’s NEOs that is based on or otherwise relates to the mergers, discussed in the section titled “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers.”

The record date for the determination of the Parsley stockholders entitled to receive notice of, and to vote at, the Parsley special meeting is the close of business on December 7, 2020. Only Parsley stockholders who held Parsley common stock of record on the Parsley record date are entitled to vote at the Parsley special meeting or any adjournments or postponements of the Parsley special meeting. Each issued and outstanding share of Parsley common stock entitles its holder of record to one vote on each matter to be considered at the Parsley special meeting. Parsley stockholders are entitled to vote on each proposal presented.

In order for business to be conducted at the Parsley special meeting, a quorum must be present. A quorum at the Parsley special meeting requires the presence of the holders of a majority of the total issued and outstanding shares of Parsley common stock entitled to vote, present virtually or represented by proxy, at the Parsley special meeting. Abstentions will be counted for purposes of determining whether there is a quorum at the Parsley special meeting. Shares represented by broker non-votes will not be considered present and entitled to vote at the Parsley special meeting for the purpose of determining the presence of a quorum. Because it is expected that all of the matters to be voted on at the Parsley special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your broker, bank or other nominee, your shares will not count towards determining whether a quorum is present and your shares will not be voted at the Parsley special meeting. If a quorum is not present or represented or if there are not sufficient votes for the approval of the Parsley merger proposal, Parsley expects that the Parsley special meeting will be adjourned by the chairman of the Parsley special meeting to solicit additional proxies. At any subsequent reconvening of the Parsley special meeting at which a quorum shall be present or represented, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Parsley special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

Approval of the Parsley merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Parsley common stock entitled to vote on the proposal. Accordingly, a Parsley



 

4


Table of Contents

stockholder’s abstention from voting, a broker non-vote or the failure of a Parsley stockholder to attend the Parsley special meeting, virtually or by proxy, and vote will have the same effect as a vote “against” the Parsley merger proposal.

Approval of the Parsley compensation proposal requires the affirmative vote of the holders of a majority of the shares of Parsley common stock present virtually during the Parsley special meeting or represented by proxy at the Parsley special meeting and entitled to vote on thereon. Accordingly, a Parsley stockholder’s abstention from voting will have the same effect as a vote “against” the Parsley compensation proposal, while a broker non-vote or the failure of a Parsley stockholder to attend the Parsley special meeting and vote will have no effect on the outcome of the Parsley compensation proposal.

As of November 30, 2020, there were 386,803,883 shares of Parsley Class A common stock and 26,062,891 shares of Parsley Class B common stock issued and outstanding, held by 58 and 23 holders of record, respectively. Each issued and outstanding share of Parsley common stock as of the record date entitles its holder of record to one vote on each matter to be considered at the Parsley special meeting. Parsley stockholders are entitled to vote on each proposal presented.

The Parsley board unanimously recommends that the Parsley stockholders vote “FOR” the Parsley merger proposal and “FOR” the Parsley compensation proposal.

For additional information on the recommendation of the Parsley board, please see “The Mergers—Recommendation of the Parsley Board and Reasons for the Mergers.”

Voting and Support Agreement with Quantum

In connection with the execution of the merger agreement, Q-Jagged Peak Energy Investment Partners, LLC (“Quantum”) entered into a voting and support agreement with Pioneer (the “Quantum voting agreement”) with respect to 65,412,650 shares of Parsley Class A common stock beneficially owned by Quantum, and any additional shares of Parsley Class A common stock, shares of Parsley Class B common stock or Parsley LLC units of which Quantum acquires voting power in between the date of the Quantum voting agreement and the earlier of the effective time and the termination of the Quantum voting agreement (collectively, the “Quantum voting agreement shares”), wherein Quantum agreed to vote all of the Quantum voting agreement shares (i) in favor of the adoption of the merger agreement and the approval of any other matters necessary for consummation of the transactions contemplated by the merger agreement, including the mergers, subject to certain exceptions, and (ii) against specified actions that could reasonably be expected to impede, interfere with, delay, discourage, postpone or adversely affect the mergers or any other transaction contemplated by the merger agreement, including specified actions that contemplate alternative transactions. Under the Quantum voting agreement, Quantum has granted to Pioneer an irrevocable proxy to vote the Quantum voting agreement shares as provided above. Subject to certain exceptions, the Quantum voting agreement restricts Quantum from transferring Parsley common stock until the earlier of the termination of the Quantum voting agreement and the effective time. As of November 30, 2020, Quantum beneficially owned approximately 15.8% of the combined voting power of the issued and outstanding shares of Parsley common stock. For more information, please see the section titled “Parsley Special Meeting—Voting and Support Agreement with Quantum.”

Voting and Support Agreement with Bryan Sheffield

In connection with the execution of the merger agreement, Bryan Sheffield, Parsley’s Executive Chairman and Chairman of the Parsley board, entered into a voting and support agreement with Pioneer (the “Sheffield voting agreement” and, together with the Quantum voting agreement, the “voting agreements”) with respect to all shares of Parsley Class A common stock, shares of Parsley Class B common stock and Parsley LLC units



 

5


Table of Contents

beneficially owned by Mr. Sheffield, and any additional shares of Parsley Class A common stock, shares of Parsley Class B common stock and Parsley LLC units of which Mr. Sheffield acquires voting power in between the date of the Sheffield voting agreement and the earlier of the effective time and the termination of the Sheffield voting agreement (collectively, the “Sheffield voting agreement shares”), wherein Mr. Sheffield agreed to vote all of the Sheffield voting agreement shares (i) in favor of the adoption of the merger agreement and the approval of any other matters necessary for consummation of the transactions contemplated by the merger agreement, including the mergers, subject to certain exceptions, and (ii) against specified actions that could reasonably be expected to impede, interfere with, delay, discourage, postpone or adversely affect the mergers or any other transaction contemplated by the merger agreement, including specified actions that contemplate alternative transactions. Under the Sheffield voting agreement, Mr. Sheffield has granted to Pioneer an irrevocable proxy to vote the Sheffield voting agreement shares as provided above. Subject to certain exceptions, the Sheffield voting agreement restricts Mr. Sheffield from transferring Parsley common stock or Parsley LLC units until the earlier of the termination of the Sheffield voting agreement and the effective time. As of November 30, 2020, Mr. Sheffield beneficially owned approximately 7.6% of the combined voting power of the issued and outstanding shares of Parsley common stock. In addition, the Sheffield voting agreement contains a lock-up agreement providing that Mr. Sheffield may not, without Pioneer’s prior written consent, subject to limited exceptions, offer, sell, transfer or otherwise dispose of more than 15% of the shares of Pioneer common stock issued to Mr. Sheffield pursuant to the terms of the merger agreement for a period of 90 days following the closing date, or more than 30% of such shares for a period of 180 days following the closing date. For more information, please see the section titled “Parsley Special Meeting—Voting and Support Agreement with Bryan Sheffield.”

Opinions of Pioneer’s Financial Advisors (See page 93 and Annexes B and C)

Goldman Sachs & Co. LLC (See page 93 and Annex B)

Pioneer engaged Goldman Sachs & Co. LLC (“Goldman Sachs”) to act as Pioneer’s financial advisor for purposes of the proposed mergers. At a meeting of the Pioneer board, Goldman Sachs rendered to the Pioneer board its oral opinion, subsequently confirmed by delivery of a written opinion, dated October 20, 2020, to the Pioneer board, to the effect that, as of the date of Goldman Sachs’ written opinion and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to Pioneer.

The full text of the written opinion of Goldman Sachs, dated October 20, 2020, which sets forth the assumptions made, procedures followed, matters considered, qualifications and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex B. The summary of Goldman Sachs’ opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Pioneer stockholders are encouraged to read the Goldman Sachs opinion carefully in its entirety. Goldman Sachs’ advisory services and opinion were provided for the information and assistance of the Pioneer board in connection with its consideration of the mergers and the opinion does not constitute a recommendation as to how any Pioneer stockholder should vote with respect to the Pioneer stock issuance or any other matter.

For more information, see the section titled “The Mergers—Opinions of Pioneer’s Financial Advisors—Opinion of Goldman Sachs & Co. LLC” beginning on page 93 of this joint proxy statement/prospectus and the full text of the written opinion of Goldman Sachs attached as Annex B to this joint proxy statement/prospectus.

Morgan Stanley & Co. LLC (See page 102 and Annex C)

Pioneer engaged Morgan Stanley & Co. LLC (“Morgan Stanley”) to act as Pioneer’s financial advisor for purposes of the proposed mergers. Morgan Stanley delivered its oral opinion to the Pioneer board on October 20,



 

6


Table of Contents

2020, which opinion was subsequently confirmed in a written opinion dated October 20, 2020, that, as of the date of such opinion, and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to Pioneer.

The full text of Morgan Stanley’s written opinion, which describes, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken, is attached as Annex C to this joint proxy statement/prospectus and is incorporated by reference in its entirety. The summary of Morgan Stanley’s opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. Pioneer stockholders are encouraged to read the Morgan Stanley opinion carefully in its entirety. Morgan Stanley’s opinion was directed to the Pioneer board, in its capacity as such, and addressed only the fairness from a financial point of view to Pioneer of the exchange ratio pursuant to the merger agreement as of the date of such opinion. Morgan Stanley’s opinion did not address any other aspects or implications of the mergers. Morgan Stanley’s opinion did not in any manner address the price at which the Pioneer common stock would trade following the consummation of the mergers or at any time, and Morgan Stanley expressed no opinion or recommendation to any holder of shares of Pioneer common stock or Parsley common stock as to how such holder should vote at the Pioneer special meeting or the Parsley special meeting, respectively, or whether to take any other action with respect to the mergers.

For more information, see the section titled “The Mergers—Opinions of Pioneer’s Financial Advisors—Opinion of Morgan Stanley & Co. LLC” beginning on page 102 of this joint proxy statement/prospectus and the full text of the written opinion of Morgan Stanley attached as Annex C to this joint proxy statement/prospectus.

Opinions of Parsley’s Financial Advisors (See page 114 and Annexes D and E)

Credit Suisse Securities (USA) LLC (See page 114 and Annex D)

Parsley retained Credit Suisse Securities (USA) LLC (“Credit Suisse”) as a financial advisor to the Parsley board in connection with the proposed mergers. At a meeting of the Parsley board on October 20, 2020, Credit Suisse rendered its oral opinion to the Parsley board as to, as of October 20, 2020, the fairness, from a financial point of view, to the Parsley Class A stockholders of the exchange ratio to be received by the holders of shares of Parsley Class A common stock with respect to their shares of Parsley Class A common stock in the first merger and the fairness, from a financial point of view, to the Parsley Class B stockholders of the exchange ratio to be received by the holders of shares of Parsley Class B common stock with respect to their Parsley LLC stapled units in the first merger and the Opco merger pursuant to the merger agreement. Credit Suisse subsequently confirmed this oral opinion by delivering its written opinion addressed to the Parsley board, dated October 20, 2020.

Credit Suisse’s opinion was directed to the Parsley board (in its capacity as such), and only addressed the fairness, from a financial point of view, to the Parsley Class A stockholders of the exchange ratio to be received by the Parsley Class A stockholders with respect to their shares of Parsley Class A common stock in the first merger and the fairness, from a financial point of view, to the Parsley Class B stockholders of the exchange ratio to be received by the holders of shares of Parsley Class B common stock with respect to their Parsley LLC stapled units in the first merger and the Opco merger pursuant to the merger agreement, and did not address any other aspect or implication (financial or otherwise) of the mergers. The summary of Credit Suisse’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex D to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its



 

7


Table of Contents

opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and they do not constitute, advice or a recommendation to any stockholder as to how such holder should vote or act on any matter relating to the mergers.

For further information, please see “The Mergers—Opinions of Parsley’s Financial Advisors—Opinion of Credit Suisse Securities (USA) LLC” beginning on page 114 and the full text of the written opinion of Credit Suisse attached as Annex D of this joint proxy statement/prospectus.

Wells Fargo Securities, LLC (See page 123 and Annex E)

Parsley retained Wells Fargo Securities, LLC (“Wells Fargo Securities”) as a financial advisor to the Parsley board in connection with the proposed mergers. At a meeting of the Parsley board on October 20, 2020, Wells Fargo Securities rendered its oral opinion to the Parsley board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, the exchange ratio in the proposed mergers was fair, from a financial point of view, to the Parsley Class A stockholders and holders of Parsley LLC stapled units. Wells Fargo Securities subsequently confirmed this oral opinion by delivering its written opinion to the Parsley board, dated October 20, 2020.

The full text of the written opinion of Wells Fargo Securities dated October 20, 2020, which sets forth the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, is attached as Annex E to this joint proxy statement/prospectus and is incorporated herein by reference. Parsley’s stockholders are urged to read the opinion in its entirety. Wells Fargo Securities’ written opinion was addressed to the Parsley board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed mergers, was directed only to the fairness, from a financial point of view, of the exchange ratio in the proposed mergers to the Parsley Class A stockholders and holders of Parsley LLC stapled units and did not address any other aspect of the proposed mergers. The opinion does not constitute a recommendation to any Parsley stockholder as to how such stockholder should vote with respect to the proposed mergers or any other matter.

For further information, please see “The Mergers—Opinions of Parsley’s Financial Advisors—Opinion of Wells Fargo Securities, LLC” beginning on page 123 and the full text of the written opinion of Wells Fargo Securities attached as Annex E of this joint proxy statement/prospectus.

Interests of Certain Parsley Directors and Executive Officers in the Mergers (See page 130)

In considering the recommendation of the Parsley board that Parsley stockholders vote to approve the Parsley merger proposal and the Parsley compensation proposal, Parsley stockholders should be aware that, aside from their interests as stockholders of Parsley, Parsley’s directors and executive officers have interests in the mergers that may be different from, or in addition to, the interests of Parsley stockholders generally. These interests are described in more detail in the section titled “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers” beginning on page 130. The Parsley board was aware of and considered these potential interests, among other matters, in evaluating and negotiating the merger agreement and the transactions contemplated therein, in approving the mergers and in recommending the approval of the Parsley merger proposal and the Parsley compensation proposal. See “The Mergers—Background of the Mergers” and “The Mergers—Recommendation of the Parsley Board and Reasons for the Mergers.” Parsley stockholders should take these interests into account in deciding whether to vote “FOR” the Parsley merger proposal and the Parsley compensation proposal. These interests are described in more detail below, and certain of them are quantified in the narrative and the tables below.



 

8


Table of Contents

Board of Directors and Management of Pioneer Following Completion of the Mergers (See page 145)

Upon completion of the mergers, the current directors and executive officers of Pioneer are expected to continue in their current positions, other than for changes previously announced by Pioneer or as may be publicly announced by Pioneer in the future in the normal course.

Additionally, pursuant to the merger agreement, Pioneer and Parsley have agreed that the Pioneer board will be expanded by two members as of the effective time and Matt Gallagher and A.R. Alameddine will be appointed as directors of the Pioneer board. If either Mr. Gallagher and/or Mr. Alameddine is unwilling or unable to serve as a member of the Pioneer board at the effective time, then another member or members of the Parsley board that is determined by the Pioneer board in good faith to be independent with respect to his or her service on the Pioneer board and is mutually agreed between Pioneer and Parsley will instead be appointed to fill such vacancy or vacancies on the Pioneer board in lieu of Mr. Gallagher and/or Mr. Alameddine, as applicable. Any remuneration to be paid to these directors will be consistent with Pioneer’s remuneration policy for its directors. Pioneer has also agreed to take all action necessary to nominate the Parsley director designees for election to the Pioneer board in the proxy statement relating to the first annual meeting of Pioneer stockholders following the closing of the mergers. In addition, the Pioneer board (or a committee thereof) will appoint each Parsley director designee to a committee of the Pioneer board within 90 days following the closing date, in a manner consistent with its ordinary policies and practices. For additional information, please see “The MergersBoard of Directors and Management of Pioneer Following Completion of the Mergers.

Appraisal Rights or Dissenters’ Rights (See page 152)

Under Delaware law, no appraisal rights or dissenters’ rights will be available with respect to the stock issuance for Pioneer stockholders or with respect to the mergers for Parsley Class A stockholders. It is anticipated that Pioneer common stock will continue to be traded on the NYSE during the pendency of and following the effectiveness of the mergers, and Pioneer’s corporate status will not change because the mergers are being consummated between various subsidiaries of Pioneer, on the one hand, and Parsley or Parsley LLC, on the other hand.

However, Parsley Class B stockholders who do not vote in favor of the Parsley merger proposal will be entitled to exercise appraisal rights under Section 262, solely with respect to their shares of Parsley Class B common stock (and not, for the avoidance of doubt, with respect to any shares of Parsley Class A common stock or Parsley LLC units held by them), in connection with the mergers if they take certain actions and meet certain conditions set forth in Section 262. Failure to comply with Section 262 may result in a Parsley Class B stockholder waiving, or being unable to exercise, appraisal rights.

For more information regarding appraisal rights, please see “The Mergers—Appraisal Rights or Dissenters’ Rights” beginning on page 152 of this joint proxy statement/prospectus and the full text of Section 262, attached as Annex F to this joint proxy statement/prospectus.

Material U.S. Federal Income Tax Consequences (See page 145)

Assuming that the integrated mergers are completed as currently contemplated, Pioneer and Parsley intend for the integrated mergers, taken together, to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Parsley’s obligation to complete the mergers that it receive an opinion from Vinson & Elkins, counsel to Parsley, or another nationally recognized law firm reasonably satisfactory to Parsley, dated as of the closing date, to the effect that the integrated mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Provided that the integrated mergers, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder (as



 

9


Table of Contents

defined in “The Mergers—Material U.S. Federal Income Tax Consequences”) of Parsley Class A common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of Parsley Class A common stock for shares of Pioneer common stock pursuant to the integrated mergers, except with respect to any cash received in lieu of fractional shares of Pioneer common stock.

The exchange of Parsley LLC units for shares of Pioneer common stock (and cash in lieu of fractional shares of Pioneer common stock, if any) in the Opco merger is intended to be a taxable event for U.S. holders (as defined in the section titled “The Mergers—Material U.S. Federal Income Tax Consequences”) of Parsley LLC units for U.S. federal income tax purposes, even though Parsley LLC unitholders will receive no cash consideration (other than cash received in lieu of fractional shares of Pioneer common stock) in the Opco merger. A U.S. holder of Parsley LLC units generally will recognize gain or loss in an amount equal to the difference between (i) the sum of (A) the fair market value of the Pioneer common stock received, (B) any cash received (including any cash in lieu of fractional shares of Pioneer common stock and any portion of the TRA termination payments that the parties to the TRA amendment have agreed to treat as additional consideration payable to such holder for the Parsley LLC units exchanged in the Opco merger) and (C) such U.S. holder’s share of Parsley LLC’s nonrecourse liabilities immediately prior to the Opco merger and (ii) such U.S. holder’s adjusted tax basis in the Parsley LLC units exchanged therefor (which will include such U.S. holder’s share of Parsley LLC’s nonrecourse liabilities immediately prior to the Opco merger). Such gain or loss generally will be capital gain or loss. However, a portion of such gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Parsley LLC and its subsidiaries. For U.S. holders subject to the passive loss rules, passive losses that were not deductible by a U.S. holder of Parsley LLC units in prior taxable periods may become available to offset a portion of any gain recognized by such holder in connection with the Opco merger.

Please see “The Mergers—Material U.S. Federal Income Tax Consequences” for a more detailed discussion of the U.S. federal income tax consequences of the integrated mergers to U.S. holders of Parsley Class A common stock and the U.S. federal income tax consequences of the Opco merger to U.S. holders of Parsley LLC units. Each Parsley Class A stockholder and Parsley LLC unitholder is strongly urged to consult with a tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the mergers to it.

Accounting Treatment of the Mergers (See page 150)

Pioneer prepares its financial statements in accordance with GAAP. The mergers will be accounted for as a business combination, using the acquisition method of accounting with Pioneer being considered the acquirer of Parsley for accounting purposes. This means that Pioneer will record all assets acquired and liabilities assumed from Parsley at their acquisition date fair values at the closing date of the mergers.

Regulatory Approvals (See page 150)

Antitrust Clearance

The completion of the mergers is subject to antitrust review in the United States. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules promulgated thereunder, the mergers cannot be completed until the parties to the merger agreement have given notification and furnished information to the Federal Trade Commission (the “FTC”) and the United States Department of Justice (the “DOJ”), and until the applicable waiting period has expired or has been terminated.

On November 12, 2020, Pioneer and Parsley received notice of early termination of the applicable waiting period under the HSR Act.



 

10


Table of Contents

At any time before or after consummation of the mergers, notwithstanding the early termination of the applicable waiting period under the HSR Act, the FTC, the DOJ or any state could take such action under antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the mergers or seeking the divestiture of substantial assets of Pioneer or Parsley or their respective subsidiaries. Private parties may also seek to take legal action under antitrust laws under certain circumstances.

Securities and Exchange Commission

In connection with the Pioneer stock issuance proposal, Pioneer has filed a registration statement on Form S-4 with the SEC under the Securities Act, of which this joint proxy statement/prospectus forms a part, pursuant to which the issuance of shares of Pioneer common stock issuable upon the effective time will be registered with the SEC.

New York Stock Exchange

In addition, the completion of the mergers is subject to approval for listing of the shares of Pioneer common stock to be issued in the mergers and reserved for issuance in connection with the mergers on the NYSE, subject to official notice of issuance.

Treatment of Parsley Equity-Based Awards (See page 158)

The merger agreement provides for the treatment set forth below with respect to the awards held by Parsley’s non-employee directors, executive officers and other employees at the effective time:

Parsley Time-Based Restricted Stock Unit Awards: Each vested Parsley time-based restricted stock unit award (including any Parsley time-based restricted stock unit award that vests by its terms as a result of the consummation of the mergers) that is issued and outstanding as of immediately prior to the effective time will, at the effective time, be cancelled and converted into the right to receive a number of shares of Pioneer common stock (to be issued within 30 days following the closing date in accordance with the terms of the applicable restricted stock unit award agreement), rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio. Any Parsley time-based restricted stock unit award held by a non-employee member of the Parsley board will become fully vested as a result of the consummation of the mergers and will be treated as a vested Parsley time-based restricted stock unit award entitled to the foregoing treatment. Each unvested Parsley time-based restricted stock unit award (excluding any Parsley time-based restricted stock unit award that vests by its terms as a result of the consummation of the mergers) that is issued and outstanding as of immediately prior to the effective time will, at the effective time, be converted, on the same terms and conditions (including time-based vesting conditions) as were applicable to such award as of immediately prior to the effective time, into the right to receive a time-based award covering a number of shares of Pioneer common stock, rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio.

Parsley Time-Based Restricted Stock Awards: Each unvested Parsley time-based restricted stock award (excluding any Parsley time-based restricted stock award that vests by its terms as a result of the consummation of the mergers) that is issued and outstanding as of immediately prior to the effective time, at the effective time, will be converted, on the same terms and conditions (including time-based vesting conditions) as were applicable to such time-based restricted stock award as of immediately prior to the effective time, into the right to receive a time-based restricted stock award of Pioneer covering a number of shares of Pioneer common stock, rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio.



 

11


Table of Contents

Parsley Performance-Based Restricted Stock Unit Awards and Performance-Based Restricted Stock Awards: Each Parsley performance-based restricted stock unit award and Parsley performance-based restricted stock award that is issued and outstanding as of immediately prior to the effective time will be deemed to have become vested pursuant to the terms of the merger agreement based on deemed achievement of the maximum level of performance applicable to such award as of the date immediately prior to the effective time. At the effective time, any such vested performance-based restricted stock unit award will automatically be cancelled and converted into the right to receive a number of shares of Pioneer common stock (to be issued within 30 days following the closing date in accordance with the terms of the applicable award agreement), rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio. At the effective time, any such vested performance-based restricted stock award will automatically be converted into the right to receive a number of shares of Pioneer common stock, rounded up or down to the nearest whole share, equal to the product of (a) the number of shares of Parsley Class A common stock subject to such award as of immediately prior to the effective time and (b) the exchange ratio.

For additional information regarding the treatment of Parsley equity awards, please see “The Merger Agreement—Treatment of Parsley Equity-Based Awards.”

Listing of Pioneer Common Stock; Delisting and Deregistration of Parsley Class A Common Stock (See page 152)

It is a condition to the consummation of the mergers that the shares of Pioneer common stock issuable to Parsley Class A stockholders and Parsley LLC unitholders in connection with the mergers be approved for listing on the NYSE, subject to official notice of issuance.

Shares of Parsley Class A common stock currently trade on the NYSE under the stock symbol “PE”. When the mergers are completed, Parsley will cease to exist and the Parsley Class A common stock will cease to be traded on the NYSE and will be deregistered under the Exchange Act.

No Solicitation; Recommendations (See page 168)

Subject to certain exceptions, the merger agreement limits Pioneer’s and Parsley’s ability to solicit, knowingly encourage or facilitate or discuss or negotiate with any person, or furnish any nonpublic information or data to any person, with respect to an acquisition proposal (as defined herein). For a more detailed discussion on Pioneer and Parsley and the ability of their boards of directors to consider other proposals, please see “The Merger Agreement—No Solicitation; Recommendations.”

Conditions Precedent to the Mergers (See page 175)

The obligations of the parties to consummate the mergers are subject to the satisfaction at or prior to the effective time of the following mutual conditions:

 

   

approval of the Pioneer stock issuance proposal by the Pioneer stockholders and approval of the Parsley merger proposal by the Parsley stockholders shall have been obtained;

 

   

any waiting period (and any extension thereof) under the HSR Act relating to the mergers shall have expired or been terminated;

 

   

no temporary restraining order, preliminary or permanent injunction or other judgment, order or decree or other legal restraint or prohibition issued by any governmental entity having jurisdiction over any party shall be in effect, and no law shall have been enacted, entered, promulgated, enforced or deemed applicable by any governmental entity that prohibits or makes illegal consummation of the mergers;



 

12


Table of Contents
   

the shares of Pioneer common stock to be issued in the mergers, and shares of Pioneer common stock to be reserved for issuance in connection with the mergers, shall have been approved for listing on the NYSE, subject to official notice of issuance; and

 

   

the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of the Form S-4 shall have been issued and no proceedings for that purpose shall have been initiated.

The obligations of Pioneer, Merger Sub Inc., Merger Sub LLC and Opco Merger Sub to effect the mergers are also subject to the satisfaction, or waiver by Pioneer, at or prior to the effective time of the following additional conditions:

 

   

the accuracy of the representations and warranties of Parsley and Parsley LLC set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date (except to the extent such representations and warranties speak as of a specified date, in which case such representations and warranties will be true and correct as of such date), and Pioneer’s receipt of an officer’s certificate from Parsley to that effect; and

 

   

performance of, or compliance with, in all material respects, all covenants and obligations required to be performed or complied with pursuant to the merger agreement by Parsley and Parsley LLC at or prior to the effective time, and Pioneer’s receipt of an officer’s certificate from Parsley to that effect.

The obligations of Parsley and Parsley LLC to effect the mergers are also subject to the satisfaction, or waiver by Parsley, at or prior to the effective time of the following additional conditions:

 

   

the accuracy of the representations and warranties of Pioneer, Merger Sub Inc., Merger Sub LLC and Opco Merger Sub set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date (except to the extent such representations and warranties speak as of a specified date, in which case such representations and warranties will be true and correct as of such date), and Parsley’s receipt of an officer’s certificate from Pioneer to that effect;

 

   

performance of, or compliance with, in all material respects, all covenants and obligations required to be performed or complied with pursuant to the merger agreement by Pioneer, Merger Sub Inc., Merger Sub LLC and Opco Merger Sub at or prior to the effective time, and Parsley’s receipt of an officer’s certificate from Pioneer to that effect; and

 

   

receipt of an opinion from Vinson & Elkins, counsel to Parsley, or another nationally recognized law firm reasonably satisfactory to Parsley, dated as of the closing date, to the effect that the integrated mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

As further discussed under the section titled “Risk Factors,” neither Pioneer nor Parsley can be certain when, or if, the conditions to the mergers will be satisfied or waived, or that the mergers will be completed.

Termination of the Merger Agreement (See page 176)

Pioneer and Parsley may mutually agree in writing to terminate the merger agreement before consummating the mergers, even after approval of the Pioneer stock issuance proposal by the Pioneer stockholders and the Parsley merger proposal by the Parsley stockholders have been obtained.



 

13


Table of Contents

In addition, either Pioneer or Parsley may terminate the merger agreement if:

 

   

the mergers have not been consummated on or before May 20, 2021 (the “outside date”); provided that the right to terminate the merger agreement as described in this bullet shall not be available to any party whose failure to fulfill in any material respect any of its obligations under the merger agreement has been the proximate cause of, or proximately resulted in, the failure of the mergers to be consummated by the outside date;

 

   

any court of competent jurisdiction or other governmental entity shall have issued any judgment, order, injunction, rule or decree, or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by the merger agreement, and such judgment, order, injunction, rule, decree or other action shall have become final and nonappealable; provided, that the party seeking to terminate the merger agreement as described in this bullet shall have used its reasonable best efforts to contest, appeal and remove such judgment, order, injunction, rule, decree, ruling or other action in accordance with the terms of the merger agreement;

 

   

the approval of the Parsley merger proposal by the Parsley stockholders shall not have been obtained at the Parsley special meeting duly convened for such purpose or at any adjournment or postponement thereof at which a vote on the Parsley merger proposal was taken;

 

   

the approval of the Pioneer stock issuance proposal by the Pioneer stockholders shall not have been obtained at the Pioneer special meeting duly convened for such purpose, or at any adjournment or postponement thereof at which a vote on the Pioneer stock issuance proposal was taken; or

 

   

the other party has breached or failed to perform any representation, warranty, covenant or other agreement contained in the merger agreement (other than the “no solicitation” and stockholder meeting covenants), or any representation or warranty of the other party shall have become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the effective time, would result in the failure of any condition to the mergers and such breach cannot be or has not been cured by the earlier of the outside date and 30 days after the giving of written notice to the breaching party of such breach or failure (a “terminable breach”); provided, that the terminating party is not then in terminable breach of any covenant or agreement contained in the merger agreement.

In addition, the merger agreement may be terminated under the following circumstances:

 

   

by Pioneer, prior to, but not after, the time the Parsley stockholders approve the Parsley merger proposal, if (i) the Parsley board has effected a Parsley adverse recommendation change, (ii) in the case of a Parsley acquisition proposal structured as a tender offer or exchange offer, Parsley has, within 10 business days of the tender or exchange offer having been commenced, failed to publicly recommend against such tender or exchange offer, (iii) upon a request to do so by Pioneer, Parsley has failed to publicly reaffirm its recommendation of the mergers within 10 business days after the date any Parsley acquisition proposal is first publicly announced, distributed or disseminated to Parsley stockholders or (iv) the Parsley board or a director or executive officer of Parsley has, or has caused Parsley to have, breached or failed to perform any obligation set forth in the “no solicitation” or stockholder meeting covenants of the merger agreement in any material respect;

 

   

by Parsley, prior to, but not after, the time the Pioneer stockholders approve the Pioneer stock issuance proposal, if (i) the Pioneer board has effected a Pioneer adverse recommendation change, (ii) in the case of a Pioneer acquisition proposal structured as a tender offer or exchange offer, Pioneer has, within 10 business days of the tender or exchange offer having been commenced, failed to publicly recommend against such tender or exchange offer, (iii) upon a request to do so by Parsley, Pioneer has failed to publicly reaffirm its recommendation of the stock issuance within 10 business days after the



 

14


Table of Contents
 

date any Pioneer acquisition proposal is first publicly announced, distributed or disseminated to Pioneer stockholders or (iv) the Pioneer board or a director or executive officer of Pioneer has, or has caused Pioneer to have, breached or failed to perform any obligation set forth in the “no solicitation” or stockholder meeting covenants of the merger agreement in any material respect; or

 

   

by Parsley, prior to, but not after, the time the Parsley stockholders approve the Parsley merger proposal, in order to enter into a definitive agreement with respect to a superior proposal (as defined below in the section titled “The Merger Agreement—No Solicitation; Recommendation”); provided that Parsley shall have contemporaneously with such termination tendered payment to Pioneer of the Parsley termination fee as defined herein and described below in the section titled “The Merger Agreement—Termination Fees and Expense Reimbursement—Termination Fees Payable by Parsley”.

Termination Fees and Expense Reimbursement (See page 177)

Termination Fees Payable by Pioneer

The merger agreement requires Pioneer to pay Parsley a termination fee of $270,000,000 (less the amount of any expense reimbursement fee previously paid to Parsley as described below under “—Expenses”) if:

 

   

(i) (A) either party terminates the merger agreement because the Pioneer stockholder approval is not obtained and on or before the date of any such termination a Pioneer acquisition proposal is made directly to Pioneer stockholders or is otherwise publicly disclosed and not withdrawn at least seven business days prior to the Pioneer special meeting, or (B) either party terminates the merger agreement following the outside date or Parsley terminates the merger agreement due to a terminable breach by Pioneer and, in either case, on or before the date of any such termination a Pioneer acquisition proposal is made directly to Pioneer stockholders or is otherwise publicly disclosed and not withdrawn at least seven business days prior to the Pioneer special meeting or is otherwise communicated to Pioneer senior management or the Pioneer board, and (ii) within 12 months after the date of such termination, Pioneer enters into an agreement with respect to a Pioneer acquisition proposal (or recommends or submits a Pioneer acquisition proposal to the Pioneer stockholders for adoption) or consummates a transaction in respect to any Pioneer acquisition proposal (although for purposes of this clause (ii), each reference to “20% or more” in the definition of “acquisition proposal” shall be deemed to be a reference to “50% or more”); or

 

   

Parsley terminates the merger agreement following a Pioneer adverse recommendation change or related events or a breach by Pioneer of the “no solicitation” or stockholder meeting covenants in any material respect, as described above in the section titled “Termination of the Merger Agreement.”

In no event shall Pioneer be required to pay the termination fee on more than one occasion.

Termination Fees Payable by Parsley

The merger agreement requires Parsley to pay Pioneer a termination fee of $135,000,000 (less the amount of any expense reimbursement fee previously paid to Pioneer as described below under “—Expenses”) if:

 

   

(i) (A) either party terminates the merger agreement because the Parsley stockholder approval is not obtained and on or before the date of any such termination a Parsley acquisition proposal is made directly to Parsley stockholders or is otherwise publicly disclosed and not withdrawn at least seven business days prior to the Parsley special meeting, or (B) either party terminates the merger agreement following the outside date or Pioneer terminates the merger agreement due to a terminable breach by Parsley and, in either case, on or before the date of any such termination a Parsley acquisition proposal is made directly to Parsley stockholders or is otherwise publicly disclosed and not withdrawn at least



 

15


Table of Contents
 

seven business days prior to the Pioneer special meeting or is otherwise communicated to Parsley senior management or the Parsley board and (ii) within 12 months after the date of such termination, Parsley enters into an agreement with respect to a Parsley acquisition proposal (or recommends or submits a Parsley acquisition proposal to the Parsley stockholders for adoption) or consummates a transaction in respect to any Parsley acquisition proposal (although for purposes of this clause (ii), each reference to “20% or more” in the definition of “acquisition proposal” shall be deemed to be a reference to “50% or more”);

 

   

Pioneer terminates the merger agreement following a Parsley adverse recommendation change or related events or a breach by Parsley of the “no solicitation” or stockholder meeting covenants in any material respect, as described above in the section titled “Termination of the Merger Agreement”; or

 

   

Parsley terminates the merger agreement, prior to, but not after, the time the Parsley stockholders approve the Parsley merger proposal, in order to enter into a definitive agreement with respect to a superior proposal as described above in the section titled “Termination of the Merger Agreement”.

In no event shall Parsley be required to pay the termination fee on more than one occasion.

Expenses

In addition, unless the other party is otherwise entitled to a termination fee, (i) Pioneer may be obligated to pay Parsley $90,000,000 for costs and expenses incurred in connection with the authorization, preparation, investigation, negotiation, execution and performance of the merger agreement and the transactions contemplated thereby, including the mergers, following a termination by either party as a result of the failure to obtain the Pioneer stockholder approval and (ii) Parsley may be obligated to pay Pioneer $45,000,000 for costs and expenses incurred in connection with the authorization, preparation, investigation, negotiation, execution and performance of the merger agreement and the transactions contemplated thereby, including the mergers, following a termination by either party as a result of the failure to obtain the Parsley stockholder approval.

In no event will either party be required to pay an expense reimbursement fee on more than one occasion. If either party pays a termination fee, then such party will not be required to also pay an expense reimbursement fee.

Specific Performance (See page 179)

In addition to any other remedy that may be available to each party prior to the termination of the merger agreement, each of the parties will be entitled to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement.

Closing and Effective Time of the Mergers (See page 159)

Unless the parties agree otherwise, the closing of the mergers will take place on a date that is two business days following the satisfaction or, to the extent permitted by applicable law, waiver of the conditions to closing (other than any such conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or, to the extent permitted by applicable law, waiver of such conditions).

As soon as practicable on the closing date, a certificate of merger with respect to the first merger will be filed with the Secretary of State of the State of Delaware and, concurrently therewith, a certificate of merger with respect to the Opco merger will be filed with the Secretary of State of the State of Delaware. The first merger and the Opco merger will each become effective at the same time on the closing date as the parties agree in writing



 

16


Table of Contents

and specify in the applicable certificate of merger. In addition, as soon as practicable on the closing date, a certificate of merger with respect to the subsequent merger will be filed with the Secretary of State of the State of Delaware and the subsequent merger will become effective one minute after the effective time, as will be specified in the certificate of merger.

Pioneer and Parsley have targeted to complete the mergers in the first quarter of 2021, subject to receipt of the required Pioneer stockholder approval and Parsley stockholder approval, regulatory approvals and the satisfaction or waiver of the other conditions to the mergers (Please see “The Merger Agreement—Conditions Precedent to the Mergers”).

Comparison of Equityholder Rights (See page 197)

Parsley Class A stockholders and Parsley LLC unitholders receiving Pioneer common stock in connection with the mergers will have different rights once they become stockholders of Pioneer due to differences between the governing documents of Pioneer and Parsley. These differences are described in more detail in “Comparison of Equityholder Rights.”

Risk Factors (See page 27)

Before voting at the Pioneer special meeting or the Parsley special meeting, you should carefully consider all of the information contained in or incorporated by reference into this joint proxy statement/prospectus, including the specific risk factors in the section titled “Risk Factors.”

Litigation Related to the Mergers (See page 156)

Following the filing of the preliminary joint proxy statement/prospectus on November 23, 2020, two complaints have been filed with respect to the mergers as of December 2, 2020, one in the United States District Court for the District of Delaware and one in the Supreme Court of the State of New York for the County of New York. The complaints are captioned as Wang v. Parsley Energy, Inc. et al, No. 1:20-cv-01600-UNA (D. Del.) (“Wang”) and Gupta v. Parsley Energy, Inc. et al, No. 656659/2020 (Sup. Ct. N.Y. Cty) (“Gupta” and, together with Wang, the “Parsley stockholder actions”). The Parsley stockholder actions were filed by purported Parsley stockholders and name Parsley and the members of the Parsley board as defendants. The Gupta action also names Pioneer, Merger Sub Inc., Merger Sub LLC and Opco Merger Sub as defendants.

The Wang action asserts claims for violations of Section 14(a) of the Exchange Act, Rule 14a-9 and 17

CFR Section 244.100 against all of the defendants, and claims for violations of Section 20(a) of the Exchange Act against the members of the Parsley board based on the allegation that the preliminary joint proxy statement/prospectus filed on November 23, 2020 omitted material information about Parsley’s financial projections and the analyses conducted by its financial advisors.

The Gupta action is a putative class action and asserts claims for breach of fiduciary duty against the members of the Parsley board and claims for aiding and abetting breach of fiduciary duty against Parsley, Pioneer and the merger subsidiaries. The Gupta complaint alleges that consideration for the mergers is inadequate, that certain aspects of the sales process were deficient, that there are conflicts of interest between Parsley insiders and Parsley’s public stockholders and that the preliminary joint proxy statement/prospectus filed on November 23, 2020 omitted material information.

The Parsley stockholder actions seek, among other things, to enjoin the consummation of the mergers, to rescind the merger agreement (to the extent already implemented) or grant an award of rescissory damages and the payment of attorneys’ and expert fees and expenses. The Gupta action also seeks damages and an order directing the members of the Parsley board to conduct a new sales process to obtain a transaction in the best interest of Parsley and its stockholders.



 

17


Table of Contents

The Parsley stockholder actions are at a preliminary stage and the defendants have not yet answered or otherwise responded to the complaints. Moreover, additional lawsuits related to the mergers may be filed.



 

18


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PIONEER

The following table sets forth selected historical consolidated financial data that has been derived from Pioneer’s audited consolidated financial statements as of and for each of the five years in the period ended December 31, 2019, as well as from Pioneer’s unaudited consolidated financial statements as of and for the nine months ended September 30, 2020 and 2019, and the related notes thereto. This disclosure does not include the effects of the mergers. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Pioneer or the combined company, and the following information should be read in conjunction with, and is qualified in its entirety by, Pioneer’s consolidated financial statements, the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Pioneer’s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, each of which is incorporated by reference into this joint proxy statement/prospectus. The selected statement of operations data for the years ended December 31, 2016 and 2015 and selected balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from Pioneer’s audited consolidated financial statements for such years, which have not been included or incorporated by reference into this joint proxy statement/prospectus. For more information, please see “Where You Can Find More Information.”

 

     Nine Months Ended
September 30,
    Year Ended December 31,  
     2020     2019     2019     2018     2017     2016     2015  
     (unaudited)     (audited)  
     (in millions, except per share data)  

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

              

Total revenues and other income

   $ 4,930   $ 6,661   $ 9,304   $ 9,415   $ 5,455   $ 3,382   $ 4,561

Total costs and expenses

     5,118     6,122     8,317     8,164     5,146     4,341     4,982
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (188     539     987     1,251     309     (959     (421
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ (170   $ 412   $ 756   $ 978     $ 833   $ (556   $ (273
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PER SHARE DATA:

              

Net income (loss) attributable to common stockholders:

              

Basic

   $ (1.03   $ 2.44   $ 4.50   $ 5.71   $ 4.86   $ (3.34   $ (1.83

Diluted

   $ (1.03   $ 2.44   $ 4.50   $ 5.70   $ 4.85   $ (3.34   $ (1.83

Dividends declared

   $ 1.65   $ 0.76   $ 1.20   $ 0.32   $ 0.08   $ 0.08   $ 0.08

Weighted average shares outstanding:

              

Basic and diluted

     165     168     167     171     170     166     149

CONSOLIDATED STATEMENT OF CASH FLOWS DATA:

              

Net cash provided by (used in):

              

Operating activities

   $ 1,546   $ 2,287   $ 3,115   $ 3,242   $ 2,099   $ 1,499   $ 1,255

Investing activities

   $ (1,342   $ (1,914   $ (2,447   $ (2,610   $ (1,792   $ (3,820   $ (1,840

Financing activities

   $ 482   $ (685   $ (788   $ (703   $ (529   $ 2,048   $ 951

CONSOLIDATED BALANCE SHEET DATA:

              

Cash and cash equivalents

   $ 1,325   $ 437   $ 631   $ 825   $ 896   $ 1,118   $ 1,391

Total assets

   $ 18,977   $ 18,078   $ 19,067   $ 17,903   $ 17,003   $ 16,459   $ 15,154

Long-term obligations

   $ 5,625     $ 3,762   $ 4,452   $ 3,974   $ 3,596   $ 4,482   $ 5,317

Total equity

   $ 11,654   $ 11,856   $ 12,119   $ 12,111   $ 11,279   $ 10,411   $ 8,375


 

19


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PARSLEY

The following table sets forth selected historical consolidated financial data that has been derived from Parsley’s audited consolidated financial statements as of and for each of the five years in the period ended December 31, 2019, as well as from Parsley’s unaudited consolidated financial statements as of and for the nine months ended September 30, 2020 and 2019, and the related notes thereto. This disclosure does not include the effects of the mergers. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Parsley or the combined company, and the following information should be read in conjunction with, and is qualified in its entirety by, Parsley’s consolidated financial statements, the related notes thereto and “Managements Discussion and Analysis of Financial Condition and Results of Operations” contained in Parsley’s Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, each of which is incorporated by reference into this joint proxy statement/prospectus. The selected statement of operations data for the years ended December 31, 2016 and 2015 and selected balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from Parsley’s audited consolidated financial statements for such years, which have not been included or incorporated by reference into this joint proxy statement/prospectus. For more information, please see “Where You Can Find More Information.”

 

     Nine Months Ended
September 30,
    Year Ended December 31,  
     2020     2019     2019     2018     2017     2016     2015  
     (unaudited)     (audited)  
     (in millions, except per share data)  

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

              

Total revenues

   $ 1,232   $ 1,436   $ 1,959   $ 1,826   $ 967   $ 458   $ 267

Total operating expenses

     6,008     986     1,422     1,198     715     427     375
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (4,776     450     537     628     252     31     (108
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (4,675     306     272     551     130     (106     (97
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (4,101   $ 247   $ 210   $ 446   $ 124   $ (89   $ (73
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PER SHARE DATA:

              

Net income (loss) per common share:

              

Basic

   $ (9.91   $ 0.76   $ 0.63   $ 1.36   $ 0.44   $ (0.46   $ (0.45

Diluted

   $ (9.91   $ 0.76   $ 0.63   $ 1.35   $ 0.42   $ (0.46   $ (0.45

Dividends declared

   $ 0.15   $ 0.03   $ 0.06   $ —     $ —     $ —     $ —  

Weighted average common shares outstanding:

              

Basic

     374     279     280     272     241     162     111

Diluted

     374     280     280     273     297     162     111

CONSOLIDATED STATEMENT OF CASH FLOWS DATA:

              

Net cash provided by (used in):

              

Operating activities

   $ 761   $ 941   $ 1,286   $ 1,219   $ 691   $ 230   $ 173

Investing activities

   $ (604   $ (1,097   $ (1,401   $ (1,594   $ (3,457   $ (1,885   $ (427

Financing activities

   $ (173   $ (3   $ (28   $ (16   $ 3,184   $ 1,447   $ 547

CONSOLIDATED BALANCE SHEET DATA:

              

Cash and cash equivalents

   $ 5   $ 5   $ 21   $ 163   $ 554   $ 133   $ 343

Total assets

   $ 7,845   $ 9,996   $ 9,856   $ 9,391   $ 8,793   $ 3,939   $ 2,505

Long-term obligations

   $ 3,110   $ 2,623   $ 2,538   $ 2,423   $ 2,300   $ 1,164   $ 690

Noncontrolling interests

   $ 311   $ 766   $ 765   $ 752   $ 1,168   $ 341   $ 322

Total equity

   $ 4,127   $ 6,563   $ 6,523   $ 6,320   $ 5,881   $ 2,430   $ 1,587


 

20


Table of Contents

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following summary unaudited pro forma condensed combined statements of operations data for the nine months ended September 30, 2020 and year ended December 31, 2019 have been prepared to give effect to the mergers as if the mergers had been completed on January 1, 2019. The unaudited pro forma condensed combined balance sheet data at September 30, 2020 has been prepared to give effect to the mergers as if the mergers were completed on September 30, 2020. The following summary unaudited pro forma condensed combined consolidated financial data should be read in conjunction with “Unaudited Pro Forma Combined Financial Statements” and related notes included in this joint proxy statement/prospectus.

The unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) have been prepared using the acquisition method of accounting for business combinations, with Pioneer treated as the acquirer. Under the acquisition method of accounting, Pioneer will record all assets acquired and liabilities assumed from Parsley at their respective fair values as of the closing date. The acquisition method of accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive fair value measure. The sources and amounts of transaction expenses may also differ from those assumed in the following pro forma adjustments. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing the pro forma financial statements, and are subject to revision based on a final determination of fair values as of the closing date. Differences between these preliminary estimates and the final acquisition accounting may have a material impact on the accompanying pro forma financial statements and the combined company’s future results of operations and financial position.

The unaudited pro forma condensed combined financial data are provided for illustrative purposes only and are not intended to represent or be indicative of the results of operations or the financial position of the combined company that would have been recorded had the mergers been completed as of the dates presented and should not be taken as representative of future results of operations or the financial position of the combined company. The unaudited pro forma condensed combined financial data does not reflect the impacts of any potential operational efficiencies, asset dispositions, cost savings or economies of scale that the combined company may achieve with respect to the combined operations.

 

     Nine Months
Ended
September 30,
2020
    Year Ended
December 31,
2019
 
     (unaudited)  
     (in millions, except per share data)  

Pro Forma Condensed Combined Statement of Operations Data:

    

Revenue

   $ 6,401   $ 11,580

Net income (loss) attributable to common stockholders

   $ (4,175   $ 1,191

Basic and diluted net income (loss) per share attributable to common stockholders

   $ (19.24   $ 5.44

 

     As of
September 30,
2020
      
     (unaudited)  
     (in millions)  

Pro Forma Condensed Combined Balance Sheet Data:

  

Total assets

   $ 27,770  

Total liabilities

   $ 10,976  

Total equity

   $ 16,794  


 

21


Table of Contents

SUMMARY PRO FORMA COMBINED OIL, NGL AND GAS RESERVE AND PRODUCTION DATA

The following tables present the estimated summary pro forma combined net proved developed and undeveloped oil, NGL and gas reserves as of December 31, 2019 and summary pro forma production data for the nine months ended September 30, 2020 and the year ended December 31, 2019. The pro forma reserve and production information set forth below gives effect to the mergers and, in the case of the pro forma reserve information and the pro forma production information for the year ended December 31, 2019, Parsley’s acquisition of Jagged Peak, as if each such transaction had been completed on January 1, 2019. The following summary pro forma reserve and production information has been prepared for illustrative purposes only and is not intended to be a projection of future results of the combined company. Future results may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors.” The summary pro forma reserve and production information should be read in conjunction with “Unaudited Pro Forma Combined Financial Statements” and the related notes thereto in this joint proxy statement/prospectus. The Parsley pro forma information gives effect to Parsley’s acquisition of Jagged Peak, as disclosed in Parsley’s Current Report on Form 8-K filed with the SEC on April 10, 2020, which is incorporated by reference into this joint proxy statement/prospectus.

 

     As of December 31, 2019  
     Pioneer
Historical
     Parsley
Pro Forma
     Pro Forma
Combined
 

Proved developed reserves:

        

Oil (MBbls)

     571,293      270,150      841,443

NGL (MBbls)

     268,468      108,132      376,600

Gas (MMcf)

     1,429,417      530,657      1,960,074

Total (MBOE)

     1,077,997      466,725      1,544,722

Proved undeveloped reserves:

        

Oil (MBbls)

     32,457      158,982      191,439

NGL (MBbls)

     13,515      58,762      72,277

Gas (MMcf)

     70,096      272,793      342,889

Total (MBOE)

     57,655      263,209      320,864
     Nine Months Ended September 30, 2020  
     Pioneer
Historical
     Parsley
Historical
     Pro Forma
Combined
 

Average daily sales volumes:

        

Oil (Bbls)

     212,718      116,708      329,426

NGL (Bbls)

     85,707      39,442      125,149

Gas (Mcf)

     418,547      189,734      608,281

Total (BOE)

     368,183      187,774      555,957
     Year Ended December 31, 2019  
     Pioneer
Historical
     Parsley
Pro Forma
     Pro Forma
Combined
 

Average daily sales volumes:

        

Oil (Bbls)

     212,353      116,745      329,098

NGL (Bbls)

     72,323      35,422      107,745

Gas (Mcf)

     365,055      168,718      533,773

Total (BOE)

     345,518      180,288      525,806


 

22


Table of Contents

UNAUDITED COMPARATIVE PER SHARE DATA

The following tables present Pioneer’s and Parsley’s historical and pro forma per share data as of and for the nine months ended September 30, 2020 and as of and for the year ended December 31, 2019. The pro forma statement of operations information is provided as if the mergers had been completed on January 1, 2019. The pro forma balance sheet information is provided as if the mergers had been completed on September 30, 2020.

The unaudited pro forma comparative per share data is based on the following information, which has been incorporated by reference into this joint proxy statement/prospectus: (i) Pioneer’s and Parsley’s audited consolidated financial statements as of and for the year ended December 31, 2019, (ii) Pioneer’s and Parsley’s unaudited consolidated financial statements as of and for the nine months ended September 30, 2020 and (iii) Parsley’s pro forma financial information as of and for the year ended December 31, 2019, giving effect to Parsley’s acquisition of Jagged Peak, as disclosed in Parsley’s Current Report on Form 8-K filed with the SEC on April 10, 2020. Please see “Where You Can Find More Information.”

Unaudited pro forma combined per share data as of and for the nine months ended September 30, 2020 and as of and for the year ended December 31, 2019 were derived and should be read in conjunction with the unaudited pro forma combined financial data included in “Unaudited Pro Forma Combined Financial Statements” and the related notes thereto in this joint proxy statement/prospectus. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the mergers had been completed as of the beginning of the period or the combined financial position of the companies as of September 30, 2020.

 

     Nine Months Ended September 30, 2020  
     Pioneer
Historical
    Parsley
Historical
    Pro Forma
Combined
Pioneer
    Pro Forma
Combined

Parsley
Equivalent (a)
 

Net income (loss) per share attributable to common stockholders:

        

Basic and diluted

   $ (1.03   $ (9.91   $ (19.24   $ (2.41

Book value per share

   $ 66.42   $ 10.06   $ 77.39     $ 9.69  

Cash dividends per share

   $ 1.65   $ 0.15     NM (b)      NM (b) 
     Year Ended December 31, 2019  
     Pioneer
Historical
    Parsley
Pro Forma
    Pro Forma
Combined
Pioneer
    Pro Forma
Combined

Parsley
Equivalent (a)
 

Net income (loss) per share attributable to common stockholders:

        

Basic and diluted

   $ 4.50   $ 0.56   $ 5.44   $ 0.68

Book value per share

   $ 69.23   $ 19.86     NM (b)      NM (b) 

Cash dividends per share

   $ 1.20   $ 0.06     NM (b)      NM (b) 

 

(a)

Determined using the pro forma combined per share data multiplied by 0.1252 (the exchange ratio).

(b)

Not meaningful.



 

23


Table of Contents

MARKET PRICE INFORMATION

Pioneer’s common stock is listed on the NYSE under the symbol “PXD”. Parsley Class A common stock is listed on the NYSE under the symbol “PE”.

The high and low trading prices for the Pioneer common stock as of October 20, 2020, the last trading day immediately before the public announcement of the mergers, were $84.82 and $81.39, respectively. The high and low trading prices for the Parsley Class A common stock as of October 20, 2020, the last trading day immediately before the public announcement of the mergers, were $10.77 and $9.88, respectively.

As of November 30, 2020, the last date before the date of this joint proxy statement/prospectus for which it was practicable to obtain this information, there were 164,418,493 shares of Pioneer common stock issued and outstanding and 386,803,883 shares of Parsley Class A common stock issued and outstanding.

Because the exchange ratio will not be adjusted for changes in the market price of either Pioneer common stock or Parsley Class A common stock, the market value of Pioneer common stock that Parsley Class A stockholders and Parsley LLC unitholders will have the right to receive on the date the mergers are completed may vary significantly from the market value of the Pioneer common stock that Parsley Class A stockholders and Parsley LLC unitholders would receive if the mergers were completed on the date of this joint proxy statement/prospectus. As a result, you should obtain recent market prices of Pioneer common stock and Parsley Class A common stock prior to voting your shares. Please see “Risk Factors—Risk Factors Relating to the Mergers.”

The following table sets forth the closing sale price per share of Parsley Class A common stock as reported on the NYSE and the closing sale price per share of Pioneer common stock as reported on the NYSE, in each case on October 20, 2020, the last trading day before the public announcement of the parties entering into the merger agreement, and on [                ], 2020, the last practicable trading day prior to the mailing of this joint proxy statement/prospectus. The table also shows the estimated implied value of the merger consideration proposed for each share of Parsley Class A common stock as of the same two dates. The implied value was calculated by multiplying the NYSE closing price of a share of Pioneer common stock on the relevant date by the exchange ratio of 0.1252 shares of Pioneer common stock for each share of Parsley Class A common stock.

 

     Pioneer
Common
Stock
Closing Price
     Parsley Class A
Common Stock
Closing Price
     Exchange
Ratio
     Implied Per Share
Value of Merger
Consideration
 

October 20, 2020

   $ 83.53      $ 10.62        0.1252      $ 10.46

                , 2020

   $                        $                          0.1252      $                    

Pioneer stockholders and Parsley stockholders are encouraged to obtain current market quotations for Pioneer common stock and Parsley Class A common stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference herein. No assurance can be given concerning the market price of Pioneer common stock before or after the effective date of the mergers. Please see “Where You Can Find More Information” for the location of information incorporated by reference into this joint proxy statement/prospectus.



 

24


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, and the documents to which Pioneer and Parsley refer you within this joint proxy statement/prospectus, as well as oral statements made or to be made by Pioneer and Parsley, include “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the United States Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, included in this joint proxy statement/prospectus, including those that address activities, events or developments that Pioneer or Parsley expects, believes or anticipates will or may occur in the future, are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the mergers, the expected timetable for completing the mergers, the results, effects, benefits and synergies of the mergers, pro forma descriptions of the combined company and its operations, integration and transition plans, synergies, opportunities, and anticipated future performance and any other statements regarding Pioneer’s or Parsley’s future expectations, beliefs, plans, objectives, financial conditions, assumptions, or future events or performance that are not historical facts. Words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “create,” “intend,” “should,” “could,” “would,” “may,” “might,” “foresee,” “plan,” “will,” “guidance,” “outlook,” “future,” “assume,” “forecast,” “focus,” “target,” “continue,” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking.

Pioneer and Parsley caution investors that any forward-looking statements are subject to known and unknown risks and uncertainties, many of which are outside Pioneer’s and Parsley’s control, and which may cause actual results and future trends to differ materially from those matters expressed in, or implied or projected by, such forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus. Investors are cautioned not to place undue reliance on these forward-looking statements. Risks and uncertainties that could cause actual results to differ from those described in forward-looking statements include the following:

 

   

the merger agreement may be terminated in accordance with its terms and the mergers may not be completed;

 

   

Pioneer stockholders may not approve the Pioneer stock issuance proposal;

 

   

Parsley stockholders may not approve the Parsley merger proposal;

 

   

the parties may not be able to satisfy the conditions to the completion of the mergers in a timely manner or at all;

 

   

the mergers may not be accretive, and may be dilutive, to Pioneer’s earnings per share, return on capital employed, cash flow and/or free cash flow, which may negatively affect the market price of Pioneer common stock;

 

   

Pioneer and Parsley may incur significant transaction and other costs in connection with the mergers in excess of those anticipated by Pioneer or Parsley;

 

   

the combined company may fail to realize anticipated synergies or other benefits expected from the mergers in the timeframe expected or at all;

 

   

the ultimate timing, outcome and results of integrating the operations of Pioneer and Parsley and the risk that Pioneer’s and Parsley’s businesses may not be integrated successfully;

 

   

the effect of the mergers and their announcement and/or completion on Pioneer’s and Parsley’s business or employee relationships;

 

   

the risk related to disruption of management time from ongoing business operations due to the mergers;



 

25


Table of Contents
   

the mergers may disrupt current plans and operations that may harm Pioneer’s and Parsley’s respective businesses;

 

   

the effects of the business combination on Pioneer and Parsley, including the combined company’s future financial condition, results of operations, strategy, credit ratings and plans;

 

   

changes in capital markets and the ability of the combined company to finance operations in the manner expected;

 

   

regulatory approval of the transaction;

 

   

any litigation relating to the mergers;

 

   

risks to Pioneer’s and Parsley’s operating results and businesses generally, including the volatility of oil and natural gas prices, the uncertainty of estimates of oil and natural gas reserves and the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, and the other risks, contingencies and uncertainties applicable to Pioneer and Parsley disclosed in Pioneer’s and Parsley’s other filings with the SEC incorporated herein by reference; and

 

   

the uncertainty of the value of the merger consideration due to the fixed exchange ratio and potential fluctuation in the market price of Pioneer common stock.

The foregoing list of factors is not exhaustive. For further discussion of these and other risks, contingencies, and uncertainties applicable to Pioneer and Parsley, please see “Risk Factors” in this joint proxy statement/prospectus as well as Pioneer’s and Parsley’s other filings with the SEC incorporated herein by reference. Please see “Where You Can Find More Information” for more information about the SEC filings incorporated by reference into this joint proxy statement/prospectus.

All subsequent written or oral forward-looking statements attributable to Pioneer, Parsley or any person acting on its or their behalf are expressly qualified in their entirety by the cautionary statements contained in this section. All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Pioneer nor Parsley assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.



 

26


Table of Contents

RISK FACTORS

In addition to the other information included or incorporated by reference in this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements”, you should carefully consider the following risks before deciding how to vote. In addition, you should read and carefully consider the risks associated with each of Pioneer and Parsley and their respective businesses. These risks can be found in Pioneer’s and Parsley’s Annual Reports on Form 10-K for the year ended December 31, 2019 and subsequent Quarterly Reports on Form 10-Q, each of which is filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. For further information regarding the documents incorporated into this joint proxy statement/prospectus by reference, please see the section titled “Where You Can Find More Information.” Realization of any of the risks described below, any of the events described under “Cautionary Statement Regarding Forward-Looking Statements” or any of the risks or events described in the documents incorporated by reference could have a material adverse effect on Pioneer’s, Parsley’s or the combined company’s businesses, financial condition, cash flows and results of operations.

Risks Relating to the Mergers

Because the market price of Pioneer common stock will fluctuate, Parsley Class A stockholders and Parsley LLC unitholders cannot be sure of the value of the shares of Pioneer common stock they will receive in connection with the mergers. In addition, because the exchange ratio is fixed, the number of shares of Pioneer common stock to be received by Parsley Class A stockholders and Parsley LLC unitholders in connection with the mergers will not change between now and the time the mergers are completed to reflect changes in the trading prices of Pioneer common stock or Parsley Class A common stock.

In connection with the mergers, each eligible share of Parsley Class A common stock and each eligible Parsley LLC unit will be converted automatically into the right to receive 0.1252 shares of Pioneer common stock, with cash paid in lieu of the issuance of any fractional shares of Pioneer common stock. The exchange ratio is fixed, which means that it will not change between now and the closing date, regardless of whether the market price of either Pioneer common stock or Parsley Class A common stock changes. Therefore, the value of the merger consideration will depend on the market price of Pioneer common stock at the effective time. The market price of Pioneer common stock has fluctuated since the date of the announcement of the parties’ entry into the merger agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the Parsley special meeting and the Pioneer special meeting, the date the mergers are completed and thereafter. The market price of Pioneer common stock, when received by Parsley Class A stockholders and Parsley LLC unitholders after the mergers are completed, could be greater than, less than or the same as the market price of Pioneer common stock on the date of this joint proxy statement/prospectus or at the time of the Parsley special meeting. Accordingly, you should obtain current stock price quotations for Pioneer common stock and Parsley Class A common stock before deciding how to vote or abstain from voting on any of the proposals described in this joint proxy statement/prospectus.

The market price for Pioneer common stock following the closing may be affected by factors different from those that historically have affected or currently affect Pioneer common stock and Parsley Class A common stock.

Upon completion of the mergers, Parsley Class A stockholders and Parsley LLC unitholders will receive shares of Pioneer common stock. Pioneer’s financial position may differ from its financial position before the completion of the mergers, and the results of operations of the combined company may be affected by some factors that are different from those currently affecting the results of operations of Pioneer and those currently affecting the results of operations of Parsley. Accordingly, the market price and performance of Pioneer common stock is likely to be different from the performance of Parsley Class A common stock in the absence of the mergers. In addition, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, Pioneer common stock, regardless of Pioneer’s actual operating performance. For a discussion of

 

27


Table of Contents

the businesses of Pioneer and Parsley and important factors to consider in connection with those businesses, see the documents incorporated by reference herein and referred to in “Where You Can Find More Information.”

Pioneer stockholders and Parsley stockholders, in each case as of immediately prior to the mergers, will have reduced ownership in the combined company.

Based on the number of issued and outstanding shares of Parsley Class A common stock and Parsley LLC units as of November 30, 2020 and the number of issued and outstanding Parsley equity awards currently estimated to be payable in shares of Pioneer common stock in connection with the mergers, Pioneer anticipates issuing approximately 52 million shares of Pioneer common stock pursuant to the merger agreement. The actual number of shares of Pioneer common stock to be issued pursuant to the merger agreement will be determined at the completion of the mergers based on the number of shares of Parsley Class A common stock and Parsley LLC units issued and outstanding immediately prior to such time and the number of issued and outstanding Parsley equity awards payable in shares of Pioneer common stock in connection with the mergers. The issuance of these new shares could have the effect of depressing the market price of Pioneer common stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, Pioneer’s earnings per share could cause the price of Pioneer common stock to decline or increase at a reduced rate.

Immediately after the completion of the mergers, it is expected that Pioneer stockholders as of immediately prior to the mergers will own approximately 76%, and Parsley stockholders as of immediately prior to the mergers will own approximately 24%, of the issued and outstanding shares of Pioneer common stock. As a result, Pioneer’s current stockholders and Parsley’s current stockholders will have less influence on the policies of the combined company than they currently have on the policies of Pioneer and Parsley, respectively.

Pioneer and Parsley must obtain certain regulatory approvals and clearances to consummate the mergers, which, if delayed, not granted or granted with unacceptable conditions, could prevent, substantially delay or impair consummation of the mergers, result in additional expenditures of money and resources or reduce the anticipated benefits of the mergers.

The completion of the mergers is subject to antitrust review in the United States. Under the HSR Act and the rules promulgated thereunder, the mergers cannot be completed until the parties to the merger agreement have given notification and furnished information to the FTC and the DOJ, and until the applicable waiting period has expired or has been terminated.

On November 12, 2020, Pioneer and Parsley received notice of early termination of the applicable waiting period under the HSR Act.

At any time before or after consummation of the mergers, notwithstanding the early termination of the applicable waiting period under the HSR Act, the FTC, the DOJ or any state could take such action under antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the mergers or seeking the divestiture of substantial assets of Pioneer or Parsley or their respective subsidiaries. Private parties may also seek to take legal action under antitrust laws under certain circumstances.

The mergers are subject to a number of conditions to the obligations of both Pioneer and Parsley to complete the mergers, which, if not fulfilled, or not fulfilled in a timely manner, may delay completion of the mergers or result in termination of the merger agreement.

The respective obligations of each of Parsley and Pioneer to effect the mergers are subject to the satisfaction at or prior to the effective time of the following conditions:

 

   

the approval of the Parsley merger proposal by Parsley stockholders must have been obtained;

 

   

the approval of the Pioneer stock issuance proposal by Pioneer stockholders must have been obtained;

 

28


Table of Contents
   

shares of Pioneer common stock that will be issued in the mergers, or reserved for issuance in connection with the mergers, must have been approved for listing on NYSE, upon official notice of issuance;

 

   

the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, will have become effective under the Securities Act, and no stop order suspending its effectiveness may be in effect;

 

   

no injunctions or decrees by any relevant governmental entity that prevent the mergers may be outstanding;

 

   

any waiting period under the HSR Act relating to the mergers must have expired or been terminated;

 

   

subject to certain exceptions and materiality standards provided in the merger agreement, the representations and warranties of the other party must be true and correct as of the date of the merger agreement and as of the closing date, and such party must have received an officer’s certificate from the other party to that effect;

 

   

the other party must have performed or complied in all material respects with all of its obligations under the merger agreement, and such party must have received an officer’s certificate from the other party to that effect; and

 

   

Parsley must have received a tax opinion from its counsel to the effect that the integrated mergers, taken together, will constitute a “reorganization” within the meaning of Section 368(a) of the Code.

Many of the conditions to completion of the mergers are not within either Pioneer’s or Parsley’s control, and neither company can predict when, or if, these conditions will be satisfied. If any of these conditions are not satisfied or waived prior to the outside date, it is possible that the merger agreement may be terminated. Although Pioneer and Parsley have agreed in the merger agreement to use reasonable best efforts, subject to certain limitations, to complete the mergers as promptly as practicable, these and other conditions to the completion of the mergers may fail to be satisfied. In addition, satisfying the conditions to and completing the mergers may take longer, and could cost more, than Pioneer and Parsley expect. Neither Pioneer nor Parsley can predict whether and when these other conditions will be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the mergers for a significant period of time or prevent them from occurring. Any delay in completing the mergers may adversely affect the cost savings and other benefits that Pioneer and Parsley expect to achieve if the mergers and the integration of the companies’ respective businesses are completed within the expected timeframe. There can be no assurance that all required regulatory approvals will be obtained or obtained prior to the termination date. For additional information, please see “The Merger Agreement—Conditions Precedent to the Mergers.”

If the integrated mergers, taken together, do not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, Parsley Class A stockholders may be required to pay substantial U.S. federal income taxes.

The integrated mergers are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and Pioneer and Parsley intend to report the integrated mergers consistent with such qualification. It is a condition to Parsley’s obligation to complete the mergers that it receive an opinion from its tax counsel to the effect that the integrated mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. This opinion will be based on customary assumptions and representations from each of Pioneer and Parsley, as well as certain covenants and undertakings by Pioneer and Parsley. If any of the representations, assumptions, covenants or undertakings upon which the opinion is based is or becomes incorrect, incomplete or inaccurate or is violated, the validity of the opinion may be affected and the U.S. federal income tax consequences of the integrated mergers could differ materially from those described herein. An opinion of counsel represents such counsel’s best legal judgment but is not binding on the Internal Revenue Service (the “IRS”) or any court. Neither Pioneer nor Parsley intends to obtain a ruling from the IRS with respect to the tax

 

29


Table of Contents

consequences of the integrated mergers. Accordingly, there can be no assurance that the IRS would not challenge the conclusions reflected in the opinion or that a court would not sustain such a challenge. If the IRS or a court determines that the integrated mergers, taken together, should not be treated as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder of Parsley Class A common stock would generally recognize taxable gain or loss upon the exchange of Parsley Class A common stock for Pioneer common stock pursuant to the integrated mergers. See “The Mergers—Material U.S. Federal Income Tax Consequences”.

The Opco merger is expected to be a taxable event for Parsley LLC unitholders, and the resulting tax liability, if any, of a Parsley LLC unitholder will depend on such unitholder’s particular situation. Additionally, the amount and character of any taxable gain or loss recognized by a Parsley LLC unitholder as a result of the Opco merger could be different than anticipated, potentially resulting in a tax liability that is more than expected.

The exchange of Parsley LLC units for shares of Pioneer common stock (and cash in lieu of fractional shares of Pioneer common stock, if any) in the Opco merger is intended to be a taxable event for Parsley LLC unitholders, even though Parsley LLC unitholders will receive no cash consideration (other than any cash received in lieu of fractional shares of Pioneer common stock) in the Opco merger. The amount and character of gain or loss recognized by each Parsley LLC unitholder as a result of such taxable exchange will vary depending on such unitholder’s particular situation, including the value of the Pioneer common stock received by such unitholder, whether such unitholder receives any cash in lieu of fractional shares of Pioneer common stock in the Opco merger or a TRA termination payment, and the adjusted tax basis of such unitholder’s Parsley LLC units (and any changes to such tax basis as a result of Parsley LLC’s allocations of income, gain, loss and deduction to such unitholder for the taxable year that includes the Opco merger). Moreover, Parsley LLC unitholders that are subject to the passive loss rules may have suspended passive losses that may become available to offset a portion of the gain recognized by such Parsley LLC unitholder in connection with the Opco merger.

Because, among other things, a Parsley LLC unitholder will not know, until the effective time of the Opco merger, the value of the shares of Pioneer common stock it will receive in the Opco merger, a Parsley LLC unitholder will not be able to calculate the amount of its taxable gain or loss until such time using the information available to such unitholder at that time and will not be able to finally determine its taxable gain or loss until it receives its Schedule K-1 for the year in which the Opco merger is consummated. In addition, because prior distributions in excess of a Parsley LLC unitholder’s allocable share of Parsley LLC’s net taxable income decrease such Parsley LLC unitholder’s tax basis in its Parsley LLC units, the amount, if any, of such prior excess distributions with respect to such Parsley LLC units will, in effect, become taxable income to a Parsley LLC unitholder if the aggregate value of the consideration received (or treated for tax purposes as received) in the Opco merger is greater than such Parsley LLC unitholder’s adjusted tax basis in its Parsley LLC units, even if the aggregate value of the consideration received (or treated for tax purposes as received) in the Opco merger is less than such Parsley LLC unitholder’s original cost basis in its Parsley LLC units. Furthermore, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Parsley LLC and its subsidiaries. For additional information, please see “The Mergers—Material U.S. Federal Income Tax Consequences”.

The U.S. federal income tax treatment to Parsley LLC unitholders with respect to owning and disposing of any shares of Pioneer common stock received in the Opco merger will be different than the U.S. federal income tax treatment to them with respect to owning and disposing of their Parsley LLC units.

Parsley LLC is classified as a partnership for U.S. federal income tax purposes and is not generally subject to entity-level U.S. federal income tax. Instead, each Parsley LLC unitholder is required to take into account such unitholder’s share of items of income, gain, loss, and deduction of Parsley LLC in computing its U.S. federal income tax liability, regardless of whether cash distributions are made to such Parsley LLC unitholder by Parsley

 

30


Table of Contents

LLC. A distribution of cash by Parsley LLC to a Parsley LLC unitholder who is a U.S. holder (as defined in the section titled “The MergersMaterial U.S. Federal Income Tax Consequences”) is generally not taxable for U.S. federal income tax purposes unless the amount of cash distributed is in excess of the Parsley LLC unitholder’s adjusted tax basis in its Parsley LLC units. Gain or loss recognized by a Parsley LLC unitholder who is a U.S. holder in connection with the disposition of its Parsley LLC units will generally be capital gain or loss. However, a portion of such gain or loss, which portion could be substantial, is separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Parsley LLC and its subsidiaries. Consequently, a Parsley LLC unitholder may recognize both ordinary income and capital loss in connection with a disposition of its Parsley LLC units.

In contrast, Pioneer is classified as a corporation for U.S. federal income tax purposes, and thus, Pioneer (and not its stockholders) is subject to U.S. federal income tax on its taxable income. A distribution of cash with respect to Pioneer common stock by Pioneer to a stockholder who is a U.S. holder will generally be included in such U.S. holder’s income as dividend income to the extent paid from Pioneer’s current or accumulated “earnings and profits” (as determined under U.S. federal income tax principles). A portion of the cash distributed to Pioneer stockholders by Pioneer after the mergers may exceed Pioneer’s current and accumulated earnings and profits. Cash distributions in excess of Pioneer’s current and accumulated earnings and profits will first be treated as a non- taxable return of capital to the extent of (and reducing, but not below zero) a U.S. holder’s adjusted tax basis in its Pioneer common stock and will thereafter be treated as capital gain from the sale or exchange of such Pioneer common stock. A Pioneer stockholder who is a U.S. holder generally will recognize capital gain or loss on a disposition of its Pioneer common stock.

Pioneer’s ability to utilize its historic U.S. net operating loss carryforwards and those of Parsley may be limited.

As of December 31, 2019, Pioneer and Parsley had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $4.8 billion and $587.1 million, respectively, $2.8 billion and $535.3 million, respectively, of which were incurred prior to January 1, 2018 and will begin to expire, if unused, in 2032 and 2034, respectively, and $2.0 billion and $51.8 million, respectively, of which were incurred on or after January 1, 2018 and will not expire and will be carried forward indefinitely. Pioneer’s ability to utilize these NOLs and other tax attributes to reduce future taxable income following the consummation of the mergers depends on many factors, including its future income, which cannot be assured. Section 382 of the Code (“Section 382”) generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of such corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382, generally determined, subject to certain adjustments, by multiplying (i) the fair market value of such corporation’s stock at the time of the ownership change by (ii) a percentage approximately equivalent to the yield on long-term tax-exempt bonds during the month in which the ownership change occurs. Any unused annual limitation may be carried over to later years.

Parsley is expected to undergo an ownership change under Section 382 as a result of the mergers, which, based on information currently available, may trigger a limitation (calculated as described above) on Pioneer’s ability to utilize any historic Parsley NOLs and could cause some of Parsley’s NOLs incurred prior to January 1, 2018 to expire before Pioneer would be able to utilize them to reduce taxable income in future periods. While Pioneer’s issuance of stock in the mergers would, standing alone, be insufficient to result in an ownership change with respect to Pioneer, we cannot assure you that Pioneer will not undergo an ownership change as a result of the mergers taking into account other changes in ownership of Pioneer stock occurring within the relevant three-year period described above. If Pioneer were to undergo an ownership change, it may be prevented from fully utilizing its historic NOLs incurred prior to January 1, 2018.

 

31


Table of Contents

Uncertainties associated with the mergers may cause a loss of management personnel and other key employees of Parsley, which could adversely affect the future business and operations of Pioneer following the mergers.

Pioneer and Parsley are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Pioneer’s success after the mergers will depend in part upon its ability to retain key management personnel and other key employees. Current and prospective employees of Parsley may experience uncertainty about their roles within Pioneer following the mergers or other concerns regarding the timing and completion of the mergers or the operations of Pioneer following the mergers, any of which may have an adverse effect on the ability of Parsley to retain or attract key management and other key personnel. In addition, the loss of key Parsley personnel could diminish the anticipated benefits of the mergers. No assurance can be given that Pioneer, following the mergers, will be able to retain or attract key management personnel and other key employees of Parsley to the same extent that Pioneer and Parsley have previously been able to retain or attract their own employees.

The business relationships of Pioneer and Parsley may be subject to disruption due to uncertainty associated with the mergers, which could have a material adverse effect on the results of operations, cash flows and financial position of Pioneer or Parsley pending and following the mergers.

Parties with which Pioneer or Parsley do business may experience uncertainty associated with the mergers, including with respect to current or future business relationships with Pioneer or Parsley following the mergers. Pioneer’s and Parsley’s business relationships may be subject to disruption as customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners may attempt to delay or defer entering into new business relationships, negotiate changes in existing business relationships or consider entering into business relationships with parties other than Pioneer or Parsley following the mergers. These disruptions could have a material and adverse effect on the results of operations, cash flows and financial position of Pioneer or Parsley, regardless of whether the mergers are completed, as well as a material and adverse effect on Pioneer’s ability to realize the expected cost savings and other benefits of the mergers. The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the mergers or termination of the merger agreement.

The merger agreement subjects Pioneer and Parsley to restrictions on their respective business activities prior to the effective time.

The merger agreement subjects Pioneer and Parsley to restrictions on their respective business activities prior to the effective time. The merger agreement obligates each of Pioneer and Parsley to use its commercially reasonable efforts to carry on its business in the ordinary course in all material respects, and the merger agreement obligates Parsley to use its commercially reasonable efforts to preserve substantially intact its business organization, substantially preserve its assets, rights and properties in good repair and condition, keep available in all material respects the services of its current officers, employees and consultants and preserve its goodwill and its relationships with material customers, suppliers, licensors, licensees, distributors and others having material business dealings with it. These restrictions could prevent Pioneer and Parsley from pursuing certain business opportunities that arise prior to the effective time and are outside the ordinary course of business. See “The Merger Agreement—Conduct of Business” for additional details.

Parsley directors and executive officers have interests in the mergers that may be different from, or in addition to, the interests of the Parsley stockholders generally.

In considering the recommendation of the Parsley board that Parsley stockholders vote in favor of the Parsley merger proposal and the Parsley compensation proposal, Parsley stockholders should be aware of and take into account the fact that certain Parsley directors and executive officers have interests in the mergers that may be different from, or in addition to, the interests of Parsley stockholders generally. These interests include, among others, TRA termination payments, severance rights and rights to continuing indemnification and

 

32


Table of Contents

directors’ and officers’ liability insurance. See “The MergersInterests of Certain Parsley Directors and Executive Officers in the Mergers” for a more detailed description of these interests. The Parsley board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the mergers, in approving the merger agreement and the transactions contemplated thereby, including the mergers, and in recommending that the Parsley stockholders approve the Parsley merger proposal and the Parsley compensation proposal.

The merger agreement limits Pioneer’s and Parsley’s respective ability to pursue alternatives to the mergers, may discourage other companies from making a favorable alternative transaction proposal and, in specified circumstances, could require Pioneer or Parsley to pay the other party a termination fee.

The merger agreement contains certain provisions that restrict each of Pioneer’s and Parsley’s ability to solicit, initiate, endorse, knowingly encourage or knowingly facilitate any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal with respect to Pioneer or Parsley, as applicable, and Pioneer and Parsley have each agreed to certain terms and conditions relating to their ability to enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to a third party any non-public information or data with respect to, or otherwise cooperate in any way with, any acquisition proposal. Further, even if the Pioneer board or the Parsley board withdraws, modifies or qualifies in any manner adverse to the other party its recommendation with respect to the Pioneer stock issuance proposal or the Parsley merger proposal, as applicable, unless the merger agreement has been terminated in accordance with its terms, both parties will still be required to submit the Pioneer stock issuance proposal or the Parsley merger proposal, as applicable, to a vote at their respective special meetings. In addition, Pioneer and Parsley generally have an opportunity to offer to modify the terms of the merger agreement in response to any competing acquisition proposals or intervening events before the Parsley board or Pioneer board, respectively, may withdraw, modify or qualify their respective recommendations. The merger agreement further provides that under specified circumstances, including after receipt of certain alternative acquisition proposals, Parsley may be required to pay Pioneer a cash termination fee equal to $135.0 million or Pioneer may be required to pay Parsley a cash termination fee equal to $270.0 million. See “The Merger Agreement—Termination Fees and Expense Reimbursement” for additional details.

These provisions could discourage a potential third-party acquirer or other strategic transaction partner that might have an interest in acquiring all or a significant portion of Parsley or Pioneer from considering or pursuing an alternative transaction with either party or proposing such a transaction, even if it were prepared, in Parsley’s case, to pay consideration with a higher per share value than the total value proposed to be paid or received in the mergers. These provisions might also result in a potential third-party acquirer or other strategic transaction partner proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

The financial forecasts are based on various assumptions that may not be realized.

The financial estimates set forth in the forecasts included under the sections “The Mergers—Certain Pioneer Unaudited Prospective Financial and Operating Information” and “The Mergers—Certain Parsley Unaudited Prospective Financial and Operating Information” were based on assumptions of, and information available to, Pioneer’s management and Parsley’s management, as applicable, when prepared, and these estimates and assumptions are subject to uncertainties, many of which are beyond Pioneer’s and Parsley’s control and may not be realized. Many factors mentioned in this joint proxy statement/prospectus, including the risks outlined in this “Risk Factors” section and the events or circumstances described under “Cautionary Statement Regarding Forward-Looking Statements,” will be important in determining the combined company’s future results. As a result of these contingencies, actual future results may vary materially from Pioneer’s and Parsley’s estimates. In view of these uncertainties, the inclusion of financial estimates in this joint proxy statement/prospectus is not and should not be viewed as a representation that the forecasted results will necessarily reflect actual future results.

 

33


Table of Contents

Pioneer’s and Parsley’s financial estimates were not prepared with a view toward public disclosure, and such financial estimates were not prepared with a view toward compliance with published guidelines of any regulatory or professional body. Further, any forward-looking statement speaks only as of the date on which it is made, and neither Pioneer nor Parsley undertakes any obligation, other than as required by applicable law, to update the financial estimates herein to reflect events or circumstances after the date those financial estimates were prepared or to reflect the occurrence of anticipated or unanticipated events or circumstances.

The financial estimates of Pioneer and Parsley included in this joint proxy statement/prospectus have been prepared by, and are the responsibility of, Pioneer and Parsley, as applicable. Moreover, neither Pioneer’s nor Parsley’s independent accountants, nor any other independent accountants, have compiled, examined or performed any procedures with respect to Pioneer’s or Parsley’s prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or achievability thereof, and, accordingly, such independent accountants assume no responsibility for, and disclaim any association with, Pioneer’s and Parsley’s prospective financial information. The reports of such independent accountants included or incorporated by reference herein, as applicable, relate exclusively to the historical financial information of the entities named in those reports and do not cover any other information in this joint proxy statement/prospectus and should not be read to do so. See “The Mergers—Certain Pioneer Unaudited Prospective Financial and Operating Information” and “The Mergers—Certain Parsley Unaudited Prospective Financial and Operating Information” for more information.

The opinions of Pioneer’s and Parsley’s respective financial advisors will not reflect changes in circumstances between the signing of the merger agreement and the completion of the mergers.

Each of Pioneer and Parsley has received opinions from its financial advisors in connection with the signing of the merger agreement, but has not obtained any updated opinion from its financial advisors as of the date of this joint proxy statement/prospectus. Changes in the operations and prospects of Pioneer or Parsley, general market and economic conditions and other factors that may be beyond the control of Pioneer or Parsley, and on which the companies’ respective financial advisors’ opinions were based, may significantly alter the value of Pioneer or Parsley or the prices of the shares of Pioneer common stock or Parsley Class A common stock by the time the mergers are completed. The opinions do not speak as of the time the mergers will be completed or as of any date other than the date of such opinions. Because neither Pioneer nor Parsley currently anticipates asking its financial advisors to update their opinions, the opinions will not address the fairness of the merger consideration from a financial point of view at the time the mergers are completed. The Pioneer board’s recommendation that Pioneer stockholders vote in favor of the Pioneer stock issuance proposal and the Parsley board’s recommendation that Parsley stockholders vote in favor of the Parsley merger proposal, however, are made as of the date of this joint proxy statement/prospectus.

Failure to complete the mergers could negatively impact Pioneer’s or Parsley’s stock price and have a material adverse effect on their results of operations, cash flows and financial positions.

If the mergers are not completed for any reason, including as a result of failure to obtain all requisite regulatory approvals or if the Pioneer stockholders or Parsley stockholders fail to approve the applicable proposals, the ongoing businesses of Pioneer and Parsley may be materially adversely affected and, without realizing any of the benefits of having completed the mergers, Pioneer and Parsley would be subject to a number of risks, including the following:

 

   

Pioneer and Parsley may experience negative reactions from the financial markets, including negative impacts on their respective stock prices;

 

   

Pioneer and Parsley and their respective subsidiaries may experience negative reactions from their respective customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners;

 

34


Table of Contents
   

Pioneer and Parsley will still be required to pay certain significant costs relating to the mergers, such as legal, accounting, financial advisor and printing fees;

 

   

Pioneer or Parsley may be required to pay a termination fee or expense reimbursement fee as required by the merger agreement;

 

   

the merger agreement places certain restrictions on the conduct of the respective businesses pursuant to the terms of the merger agreement, which may delay or prevent the respective companies from undertaking business opportunities that, absent the merger agreement, may have been pursued;

 

   

matters relating to the mergers (including integration planning) require substantial commitments of time and resources by each company’s management, which may have resulted in the distraction of each company’s management from ongoing business operations and pursuing other opportunities that could have been beneficial to the companies; and

 

   

litigation related to any failure to complete the mergers or related to any enforcement proceeding commenced against Pioneer or Parsley to perform their respective obligations pursuant to the merger agreement.

If the mergers are not completed, the risks described above may materialize and they may have a material adverse effect on Pioneer’s or Parsley’s results of operations, cash flows, financial position and stock prices.

The shares of Pioneer common stock to be received by Parsley Class A stockholders and Parsley LLC unitholders upon completion of the mergers will have different rights from shares of Parsley common stock or Parsley LLC units.

Upon completion of the mergers, Parsley Class A stockholders and Parsley LLC unitholders (other than Parsley) will no longer be stockholders of Parsley or unitholders of Parsley LLC. Instead, former Parsley Class A stockholders and Parsley LLC unitholders (other than Parsley) will become Pioneer stockholders, and, while their rights as Pioneer stockholders will continue to be governed by the laws of the state of Delaware, their rights will be subject to and governed by the terms of the Pioneer certificate of incorporation and the Pioneer bylaws. The laws of the state of Delaware and terms of the Pioneer certificate of incorporation and the Pioneer bylaws are in some respects different than the terms of the Parsley certificate of incorporation, the Parsley bylaws and the Parsley LLC agreement, which currently govern the rights of Parsley stockholders and Parsley LLC unitholders, as applicable. See “Comparison of Equityholder Rights” for a discussion of the different rights associated with shares of Pioneer common stock, shares of Parsley common stock and Parsley LLC units.

Completion of the mergers may trigger change in control or other provisions in certain agreements to which Parsley is a party.

The completion of the mergers may trigger change in control or other provisions in certain agreements to which Parsley, Parsley LLC or another subsidiary of Parsley is a party. If Pioneer, Parsley or their respective subsidiaries are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements, or seeking monetary damages. Even if Pioneer and Parsley are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Parsley.

The indentures governing Parsley’s $650,000,000 principal amount outstanding of 5.375% senior notes due 2025, $448,031,000 principal amount outstanding of 5.250% senior notes due 2025, $494,607,000 principal amount outstanding of 5.875% senior notes due 2026, $700,000,000 principal amount outstanding of 5.625% senior notes due 2027 and $399,472,000 principal amount outstanding of 4.125% senior notes due 2028 (collectively, the “Parsley notes”) require Parsley LLC to make an offer to repurchase the Parsley notes at a purchase price in cash equal to 101% of the aggregate principal amount of notes repurchased, plus accrued and unpaid interest (collectively, the “change of control purchase price”), within 30 days of the occurrence of a

 

35


Table of Contents

change of control transaction. A “change of control” transaction, as defined under the Parsley notes indentures, occurs when, among other things, a transaction is consummated and, as a result, any person (other than certain legacy holders) becomes the beneficial owner of more than 50% of Parsley LLC’s voting stock (as defined in the applicable indenture). In the case of the 5.875% senior notes due 2026 and the 4.125% senior notes due 2028, however, such transaction is not a “change of control” transaction unless it is followed by a ratings decline within 90 days or 60 days, respectively.

Under each of the indentures governing the 5.375% senior notes due 2025, the 5.250% senior notes due 2025, and the 5.625% senior notes due 2027, the completion of the mergers is anticipated to constitute a change of control and, as a result, Parsley LLC will be required to make an offer to each holder of such Parsley notes to purchase all or any part of that holder’s notes at the change of control purchase price. If the mergers are followed by a ratings decline (as described in the applicable indenture, within 90 days for the 5.875% senior notes due 2026 or within 60 days for the 4.125% senior notes due 2028), a “change of control” may be deemed to have occurred for those notes as well. If the holders of the Parsley notes accept any such offer of repurchase of their notes, such repurchase could significantly affect the liquidity, business, liabilities and financial condition of Pioneer following the completion of the mergers.

In addition, the completion of the transaction will constitute a change of control under Parsley LLC’s revolving credit facility (the “Parsley revolving credit facility”). As a result, at the direction of the lenders holding a majority of the outstanding loans under the Parsley revolving credit facility, the commitments under the Parsley revolving credit facility may be terminated and the outstanding balance under the Parsley revolving credit facility may be accelerated and become due and payable by Parsley LLC in connection with the completion of the mergers. As of September 30, 2020, Parsley LLC had $305 million of outstanding borrowings under the Parsley revolving credit facility.

Additionally, the completion of the mergers will constitute a change of control under the Parsley employment agreements (as defined below).

Further, the mergers will constitute a change of control event under the tax receivable agreement. In connection with its initial public offering (“IPO”) in 2014, Parsley entered into the tax receivable agreement with the TRA holders, pursuant to which Parsley agreed to make specified future payments to the TRA holders relating to tax attributes generated to Parsley’s benefit in future taxable exchanges of Parsley LLC units by TRA holders, with such payment obligations accelerating upon a change of control (as defined in the tax receivable agreement). It is estimated, as of November 30, 2020, that the TRA termination payments made upon the completion of the mergers to the TRA holders will be, in the aggregate, approximately $164.0 million.

For additional details, see “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers.”

Pioneer and Parsley are expected to incur significant transaction costs in connection with the mergers, which may be in excess of those anticipated by them.

Pioneer and Parsley have incurred and are expected to continue to incur a number of non-recurring costs associated with negotiating and completing the mergers, combining the operations of the two companies and achieving desired synergies. These costs have been, and will continue to be, substantial and, in many cases, will be borne by Pioneer and Parsley whether or not the mergers are completed. A substantial majority of non- recurring expenses will consist of transaction costs and include, among others, fees paid to financial, legal, accounting and other advisors, employee retention, severance and benefit costs and filing fees. Pioneer will also incur costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and other employment-related costs. Pioneer and Parsley will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in connection with the mergers and the integration of the two companies’ businesses. While Pioneer and Parsley have assumed that a certain level of

 

36


Table of Contents

expenses would be incurred, there are many factors beyond their control that could affect the total amount or the timing of the expenses. The elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may not offset integration-related costs and achieve a net benefit in the near term, or at all. The costs described above and any unanticipated costs and expenses, many of which will be borne by Pioneer or Parsley even if the mergers are not completed, could have an adverse effect on Pioneer’s or Parsley’s financial condition and operating results.

Litigation relating to the mergers could result in an injunction preventing the completion of the mergers and/or substantial costs to Pioneer and Parsley.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger, or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Pioneer’s and Parsley’s respective liquidity and financial condition.

Lawsuits that may be brought against Pioneer, Parsley or their respective directors could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the merger agreement already implemented and to otherwise enjoin the parties from consummating the mergers. One of the conditions to the closing of the mergers is that no injunction by any court or other tribunal of competent jurisdiction has been entered and continues to be in effect and no law has been adopted or is effective, in either case that prohibits or makes illegal the closing of the mergers. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the mergers, that injunction may delay or prevent the mergers from being completed within the expected timeframe or at all, which may adversely affect Pioneer’s and Parsley’s respective business, financial position and results of operation. Either Pioneer or Parsley may terminate the merger agreement if any court of competent jurisdiction or other governmental entity issues any judgment, order, injunction, rule or decree, or takes any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by the merger agreement, and such judgment, order, injunction, rule, decree or other action becomes final and nonappealable, so long as the party seeking to terminate the merger agreement has used its reasonable best efforts to contest, appeal and remove such judgment, order, injunction, rule, decree, ruling or other action in accordance with the terms of the merger agreement.

There can be no assurance that any of the defendants will be successful in the outcome of any pending lawsuit or any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the mergers are completed may adversely affect Pioneer’s or Parsley’s business, financial condition, results of operations and cash flows.

See the section titled “The Mergers—Litigation Related to the Mergers” for more information about litigation related to the mergers that has been commenced prior to the date of this joint proxy statement/prospectus.

The mergers may be completed even though material adverse changes subsequent to the announcement of the mergers, such as industry-wide changes or other events, may occur.

In general, either party can refuse to complete the mergers if there is a material adverse change affecting the other party. However, some types of changes do not permit either party to refuse to complete the transaction, even if such changes would have a material adverse effect on either of the parties. For example, a worsening of Pioneer’s or Parsley’s financial condition or results of operations due to a decrease in commodity prices or general economic conditions would not give the other party the right to refuse to complete the mergers. In addition, the parties have the ability, but are under no obligation, to waive any material adverse change that results in the failure of a closing condition and instead proceed with completing the mergers. If adverse changes occur that affect either party but the parties are still required or voluntarily decide to complete the transaction, Pioneer’s share price, business and financial results after the mergers may suffer.

 

37


Table of Contents

Parsley Class A stockholders are not entitled to appraisal rights in connection with the mergers.

Appraisal rights are statutory rights that enable stockholders to dissent from certain extraordinary transactions, such as certain mergers, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the applicable transaction. Under the DGCL, Parsley Class A stockholders will not have rights to an appraisal of the fair value of their shares in connection with the mergers because they are receiving shares of Pioneer common stock and Pioneer common stock is expected to continue to be traded on the NYSE during the pendency of and following the effectiveness of the mergers. However, Parsley Class B stockholders who do not vote in favor of the Parsley merger proposal will be entitled to exercise appraisal rights under the DGCL, solely with respect to their shares of Parsley Class B common stock (and not, for the avoidance of doubt, with respect to any shares of Parsley Class A common stock or Parsley LLC units held by them), in connection with the mergers if they take certain actions and meet certain conditions. See “The Mergers—Appraisal Rights or Dissenters’ Rights” for more information about appraisal rights in connection with the mergers.

The COVID-19 outbreak may adversely affect Pioneer’s and Parsley’s ability to timely consummate the mergers.

COVID-19 and the various precautionary measures attempting to limit its spread taken by many governmental authorities worldwide has had a severe effect on global markets and the global economy. The extent to which the COVID-19 pandemic impacts Pioneer’s and Parsley’s respective business operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the nature and extent of governmental actions taken to contain it or treat its impact, among others. COVID-19 and official actions in response to it have made it more challenging for Pioneer, Parsley and relevant third parties to adequately staff their respective businesses and operations, and may cause delay in the companies’ ability to obtain the relevant approvals for the consummation of the mergers.

Risks Relating to Pioneer Following the Mergers

Pioneer may be unable to integrate the business of Parsley successfully or realize the anticipated benefits of the mergers.

The mergers involve the combination of two companies that currently operate as independent public companies. The combination of two independent businesses is complex, costly and time consuming, and each of Pioneer and Parsley will be required to devote significant management attention and resources to integrating their respective business practices and operations. Potential difficulties that the companies may encounter as part of the integration process include the following:

 

   

the inability to successfully combine the business of Parsley in a manner that permits Pioneer to achieve, on a timely basis or at all, the enhanced revenue opportunities and cost savings and other benefits anticipated to result from the mergers;

 

   

complexities associated with managing the combined businesses, including difficulty addressing possible differences in operational philosophies and the challenge of integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;

 

   

the assumption of contractual obligations with less favorable or more restrictive terms; and

 

   

potential unknown liabilities and unforeseen increased expenses or delays associated with the mergers.

In addition, Pioneer and Parsley have previously operated and, until the completion of the mergers, will continue to operate, independently. It is possible that the integration process could result in:

 

   

diversion of the attention of each company’s management; and

 

38


Table of Contents
   

the disruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies.

Any of these issues could adversely affect each company’s ability to maintain relationships with customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the mergers, or could reduce each company’s earnings or otherwise adversely affect the business and financial results of Pioneer following the mergers.

The synergies attributable to the mergers may vary from expectations.

Pioneer may fail to realize the anticipated benefits and synergies expected from the mergers, which could adversely affect its business, financial condition and operating results. The success of the mergers will depend, in significant part, on Pioneer’s ability to successfully integrate the acquired business and realize the anticipated strategic benefits and synergies from the combination. Pioneer believes that the addition of Parsley will complement Pioneer’s strategy by providing operational and financial scale, increasing free cash flow, and enhancing Pioneer’s corporate rate of return. However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the mergers. The anticipated benefits of the transaction may not be realized fully or at all, or may take longer to realize than expected. Actual operating, technological, strategic and revenue opportunities, if achieved at all, may be less significant than expected or may take longer to achieve than anticipated. If Pioneer is not able to achieve these objectives and realize the anticipated benefits and synergies expected from the mergers within the anticipated timing or at all, Pioneer’s business, financial condition and operating results may be adversely affected.

The future results of Pioneer following the mergers will suffer if Pioneer does not effectively manage its expanded operations.

Following the mergers, the size and geographic footprint of the business of Pioneer will increase. Pioneer’s future success will depend, in part, upon its ability to manage this expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and basins and associated increased costs and complexity. Pioneer may also face increased scrutiny from governmental authorities as a result of the increase in the size of its business. There can be no assurances that Pioneer will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the mergers.

The mergers may result in a loss of customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners and may result in the termination of existing contracts.

Following the mergers, some of the customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners of Pioneer or Parsley may terminate or scale back their current or prospective business relationships with Pioneer. Some customers may not wish to source a larger percentage of their needs from a single company or may feel that Pioneer is too closely allied with one of their competitors. In addition, Pioneer and Parsley have contracts with customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners that may require Pioneer or Parsley to obtain consents from these other parties in connection with the mergers, which may not be obtained on favorable terms or at all. If relationships with customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners are adversely affected by the mergers, or if Pioneer, following the mergers, loses the benefits of the contracts of Pioneer or Parsley, Pioneer’s business and financial performance could suffer.

 

39


Table of Contents

The unaudited pro forma combined financial statements and the summary pro forma combined oil, NGL and gas reserve and production data included in this joint proxy statement/prospectus are based on a number of preliminary estimates and assumptions, and the actual results of operations, cash flows and financial position of Pioneer after the mergers may differ materially.

The unaudited pro forma information in this joint proxy statement/prospectus is presented for illustrative purposes only, has been prepared based on available information and certain assumptions and estimates that Pioneer and Parsley believe are reasonable, and is not necessarily indicative of what Pioneer’s actual financial position or results of operations would have been had the pro forma events been completed on the dates indicated. Further, Pioneer’s actual results and financial position after the pro forma events occur may differ materially and adversely from the unaudited pro forma information included in this joint proxy statement/prospectus. The unaudited pro forma combined financial statements have been prepared with the assumption that Pioneer will be identified as the acquirer under GAAP and reflect adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed.

Following the completion of the mergers, Pioneer may incorporate Parsley’s hedging activities into Pioneer’s business, and Pioneer may be exposed to additional commodity price risks arising from such hedges.

To mitigate its exposure to changes in commodity prices, Parsley hedges oil prices from time to time, primarily through the use of commodity derivative contracts. If Pioneer assumes existing Parsley hedges, Pioneer will bear the economic impact of all of Parsley’s current hedges following the completion of the mergers. Actual crude oil prices may differ from the combined company’s expectations and, as a result, such hedges may or may not have a negative impact on Pioneer’s business.

Other Risks Relating to Pioneer and Parsley

As a result of entering into the merger agreement, Pioneer’s and Parsley’s businesses are and will be subject to the risks described above. In addition, Pioneer and Parsley are, and following completion of the mergers, Pioneer will be, subject to the risks described in Pioneer’s and Parsley’s Annual Report on Form 10-K for the year ended December 31, 2019 as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

40


Table of Contents

PIONEER SPECIAL MEETING

General

This joint proxy statement/prospectus is being provided to Pioneer stockholders as part of a solicitation of proxies by the Pioneer board for use at the Pioneer special meeting and at any adjournments or postponements of such special meeting. This joint proxy statement/prospectus provides Pioneer stockholders with important information about the Pioneer special meeting and should be read carefully in its entirety.

Date, Time and Place of the Pioneer Special Meeting

The Pioneer special meeting will be a virtual meeting conducted exclusively via live webcast online at www.virtualshareholdermeeting.com/PXD21SM starting at 9:00 a.m. Central Time (with log-in beginning at 8:45 a.m. Central Time) on January 12, 2021. Pioneer stockholders will be able to attend the Pioneer special meeting online and vote shares electronically at the meeting by going to www.virtualshareholdermeeting.com/PXD21SM and entering the 16-digit control number included on the proxy card or voting instruction form you received. Because the Pioneer special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.

Purpose of the Pioneer Special Meeting

The Pioneer special meeting is being held to consider and vote on a proposal to approve the issuance of shares of Pioneer common stock in the mergers and other shares of Pioneer common stock reserved for issuance in connection with the mergers, in each case pursuant to the terms of the merger agreement, which is referred to as the Pioneer stock issuance proposal.

Recommendation of the Pioneer Board

The Pioneer board unanimously recommends that Pioneer stockholders vote “FOR” the Pioneer stock issuance proposal.

This joint proxy statement/prospectus contains important information regarding the Pioneer stock issuance proposal and factors that Pioneer stockholders should consider when deciding how to cast their votes. Pioneer stockholders are encouraged to read the entire document carefully, including the annexes to and documents incorporated by reference into this joint proxy statement/prospectus, for more detailed information regarding the merger agreement, including the Pioneer stock issuance proposal, and the mergers.

Voting by Directors and Executive Officers

On November 30, 2020, Pioneer directors and executive officers, and their affiliates, as a group, beneficially owned and were entitled to vote 1,044,372 shares of Pioneer common stock, or approximately 0.6% of the issued and outstanding shares of Pioneer common stock. Although none of them has entered into any agreement obligating them to do so as a director or executive officer of Pioneer, Pioneer currently expects that all of its directors and executive officers will vote their shares “FOR” the Pioneer stock issuance proposal.

Attendance at the Pioneer Special Meeting

Only Pioneer stockholders of record on the Pioneer record date, beneficial owners of Pioneer common stock on the Pioneer record date and holders of valid proxies for the Pioneer special meeting may attend the virtual Pioneer special meeting. Participating stockholders who log-on to the meeting using his, her or its unique 16-digit control number will also be able to examine the stockholder list during the Pioneer special meeting by following the instructions provided on the meeting website.

 

41


Table of Contents

Submitting Questions for the Virtual Pioneer Special Meeting

Pioneer stockholders attending the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast. However, in order to maintain the interactive nature of the virtual meeting, stockholders are able submit questions before the meeting at www.proxyvote.com.

Limitations on Submitting Questions for the Virtual Pioneer Special Meeting

Pioneer will answer questions during the Pioneer special meeting that are relevant to meeting matters, comply with the meeting rules of conduct and have been submitted prior to the start of the Pioneer special meeting, subject to time constraints. However, Pioneer reserves the right to exclude questions that are not pertinent to meeting matters or to edit profanity or other inappropriate language. Each stockholder is limited to a total of one question that must be related to the business of the Pioneer special meeting. Each question should cover only one topic and be as succinct as possible. If Pioneer receives substantially similar questions, Pioneer will group such questions together and provide a single response to avoid repetition. The questions of all Pioneer stockholders are welcome. However, the purpose of the Pioneer special meeting must be observed and questions that are not directly related to the business of Pioneer or are not otherwise in good taste, related to personal grievances or otherwise inappropriate (as determined by the chairman of the meeting) will not be answered.

Record Date

The Pioneer board has fixed the close of business on December 7, 2020 as the Pioneer record date for the determination of the Pioneer stockholders entitled to receive notice of, and to vote at, the Pioneer special meeting. The Pioneer stockholders of record on the Pioneer record date are the only Pioneer stockholders that are entitled to receive notice of, and to vote at, the Pioneer special meeting or any adjournments or postponements of the Pioneer special meeting.

Participants in the Pioneer Natural Resources USA, Inc. 401(k) and Matching Plan

Participants in the Pioneer Natural Resources USA, Inc 401(k) Plan (the “Pioneer 401(k) Plan”) who have shares of Pioneer common stock credited to their plan account as of the record date will have the right to direct the Pioneer 401(k) Plan trustee how to vote those shares. The trustee will vote the shares in a participant’s Pioneer 401(k) Plan account in accordance with the participant’s instructions or, if no instructions are received prior to 4:00 p.m. Central Time on January 11, 2021, the shares credited to that participant’s account will be voted by the trustee in the same proportion as it votes shares for which it did receive timely instructions. Information as to how participants voted the shares credited to their Pioneer 401(k) Plan account will not be disclosed to Pioneer. If a participant holds Pioneer common stock outside of the Pioneer 401(k) Plan, the participant will need to vote those shares separately.

Outstanding Shares and Voting Rights of Pioneer Stockholders

On November 30, 2020, there were 164,418,493 shares of Pioneer common stock issued and outstanding, held by 9,120 holders of record. Each issued and outstanding share of Pioneer common stock entitles its holder of record to one vote at the Pioneer special meeting.

Stockholder List

A complete list of registered Pioneer stockholders entitled to vote at the Pioneer special meeting will be available for inspection at Pioneer’s principal executive offices at 777 Hidden Ridge, Irving, Texas 75038, during ordinary business hours, for a period of no less than ten days before the Pioneer special meeting and will be available during the virtual Pioneer special meeting at www.virtualshareholdermeeting.com/PXD21SM. If a Pioneer stockholder wants to inspect the stockholder list, such stockholder should call the Pioneer corporate secretary at (972) 444-9001 to schedule an appointment or request access.

 

42


Table of Contents

Quorum; Abstentions and Broker Non-Votes

In order for business to be conducted at the Pioneer special meeting, a quorum must be present. A quorum at the Pioneer special meeting requires the presence of the holders of a majority of the total issued and outstanding shares of Pioneer common stock entitled to vote, present virtually or represented by proxy, at the Pioneer special meeting. An abstention occurs when a stockholder is present for purposes of a quorum by virtually attending the Pioneer special meeting and either does not vote or submits a ballot marked “abstain”. An abstention also occurs when a stockholder does not attend the meeting virtually and instead submits a proxy with an “abstain” instruction. Abstentions will be counted for purposes of determining whether there is a quorum at the Pioneer special meeting. Because it is expected that the only matter to be voted on at the Pioneer special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on the Pioneer stock issuance proposal; therefore, if you do not provide voting instructions to your broker, bank or other nominee, your shares will not count towards determining whether a quorum is present and your shares will not be voted on the Pioneer stock issuance proposal.

Adjournment

If a quorum is not present or represented or if there are not sufficient votes for the approval of the Pioneer stock issuance proposal, Pioneer expects that the Pioneer special meeting will be adjourned by the chairman of the Pioneer special meeting to solicit additional proxies. In addition, the holders of a majority in voting power of Pioneer common stock entitled to vote at the Pioneer special meeting who are present online or by proxy at the Pioneer special meeting have the power to adjourn such meeting, whether or not a quorum is present. No notice of the reconvened meeting is required to be given if the date, time and place (including the means of remote communication) are announced at the Pioneer special meeting unless the reconvened meeting is more than 30 days after the date for which notice was originally given. At any reconvened Pioneer special meeting at which a quorum is present, (i) any business may be transacted that may have been transacted at the Pioneer special meeting had a quorum been present and (ii) all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Pioneer special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

Vote Required

Approval of the Pioneer stock issuance proposal requires the affirmative vote of holders of a majority of the shares of Pioneer common stock present virtually during the Pioneer special meeting or represented by proxy at the Pioneer special meeting and entitled to vote thereon. Abstentions are considered votes cast and will have the same effect as a vote “against” the Pioneer stock issuance proposal. The failure of any Pioneer stockholder to submit a vote (e.g., by not submitting a proxy and not attending and voting online at the virtual meeting) will not be counted in determining the votes cast in connection with the Pioneer stock issuance proposal and will therefore have no effect on the outcome of the Pioneer stock issuance proposal. Because the Pioneer stock issuance proposal is non-routine under NYSE rules, banks, brokers, and other nominees do not have discretionary authority to vote on the Pioneer stock issuance proposal and will not be able to vote on the Pioneer stock issuance proposal absent instructions from the beneficial owner. The failure of a beneficial owner to provide voting instructions to its bank, broker or other nominee will result in the applicable shares not being counted in determining the votes cast in connection with the Pioneer stock issuance proposal, and will therefore have no effect on the outcome of the Pioneer stock issuance proposal.

How to Vote

Pioneer stockholders of record and beneficial owners of Pioneer common stock on the Pioneer record date may vote their shares of Pioneer common stock by submitting a proxy or may vote virtually online at the Pioneer special meeting by following the instructions provided on the proxy card or voting instruction form received. Pioneer recommends that Pioneer stockholders entitled to vote submit a proxy prior to the Pioneer special meeting even if they plan to attend the virtual Pioneer special meeting.

 

43


Table of Contents

Pioneer stockholders are encouraged to submit a proxy promptly. Each valid proxy received in time will be voted at the Pioneer special meeting according to the choice specified, if any. Executed but uninstructed proxies (i.e., proxies that are properly signed, dated and returned but are not marked to tell the proxies how to vote) will be voted in accordance with the recommendations of the Pioneer board.

Record Holders

Pioneer stockholders of record may vote in one of the following ways:

 

   

Internet: Pioneer stockholders of record may submit their proxy over the internet at www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 10:59 p.m., Central Time, on January 11, 2021. Stockholders will be given an opportunity to confirm that their voting instructions have been properly recorded. Pioneer stockholders who submit a proxy this way need not send in their proxy card.

 

   

Telephone: Pioneer stockholders of record may submit their proxy by calling 1-800-690-6903. Telephone voting is available 24 hours a day and will be accessible until 10:59 p.m., Central Time, on January 11, 2021. Easy-to-follow voice prompts will guide stockholders through the voting and allow them to confirm that their instructions have been properly recorded. Pioneer stockholders who submit a proxy this way need not send in their proxy card.

 

   

Mail: Pioneer stockholders of record may submit their proxy by properly completing, signing, dating and mailing their proxy card or voting instruction form in the self-addressed, stamped envelope (if mailed in the United States) included with this joint proxy statement/prospectus. Pioneer stockholders who vote this way should mail the proxy card early enough so that it is received prior to the closing of the polls at the Pioneer special meeting.

 

   

Online During the Virtual Meeting: Pioneer stockholders of record may attend the virtual Pioneer special meeting by entering his, her or its unique 16-digit control number and vote online; attendance at the virtual Pioneer special meeting will not, however, in and of itself constitute a vote or a revocation of a prior proxy.

Beneficial Owners

Pioneer stockholders who hold their shares of Pioneer common stock beneficially in “street name” and wish to submit a proxy must provide instructions to the bank, broker or other nominee that holds their shares of record as to how to vote their shares with respect to the Pioneer stock issuance proposal. Most beneficial owners will have a choice of voting before the Pioneer special meeting by proxy over the internet, by telephone or by using a voting instruction form. Each beneficial owner of Pioneer common stock should refer to the voting instruction form received to see what options are available and how to use them. Pioneer stockholders who hold their shares of Pioneer common stock beneficially and wish to vote virtually at the Pioneer special meeting may do so by attending the special meeting, entering his, her or its unique 16-digit control number and voting their shares electronically; however attendance at the virtual Pioneer special meeting will not, in and of itself, constitute a vote or a revocation of a prior proxy.

Proxies and Revocation

Pioneer stockholders of record may revoke their proxies at any time before their shares of Pioneer common stock are voted at the Pioneer special meeting in any of the following ways:

 

   

delivering written notice of revocation of the proxy to Pioneer’s corporate secretary at Pioneer’s principal executive offices at 777 Hidden Ridge, Irving, Texas 75038, by no later than 10:59 p.m. Central Time on January 11, 2021;

 

44


Table of Contents
   

delivering another proxy with a later date to Pioneer’s corporate secretary at Pioneer’s principal executive offices at 777 Hidden Ridge, Irving, Texas 75038, by no later than 10:59 p.m. Central Time on January 11, 2021 (in which case only the later-dated proxy is counted and the earlier proxy is revoked);

 

   

submitting another proxy again via the internet or by telephone at a later date, by no later than 10:59 p.m. Central Time on January 11, 2021 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or

 

   

attending the Pioneer special meeting virtually, using his, her or its unique 16-digit control number and voting their shares online during the meeting; attendance at the virtual Pioneer special meeting will not, in and of itself, revoke a valid proxy that was previously delivered unless you give written notice of revocation to the Pioneer corporate secretary before the proxy is exercised or unless you vote your shares online during the Pioneer special meeting.

If a Pioneer stockholder holds shares through a bank, broker or other nominee, such stockholder may change or revoke his, her or its voting instructions before the Pioneer special meeting by providing instructions again through the means specified on his, her or its voting instruction form (with most having the option to do so by internet, telephone or mail), which must be received before 10:59 p.m. Central Time on January 11, 2021. Alternatively, a Pioneer stockholder may also revoke their proxy by attending the Pioneer special meeting virtually, using his, her or its unique 16-digit control number and voting his, her or its shares online during the meeting.

Solicitation of Proxies

Pioneer will pay for the proxy solicitation costs related to the Pioneer special meeting. In addition to sending and making available these materials, some of Pioneer’s directors, officers and other employees may solicit proxies by contacting Pioneer stockholders by telephone, by mail, by e-mail or online. Pioneer stockholders may also be solicited by, among others, news releases issued by Pioneer and/or Parsley, postings on Pioneer’s or Parsley’s websites and social media accounts and advertisements in periodicals. None of Pioneer’s directors, officers or employees will receive any extra compensation for their solicitation services. Pioneer has also retained D.F. King & Co., Inc. as its proxy solicitor to assist in the solicitation of proxies. For these proxy solicitation services, D.F. King & Co., Inc. will receive an estimated fee of approximately $20,000, plus reasonable out-of-pocket expenses and fees for any additional services. Pioneer will also reimburse banks, brokers, and other nominees for their expenses in sending proxy solicitation materials to the beneficial owners of shares of Pioneer common stock and obtaining their proxies.

Other Matters

At this time, Pioneer knows of no other matters to be submitted at the Pioneer special meeting.

Questions and Additional Information

Pioneer stockholders may contact Pioneer’s proxy solicitor with any questions about the Pioneer stock issuance proposal or how to vote or to request additional copies of any materials at:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call Collect: (212) 269-5550

All Others Call Toll-Free: (800) 859-8509

Email: pxd@dfking.com

 

45


Table of Contents

THE PIONEER STOCK ISSUANCE PROPOSAL

This joint proxy statement/prospectus is being furnished to you as a stockholder of Pioneer as part of the solicitation of proxies by the Pioneer board for use at the Pioneer special meeting to consider and vote upon a proposal to approve the issuance of shares of Pioneer common stock in the mergers and other shares of Pioneer common stock reserved for issuance in connection with the mergers, in each case pursuant to the terms of the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus. Under the rules of the NYSE, a company listed on the NYSE is required to obtain stockholder approval prior to the issuance of common stock in any transaction or series of related transactions if the number of shares of common stock to be issued is equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock. If the mergers are completed, it is currently estimated that Pioneer will issue approximately 52 million shares of Pioneer common stock in connection with the mergers, which will exceed 20% of the shares of Pioneer common stock outstanding before such issuance and for this reason Pioneer must obtain the approval of Pioneer stockholders for that issuance.

In the event the Pioneer stock issuance proposal is approved by the Pioneer stockholders, but the merger agreement is terminated (without the mergers being completed) prior to the issuance of shares of Pioneer common stock pursuant to the merger agreement, Pioneer will not issue any shares of Pioneer common stock as a result of the approval of the Pioneer stock issuance proposal.

The Pioneer board has unanimously determined that the mergers and the other transactions contemplated by the merger agreement are in the best interests of, and are advisable to, Pioneer and the Pioneer stockholders, approved, adopted and declared advisable the merger agreement and the transactions contemplated thereby, and directed that the stock issuance be submitted to Pioneer stockholders for approval.

 

 

IF YOU ARE A PIONEER STOCKHOLDER, THE PIONEER BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PIONEER STOCK ISSUANCE PROPOSAL.

 

46


Table of Contents

PARSLEY SPECIAL MEETING

General

This joint proxy statement/prospectus is being provided to Parsley stockholders as part of a solicitation of proxies by the Parsley board for use at the Parsley special meeting and at any adjournments or postponements of such special meeting. This joint proxy statement/prospectus provides Parsley stockholders with important information about the Parsley special meeting and should be read carefully in its entirety.

Date, Time and Place of the Parsley Special Meeting

The Parsley special meeting will be a virtual meeting conducted exclusively via live webcast online at www.virtualshareholdermeeting.com/PE21SM starting at 9:00 a.m. Central Time (with log-in beginning at 8:45 a.m. Central Time) on January 12, 2021. Parsley stockholders will be able to attend the Parsley special meeting online and vote shares electronically at the meeting by going to www.virtualshareholdermeeting.com/PE21SM and entering the 16-digit control number included on the proxy card or voting instruction form you received. Because the Parsley special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.

Purposes of the Parsley Special Meeting

The Parsley special meeting is being held to consider and vote on the following proposals:

 

   

Parsley Merger Proposal: To approve and adopt the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and the transactions contemplated thereby (including the integrated mergers), pursuant to which, among other things, upon consummation of the mergers (i) each eligible share of Parsley Class A common stock will be converted automatically into the right to receive a number of shares of Pioneer common stock equal to the exchange ratio, with cash paid in lieu of any fractional shares of Pioneer common stock, if any, (ii) each eligible Parsley LLC unit will be converted into the right to receive a number of shares of Pioneer common stock equal to the exchange ratio, with cash paid in lieu of any fractional shares of Pioneer common stock, if any, and (iii) each share of Parsley Class B common stock will automatically be cancelled for no additional consideration.

 

   

Parsley Compensation Proposal: To approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Parsley’s NEOs that is based on or otherwise relates to the mergers, discussed in the section titled “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers”.

Recommendation of the Parsley Board

The Parsley board unanimously recommends that Parsley stockholders vote:

 

   

FOR” the Parsley merger proposal; and

 

   

FOR” the Parsley compensation proposal.

This joint proxy statement/prospectus contains important information regarding these proposals and factors that Parsley stockholders should consider when deciding how to cast their votes. Parsley stockholders are encouraged to read the entire document carefully, including the annexes to and documents incorporated by reference into this joint proxy statement/prospectus, for more detailed information regarding the merger agreement and the mergers.

The Parsley Compensation Proposal

In considering the recommendations of the Parsley board, Parsley stockholders should be aware that some of Parsley’s directors and executive officers have interests that are different from, or in addition to, the interests

 

47


Table of Contents

of Parsley stockholders more generally. For additional information, please see “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers.”

Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that Parsley provide its stockholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Parsley’s NEOs that is based on or otherwise relates to the mergers, as disclosed in this joint proxy statement/prospectus, including the compensation table and the related narrative NEO compensation disclosures set forth in “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers.” This vote is commonly referred to as a “say on golden parachute” vote. Accordingly, Parsley stockholders are being provided with the opportunity to cast an advisory (i.e., non-binding) vote on those change of control payments.

Parsley stockholders should note that the Parsley compensation proposal is merely an advisory vote that will not be binding on Parsley, Pioneer or their respective boards of directors. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the mergers are consummated, the eligibility of Parsley’s NEOs for such payments and benefits will not be affected by the advisory vote.

The vote on the Parsley compensation proposal is a vote separate and apart from the vote on the Parsley merger proposal. Accordingly, a Parsley stockholder may vote to approve one proposal and not the other. Because the vote on the Parsley compensation proposal is advisory in nature only, it will not be binding on Parsley or Pioneer, and the approval of the Parsley compensation proposal is not a condition to the completion of the mergers.

Voting by Directors and Executive Officers

As of November 30, 2020, Parsley directors and executive officers, and their affiliates, as a group, beneficially owned 100,960,573 shares of Parsley common stock, or approximately 24.5% of the issued and outstanding shares of Parsley common stock. Although none of them has entered into any agreement obligating them to do so as a director or executive officer of Parsley (other than Mr. Bryan Sheffield, Parsley’s Executive Chairman and Chairman of the Parsley board, pursuant to the Sheffield voting agreement and Mr. S. Wil VanLoh, Jr., who may be deemed to share voting and dispositive power over the Quantum voting agreement shares, pursuant to the Quantum voting agreement), Parsley currently expects that all of its directors and executive officers will vote their shares “FOR” the Parsley merger proposal and “FOR” the Parsley compensation proposal.

Voting and Support Agreement with Quantum

In connection with the execution of the merger agreement, Quantum entered into the Quantum voting agreement with respect to the Quantum voting agreement shares. As of November 30, 2020, Quantum held approximately 15.8% of the combined voting power of the issued and outstanding shares of Parsley common stock.

Pursuant to the Quantum voting agreement, Quantum has agreed to vote all of the Quantum voting agreement shares (i) in favor of the adoption of the merger agreement and the approval of any other matters necessary for consummation of the transactions contemplated by the merger agreement, including the mergers, subject to certain exceptions, and (ii) against specified actions that could reasonably be expected to impede, interfere with, delay, discourage, postpone or adversely affect the mergers or any other transaction contemplated by the merger agreement, including specified actions that contemplate alternative transactions. Under the Quantum voting agreement, Quantum has granted to Pioneer an irrevocable proxy to vote the Quantum voting agreement shares as provided above. Subject to certain exceptions, the Quantum voting agreement restricts Quantum from transferring Parsley common stock until the earlier of the termination of the Quantum voting agreement and the effective time.

 

48


Table of Contents

The Quantum voting agreement, including the irrevocable proxy granted thereunder, will terminate upon the date the merger agreement is validly terminated in accordance with its terms. The Quantum voting agreement is attached to this joint proxy statement/prospectus as Annex G.

Voting and Support Agreement with Bryan Sheffield

In connection with the execution of the merger agreement, Mr. Sheffield entered into the Sheffield voting agreement with respect to the Sheffield voting agreement shares. As of November 30, 2020, Mr. Sheffield beneficially owned approximately 7.6% of the combined voting power of the issued and outstanding shares of Parsley common stock.

Pursuant to the Sheffield voting agreement, Mr. Sheffield has agreed to vote all of the Sheffield voting agreement shares (i) in favor of the adoption of the merger agreement and the approval of any other matters necessary for consummation of the transactions contemplated by the merger agreement, including the mergers, subject to certain exceptions, and (ii) against specified actions that could reasonably be expected to impede, interfere with, delay, discourage, postpone or adversely affect the mergers or any other transaction contemplated by the merger agreement, including specified actions that contemplate alternative transactions. Under the Sheffield voting agreement, Mr. Sheffield has granted to Pioneer an irrevocable proxy to vote the Sheffield voting agreement shares as provided above. Subject to certain exceptions, the Sheffield voting agreement restricts Mr. Sheffield from transferring Parsley common stock or Parsley LLC units until the earlier of the termination of the Sheffield voting agreement and the effective time.

In addition, the Sheffield voting agreement contains a lock-up agreement providing that Mr. Sheffield may not, without Pioneer’s prior written consent, subject to limited exceptions, offer, sell, transfer or otherwise dispose of more than 15% of the shares of Pioneer common stock issued to Mr. Sheffield pursuant to the terms of the merger agreement for a period of 90 days following the closing date, or more than 30% of such shares for a period of 180 days following the closing date.

The Sheffield voting agreement, including the irrevocable proxy granted thereunder, will terminate upon the date the merger agreement is validly terminated in accordance with its terms. The Sheffield voting agreement is attached to this joint proxy statement/prospectus as Annex H.

Attendance at the Parsley Special Meeting

Only Parsley stockholders of record on the Parsley record date, beneficial owners of Parsley common stock on the Parsley record date and holders of valid proxies for the Parsley special meeting may attend the virtual Parsley special meeting. Participating stockholders who log-on to the meeting using his, her or its unique 16-digit control number will also be able to examine the stockholder list during the Parsley special meeting by following the instructions provided on the meeting website.

Submitting Questions for the Virtual Parsley Special Meeting

Parsley stockholders attending the virtual meeting will be in a listen-only mode and will not be able to speak during the webcast. However, in order to maintain the interactive nature of the virtual meeting, stockholders are able submit questions before the meeting at www.proxyvote.com.

Limitations on Submitting Questions for the Virtual Parsley Special Meeting

Parsley will answer questions during the Parsley special meeting that are relevant to meeting matters, comply with the meeting rules of conduct and have been submitted prior to the start of the Parsley special meeting, subject to time constraints. However, Parsley reserves the right to exclude questions that are not pertinent to meeting matters or to edit profanity or other inappropriate language. Each stockholder is limited to a

 

49


Table of Contents

total of one question that must be related to the business of the Parsley special meeting. Each question should cover only one topic and be as succinct as possible. If Parsley receives substantially similar questions, Parsley will group such questions together and provide a single response to avoid repetition. The questions of all Parsley stockholders are welcome. However, the purpose of the Parsley special meeting must be observed and questions that are not directly related to the business of Parsley or are not otherwise in good taste, related to personal grievances or otherwise inappropriate (as determined by the chairman of the meeting) will not be answered.

Record Date

The Parsley board has fixed the close of business on December 7, 2020 as the Parsley record date for the determination of the Parsley stockholders entitled to receive notice of, and to vote at, the Parsley special meeting. The Parsley stockholders of record on the Parsley record date are the only Parsley stockholders that are entitled to receive notice of, and to vote at, the Parsley special meeting or any adjournments or postponements of the Parsley special meeting.

Outstanding Shares as of Record Date and Voting Rights of Parsley Stockholders

As of November 30, 2020, there were 386,803,883 shares of Parsley Class A common stock and 26,062,891 shares of Parsley Class B common stock issued and outstanding, held by 58 and 23 holders of record, respectively. Each issued and outstanding share of Parsley common stock as of the record date entitles its holder of record to one vote on each matter to be considered at the Parsley special meeting. Parsley stockholders are entitled to vote on each proposal presented.

Stockholder List

A complete list of registered Parsley stockholders entitled to vote at the Parsley special meeting will be available for inspection at Parsley’s principal executive offices at 303 Colorado Street, Austin, Texas 78701, during ordinary business hours, for a period of no less than ten days before the Parsley special meeting and will be available during the virtual Parsley special meeting at www.virtualshareholdermeeting.com/PE21SM. If a Parsley stockholder wants to inspect the stockholder list, such stockholder should call Parsley’s Legal department at (512) 220-7102 to schedule an appointment or request access.

Quorum; Abstentions and Broker Non-Votes

In order for business to be conducted at the Parsley special meeting, a quorum must be present. A quorum at the Parsley special meeting requires the presence of the holders of a majority of the total issued and outstanding shares of Parsley common stock entitled to vote, present virtually or represented by proxy, at the Parsley special meeting. An abstention occurs when a stockholder is present for purposes of a quorum by virtually attending the Parsley special meeting and either does not vote or submits a ballot marked “abstain”. An abstention also occurs when a stockholder does not attend the meeting virtually and instead submits a proxy with an “abstain” instruction. Abstentions will be counted for purposes of determining whether there is a quorum at the Parsley special meeting. Because it is expected that all of the matters to be voted on at the Parsley special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your broker, bank or other nominee, your shares will not count towards determining whether a quorum is present and your shares will not be voted on the Parsley merger proposal or the Parsley compensation proposal.

Adjournment

If a quorum is not present or represented or if there are not sufficient votes for the approval of the merger proposal, Parsley expects that the Parsley special meeting will be adjourned by the chairman of the Parsley special meeting to solicit additional proxies. In addition, the holders of a majority of the shares represented at the

 

50


Table of Contents

Parsley special meeting may adjourn the meeting at any time and for any reason, whether or not a quorum is present. No notice of the reconvened meeting is required to be given if the date, time and place (including the means of remote communication) are announced at the Parsley special meeting unless the adjournment is for more than 30 days. At any reconvened Parsley special meeting at which a quorum is present, (i) any business may be transacted that may have been transacted at the Parsley special meeting had a quorum been present and (ii) all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Parsley special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

Vote Required

The votes required for each proposal are as follows:

 

   

Parsley Merger Proposal: The affirmative vote of the holders of a majority of the outstanding shares of Parsley common stock entitled to vote on the proposal is required to approve the Parsley merger proposal. Abstentions or failures to vote, either virtually or by proxy, at the Parsley special meeting will have the same effect as a vote “against” the Parsley merger proposal. Because the Parsley merger proposal is non-routine under NYSE rules, banks, brokers, and other nominees do not have discretionary authority to vote on the Parsley merger proposal and will not be able to vote on the Parsley merger proposal absent instructions from the beneficial owner. The failure of a beneficial owner to provide voting instructions to its bank, broker or other nominee will have the same effect as a vote “against” the Parsley merger proposal.

 

   

Parsley Compensation Proposal: The affirmative vote of the holders of a majority of the shares of Parsley common stock present virtually during the Parsley special meeting or represented by proxy at the Parsley special meeting and entitled to vote on the proposal is required to approve the Parsley compensation proposal. Abstentions are considered shares of Parsley common stock present and entitled to vote and will have the same effect as a vote “against” the Parsley compensation proposal. Failures to submit a proxy or failures to attend and vote, either virtually or by proxy, at the Parsley special meeting will have no effect on the outcome of the Parsley compensation proposal. Because the Parsley compensation proposal is non-routine under NYSE rules, banks, brokers, and other nominees do not have discretionary authority to vote on the Parsley compensation proposal and will not be able to vote on the Parsley compensation proposal absent instructions from the beneficial owner. The failure of a beneficial owner to provide voting instructions to its bank, broker or other nominee will have no effect on the outcome of the Parsley compensation proposal.

How to Vote

Parsley stockholders of record and beneficial owners of Parsley common stock on the Parsley record date may vote their shares of Parsley common stock by submitting a proxy or may vote virtually during the Parsley special meeting by following the instructions provided on the enclosed proxy card or voting instruction form received. Parsley recommends that Parsley stockholders entitled to vote submit a proxy prior to the Parsley special meeting even if they plan to attend the virtual Parsley special meeting.

Parsley stockholders are encouraged to submit a proxy promptly. Each valid proxy received in time will be voted at the Parsley special meeting according to the choice specified, if any. Executed but uninstructed proxies (i.e., proxies that are properly signed, dated and returned but are not marked to tell the proxies how to vote) will be voted in accordance with the recommendations of the Parsley board.

Record Holders

Parsley stockholders of record may vote in one of the following ways:

 

   

Internet: Parsley stockholders of record may submit their proxy over the internet at www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until

 

51


Table of Contents
 

10:59 p.m., Central Time, on January 11, 2021. Stockholders will be given an opportunity to confirm that their voting instructions have been properly recorded. Parsley stockholders who submit a proxy this way need not send in their proxy card.

 

   

Telephone: Parsley stockholders of record may submit their proxy by calling 1-800-690-6903. Telephone voting is available 24 hours a day and will be accessible until 10:59 p.m., Central Time, on January 11, 2021. Easy-to-follow voice prompts will guide stockholders through the voting and allow them to confirm that their instructions have been properly recorded. Parsley stockholders who submit a proxy this way need not send in their proxy card.

 

   

Mail: Parsley stockholders of record may submit their proxy by properly completing, signing, dating and mailing their proxy card or voting instruction form in the self-addressed, stamped envelope (if mailed in the United States) included with this joint proxy statement/prospectus. Parsley stockholders who vote this way should mail the proxy card early enough so that it is received prior to the closing of the polls at the Parsley special meeting.

 

   

Online During the Virtual Meeting: Parsley stockholders of record may attend the virtual Parsley special meeting by entering his, her or its unique 16-digit control number and vote online; attendance at the virtual Parsley special meeting will not, however, in and of itself constitute a vote or a revocation of a prior proxy.

Beneficial Owners

Parsley stockholders who hold their shares of Parsley common stock beneficially in “street name” and wish to submit a proxy must provide instructions to the bank, broker or other nominee that holds their shares of record as to how to vote their shares with respect to the Parsley merger proposal and the Parsley compensation proposal. Most beneficial owners will have a choice of voting before the Parsley special meeting by proxy over the internet, by telephone or by using a voting instruction form. Each beneficial owner of Parsley common stock should refer to the voting instruction form received to see what options are available and how to use them. Parsley stockholders who hold their shares of Parsley common stock beneficially and wish to vote virtually at the Parsley special meeting may do so by attending the special meeting, entering his, her or its unique 16-digit control number and voting their shares electronically; however attendance at the virtual Parsley special meeting will not, in and of itself, constitute a vote or a revocation of a prior proxy.

Proxies and Revocation

Parsley stockholders of record may revoke their proxies at any time before their shares of Parsley common stock are voted at the Parsley special meeting in any of the following ways:

 

   

delivering written notice of revocation of the proxy to Parsley’s corporate secretary at Parsley’s principal executive offices at 303 Colorado Street, Austin, Texas 78701, Attention: Corporate Secretary, by no later than 10:59 p.m. Central Time on January 11, 2021;

 

   

delivering another proxy with a later date to Parsley’s corporate secretary at Parsley’s principal executive offices at 303 Colorado Street, Austin, Texas 78701, Attention: Corporate Secretary, by no later than 10:59 p.m. Central Time on January 11, 2021 (in which case only the later-dated proxy is counted and the earlier proxy is revoked);

 

   

submitting another proxy via the internet or by telephone at a later date, by no later than 10:59 p.m. Central Time on January 11, 2021 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or

 

   

attending the Parsley special meeting virtually, using his, her or its unique 16-digit control number and voting their shares online during the meeting; attendance at the virtual Parsley special meeting will not,

 

52


Table of Contents
 

in and of itself, revoke a valid proxy that was previously delivered unless you give written notice of revocation to the Parsley corporate secretary before the proxy is exercised or unless you vote your shares online during the Parsley special meeting.

If a Parsley stockholder holds shares through a bank, broker or other nominee, such stockholder may change or revoke his, her or its voting instructions before the Parsley special meeting by providing instructions again through the means specified on his, her or its voting instruction form (with most having the option to do so by internet, telephone or mail), which must be received before 10:59 p.m. Central Time on January 11, 2021. Alternatively, a Parsley stockholder may also revoke their proxy by attending the Parsley special meeting virtually, using his, her or its unique 16-digit control number and voting his, her or its shares online during the meeting.

Solicitation of Proxies

Parsley will pay for the proxy solicitation costs related to the Parsley special meeting. In addition to sending and making available these materials, some of Parsley’s directors, officers and other employees may solicit proxies by contacting Parsley stockholders by telephone, by mail, by e-mail or online. Parsley stockholders may also be solicited by, among others, news releases issued by Parsley and/or Pioneer, postings on Parsley’s or Pioneer’s websites and social media accounts and advertisements in periodicals. None of Parsley’s directors, officers or employees will receive any extra compensation for their solicitation services. Parsley has also retained MacKenzie Partners, Inc. as its proxy solicitor to assist in the solicitation of proxies. For these proxy solicitation services, MacKenzie Partners, Inc. will receive an estimated fee of approximately $25,000, plus reasonable out-of-pocket expenses and fees for any additional services. Parsley will also reimburse banks, brokers, and other nominees for their expenses in sending proxy solicitation materials to the beneficial owners of shares of Parsley common stock and obtaining their proxies.

Other Matters

At this time, Parsley knows of no other matters to be submitted at the Parsley special meeting.

Questions and Additional Information

Parsley stockholders may contact Parsley’s proxy solicitor with any questions about the Parsley merger proposal, the Parsley compensation proposal or how to vote or to request additional copies of any materials at:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Banks and Brokers Call Collect: (212) 929-5500

All Others Call Toll-Free: (800) 322-2885

Email: proxy@mackenziepartners.com

 

53


Table of Contents

THE PARSLEY MERGER PROPOSAL

The Parsley board, after due and careful discussion and consideration, unanimously declared that the merger agreement and the transactions contemplated thereby (including the integrated mergers) were fair to, and in the best interests of, Parsley, the Parsley stockholders and the Parsley LLC unitholders and approved and declared advisable the merger agreement and the transactions contemplated thereby (including the integrated mergers).

The Parsley board accordingly unanimously recommends that Parsley stockholders vote “FOR” the proposal to approve and adopt the merger agreement and the transactions contemplated thereby (including the integrated mergers), as disclosed in this joint proxy statement/prospectus, particularly the related narrative disclosures in the sections of this joint proxy statement/prospectus titled “The Mergers” and “The Merger Agreement,” and as attached as Annex A to this joint proxy statement/prospectus.

The mergers cannot be completed without the affirmative vote of the holders of a majority of the outstanding shares of Parsley common stock entitled to vote thereon at the Parsley special meeting. Accordingly, a Parsley stockholder’s abstention from voting, a broker non-vote or the failure of a Parsley stockholder to attend the Parsley special meeting, virtually or by proxy, and vote will have the same effect as a vote “against” the Parsley merger proposal.

 

 

IF YOU ARE A PARSLEY STOCKHOLDER, THE PARSLEY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PARSLEY MERGER PROPOSAL.

 

54


Table of Contents

THE PARSLEY COMPENSATION PROPOSAL

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, Parsley is seeking non-binding advisory stockholder approval of the compensation of Parsley’s NEOs that is based on or otherwise relates to the mergers, as disclosed in the section of this joint proxy statement/prospectus titled “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers—Quantification of Potential Payments and Benefits to Parsley’s Named Executive Officers.” The proposal gives Parsley stockholders the opportunity to express their views on the merger-related compensation of Parsley’s NEOs.

Accordingly, the Parsley board unanimously recommends that Parsley stockholders vote “FOR” the adoption of the following resolution, on a non-binding, advisory basis:

“RESOLVED, that Parsley stockholders approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Parsley’s NEOs that is based on or otherwise relates to the mergers, as disclosed pursuant to Item 402(t) of Regulation S-K under the heading “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers” (which disclosure includes the compensation table and related narrative NEO compensation disclosures required pursuant to Item 402(t) of Regulation S-K).”

The vote on the Parsley compensation proposal is a vote separate and apart from the vote on the Parsley merger proposal. Accordingly, Parsley stockholders may vote to approve the Parsley merger proposal and vote not to approve the Parsley compensation proposal, and vice versa. If the mergers are completed, the merger-related compensation may be paid to Parsley’s NEOs to the extent payable in accordance with the terms of the compensation agreements and arrangements even if the Parsley stockholders fail to approve the Parsley compensation proposal.

Assuming a quorum is present at the Parsley special meeting, approval of the Parsley compensation proposal requires the affirmative vote of the holders of a majority of the shares of Parsley common stock present virtually during the Parsley special meeting or represented by proxy at the Parsley special meeting and entitled to vote thereon. Accordingly, a Parsley stockholder’s abstention from voting will have the same effect as a vote “against” the Parsley compensation proposal, while a broker non-vote or the failure of a Parsley stockholder to attend the Parsley special meeting, virtually or by proxy, and vote will not count as votes cast and will have no effect on the outcome of the Parsley compensation proposal.

 

 

IF YOU ARE A PARSLEY STOCKHOLDER, THE PARSLEY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PARSLEY COMPENSATION PROPOSAL.

 

55


Table of Contents

THE MERGERS

This section of the joint proxy statement/prospectus describes the material aspects of the proposed mergers. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus, including the full text of the merger agreement, a copy of which is attached to this joint proxy statement/prospectus as Annex A, for a more complete understanding of the proposed mergers and the transactions related thereto. In addition, important business and financial information about each of Pioneer and Parsley is included in or incorporated by reference into this joint proxy statement/prospectus. Please see “Where You Can Find More Information.”

Background of the Mergers

The Parsley board, together with Parsley senior management, regularly reviews and assesses Parsley’s performance, strategy, financial position and leverage, opportunities and risks in light of current business and economic conditions, and developments in the oil and gas exploration and production sector, in each case across a range of scenarios and potential future industry developments.

The Pioneer board and Pioneer senior management regularly review and evaluate Pioneer’s long-term strategic plans and goals, opportunities, overall industry trends and Pioneer’s operations, with a focus on growing free cash flow and returning capital to stockholders. In connection with such ongoing reviews and evaluations, Pioneer senior management engages in discussions with representatives of other exploration and production companies from time to time. In connection with these activities, the Pioneer board meets periodically in the ordinary course of business to receive updates from Pioneer senior management on such discussions and to consider and evaluate potential strategic alternatives available to Pioneer, including merger and acquisition transactions. Over the past several years, Pioneer has not executed, and has not been requested to execute, any confidentiality or similar agreement or exchanged confidential information with respect to a sale of Pioneer, nor has Pioneer received any proposals containing economic terms associated with any such sale.

On January 10, 2020, through a series of transactions, Parsley acquired Jagged Peak, a Delaware corporation that previously traded on the NYSE under the symbol “JAG”, pursuant to the Agreement and Plan of Merger, dated as of October 14, 2019, among Parsley, Jackal Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parsley, and Jagged Peak (the “Jagged Peak acquisition”). Upon closing of the Jagged Peak acquisition, the Parsley board was increased by two members, and each of James J. Kleckner and S. Wil VanLoh, Jr. (Founder and Chief Executive Officer of Quantum Energy Partners) was appointed to the Parsley board. Following the completion of the Jagged Peak acquisition, Quantum became Parsley’s largest stockholder.

In connection with its continued regular reviews of outlook and strategy, the Parsley board, together with Parsley senior management, regularly discusses likely key drivers of stockholder value creation and positive stock price performance for Parsley as a publicly-traded company operating in a sector facing increasingly negative investor sentiment, due to, among other things, sector financial underperformance, commodity price volatility and the impact of increased investor focus on environmental, social and governance matters. The Parsley board noted in these discussions that investors have increasingly favored companies with large market capitalizations that have the ability to maintain strong balance sheets across commodity price cycles, generate free cash flow and return capital to stockholders, either in the form of dividends or share repurchases.

Investors’ focus on scale, strong balance sheets and the ability of issuers to return capital to stockholders was further accelerated and heightened in March 2020, when the global response to COVID-19, together with periods of increased production from foreign oil producers (most notably Saudi Arabia and Russia), resulted in steep declines in the prices of oil and NGL and severe temporary storage shortages, negatively impacting oil and gas producers located in the United States, including Parsley. In response to these events and an increased focus

 

56


Table of Contents

on risk management strategies, Parsley announced, in a series of press releases on March 13, 2020 and March 18, 2020, among other things, a restructuring of 2020 and 2021 oil swaps to provide incremental downside protection in the event of sustained low commodity prices during those years, a 40% reduction in its capital budget for 2020 and temporary 50% reductions in cash compensation for executive officers. These actions were designed to bolster Parsley’s ability to generate free cash flow, maintain its dividend and avoid incurring additional leverage.

With this backdrop, on April 21, 2020, the Parsley board at a regularly scheduled board meeting met with representatives of Parsley senior management to discuss the ongoing pandemic and market disruptions, as well as Parsley’s responsive actions to date, and Parsley’s performance, strategy, financial position and opportunities in the current market environment, including the exploration of opportunities to combine with a potential merger partner to achieve benefits of scale and efficiency. In addition, the Parsley board and Parsley senior management discussed other options that could be available to raise additional capital through conventional and alternative financing transactions, asset sales or asset monetizations. In anticipation of discussing this agenda item with the Parsley board, Parsley senior management requested that Credit Suisse review then-current market conditions, investor sentiment, historical industry trading multiples and certain considerations that the Parsley board may want to assess when considering a strategic combination, including an overview of possible counterparties. As part of this discussion, the Parsley board discussed its perspective on strategic objectives and key investment metrics that were likely to enhance investor interest in the industry in general and Parsley in particular. The Parsley board identified high quality assets in a basin that occupied a lower position on the global cost curve, low break-even inventory, the ability to generate sustainable free cash flow through the commodity price cycle with modest production growth, low leverage, a market capitalization greater than $10 billion, a low cost of capital and a strong operational track record as characteristics that would be attractive to investors. The Parsley board noted that Parsley possessed a number of these characteristics and discussed Parsley’s ability, and the timeline for Parsley, to achieve others that it did not currently possess on a stand-alone basis, such as an industry leading cost of capital, a lower debt to EBITDA leverage ratio and a market capitalization of greater than $10 billion. The Parsley board also discussed the divergence in trading multiples for companies that possessed these characteristics versus those that did not.

The Parsley board noted that Parsley senior management’s actions in response to the price war and COVID-19 had positioned Parsley to withstand an extended downturn and generate free cash flow despite challenging market conditions, but acknowledged that significant downside risk remained. The Parsley board discussed with Parsley senior management the potential benefits and drawbacks of pursuing a strategic combination, including the potential benefits to Parsley’s stockholders if Parsley were to combine in an all-stock transaction to form a company with a lower cost of capital, lower leverage and larger market capitalization than Parsley on a stand-alone basis. The Parsley board discussed with management a number of possible counterparties for a strategic combination and the respective trade-offs associated with each of these counterparties, with the Parsley board generally viewing high quality assets and inventory, balance sheet strength/access to capital and geographic overlap as important characteristics of a potential merger counterparty. The Parsley board requested that Parsley senior management continue to evaluate the possibility of a strategic combination and identify potential counterparties for further discussion after Parsley’s annual meeting of stockholders on May 21, 2020. In addition, the Parsley board requested that Parsley senior management evaluate the potential benefits of alternative financing transactions, including the monetization of Parsley’s fresh water and produced water assets.

In the weeks following the April 21, 2020 board meeting, Parsley senior management contacted its outside counsel at Vinson & Elkins regarding Vinson & Elkins’ representation of Parsley with respect to its exploration of strategic alternatives.

Over the course of the next several weeks, senior management of Parsley continued to evaluate the possibility of a strategic combination and, after considering the input from the Parsley board at the April 21, 2020 meeting, and subsequent discussions with Mr. Wil VanLoh, Jr., Mr. Bryan Sheffield and Mr. A.R. Alameddine, Parsley’s lead director, determined to recommend to the Parsley board that Parsley contact six potentially

 

57


Table of Contents

attractive merger counterparties (all of which satisfied some or all of the criteria noted above): Company A and Company B, each of which is an integrated major oil and gas company, Company C, Company D and Company E, each of which is a large, independent oil and gas company, and Pioneer. In a series of conversations with individual Parsley board members, Parsley senior management confirmed the support of the Parsley board to ascertain the potential level of interest of each counterparty in a potential combination prior to the May 21, 2020 annual meeting of Parsley stockholders.

Also during late April and early May, Parsley senior management, acting at the direction of the Parsley board given at the April 21, 2020 meeting, re-engaged with Bank of Montreal to advise Parsley on the monetization of a minority interest in Parsley’s fresh water and produced water assets, including a review of potential counterparties and financial analysis of potential transaction terms, pursuant to an engagement letter originally entered into by Parsley and Bank of Montreal on July 24, 2019.

On May 15, 2020, Matt Gallagher, the President and Chief Executive Officer of Parsley, contacted a representative of Company C and Mr. Scott Sheffield, President and Chief Executive Officer of Pioneer, to inquire as to whether either company would be interested in evaluating a combination with Parsley.

Later that week, Mr. Bryan Sheffield and Mr. Scott Sheffield discussed market conditions and industry consolidation in general. During the course of this general discussion, they discussed potential candidates for industry consolidation, including Company C, and the possibility of a three-party combination with Company C.

Mr. Scott Sheffield then discussed with Messrs. Mark Berg, Executive Vice President, Corporate Operations of Pioneer, and Rich Dealy, Executive Vice President and Chief Financial Officer of Pioneer, whether to contact Company C regarding a potential three-party combination with Parsley and Pioneer. Although not known to Parsley, from time to time over several years, representatives of Pioneer and Company C had discussed the possibility of a business combination, most recently at a series of meetings held between senior management of both companies between November 2019 and January 2020. Similarly, from time to time over several years, Parsley had evaluated the possibility of a combination with Company C.

On May 18, 2020, after indicating preliminary interest in exploring a combination with Parsley, Pioneer executed a mutual confidentiality agreement with Parsley. In addition, Messrs. Berg and Dealy informed Mr. Gallagher that Mr. Scott Sheffield would not participate in any substantive negotiations of any potential combination with Parsley, given the fact that Mr. Bryan Sheffield, Mr. Scott Sheffield’s son, was the Executive Chairman of the Parsley board and the second largest stockholder of Parsley, owning approximately 7.8% of the company. Through the course of discussions on May 18 and May 19, 2020, and after receiving input from their respective legal advisors, Messrs. Gallagher, Berg and Dealy agreed that neither Mr. Scott Sheffield nor Mr. Bryan Sheffield would participate in any substantive discussions or negotiations between the companies related to a potential combination of their respective companies and that each company would direct its representatives to communicate with the other company accordingly.

Mr. Bryan Sheffield and Mr. Gallagher determined to share responsibilities for contacting the other potential merger counterparties identified by the Parsley board based on their existing relationships with representatives of each company. On May 19, 2020, Mr. Bryan Sheffield contacted representatives of each of Company B and Company D and Mr. Gallagher contacted a representative of Company A to discuss whether such companies may have interest in evaluating a strategic combination with Parsley. During these initial conversations, a representative of Company B indicated the company might be interested in an all-stock combination, but only one that was completed with no premium received by Parsley stockholders, and a representative of Company D also indicated that while they would evaluate a potential combination, any combination would also have to be at no premium. The representative of Company A indicated he would review the matter internally and follow up in a couple of weeks. Mr. Bryan Sheffield requested that the representatives of each of Company B and Company D communicate with Mr. Gallagher if they later determined to pursue a strategic combination.

 

58


Table of Contents

Also, on May 19, 2020, the Chief Executive Officer of Company C requested an in-person meeting with Mr. Gallagher to further discuss a potential combination of Parsley and Company C.

On May 21, 2020, at a regularly scheduled meeting of the Pioneer board, Mr. Dealy and Mr. Christopher Paulsen, Vice President, Business Development, of Pioneer, presented on the potential combination between Pioneer and Parsley as an opportunity to acquire synergistic acreage and production in a transaction that would be highly accretive to cash flows, provide the combined company with a scale advantage relative to its peers and result in strong operational synergies due to, among other things, reduced facilities, capital and operating expenses. Pioneer senior management also outlined the procedural protections agreed to between Pioneer and Parsley (including that Mr. Scott Sheffield and Mr. Bryan Sheffield would not be involved in substantive discussions and negotiations between the companies) and confirmed that Mr. Scott Sheffield would serve only in an advisory capacity to Pioneer senior management in connection with the potential combination. The Pioneer board authorized Pioneer senior management (excluding Mr. Scott Sheffield) to continue working with Parsley to refine the financial analyses regarding the potential combination in advance of presenting any recommendation to proceed to the Pioneer board at a future meeting.

Also on May 21, 2020, the Parsley board convened a special board meeting following Parsley’s regularly scheduled annual meeting of stockholders. During such meeting, senior management of Parsley reviewed with the Parsley directors the company’s updated long-term financial forecasts, utilizing a variety of commodity price cases, and the Parsley board discussed the prospects of Parsley on a stand-alone basis, particularly given the consensus amongst the members of the Parsley board that there was a significant chance of an extended period of low commodity prices over the coming years. In addition, senior management of Parsley provided an update on its outreach to potential transaction counterparties, including advising the Parsley board of the initial outreach to Pioneer, Company A, Company B, Company C and Company D. Mr. VanLoh also reported to the Parsley board that, consistent with prior discussions, he intended to contact a representative of Company E to solicit interest in a potential strategic combination and direct Company E’s representatives to contact Mr. Gallagher for any follow-up discussions. Mr. Gallagher also provided the Parsley board with an update on the initial due diligence discussions with Pioneer, which were focused on potential synergies, and discussed with the Parsley board the procedural protections that Pioneer and Parsley had agreed to implement to limit the role of Mr. Scott Sheffield and Mr. Bryan Sheffield in substantive discussions and negotiations between the companies, given their familial relationship, and the Parsley board indicated its support for this approach.

Following the update on process to date, the Parsley board, together with Parsley senior management, discussed the potential benefits of a strategic combination compared to Parsley’s continued operation as a stand-alone company, as well as the likely benefits and drawbacks of a combination with each of the identified potential counterparties, and the likely willingness and ability of each potential counterparty to consummate a transaction. The Parsley board’s discussion was aided by certain information Credit Suisse had reviewed with Parsley management, including information covering the current mergers and acquisitions environment and an overview of several potential acquirers. The Parsley board discussed its views that some of the key benefits to be derived from a merger were consolidating into a larger company with a stronger balance sheet, lower cost of capital and enhanced ability to return capital to investors, while some of the key risks of a merger were transacting at a time of depressed equity values and the possible dilution of Parsley’s high quality, pure-play Permian acreage. Given these benefits and risks, the Parsley board generally agreed that the ideal combination would be structured as a stock-for-stock merger with another company with a significant Permian presence and strong balance sheet, in a transaction that would permit Parsley stockholders to benefit from ownership in a more attractive equity security and the synergies and growth of the pro forma company. The Parsley board also generally agreed that continuing to evaluate a potential combination was in the best interest of Parsley and its stockholders, given the identified challenges facing Parsley on a stand-alone basis. At the conclusion of the discussion, the Parsley board authorized senior management to continue discussions with the identified potential counterparties regarding a potential combination. In addition, the Parsley board requested that senior management of Parsley continue to work in parallel with the Bank of Montreal to identify opportunities to monetize a minority interest in Parsley’s water assets through a competitive bid process.

 

59


Table of Contents

Following the meeting of the Parsley board on May 21, 2020, Mr. VanLoh contacted a representative of Company E to inquire if the company had an interest in evaluating a strategic combination with Parsley. The representative of Company E indicated that they would evaluate and respond within a week or so.

On May 28, 2020, Messrs. Gallagher and Colin Roberts, Executive Vice President and General Counsel of Parsley, met with representatives of Company C to discuss a potential combination of Parsley and Company C. During these discussions, the representatives of Company C did not propose economic terms of a proposed combination but indicated that Company C would evaluate a potential combination and respond in a timely manner to Mr. Gallagher.

Also on May 28, 2020, Mr. Gallagher spoke to a representative of Company B to discuss a potential combination. During that discussion, the Company B representative indicated that Company B would be interested in pursuing a no-premium, all-stock combination and could move quickly towards a transaction on those terms. Following the discussion, Mr. Gallagher updated Mr. Alameddine.

On May 30, 2020, Mr. Gallagher contacted Mr. Scott Sheffield at Pioneer to advise him that Parsley had received an indication of interest from a third party (Company B) regarding a combination, and that if Parsley elected to move forward with the transaction, it would likely move very quickly. Mr. Scott Sheffield indicated that he would inform Messrs. Berg and Dealy of Mr. Gallagher’s message.

On June 1, 2020, Messrs. Berg and Dealy contacted Mr. Gallagher and advised him that, due to certain factors, including the significant macroeconomic uncertainty around oil demand and Parsley’s relatively high debt burden, and in light of the timeframe proposed, Pioneer was unwilling to pursue a combination with Parsley at that time.

Also on June 1, 2020, a representative of Company E contacted Mr. VanLoh and advised him that, after evaluating a potential combination with Parsley, Company E had determined that they were not interested in pursuing a potential transaction with Parsley.

Also during the week of June 1, 2020, representatives from Company C followed up with Mr. Gallagher to communicate that they had determined not to pursue a possible combination with Parsley at that time, but that they might be interested in pursuing a combination in 2021.

On June 5, 2020, Messrs. Gallagher and Roberts met with a representative of Company B. At that meeting, the Company B representative reaffirmed Company B’s interest in a no-premium, all-stock combination, and advised that Company B was not interested in participating in a formal marketing process through an investment bank, and therefore would like Parsley to sign an exclusivity agreement. Mr. Gallagher advised the Company B representative that he thought the Parsley board would be unlikely to grant exclusivity without some indication of a premium.

On June 6, 2020, Mr. Scott Sheffield discussed with Mr. Ken Thompson, Chairman of the Pioneer board, a potential three-party combination with Parsley and Company F, an independent oil and gas company.

On or around the same day, Mr. Bryan Sheffield and Mr. Scott Sheffield discussed market conditions and industry consolidation in general. During the course of the general discussion, they discussed potential candidates for industry consolidation such as Company G, a large, independent oil and gas company, and they discussed the possibility of a three-party combination with Company G. Although not known to each other, from time to time over several years, each of Pioneer and Parsley had evaluated the possibility of a combination with Company G and had independently discussed the possibility of such a combination with representatives of Company G.

On June 8, 2020, Messrs. Berg and Dealy contacted Mr. Gallagher and suggested that Parsley consider a three-party combination involving either Parsley, Pioneer and Company F or Parsley, Pioneer and Company G. Mr. Gallagher indicated that if Pioneer made a proposal of this nature, Mr. Gallagher would take such proposal to the Parsley board for consideration.

 

60


Table of Contents

On June 9, 2020, a representative of Company A contacted Mr. Gallagher and informed him that, after evaluating a potential combination with Parsley, Company A would not make a proposal regarding a combination at that time.

On June 10, 2020, Mr. Bryan Sheffield contacted a representative of Company G to ascertain whether Company G had any interest in pursuing a strategic combination with Parsley.

On June 11, 2020, Mr. Scott Sheffield contacted a representative of Company F to discuss Company F’s potential interest in a three-party combination with Parsley and Pioneer. On the same day, a representative of Company B contacted Mr. Gallagher to further stress the importance of exclusivity to Company B and reaffirm Company B’s interest in a possible combination with Parsley on a no or low premium basis. Also on June 11, 2020, Mr. Berg contacted Mr. Gallagher and indicated that Pioneer had engaged in productive discussions with Company F, which was open to considering the possibility of a three-party combination. Mr. Gallagher indicated that he would present any formal proposal to the Parsley board for consideration.

On June 12, 2020, Mr. Scott Sheffield contacted Mr. Alameddine to discuss Mr. Scott Sheffield’s discussions with Company F and the ongoing discussions with Parsley generally. Mr. Scott Sheffield indicated that Messrs. Berg and Dealy would lead any aspect of the negotiations involving Parsley.

Also on June 12, 2020, the Parsley board met to receive an update from Parsley senior management on ongoing discussions regarding a potential strategic combination, including the potential three-party combination involving Pioneer and Company F and discussions with Company B regarding a potential combination. Parsley management also advised the Parsley board that its outreach to Company A, Company C, Company D, Company E and Company G had not resulted in any indications of interest from those parties in pursuing a combination at this time. The Parsley board discussed each of Company B and the potential three-party combination with Pioneer and Company F, and authorized Mr. Gallagher to continue discussions for each prospective transaction, but instructed him that that a no-premium to single digit premium combination would not be attractive. In addition, the Parsley board authorized Mr. Alameddine, Mr. VanLoh, Mr. Bryan Sheffield and Mr. Gallagher, as a small committee, to evaluate any formal proposals to ensure that the terms justified consideration of the full board.

Following the Parsley board meeting, Mr. Gallagher called Mr. Berg to advise him that the Parsley board was evaluating whether to grant exclusivity to another potential counterparty, and thus Pioneer should move quickly to make a formal proposal. Mr. Gallagher emphasized that the Parsley board was not likely to accept a proposal that did not include an appropriate premium reflecting Parsley’s contribution to the pro forma company. Following such call, Messrs. Berg, Dealy and Scott Sheffield updated Mr. Thompson on Mr. Berg’s discussions with Mr. Gallagher and determined to call a meeting of the Pioneer board to discuss a potential three-party combination with Parsley and Company F.

On June 13, 2020, Mr. Berg contacted Mr. Gallagher to inform him that, following a meeting on that date of the Pioneer management committee, comprised of Messrs. Scott Sheffield, Berg, Dealy and several other members of Pioneer senior management, the management committee determined to support Pioneer’s continued pursuit of a three-party combination with Parsley and Company F.

On June 15, 2020, the Pioneer board held a meeting at which Pioneer senior management provided an overview of its evaluation of potential strategic initiatives available to Pioneer, including an analysis of the potential strengths, weaknesses, opportunities and threats in connection with pursuing a three-party combination involving Parsley and Company F. Pioneer senior management also provided an update on discussions held with representatives of Parsley and Company F regarding the potential transaction and remaining key due diligence items. The Pioneer board also discussed, together with Morris, Nichols, Arsht & Tunnell LLP, Pioneer’s Delaware legal advisor (“Morris Nichols”), the appropriate procedural protections related to Mr. Scott Sheffield’s involvement in any potential combination involving Parsley in light of the familial relationship. In

 

61


Table of Contents

particular, these procedural protections included restrictions on Mr. Scott Sheffield’s participation in substantive negotiations with Parsley and the recusal of Mr. Scott Sheffield from any deliberations of Pioneer’s disinterested directors meeting in executive session regarding a potential combination with Parsley. At the conclusion of the meeting, the Pioneer board indicated its support of Pioneer senior management conducting further due diligence on Parsley and Company F in order to provide the Board with a recommendation as to whether Pioneer should proceed with negotiating a potential three-party combination, and the Pioneer board approved Mr. Scott Sheffield’s leading the negotiations with Company F.

During its initial evaluation of a potential three-party combination with Parsley and Company F, Pioneer was advised by Goldman Sachs and The Klein Group LLC.

Also on June 15, 2020, Mr. Gallagher contacted a representative of Company B to advise him that the Parsley board was not willing to grant exclusivity at this time based on the Company B proposal.

Over the next several weeks, each of Parsley, Pioneer and Company F continued to explore the potential three-party combination, including conducting diligence on each other’s assets and operations and potential synergies.

On June 18, 2020, Messrs. Gallagher and Alameddine of Parsley had a call with Messrs. Berg, Dealy and Thompson to discuss and reconfirm each side’s agreement with respect to the recusal of each of Mr. Scott Sheffield and Mr. Bryan Sheffield from substantive discussions and negotiations between Pioneer and Parsley. Mr. Scott Sheffield also contacted Mr. Bryan Sheffield on that date to reconfirm such arrangement.

On June 19, 2020, Pioneer and Parsley entered into a second mutual confidentiality agreement that superseded the May 18, 2020 agreement, and which contained mutual customary standstill obligations in favor of each party, subject to the ability to privately communicate with the other party’s board of directors in a manner that would not be reasonably likely to place either party under a legal obligation to make a public announcement. The confidentiality agreement also contained a “fall away” provision rendering the standstill obligations inapplicable upon certain events related to a change of control transaction involving the other party. Each of Parsley and Pioneer also entered into separate confidentiality agreements with Company F with respect to a potential three-party combination on substantially the same terms.

On June 19, 2020, Pioneer engaged Gibson, Dunn & Crutcher LLP (“Gibson Dunn”) to represent Pioneer in connection with a possible combination involving Parsley and Company F.

On June 24, 2020, a representative of Company G contacted Mr. Bryan Sheffield and informed him that Company G was not interested in a potential combination with Parsley at that time.

On June 29, 2020, at a meeting of the Pioneer board, Pioneer senior management provided the Pioneer board with an update on the ongoing discussions with Parsley and Company F.

On July 20, 2020, Parsley and Bank of Montreal amended their July 24, 2019 engagement letter to reflect the current anticipated structure, fees and advisory services to be provided by Bank of Montreal with respect to a potential monetization of a minority interest in Parsley’s water assets.

On July 21, 2020, Mr. Gallagher, Mr. Ryan Dalton, Executive Vice President–Chief Financial Officer of Parsley, and Mr. VanLoh met with Messrs. Dealy, Berg and Scott Sheffield of Pioneer, as well as representatives of Company F, to discuss potential economics for a three-party combination. During the course of these discussions, representatives of Pioneer and Company F indicated that they had been working under the assumption that Parsley stockholders would receive an approximate 5% to 10% premium, though that premium was potentially under pressure due to the recent runup in the price of Parsley Class A common stock compared to the price performance of Pioneer common stock. On July 20, 2020, the closing price of Parsley Class A common stock was $10.66 per share, compared to $96.91 per share for Pioneer common stock, implying a 0.1099 exchange ratio assuming a no-premium transaction, and an exchange ratio range of 0.1154 to 0.1209 assuming a 5% to 10% premium range. The representatives of Parsley indicated that they believed a transaction on such terms would undervalue Parsley’s contributions to the combined company, but indicated they would discuss such potential transaction with senior management of Parsley and the Parsley board.

 

62


Table of Contents

That same afternoon, Messrs. Gallagher and VanLoh reconvened with Messrs. Bryan Sheffield and Alameddine to discuss the terms of the combination that had been proposed at the meeting earlier that day. After the discussion, Messrs. Gallagher, Alameddine, VanLoh and Bryan Sheffield agreed that, based on the Parsley board’s previous instructions regarding a no to single-digit premium proposal, the proposed terms were not attractive enough to warrant any further discussions regarding the potential combination. Later that night, Mr. Gallagher informed Mr. Dealy that Parsley was no longer interested in pursuing a three-party combination, given the proposed terms. Mr. Gallagher reiterated that Parsley was seeking a premium in the three-party combination in excess of 20%.

Following their call with Mr. Gallagher, Messrs. Dealy and Berg determined to stop work on the potential three-party combination and communicated the same to the Pioneer board. Mr. Scott Sheffield separately communicated this determination to representatives of Company F. At a meeting of the Pioneer board held on July 31, 2020, Pioneer senior management updated the Pioneer board on, among other things, the conclusion of discussions regarding the potential three-party combination.

On August 4, 2020, at a regularly scheduled meeting of the Parsley board, Mr. Gallagher recapped the history of negotiations with the prospective counterparties, including the unsuccessful negotiation to enter into a three-party combination with Pioneer and Company F due to the lack of an appropriate premium for Parsley stockholders. The Parsley board discussed market conditions and reiterated its strategic goals of lowering leverage, generating sustainable free cash flow and moderate growth through cycles and achieving greater market capitalization and operational scale.

On August 11, 2020, Mr. Scott Sheffield had separate discussions with representatives of Company C and Company G regarding potential combinations, including the possibility of a three-party combination involving such company, Pioneer and either Parsley or Company F.

On August 19, 2020, at a regularly scheduled meeting of the Pioneer board, Mr. Dealy provided an overview of Pioneer’s strategic initiatives, and the Pioneer board discussed Pioneer’s competitive position, opportunities, prospects and long-term strategy, including the options of continuing to operate as a stand-alone company or acquiring additional assets in the Permian Basin. Pioneer senior management discussed with the Pioneer board the merits of adding scale in the Permian Basin, including the addition of inventory at attractive valuations, improved cash flow and free cash flow generation, continued levels of low leverage and the ability for Pioneer to enhance its investment thesis.

On August 20, 2020, Mr. Gallagher contacted Mr. Scott Sheffield to express his disappointment that the parties’ discussions regarding a potential combination had failed and to highlight some of the potential benefits of a merger between the parties. Mr. Gallagher advised Mr. Scott Sheffield regarding Parsley’s view that a combination of Parsley and Pioneer would result in significantly greater synergies than Pioneer was assuming, including through the refinancing of Parsley’s indebtedness on more attractive terms. Mr. Scott Sheffield suggested that Mr. Gallagher review the synergies discussion with Mr. Dealy, and such a review took place on August 28, 2020.

Over the next several weeks, senior management of Parsley and Pioneer continued to analyze potential synergies related to a transaction and to conduct other due diligence, including in respect of Parsley’s debt and other items that might result in potential synergies achievable through a potential combination.

On September 5, 2020, Mr. Scott Sheffield called Mr. Alameddine, who expressed a continued belief in Parsley’s status as an attractive acquisition target and indicated that the company had received strong expressions of interest from a third party. Mr. Alameddine communicated his belief that the Parsley board would be willing to recommence discussions at a range of 15% to 20% or potentially higher premium, and Messrs. Scott Sheffield and Alameddine moved to schedule a call between the parties’ senior management. Mr. Scott Sheffield informed Mr. Thompson of his conversation with Mr. Alameddine the following day.

 

63


Table of Contents

On September 14, 2020, the Pioneer board held a meeting, during which representatives of Pioneer senior management provided an update on a potential business combination with Parsley and discussed investor materials recently made publicly available by Parsley. In addition, the Pioneer board discussed with representatives of Morris Nichols recent developments and communications regarding the potential combination with Parsley.

On September 16, 2020, Messrs. Berg and Dealy had a call with Mr. Gallagher, during which they discussed the Pioneer board’s process with respect to evaluating a potential combination with Parsley. On the same day, Mr. Thompson had a call with Mr. Alameddine, during which Mr. Thompson provided an update on the Pioneer board’s process and Mr. Alameddine discussed the Parsley board’s expectations regarding the receipt of a premium in any potential combination within the range of 15% to 20% and potentially higher.

On September 21, 2020, the Parsley board met to review the possible sale of a minority equity interest in Parsley’s fresh water and produced water assets. The Parsley board discussed the strategic rationale for the proposed transaction, and senior management reported that they had selected a preferred counterparty and reviewed with the Parsley board the material terms of the proposed transaction. The Parsley board authorized senior management to continue negotiations with the prospective counterparty and requested a follow-up call to discuss progress.

On September 23, 2020, Mr. Bryan Sheffield contacted a representative of Company B to discuss market conditions and industry consolidation in general. He discussed Parsley’s assets and other characteristics and expressed his belief that Parsley’s stockholders should receive a premium should the company be acquired.

On September 28, 2020, the Parsley board met to further discuss a possible sale of a minority equity interest in Parsley’s water assets. After further discussion regarding the material terms of and strategic rationale for the proposed transaction, the Parsley board authorized senior management to finalize the legal agreements and approved the transaction, contingent upon the counterparty agreeing to make certain concessions on the financial terms.

On October 1, 2020, the Pioneer board met to discuss, among other things, the ongoing review by Pioneer’s management committee of strategic initiatives available to Pioneer. At such meeting, Pioneer senior management discussed with the Pioneer board the strengths and weaknesses of pursuing a stand-alone plan focused on maintaining Pioneer’s pure-play Permian strategy and exploiting Pioneer’s existing assets compared with near-term opportunities relating to acquiring the assets of others that would be accretive to cash flow and free cash flow and further improve its investment thesis. Pioneer senior management also discussed with the Pioneer board other strategic initiatives, including a possible sale of Pioneer. Following Pioneer senior management’s discussion of strategic initiatives, representatives of Goldman Sachs reviewed historical premia paid in precedent transactions based on publicly available information. The Pioneer board also discussed with Pioneer senior management, Gibson Dunn and Morris Nichols the procedural protections restricting the involvement of Mr. Scott Sheffield in substantive discussions and negotiations with Parsley and the recusal of Mr. Scott Sheffield and Mr. Phillip Gobe from the discussions and deliberations by Pioneer’s disinterested directors meeting in executive session regarding the potential combination with Parsley. The Pioneer board and Mr. Scott Sheffield determined that Mr. Scott Sheffield should continue to recuse himself from substantive discussions and negotiations with Parsley and also from deliberations of Pioneer’s disinterested directors regarding a potential combination with Parsley, due to his familial relationship with Mr. Bryan Sheffield. In addition, the Pioneer board and Mr. Gobe determined that Mr. Gobe should recuse himself from such discussions and deliberations due to his position as Chairman and Chief Executive Officer of ProPetro Holding Corp., which has a significant business relationship with Pioneer that could materially benefit from a combination with Parsley. At each subsequent meeting of the Pioneer board, during executive sessions of Pioneer’s disinterested directors, Messrs. Scott Sheffield and Gobe recused themselves from the discussion and deliberations with respect to the proposed combination with Parsley.

 

64


Table of Contents

On October 4, 2020, the Pioneer board met to further discuss the opportunity of a potential combination of Pioneer and Parsley. Pioneer senior management and representatives of Goldman Sachs, Gibson Dunn and Morris Nichols were also present at the meeting. Goldman Sachs reviewed a preliminary financial analysis with respect to a potential business combination with Parsley. Gibson Dunn and Morris Nichols then provided the Pioneer board with an overview of their fiduciary duties with respect to the evaluation of a potential combination with Parsley, after which Gibson Dunn reviewed the key terms of the draft merger agreement to be proposed to Parsley in connection with the potential combination. Following a discussion on next steps, the Pioneer board approved Pioneer senior management’s recommendation to proceed with negotiating a potential combination at a specified exchange ratio range and delegated the conduct of such negotiations to Messrs. Dealy, Berg and Thompson.

On October 5, 2020, Messrs. Berg, Dealy, Gallagher and Roberts met to discuss the strategic rationale of a potential combination, with Messrs. Thompson and Alameddine also participating in the discussions virtually. During the course of these discussions, Messrs. Berg, Dealy and Thompson delivered to the Parsley representatives, on behalf of the Pioneer board, a proposal to negotiate a combination of Parsley and Pioneer at an exchange ratio of 0.1170 to 0.1200 shares of Pioneer common stock to be received for each share of Parsley common stock (the “October 5 proposed range”). The Pioneer representatives indicated that Pioneer believed it was the right counterparty for Parsley, with complementary assets, a similar corporate culture, an investment grade balance sheet, a strong free cash flow model built to return capital to stockholders and the size and scale to attract investors, and noted that the all-stock nature of the proposed combination would provide Parsley stockholders the opportunity to participate in the upside of the combined company as macroeconomic conditions improved. The Pioneer representatives also noted that the October 5 proposed range would have represented a meaningful premium to the closing price of Parsley Class A common stock over five of the six preceding weeks, and emphasized Pioneer’s sensitivity to equity market reaction to a transaction premium perceived to be excessive, which would be to the detriment of both companies. In this regard, the parties discussed recently announced upstream consolidation transactions with modest or no premiums, including the combination of Devon Energy Corporation and WPX Energy, Inc., announced on September 28, 2020, and the acquisition of Noble Energy, Inc. by Chevron Corporation, announced on July 20, 2020. The Pioneer representatives also proposed the addition of one member of the Parsley board to the Pioneer board at closing of the proposed combination, but indicated that Pioneer was open to evaluating the appointment of two Parsley directors, subject to agreement on who those individuals would be. The Pioneer and Parsley representatives also discussed the willingness of Quantum and Mr. Bryan Sheffield to enter into voting and lock-up agreements with Pioneer in connection with the proposed combination. At the conclusion of the meeting, the Pioneer representatives indicated they were prepared to deliver a draft merger agreement to Parsley, which Pioneer provided promptly following the meeting. The Parsley representatives advised the Pioneer representatives that they would discuss Pioneer’s proposal with the full Parsley board.

On October 6, 2020, the Parsley board met to review the proposal from Pioneer and to discuss whether the proposal justified engagement of financial advisors to assist in evaluating the proposal and to commence formal negotiations regarding a potential combination. Mr. Gallagher recapped all discussions that had occurred up to this point and the Parsley board engaged in a detailed discussion regarding the strategic rationale for a combination with Pioneer. The Parsley board acknowledged the potentially significant operational and financial synergies that could be achieved, the pro forma company’s operational scale, lower cost of capital, lower debt ratios, high asset quality, and its ability to generate free cash flow, return capital to stockholders, and deliver moderate production growth. The Parsley board also noted that the combined company would be the largest Permian-only independent, which it viewed as a potential differentiator for attracting investors and generating positive stock performance. In addition, the Parsley board discussed Parsley and Pioneer’s shared dedication to environmental, social, and governance performance, which it indicated would be critical for generating stockholder value in the long term. The Parsley board also discussed the pros and cons of continuing as a stand-alone company, including the risk of an extended downturn caused by COVID-19, ongoing industry consolidation and negative investor sentiment towards the sector, the combination of which might further erode Parsley’s trading multiples in comparison to larger competitors.

 

65


Table of Contents

Based on this discussion, the Parsley board generally agreed that Pioneer was a very attractive potential merger partner, but that Parsley should seek an exchange ratio in excess of the October 5 proposed range before commencing negotiations of transaction documents. The Parsley board authorized Mr. Gallagher to continue discussions and seek a higher exchange ratio range from Pioneer, between the range of 0.1295 and 0.1315, which at such time represented premiums ranging from 12.29% to 14.03%, 20.79% to 22.65% and 23.26% to 25.16% to the Parsley common stock price based on the October 5, 2020 closing price, the average closing price for the 10-trading days prior and up to October 5, 2020 and the average closing price for the 30 trading days prior and up to October 5, 2020, respectively. After discussion of the relative merits of a combination with other counterparties and the likelihood of other potential counterparties being willing to pursue a transaction on more attractive terms than the October 5 proposed range, the Parsley board agreed that Mr. Gallagher should contact each of Company B and Company C and indicate that Parsley may be pursuing a strategic transaction in the relatively near term and gauge whether there had been any development in either party’s interest in evaluating a combination with Parsley. Finally, the Parsley board, together with Parsley senior management, discussed the formal engagement of legal and financial advisors, given the possibility that Parsley may soon engage in formal merger negotiations, and agreed to ask Parsley’s outside legal counsel, Vinson & Elkins, together with representatives from Credit Suisse, to participate in a Parsley board meeting later that week.

Following the Parsley board meeting, Mr. Gallagher called Mr. Dealy to discuss the Parsley board’s proposed exchange ratio range of 0.1295 to 0.1315 as well as its proposal for the appointment of two Parsley directors to the Pioneer board. Mr. Gallagher indicated that he believed the parties could quickly conclude negotiations of the merger agreement if there was agreement on the exchange ratio. On the following day, Messrs. Berg and Dealy called Mr. Gallagher to narrow the proposed exchange ratio range to 0.1190 to 0.1200. Mr. Gallagher indicated that he would discuss the proposal with the Parsley board.

On October 8, 2020, Mr. Gallagher reinitiated contact with representatives of each of Company B and Company C to gauge whether either party would have interest in pursuing a combination with Parsley.

On October 8, 2020, the Parsley board met to further consider the possibility of pursuing a combination with Pioneer. Members of Parsley senior management as well as representatives of Vinson & Elkins and Credit Suisse attended the meeting.

At the outset of the meeting, representatives of Vinson & Elkins reviewed with the members of the Parsley board their fiduciary duties with respect to the evaluation of a potential strategic combination. In addition, representatives of Vinson & Elkins discussed legal considerations related to actual or potential conflicts that could arise in connection with the evaluation of a strategic transaction, including the fact that the TRA holders (including Messrs. Bryan Sheffield, Gallagher, Dalton, and other officers) would be entitled to material early termination payments upon consummation of a transaction such as a combination with Pioneer (pursuant to the arrangement established at the time of Parsley’s IPO), as well as the familial relationship between Mr. Bryan Sheffield and Mr. Scott Sheffield.

Following the discussion of fiduciary duties led by Vinson & Elkins, representatives of Credit Suisse reviewed with the Parsley board certain information and financial aspects relating to a possible combination of Parsley and Pioneer. During the course of their presentation, representatives of Credit Suisse reviewed and discussed with members of the Parsley board and senior management the underperformance of the upstream oil and gas sector relative to other market sectors and the challenges associated with market positioning and attracting investor interest. Credit Suisse also reviewed selected preliminary financial information with respect to a potential combination with Pioneer and discussed certain other aspects relating to the potential combination. Representatives from Credit Suisse also discussed certain other potential counterparties and reviewed the challenges, based on the response of the market to recent strategic transactions in the upstream oil and gas sector, in attracting a high premium in the near term. At the conclusion of the meeting, the Parsley board determined to continue to seek a higher exchange ratio from Pioneer, and authorized a formal response to Pioneer that the

 

66


Table of Contents

Parsley board would be willing to engage advisors and fully evaluate a proposed combination at no lower than a 0.1250 exchange ratio. The Parsley board also determined, following a review of Credit Suisse’s credentials and considering its experience on similar transactions within the industry, as well as its significant knowledge of Parsley’s assets, to formally engage Credit Suisse to provide advice to the Parsley board should it determine to proceed with negotiations of a combination with Pioneer. Credit Suisse was subsequently retained by Parsley to act as its financial advisor with respect to a possible business combination or similar transaction.

On October 9, 2020, Mr. Alameddine contacted Mr. Thompson to advise him of the outcome of the Parsley board meeting the prior day, and to discuss economic terms of a potential combination. Mr. Alameddine indicated to Mr. Thompson that the Parsley board was prepared to move forward with formal negotiations and evaluations of a combination with Pioneer at an exchange ratio of 0.1256. During the course of these discussions, Mr. Thompson advised Mr. Alameddine of the importance of understanding Parsley’s position on certain terms set forth in the initial draft merger agreement provided by Pioneer on October 5, 2020, including the mutual “force the vote” covenants that would preclude either Parsley or Pioneer from terminating the merger agreement to accept a superior proposal, equivalent termination fees payable upon a termination in connection with a change in board recommendation by other party, the execution of voting agreements with Parsley’s two largest stockholders, Quantum and Mr. Bryan Sheffield, and the agreement of Quantum and Mr. Bryan Sheffield to subject the Pioneer common stock they would receive in the merger to post-closing lock-ups. Mr. Alameddine also emphasized that Parsley was actively negotiating the potential sale of a minority equity interest in Parsley’s water assets and that time was of the essence if Pioneer wished to proceed because Parsley was not willing to delay the potential water transaction for an extended period. Also on that day, Mr. Gallagher called Mr. Scott Sheffield to discuss a potential three-party combination with Company C.

On October 11, 2020, the Pioneer board held a meeting to discuss the proposed combination with Parsley. Certain members of Pioneer senior management and representatives of Gibson Dunn, Morris Nichols, Goldman Sachs and Sard Verbinnen & Co. (“Sard Verbinnen”), Pioneer’s public relations advisor, were also in attendance. Mr. Dealy provided an update on negotiations with Parsley management, outlining the counterproposal relayed by Mr. Alameddine on October 9, 2020, and recommended that the Pioneer board provide Pioneer senior management with authority to continue negotiations with Parsley management at a proposed exchange ratio of 0.1230 at a one-day premium of no more than 10%, with 180-day post-closing lock-ups for Quantum and Mr. Bryan Sheffield and a termination fee payable by either party equal to 3% of Parsley’s equity value. Representatives of Goldman Sachs reviewed an updated preliminary financial analysis and discussion materials related to the potential business combination with Parsley. Finally, Sard Verbinnen discussed several public relations considerations regarding the proposed combination, provided key talking points for Pioneer senior management and the Pioneer board and outlined a communication plan for announcing a potential combination. At the conclusion of the meeting, the Pioneer board authorized Messrs. Berg, Dealy and Thompson to continue negotiations with Parsley management consistent with Mr. Dealy’s recommendations.

Later that day, Mr. Thompson and Mr. Alameddine and, separately, Messrs. Berg, Dealy and Gallagher engaged in discussions regarding the proposed exchange ratio for a combination of Parsley and Pioneer. During these discussions, the Pioneer representatives indicated the Pioneer board would be interested in pursuing a transaction at a 0.1230 exchange ratio, but not at a higher exchange ratio. Based on the Parsley board’s instructions at its October 8, 2020 meeting, Mr. Alameddine advised Mr. Thompson that the proposed exchange ratio was insufficient, and that the Parsley board was not willing to continue negotiations on such terms, and negotiations among the parties ceased. Messrs. Alameddine and Gallagher informed the Parsley board later that day that discussions had ceased, and on the following day, Mr. Dealy informed the Pioneer board of the same.

Also on October 11, 2020, a representative from Company B contacted Mr. Gallagher and advised him Company B would not make an offer at this time. On October 13, 2020, a representative from Company C similarly advised Mr. Gallagher that Company C was not prepared to pursue a combination at that time.

 

67


Table of Contents

On October 13, 2020, media outlets reported that ConocoPhillips was in talks to acquire Concho Resources Inc. (“Concho Resources”), a large, independent, Permian-pure play exploration and production company, and a key competitor of Pioneer and Parsley. Following these media reports, there was a general increase in trading prices of Concho Resources’ competitor companies, including Pioneer and Parsley, although Parsley’s stock price improved more, on a relative basis, than Pioneer’s, trading up 7.06%, from $9.63 to $10.31, from the close of trading on October 13, 2020 to the close of trading on October 16, 2020, compared to Pioneer’s stock price, which traded up 2.39%, from $88.15 to $90.26 during the same period.

On October 14, 2020, Mr. Thompson contacted Mr. Alameddine and advised him that the Pioneer board was scheduled to meet the following day to evaluate making a revised proposal to Parsley. Mr. Thompson inquired of Mr. Alameddine whether Parsley would be receptive to an exchange ratio equal to 0.1243, if the Pioneer board approved making such proposal. Based on the Parsley board’s instructions at its October 8, 2020 meeting, Mr. Alameddine indicated that 0.1243 was unacceptable, and that the Parsley board would support an exchange ratio of no less than 0.1252.

On October 15, 2020, the Pioneer board met to evaluate the submission of a revised proposal to Parsley. Pioneer senior management provided an overview of the history of negotiations between Pioneer and Parsley as to proposed exchange ratios and the expected synergies resulting from the proposed combination, noting that the minimum exchange ratio of 0.1252 proposed earlier that day by Mr. Alameddine was expected to be more than offset by the present value of the expected synergies and, if realized, would result in a transaction highly accretive to cash flow and free cash flow, earnings per share and return on capital employed to Pioneer stockholders. Pioneer senior management then recommended approval of an exchange ratio of 0.1252, subject to the negotiation of the final terms of the proposed combination, including proposing the appointment of up to two additional directors to the Pioneer board to be mutually agreed between Pioneer and Parsley, a reciprocal termination fee equal to 3% of Parsley’s equity value, voting agreements with Quantum and Mr. Bryan Sheffield and post-closing lock-ups on shares of Pioneer common stock received by Quantum and Mr. Bryan Sheffield in the mergers for a minimum of 180 days, subject to the ability to sell an agreed portion of such shares during such period. The Pioneer board authorized Messrs. Dealy, Berg and Thompson to proceed with definitive negotiations on the basis of the foregoing recommendations, subject to the satisfactory completion of its legal and business due diligence of Parsley.

Following the meeting, Mr. Thompson contacted Mr. Alameddine to advise him that the Pioneer board had approved proceeding with definitive negotiations of a combination with Parsley at an exchange ratio of 0.1252 shares of Pioneer common stock to be paid for each share of Parsley common stock (the “October 15 proposal”). Mr. Alameddine communicated this information to Mr. Gallagher, and the two of them communicated the October 15 proposal to the rest of the Parsley board.

Also on October 15, 2020, Pioneer contacted Morgan Stanley to engage Morgan Stanley as a financial advisor to Pioneer in connection with the potential combination with Parsley based on, among other things, Morgan Stanley’s industry experience and performance, as well as its familiarity with both Pioneer and Parsley.

On October 16, 2020, representatives of senior management of each of Parsley and Pioneer, together with representatives from their respective legal advisors at Vinson & Elkins and Gibson Dunn, discussed key workstreams and potential timelines to complete due diligence and potentially execute a merger agreement. In addition, on the afternoon of October 16, 2020, Mr. Dalton discussed with representatives of Wells Fargo Securities the possible engagement of the bank as a financial advisor with respect to a potential combination of Parsley and Pioneer.

Also on October 16, 2020, the Parsley board met to consider the revised proposal from Pioneer, with the participation of Parsley senior management and representatives from Vinson & Elkins. During the meeting, Mr. Dalton reviewed with the Parsley board an updated set of forecasts for Parsley on a stand-alone basis, which were generally consistent with the forecasts reviewed and considered by the Parsley board at the outset of its

 

68


Table of Contents

strategic alternative review during the spring of 2020, but updated for changes in commodity prices. Representatives from Vinson & Elkins also reviewed and discussed with the Parsley board key provisions of the merger agreement draft that had been provided by Pioneer on October 5, 2020, including (i) the fact that the merger agreement provided for a transaction structure that would generally result in a tax free transaction for Parsley Class A stockholders but a taxable transaction for Parsley LLC unitholders, (ii) the key conditions to closing of the merger, including receipt of stockholder approvals for both Pioneer and Parsley, (iii) the deal protection provisions, including the mutual non-solicitation and “force the vote” covenants and the proposed equivalent termination fees and expense reimbursement obligations, (iv) the request that each of Quantum and Mr. Bryan Sheffield execute voting agreements obligating them to vote in favor of the merger (even if the Parsley board changed its recommendation for the merger) and (v) the request that each of Quantum and Mr. Bryan Sheffield agree to post-closing lock-ups restricting their ability to transfer Pioneer shares for a period of time following closing of the merger. Among other things, the Parsley board discussed with the representatives of Vinson & Elkins whether it would be prudent to seek to negotiate with Pioneer an alternative transaction structure, which would likely result in tax deferral for Parsley LLC unitholders, but would present structural complexities, including creating a potentially inefficient financing structure by potentially triggering change of control provisions in certain of Pioneer’s debt agreements, increasing the risk that additional material indebtedness would be required to be refinanced or amended in connection with a combination. After discussion with its legal advisors, the Parsley board determined that it was very unlikely Pioneer would be willing to entertain such an alternative structure and that it would not be prudent to request that Pioneer consider the same, in light of other key deal terms of greater importance to Parsley stockholders as a whole. At the conclusion of the discussion of the October 15 proposal, including in comparison to the other alternatives that could be available to Parsley, the Parsley board determined to proceed towards negotiating definitive transaction documents, subject to satisfactory completion of due diligence, including financial due diligence. The Parsley board also provided Vinson & Elkins with direction as to how to respond on key terms of the merger agreement, and authorized senior management, together with Vinson & Elkins, to prepare and distribute a revised draft of the merger agreement to Pioneer, consistent with the feedback provided by the Parsley board. In addition, the Parsley board requested that Mr. Dalton proceed with the formal engagement of Wells Fargo Securities as a financial advisor.

Later on October 16, 2020, Vinson & Elkins distributed to Gibson Dunn a revised draft of the merger agreement including the following terms, as instructed by the Parsley board: (i) a no solicitation provision applicable to Parsley but a “no talk” provision applicable to Pioneer, which would restrict Pioneer’s ability to discuss alternative transaction proposals during the pendency of the merger, (ii) a “fiduciary out” applicable to Parsley, permitting the Parsley board to terminate the merger agreement to permit Parsley to enter into a definitive agreement with respect to a superior proposal, (iii) termination fees and expense reimbursement obligations payable by each of Pioneer and Parsley calculated to represent an equivalent percentage of each company’s equity value and (iv) restrictions on the ability of Pioneer to engage in certain transactions that would materially alter the nature of Pioneer between signing and closing without Parsley’s consent, including certain transactions involving the issuance of equity, the incurrence of debt or the acquisition or divestiture of material assets. In addition, at the direction of Mr. VanLoh (on behalf of Quantum) and Mr. Bryan Sheffield, the revised merger agreement indicated that while each would agree to enter into a voting agreement in support of the transaction, (a) neither party would agree to a post-closing lock-up on trading of Pioneer shares received in the merger and (b) any obligation to vote in favor of the merger would fall away upon a change in recommendation by the Parsley board.

From October 16, 2020, to October 19, 2020, Pioneer and Parsley, together with their advisors, conducted due diligence of each other, and exchanged confidential information with respect to each company, including the corporate financial forecasts of each company described under “The Mergers—Certain Pioneer Unaudited Prospective Financial and Operating Information” and “The Mergers—Certain Parsley Unaudited Prospective Financial and Operating Information.”

On October 17, 2020, following discussions with Gibson Dunn regarding the key issues presented in the revised draft of the merger agreement distributed by Vinson & Elkins the prior day, Messrs. Dealy and Berg

 

69


Table of Contents

contacted Messrs. Gallagher and Roberts to discuss such key issues. In particular, Messrs. Dealy and Berg noted that (i) Pioneer desired 180-day post-closing lock-ups from each of Quantum and Mr. Bryan Sheffield, with the lock-ups falling away on 20% of each holder’s shares after 90 days, (ii) each of Quantum and Mr. Bryan Sheffield needed to be obligated to vote in favor of the mergers, regardless of whether the Parsley board continued to recommend a transaction, (iii) the merger agreement should contain a mutual no solicitation and force the vote covenant, (iv) termination fees for both parties should be equal to 3% of Parsley’s equity value and (v) that Parsley should have less flexibility and Pioneer should have more flexibility to operate their respective businesses during the pendency of the mergers than the draft provided by Vinson & Elkins permitted. Messrs. Dealy and Berg also communicated Pioneer’s willingness to add two mutually agreed upon Parsley board members to the Pioneer board, and Pioneer’s desire to have the parties to the tax receivable agreement acknowledge their agreement with Parsley’s historical method of calculating potential liabilities under the tax receivable agreement, in an amendment to the tax receivable agreement.

Later that night, Gibson Dunn distributed a revised draft of the merger agreement to Vinson & Elkins, which draft reflected the positions outlined by Messrs. Dealy and Berg.

On October 18, 2020, representatives of Vinson & Elkins and Gibson Dunn, together with senior management from each of Parsley and Pioneer, had a call to negotiate certain provisions in the revised draft merger agreement. During the call, Mr. Roberts and the Vinson & Elkins representatives advised Pioneer and its advisors that they intended to discuss the material open deal protection and other business points with the Parsley board that evening, and would revert with a comprehensive counterproposal after that discussion.

Also on October 18, 2020, Parsley entered into an engagement letter with Wells Fargo Securities to act as financial advisor with respect to a potential transaction involving Parsley’s business, assets or equity interests, which would include a potential transaction with Pioneer.

On that same day, Pioneer entered into engagement letters with each of Goldman Sachs and Morgan Stanley, pursuant to which each of them agreed to serve as a financial advisor to Pioneer with respect to the possible acquisition of Parsley by Pioneer.

Later on October 18, 2020, the Parsley board met, with members of Parsley management and representatives of Vinson & Elkins, Credit Suisse, Wells Fargo Securities and Ernst & Young LLP in attendance, to further consider the potential combination with Pioneer. During that meeting, representatives of Credit Suisse reviewed, among other things, the implied exchange ratio represented by the then current per-share prices of the common stock of Parsley and Pioneer, the percentage premium to then current per share price of Parsley Class A common stock and percentage premium to “unaffected” price, each as implied by the October 15 proposal, explaining that “unaffected” price reflected the last closing per-share price of Parsley Class A common stock on October 13, 2020, the day before published reports of a potential acquisition of Concho Resources by ConocoPhillips. Credit Suisse also provided an overview of Parsley Class A common stock price performance and analyst price targets for each of Parsley and Pioneer and discussed certain other financial aspects of the merger. Wells Fargo Securities then presented on a preliminary basis, among other things, the valuation of Parsley on a stand-alone basis, the valuation of Pioneer on a stand-alone basis, a comparison of financial metrics of each of Parsley and Pioneer to selected public companies and a discounted cash flow analysis of each of Parsley and Pioneer.

Also during the meeting, Ernst & Young LLP reviewed with the Parsley board the key terms of the tax receivable agreement. Parsley entered into the tax receivable agreement in connection with its IPO, which IPO was completed using an “Up-C” structure. In an Up-C structure, certain founders continue to hold their economic interests in an operating company subsidiary of the IPO issuer that is taxed as a partnership, while the public is offered shares in a publicly traded parent corporation. The units in the operating partnership are exchangeable for shares of the publicly traded corporation, and such exchanges, when completed, result in an increase or “step up” in tax basis of the operating company’s assets, which can be used to reduce corporate taxable income for the

 

70


Table of Contents

benefit of all stockholders. The tax receivable agreement generally provides for the payment by Parsley to each TRA holder of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Parsley actually realizes (or is deemed to realize in certain circumstances) in periods after its IPO as a result of certain increases in tax basis and certain benefits attributable to imputed interest associated with the exchanges, with Parsley retaining the benefit of the remaining 15% of these cash savings. Pursuant to the terms of the tax receivable agreement, however, if Parsley experiences a change of control (as defined under the tax receivable agreement, which includes the mergers), Parsley is required to make an immediate lump-sum payment equal to the present value of hypothetical future payments that could be required to be paid under the tax receivable agreement (determined by applying a discount rate equivalent to the one-year London Interbank Offered Rate plus 3%). Representatives of Ernst & Young LLP noted to the Parsley board that they had calculated the early termination payments to be approximately $156 million in July 2020, and had re-calculated such payments as of October 18, 2020 to be approximately $157 million, basing the amount payable under the tax receivable agreement as of October 18, 2020 on current assumptions. For further discussion of amounts expected to be payable under the tax receivable agreement, please see “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers”.

Following discussion of the financial analyses, representatives from Vinson & Elkins reviewed with the Parsley board the key remaining open issues in the merger agreement, including (i) Pioneer’s position that the merger agreement should contain a mutual no solicitation and force the vote covenant, compared to Parsley’s requested “no talk” covenant applicable to Pioneer and “fiduciary out” applicable to Parsley, (ii) Pioneer’s position that termination fees for both parties should be equal to 3% of Parsley’s equity value, with expense reimbursement obligations at 1% of Parsley’s equity value, compared to Parsley’s position that the fees should be in proportion to each company’s equity value, (iii) Pioneer’s position that the obligations of each of Quantum and Mr. Bryan Sheffield to vote in favor of the merger should continue in the event the Parsley board were to change its recommendation, compared to Parsley’s view that such obligations should fall away in such event, and (iv) Pioneer’s position that it should have significant discretion to operate its business without input from Parsley during the period between signing and closing. The Parsley board then discussed potential responses with Vinson & Elkins and authorized senior management of Parsley and Vinson & Elkins to propose a resolution of all outstanding key points including the following terms: (a) mutual no solicitation covenants for Pioneer and Parsley, but a fiduciary out applicable only to Parsley, (b) termination fee and expense reimbursement obligations equal to 3% and 1% of Parsley’s equity value, respectively, payable by Parsley, with the termination fee and expense reimbursement obligations payable by Pioneer to equal double the amounts of the Parsley termination fee and expense reimbursement obligations, respectively, (c) the continuation of the obligations of Quantum and Mr. Bryan Sheffield under their respective voting agreements to vote in favor of the mergers (with the understanding that upon termination of the merger agreement upon exercise of a fiduciary out, the voting agreements would also terminate by their terms) and (d) Pioneer’s ability to exercise significant discretion in the operation of its business without input from Parsley during the interim period prior to closing, subject to a limitation on Pioneer’s ability to engage in acquisitions outside of the Permian Basin without Parsley’s consent. In addition, the Parsley board agreed that Pioneer should be advised to pursue any further negotiations with respect to the requested lock-ups directly with each of Quantum and Mr. Bryan Sheffield.

At the conclusion of the Parsley board meeting, the Parsley board members met in executive session and agreed to propose that Messrs. Gallagher and Alameddine be designated by Parsley for service on the Pioneer board following the mergers.

Following the Parsley board meeting, on the night of October 18, 2020, Mr. Gallagher contacted Messrs. Dealy and Berg and reviewed with them the key terms of the Parsley board’s counterproposal, and subsequently delivered a written summary of such counterproposal.

Later that night, Messrs. Gallagher and Roberts, together with representatives of Vinson & Elkins, and Messrs. Dealy and Berg, together with representatives of Gibson Dunn, met, and the representatives of Pioneer indicated that Pioneer was generally amenable to the proposed comprehensive counterproposal, subject to Pioneer being able to reach an acceptable agreement with each of Quantum and Mr. Bryan Sheffield regarding

 

71


Table of Contents

the requested lock-ups and the satisfactory resolution of the other less material open matters in the merger agreement. Following that discussion, Vinson & Elkins circulated a revised draft merger agreement to Gibson Dunn reflecting the parties’ agreed terms.

Over the course of October 19, 2020, the parties and their respective advisors negotiated near final versions of the merger agreement, voting agreements, TRA amendment and other definitive documents. During these discussions, Mr. Bryan Sheffield and Mr. Berg, on behalf of Pioneer, negotiated the terms of Mr. Bryan Sheffield’s voting agreement, whereby Mr. Bryan Sheffield agreed to include in his voting agreement a lock-up of the shares beneficially owned by him pursuant to which Mr. Bryan Sheffield may not, without Pioneer’s prior written consent, subject to limited exceptions, offer, sell, transfer or otherwise dispose of more than 15% of the shares of Pioneer common stock issued to Mr. Bryan Sheffield pursuant to the terms of the merger agreement for a period of 90 days following the closing date of the mergers or more than 30% of such shares for a period of 180 days following the closing date of the mergers. During the same time, Messrs. Berg and Dealy discussed with Mr. VanLoh whether Quantum would deliver a similar lock-up. Mr. VanLoh emphasized his confidence in the combination and Quantum’s intent to be a long-term holder, but expressed that Quantum would not agree to a lock-up. Pioneer agreed that Quantum would not be required to deliver a lock-up.

The same day, Messrs. Thompson and Alameddine discussed a possible transaction bonus pool program for Parsley employees, but ultimately decided that the parties would not establish a separate transaction bonus pool program. Rather, Parsley would proceed with its normal bonus program. Messrs. Thompson and Alameddine also discussed the treatment of the 280(G) excise tax that certain Parsley employees may owe as a result of payments in connection with the mergers.

On the evening of October 19, 2020, media reports began to circulate that Pioneer and Parsley were in merger discussions.

On the morning of October 20, 2020, the Pioneer board convened a meeting, with members of Pioneer senior management and representatives of Gibson Dunn, Morris Nichols, Goldman Sachs and Morgan Stanley in attendance, to consider the proposed final terms of the combination with Parsley. At such meeting, Pioneer senior management provided an update on the due diligence that had been conducted on Parsley, including an overview of the methodology used to calculate the early termination payments payable under the tax receivable agreement. Pioneer senior management also discussed the two members of the Parsley board proposed to be appointed to the Pioneer board upon closing of the mergers, Messrs. Gallagher and Alameddine. Following Pioneer senior management’s presentation, representatives of Gibson Dunn reviewed with the Pioneer board their fiduciary duties with respect to their evaluation of the proposed combination and the key terms of the merger agreement, voting agreements and TRA amendment. Representatives of Morgan Stanley then provided an overview of the exploration and production landscape in the Permian Basin, followed by a review of its financial analysis of the exchange ratio. Morgan Stanley then rendered an oral opinion to the Pioneer board (subsequently confirmed in a written opinion dated the same date) that, as of the date of such opinion, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to Pioneer, as more fully described below in the section titled “—Opinions of Pioneer’s Financial Advisors—Opinion of Morgan Stanley & Co. LLC”. In addition, representatives of Goldman Sachs reviewed with the Pioneer board Goldman Sachs’ financial analysis summarized in the section titled “—Opinions of Pioneer’s Financial Advisors—Opinion of Goldman Sachs & Co. LLC” and rendered to the Pioneer board the oral opinion of Goldman Sachs (subsequently confirmed by delivery of a written opinion dated the same date) to the Pioneer board to the effect that, as of the date of Goldman Sachs’ written opinion and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to Pioneer. Prior to the conclusion of the meeting and following discussion of the proposed combination by the Pioneer board and by the disinterested directors in the executive session, the Pioneer board (including Messrs. Scott Sheffield and Gobe) unanimously (i) determined that the mergers and the other transactions contemplated by the merger agreement were in the best interests of, and were advisable to, Pioneer and its stockholders, (ii) approved, adopted and declared advisable the

 

72


Table of Contents

merger agreement and the transactions contemplated thereby, (iii) directed that the Pioneer stock issuance proposal be submitted to Pioneer stockholders for approval and (iv) resolved to recommend that Pioneer stockholders approve the Pioneer stock issuance at a duly held meeting of Pioneer stockholders for such purpose.

On the afternoon of October 20, 2020, the Parsley board met, with members of Parsley management and representatives of Vinson & Elkins, Credit Suisse and Wells Fargo Securities in attendance to consider the proposed final terms of the combination with Pioneer. At this meeting, Credit Suisse reviewed its financial analysis of the exchange ratio and rendered an oral opinion to the Parsley board (confirmed by delivery of a written opinion addressed to the Parsley board dated the same date) to the effect that, as of such date and based upon and subject to the factors and assumptions considered in connection with the preparation of its opinion, including among others that each Parsley LLC stapled unit is equivalent in value and identical in all other respects material to its analyses and opinion to a share of Parsley Class A common stock, the exchange ratio to be received by the holders of shares of Parsley Class A common stock with respect to their shares of Parsley Class A common stock in the first merger was fair, from a financial point of view, to the holders of shares of Parsley Class A common stock and the exchange ratio to be received by the holders of shares of Parsley Class B common stock with respect to their Parsley LLC stapled units in the first merger and the Opco merger was fair, from a financial point of view, to the holders of shares of Parsley Class B common stock, as more fully described below in the section entitled “—Opinions of Parsleys Financial Advisors—Opinion of Credit Suisse Securities (USA) LLC”. In addition, representatives of Wells Fargo Securities reviewed with the Parsley board its final financial analysis of the exchange ratio provided for in the merger agreement and then representatives of Wells Fargo Securities rendered an oral opinion to the Parsley board (confirmed by delivery of a written opinion addressed to the Parsley board dated the same date) to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing the opinion, including among others the assumption that the Parsley Class A common stock and the Parsley LLC stapled units are equivalent in all respects, the exchange ratio in the proposed mergers was fair, from a financial point of view, to the holders of Parsley Class A common stock and to the holders of Parsley LLC stapled units, as more fully described below in the section entitled “—Opinions of Parsleys Financial Advisors—Opinion of Wells Fargo Securities, LLC”. A representative of Vinson & Elkins then updated the Parsley board on the key terms in the merger agreement and reviewed with the members of the Parsley board their fiduciary duties with respect to the evaluation of the proposed combination. Prior to the end of the meeting, the Parsley board unanimously (i) declared that the merger agreement and the transactions contemplated thereby (including the integrated mergers) were fair to, and in the best interests of, Parsley and the Parsley stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby (including the integrated mergers) and (iii) recommended that the Parsley stockholders approve and adopt the merger agreement and the transactions contemplated thereby. In addition, the Parsley board authorized certain officers of Parsley to execute written consents on behalf of Parsley, (i) in its capacity as the managing member of Parsley LLC, determining that the merger agreement and the transactions contemplated thereby are fair to, and in the best interests of, Parsley LLC, and approving and declaring advisable the merger agreement and the transactions contemplated thereby and (ii) in its capacity as the holder of more than a majority of the issued and outstanding Parsley LLC units, adopting the merger agreement concurrently with its execution.

Later that afternoon, Parsley and Pioneer executed the merger agreement and Pioneer, Parsley and the other parties thereto executed the voting agreements and the TRA amendment. Following the closing of the U.S. stock markets, Pioneer and Parsley issued a joint press release announcing the proposed mergers and Pioneer hosted a conference call to discuss the transaction.

Recommendation of the Pioneer Board and Reasons for the Mergers

At a meeting held on October 20, 2020, the Pioneer board unanimously determined that the mergers and the other transactions contemplated by the merger agreement were in the best interests of, and were advisable to, Pioneer and its stockholders, approved, adopted and declared advisable the merger agreement and the transactions contemplated thereby, directed that the Pioneer stock issuance proposal be submitted to Pioneer

 

73


Table of Contents

stockholders for approval and resolved to recommend that Pioneer stockholders approve the Pioneer stock issuance at a duly held meeting of Pioneer stockholders for such purpose. The Pioneer board unanimously recommends that Pioneer stockholders vote “FOR” the Pioneer stock issuance proposal.

In deciding to approve the merger agreement and to recommend that Pioneer stockholders approve the Pioneer stock issuance proposal, the Pioneer board consulted with Pioneer’s management and financial and legal advisors and considered several factors.

The Pioneer board considered a number of factors when evaluating the mergers, many of which support the Pioneer board’s determination that the mergers and the other related transactions contemplated by the merger agreement were in the best interests of, and were advisable to, Pioneer and its stockholders. The Pioneer board considered these factors as a whole and without assigning relative weights to each such factor, and overall considered the relevant factors to be favorable to, and in support of, its determinations and recommendations. These factors included:

 

   

the belief that the mergers will be accretive on key financial metrics beginning in 2021, including cash flow and free cash flow per share, earnings per share and return on capital employed;

 

   

the belief that the combined company will benefit from increased cash flows, further strengthening Pioneer’s investment framework by creating a more robust free cash flow profile, with a lower expected reinvestment rate range of 65% to 75% (based on futures strip pricing for oil and gas as of the time of the Pioneer board’s consideration);

 

   

the belief that the mergers will result in annual cost savings of approximately $325 million through operational efficiencies and reductions in general and administrative and interest expenses, with an expected present value in excess of $2 billion over a ten-year period;

 

   

the belief that the combined company will be a leading Permian Basin independent exploration and production company with a premium asset base of approximately 930 thousand net acres, with no federal acreage, and a production base of 328 thousand barrels of oil per day and 558 thousand barrels of oil equivalent per day based on reported production for the second quarter of 2020;

 

   

that, based on year-end 2019 proved reserves, the mergers will increase Pioneer’s proved reserves by approximately 65%;

 

   

that the mergers would enhance Pioneer’s asset base in the Permian Basin through the addition of complementary high-return inventory in the premier shale oil basin in the United States;

 

   

the belief that Parsley’s high-margin, oil-weighted asset base will integrate smoothly into Pioneer’s development program;

 

   

that the combination of Pioneer’s and Parsley’s acreage positions will create a highly contiguous geographic footprint in the Midland Basin that will allow for significant operational efficiencies;

 

   

the expectation that the leverage of the combined company will remain among the lowest in the industry, preserving Pioneer’s financial flexibility and enhancing the return of capital to stockholders, with the combined company expected to benefit from approximately $75 million per year in lower interest expense after the Parsley notes are refinanced at Pioneer’s lower borrowing costs and a gradual reduction of leverage over time to less than 0.75x net debt to EBITDAX;

 

   

that both Pioneer and Parsley have demonstrated peer-leading environmental, social and governance practices, and the expectation that the combined company will continue to aggressively pursue improvements and promote a culture that prioritizes sustainable operations;

 

   

that the merger consideration represented a premium of 7.9% based on the unaffected closing share prices on October 19, 2020 (the last trading day prior to the Pioneer board’s approval of the merger agreement and recommendation that Pioneer stockholders approve the Pioneer stock issuance proposal), which the Pioneer board regarded as an attractive valuation relative to other transactions and peer comparisons;

 

74


Table of Contents
   

that Pioneer will continue to be led by the current experienced Pioneer management team and that the addition of two directors to the Pioneer board, each of whom currently serves as a member of the Parsley board, in connection with the mergers will add valuable expertise and experience and in-depth familiarity with Parsley’s assets and operations to the Pioneer board, which will enhance the likelihood of attaining the strategic benefits that Pioneer expects to derive from the mergers;

 

   

the terms of the merger agreement, including the structure of the transaction, the conditions to each party’s obligation to complete the mergers and the ability of Pioneer to terminate the agreement under certain circumstances;

 

   

the belief that the restrictions imposed on Pioneer’s business and operations during the pendency of the mergers are reasonable and not unduly burdensome;

 

   

that the exchange ratio is fixed and will not fluctuate in the event that the market price of Parsley Class A common stock increases relative to the market price of Pioneer common stock between the date of the merger agreement and the closing of the mergers;

 

   

the likelihood of consummation of the mergers and the Pioneer board’s evaluation of the likely time frame necessary to close the mergers;

 

   

that Pioneer stockholders will have the opportunity to vote on the Pioneer stock issuance proposal, which is a condition precedent to the mergers;

 

   

the Pioneer board’s knowledge of, and discussions with Pioneer management and its advisors regarding, Pioneer’s and Parsley’s business operations, financial conditions, results of operations and prospects, taking into account Pioneer’s due diligence investigation of Parsley;

 

   

that certain Parsley stockholders holding, as of October 20, 2020, approximately 15.8% and 7.6% of the combined voting power of the issued and outstanding shares of Parsley common stock have entered into voting agreements with Pioneer obligating such stockholders to vote or cause to be voted, as applicable, all of their shares of Parsley Class A common stock and Parsley Class B common stock (with respect to any vote solicited by Parsley) and Parsley LLC units (with respect to any vote solicited by Parsley LLC) in favor of the adoption of the merger agreement and against alternative transactions, as more fully described in the sections titled “Parsley Special Meeting—Voting and Support Agreement with Quantum” and “Parsley Special Meeting—Voting and Support Agreement with Bryan Sheffield”; and

 

   

Goldman Sachs’s and Morgan Stanley’s separate oral opinions rendered to the Pioneer board on October 20, 2020 and subsequently confirmed by delivery of their respective written opinions dated the same date, to the effect that, as of the date thereof and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken as set forth in such written opinions, the exchange ratio pursuant to the merger agreement was fair, from a financial point of view, to Pioneer. The full text of the written opinions of Goldman Sachs and Morgan Stanley to the Pioneer board, each dated as of October 20, 2020, are attached as Annex B and Annex C, respectively, to this joint proxy statement/prospectus. For more information, see “—Opinions of Pioneer’s Financial Advisors.”

The Pioneer board also considered a variety of risks and other potentially negative factors concerning the merger agreement and the related transactions contemplated thereby. These factors included:

 

   

the possibility that the mergers may not be completed or that completion may be unduly delayed for reasons beyond the control of Pioneer or Parsley, including the failure to obtain stockholder approval of the Pioneer stock issuance proposal or the Parsley merger proposal;

 

   

that the exchange ratio in the merger agreement provides for a fixed number of shares of Pioneer common stock, and, as such, Pioneer stockholders cannot be certain at the time of the Pioneer special meeting of the market value of the merger consideration to be paid, and the possibility that Pioneer

 

75


Table of Contents
 

stockholders could be adversely affected in the event that the market price of Pioneer common stock increases relative to the market price of Parsley Class A common stock between the date of the merger agreement and the closing of the mergers;

 

   

that there are significant risks inherent in integrating the operations of Parsley into Pioneer, including that the expected synergies may not be realized, and that successful integration will require the dedication of significant management resources, which will temporarily detract attention from the day-to-day businesses of the combined company;

 

   

that the merger agreement provides that, in certain circumstances, Pioneer could be required to pay a termination fee of $270.0 million to Parsley or an expense reimbursement fee of $90.0 million;

 

   

that the mergers might not be completed as a result of a failure to satisfy the conditions contained in the merger agreement, including failure to receive necessary regulatory approvals;

 

   

that Parsley’s obligation to close the mergers is conditioned on the approval of the holders of a majority of outstanding shares of Parsley Class A common stock and Parsley Class B common stock, voting together as one class, with respect to the Parsley merger proposal;

 

   

Parsley’s ability, under certain circumstances, to terminate the merger agreement in order to enter into an agreement providing for a superior proposal, provided that Parsley concurrently with such termination pays to Pioneer a termination fee of $135.0 million;

 

   

that the restrictions on the conduct of Pioneer’s business prior to the consummation of the mergers, although believed to be reasonable and not unduly burdensome, may delay or prevent Pioneer from undertaking business opportunities that may arise or other actions it would otherwise take with respect to the operations of Pioneer pending the consummation of the mergers;

 

   

that the merger agreement restricts Pioneer’s ability to entertain other acquisition proposals unless certain conditions are satisfied;

 

   

the father-son relationship between Scott Sheffield, Pioneer’s Chief Executive Officer, and Bryan Sheffield, Parsley’s Executive Chairman and Chairman of the Parsley board, and the potential for negative perceptions regarding that relationship in light of the mergers;

 

   

the substantial costs to be incurred in connection with the mergers, including the costs of integrating the businesses of Pioneer and Parsley, the TRA termination payments, the potential costs associated with the obligation of Parsley LLC to make an offer to repurchase certain Parsley notes at the applicable change of control purchase price, the anticipated costs associated with refinancing the Parsley notes and the other transaction costs to be incurred in connection with the mergers;

 

   

that certain Parsley directors and executive officers have interests in the mergers that are different from, or in addition to, the interests of Parsley stockholders generally, including, among others, the TRA termination payments, severance rights and rights to continuing indemnification and directors’ and officers’ liability insurance described in the section titled “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers”;

 

   

the possibility that the $45 million expense reimbursement fee that Parsley would be required to pay under the merger agreement upon termination of the merger agreement under certain circumstances would be insufficient to compensate Pioneer for its costs incurred in connection with the merger agreement;

 

   

the possibility of losing key employees and skilled workers as a result of the expected consolidation of Pioneer’s and Parsley’s personnel when the mergers are completed; and

 

   

other risks of the type and nature described in the section titled “Risk Factors.”

This discussion of the information and factors considered by the Pioneer board in reaching its conclusion and recommendations includes all of the material factors considered by the Pioneer board but is not intended to be exhaustive and is not provided in any specific order or ranking. In view of the wide variety of factors

 

76


Table of Contents

considered by the Pioneer board in evaluating the merger agreement and the related transactions contemplated thereby, and the complexity of these matters, the Pioneer board did not find it practicable to, and did not attempt to, quantify, rank or otherwise assign relative weight to those factors. In addition, different members of the Pioneer board may have given different weight to different factors. The Pioneer board did not reach any specific conclusion with respect to any of the factors considered and instead conducted an overall analysis of such factors and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the merger agreement and the issuance of Pioneer common stock pursuant to the merger agreement.

It should be noted that this explanation of the reasoning of the Pioneer board and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

Recommendation of the Parsley Board and Reasons for the Mergers

By unanimous vote, the Parsley board, at a meeting held on October 20, 2020, (i) declared that the merger agreement and the transactions contemplated thereby (including the integrated mergers) were fair to, and in the best interests of, Parsley, the Parsley stockholders and the Parsley LLC unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement (including the integrated mergers) and (iii) recommended that the Parsley stockholders approve and adopt the merger agreement and the transactions contemplated by the merger agreement (including the integrated mergers). The Parsley board unanimously recommends that Parsley stockholders vote “FOR” the Parsley merger proposal and “FOR” the Parsley compensation proposal.

In evaluating the merger agreement, the mergers and the other transaction documents (including the transactions contemplated by those documents), the Parsley board consulted with Parsley’s senior management, outside legal counsel, financial advisors and tax advisors. The Parsley board determined that entering into the merger agreement with Pioneer provided the best alternative for maximizing stockholder value reasonably available to Parsley, including when compared to continuing to operate on a stand-alone basis, strategic combinations with other counterparties and potential asset monetization opportunities.

In recommending that Parsley stockholders vote their shares of Parsley common stock to approve and adopt the merger agreement, the Parsley board also considered a number of factors, including the following factors (not necessarily in order of relative importance) that the Parsley board viewed as generally positive or favorable to its determination, approval and related recommendation:

Attractive Value and Merger Consideration. The attractive value and nature of the consideration to be received in the mergers by Parsley stockholders, including the fact that:

 

   

the stock-for-stock merger allows Parsley stockholders to participate in the value of the combined company, including expected future free cash flow growth, which the Parsley board viewed as an important opportunity for Parsley stockholders to enhance long-term returns;

 

   

based on the closing trading price of Pioneer common stock of $90.26 on October 16, 2020 (the last trading day prior to Parsley and Pioneer agreeing on the exchange ratio), the merger consideration represented an implied value of $11.30 per share of Parsley Class A common stock, a premium of 16.6% to the average closing price of the shares of Parsley Class A common stock for the 20 trading days prior and up to October 16, 2020;

 

   

based on the closing trading price of Pioneer common stock of $88.15 on October 13, 2020 (the last trading day that stock prices of Pioneer and Parsley were “unaffected” by prevailing reports of the acquisition of Concho Resources by ConocoPhillips), the merger consideration represented an implied value of $11.04 per share of Parsley Class A common stock, a premium of 14.6% to the closing price of the shares of Parsley Class A common stock as of October 13, 2020;

 

77


Table of Contents
   

based on the closing trading price of Pioneer common stock of $87.05 on October 19, 2020 (the last trading day prior to the Parsley board’s approval of the mergers), the merger consideration represented an implied value of $10.90 per share of Parsley Class A common stock, a premium of 7.9% to the closing price of shares of Parsley Class A common stock as of October 19, 2020;

 

   

based on the exchange ratio, Parsley stockholders would own approximately 24% of the combined company on a pro forma basis, representing a greater interest for Parsley stockholders in the combined company versus the implied exchange ratio relative to the six-month, one-year, and two-year historical market-based exchange ratios; and

 

   

the trading market for Pioneer common stock should provide Parsley stockholders who receive Pioneer common stock in the mergers with greater trading liquidity than is currently available for Parsley common stock.

Benefits of a Combined Company. The belief of the Parsley board that the company resulting from a merger of Pioneer and Parsley would be well positioned to achieve future free cash flow growth and generate superior returns for Parsley’s former stockholders, including as a result of:

 

   

the benefits associated with consolidating the assets of the two companies, including the expected annual operating synergies of approximately $325.0 million associated with the following:

 

   

creating a predominantly contiguous, interlocking footprint in the Permian Basin with adjacent acreage footprints that allows for increased capital efficiency and the drilling of extended laterals where lease configurations of the separate companies prevented long-lateral horizontal wells;

 

   

leveraging existing and anticipated future water infrastructure to reduce fresh water utilization and to optimize produced water utilization by seeking third-party revenue opportunities and further reducing truck-hauling of produced water;

 

   

realizing operational efficiencies and reductions in general and administrative expenses driven by the utilization of shared facilities, overlapping operations and scale efficiencies, which is expected to result in $100 million of annual general and administrative synergies; and

 

   

Pioneer’s mid-investment grade rating supports reduced interest expense of the combined company, which is expected to gradually reduce leverage and preserve the combined company’s financial flexibility, enhancing the return of capital to stockholders;

 

   

the increased size and scale of the combined company, which is expected to afford new structural advantages including a lower cost of capital, a fortified balance sheet and economies of scale;

 

   

the strong focus on enhancing environmental, social and governance capabilities, which is expected to enable the combined company to aggressively pursue further improvements and to promote a culture that prioritizes sustainable operations;

 

   

the reinforced commitment to operating near the low end of the global oil supply cost curve, with a shared focus on capital efficiency and competitive, high operating margins of both Pioneer and Parsley merging in the combined company;

 

   

combined Permian Basin acreage of approximately 930 thousand net acres, with no federal acreage, and a combined production base of 328 thousand net barrels of oil per day and 558 thousand net barrels oil equivalent per day based on reported production for the second quarter of 2020;

 

   

the combined company will be less levered than Parsley on a stand-alone basis, which together with the increased scale and operational synergies, will better position the combined company to operate through periods of low commodity prices and/or negative sentiment towards the energy industry from equity and debt investors;

 

   

the increased dividend base and enhanced variable dividend proposition of the combined company;

 

78


Table of Contents
   

strengthening the combined company’s ability to return capital to stockholders, compared to Parsley on a stand-alone basis, by combining two companies with attractive free cash flow profiles, which is expected to enhance the combined company’s investment framework;

 

   

the caliber of Pioneer’s executive management team, which is expected to continue as the executive management team of the combined company; and

 

   

the quality and experience of the Pioneer board members, who are expected to remain on the combined company board, and the fact that two board members from the current Parsley board are expected to join the board of the combined company;

Continuation of Stand-alone Parsley. The Parsley board’s consideration of Parsley’s business, prospects and other strategic opportunities, and the Parsley board’s belief that there are certain risks associated with continuing to operate as a stand-alone company, including:

 

   

the risk that Parsley may become less competitive, on a relative basis, compared with larger Permian Basin producers, given scale-related advantages available to larger companies, including with respect to cost savings achieved by larger companies through economies of scale and greater purchasing power;

 

   

the risks related to the ongoing trend of investors seeking to allocate capital to the largest and most financially stable and flexible producers, which has contributed to accelerating consolidation of the U.S. upstream oil and gas industry;

 

   

the risks and uncertainties related to the ongoing and unprecedented disruption to oil demand, due to the COVID-19 pandemic, unpredictable geopolitical dynamics, including actions of foreign oil producers, and expected consumption of hydrocarbons trending lower long-term, which risks are relatively greater were Parsley to continue to operate as a stand-alone company with relatively higher leverage and a smaller market capitalization than the combined company; and

 

   

the risk that it will become increasingly difficult for Parsley to grow its production and reserves through acquisitions given that many of the most attractive acquisition targets have been acquired by larger companies.

The Parsley board also considered the following factors as being generally positive or favorable in making its determination, approval and related recommendation:

Alternative Combination Transactions. The Parsley board considered alternative transactions and, following a review of such alternatives with the assistance of Parsley’s management and in consultation with Credit Suisse, and after taking into account the results of outreach to potential other counterparties described in the section titled “The Mergers—Background of the Mergers,” all of which declined to submit a proposal or primarily indicated interest only in a no-premium merger, believed that it was unlikely that an alternative bidder would consummate a transaction on superior terms and provide Parsley stockholders more valuable consideration than provided in connection with the mergers;

Opportunity to Receive Alternative Acquisition Proposals and to Change the Parsley Board’s Recommendation Upon Receipt of a Superior Proposal. The Parsley board considered the terms of the merger agreement related to Parsley’s ability to respond to unsolicited acquisition proposals and determined that third parties would be unlikely to be deterred from making an acquisition proposal by the provisions of the merger agreement, including because the Parsley board may, under certain circumstances, furnish information or enter into discussions in connection with an acquisition proposal or terminate the merger agreement to enter into an alternative acquisition agreement providing for a superior proposal. In this regard, the Parsley board considered that:

 

   

subject to its compliance with the merger agreement, the Parsley board can change its recommendation to Parsley stockholders with respect to the approval and adoption of the merger agreement prior to the approval and adoption of the merger agreement by the vote of its stockholders if it determines, with

 

79


Table of Contents
 

respect to a superior proposal or an intervening event, in good faith (after consultation with its outside legal counsel) that the failure to take such action would be inconsistent with the Parsley board’s fiduciary duties under applicable law;

 

   

subject to its compliance with the merger agreement, the Parsley board may terminate the merger agreement in order to enter into an alternative acquisition agreement providing for a superior proposal; and

 

   

while the merger agreement contains a termination fee of $135.0 million, representing approximately 3% of Parsley’s equity value as of the date of the merger agreement, that Parsley would be required to pay to Pioneer in certain circumstances, including if (i) Pioneer terminates the merger agreement in connection with a change in the Parsley board’s recommendation to stockholders with respect to approval and adoption of the merger agreement, (ii) Parsley terminates the merger agreement in order to enter into an alternative acquisition agreement providing for a superior proposal or (iii) under certain circumstances, within 12 months of termination of the merger agreement, Parsley enters into or recommends an agreement in respect of any acquisition proposal, or a transaction in respect of any acquisition proposal with respect to Parsley is consummated, the Parsley board believed that this fee is reasonable in light of the circumstances and the overall terms of the merger agreement, consistent with fees in comparable transactions and not preclusive of other offers.

Post-Merger Corporate Governance. The Parsley board considered that the merger agreement provides that the Pioneer board must take all necessary corporate action to increase the size of the combined company’s board by two and to appoint Matt Gallagher and A.R. Alameddine of the Parsley board as directors of the combined company, or, in the event Mr. Gallagher and/or Mr. Alameddine is unwilling or unable to serve as a member of the Pioneer board at the time of such appointment, then another member or members of the Parsley board that is determined by the Pioneer board in good faith to be independent with respect to his or her service on the Pioneer board and that is mutually agreed between Parsley and Pioneer will be appointed to the Pioneer board to fill such vacancy or vacancies on the Pioneer board in lieu of Mr. Gallagher and/or Mr. Alameddine, as applicable, and that the Pioneer board (or an authorized committee of the Pioneer board) will, in a manner consistent with its ordinary policies and practices, appoint each new board designee to a committee of the Pioneer board within 90 days following the closing date, in a manner consistent with its ordinary policies and practices;

Tax Considerations for Parsley Class A Stockholders. The Parsley board considered that the integrated mergers, taken together, are intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code;

Opinions of Parsley’s Financial Advisors. The Parsley board considered:

 

   

the opinion of Credit Suisse, dated October 20, 2020, to the Parsley board, with respect to the fairness, from a financial point of view, to the Parsley Class A stockholders of the exchange ratio to be received by the holders of shares of Parsley Class A common stock with respect to their shares of Parsley Class A common stock in the first merger and the fairness, from a financial point of view, to the Parsley Class B stockholders of the exchange ratio to be received by the holders of shares of Parsley Class B common stock with respect to their Parsley LLC stapled units in the first merger and the Opco merger pursuant to the merger agreement, which opinion was based on and subject to various assumptions made, procedures followed, qualifications, limitations and other matters considered, as more fully described below in the section titled “The Mergers—Opinions of Parsley’s Financial Advisors—Opinion of Credit Suisse Securities (USA) LLC;” and

 

   

the opinion of Wells Fargo Securities, dated October 20, 2020, to the Parsley board, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing the opinion, the exchange ratio in the proposed mergers was fair, from a financial point of view, to the Parsley Class A stockholders and holders of Parsley LLC stapled units, as more fully described below in the section titled “The Mergers—Opinions of Parsley’s Financial Advisors—Opinion of Wells Fargo Securities, LLC.”

 

80


Table of Contents

Terms of the Merger Agreement. The Parsley board reviewed and considered the terms of the merger agreement, taken as a whole, including the parties’ representations, warranties and covenants, and the circumstances under which the merger agreement may be terminated, and concluded that such terms are reasonable and fair to Parsley, the Parsley stockholders and the Parsley LLC unitholders. The Parsley board also reviewed and considered the conditions to the completion of the mergers, and concluded that while the completion of the mergers is subject to regulatory approvals, such approvals were not likely to prevent the completion of the mergers.

The Parsley board also considered a number of uncertainties, risks and factors it deemed generally negative or unfavorable in making its determination, approval and related recommendation, including the following (not necessarily in order of relative importance):

Transacting During a Downturn in the Energy Industry. The Parsley board considered that the mergers with Pioneer would occur at a time when commodity prices and the stock prices of energy companies, including Parsley, are depressed;

Merger Consideration. The Parsley board considered that, because the merger consideration is based on a fixed exchange ratio rather than a fixed value, Parsley stockholders bear the risk of a decrease in the trading price of Pioneer common stock during the pendency of the mergers and the fact that the merger agreement does not provide Parsley with a value-based termination right;

Interim Operating Covenants. The Parsley board considered the restrictions on the conduct of Parsley’s and its subsidiaries’ businesses during the period between the execution of the merger agreement and the completion of the mergers as set forth in the merger agreement;

Risks Associated with the Pendency of the Mergers. The risks and contingencies relating to the announcement and pendency of the mergers (including the likelihood of litigation or other opposition brought by or on behalf of Parsley stockholders or Pioneer stockholders challenging the mergers and the other transactions contemplated by the merger agreement) and the risks and costs to Parsley if the mergers are not completed in a timely manner or if the mergers do not close at all, including potential employee attrition, the impact on Parsley’s relationships with third parties and the effect termination of the merger agreement may have on the trading price of Parsley Class A common stock and Parsley’s operating results;

Pioneer Change of Recommendation; Pioneer Stockholder Vote. The Parsley board considered the right of the Pioneer board to change its recommendation to Pioneer stockholders in certain circumstances, subject to certain conditions (including considering any adjustments to the merger agreement proposed by Parsley and payment to Parsley of a $270.0 million termination fee). The Parsley board also considered that, even if the merger agreement is approved by Parsley stockholders, Pioneer stockholders may not approve the Pioneer stock issuance proposal, which is a closing condition of the mergers;

Opportunity to Receive Acquisition Proposals and to Terminate the Mergers in Order to Accept a Superior Proposal; Termination Fees; Expense Reimbursement. The Parsley board considered the possibility that a third party may be willing to enter into a strategic combination with Parsley on terms more favorable than the mergers. In connection therewith, the Parsley board considered the terms of the merger agreement relating to no-shop covenants and termination fees and the potential that such provisions might deter alternative bidders that might have been willing to submit an acquisition proposal to Parsley. The Parsley board also considered that, under specified circumstances, Parsley may be required to pay a termination fee or expenses in the event the merger agreement is terminated and the effect this could have on Parsley, including:

 

   

the possibility that the termination fee could discourage other potential parties from making an acquisition proposal, although the Parsley board believed that the termination fee was reasonable in amount and would not unduly deter any other party that might be interested in making an acquisition proposal;

 

81


Table of Contents
   

if the mergers are not consummated, Parsley will generally be obligated to pay its own expenses incident to preparing for and entering into and carrying out its obligations under the merger agreement and the transactions contemplated by the merger agreement; and

 

   

the requirement that if the merger agreement is terminated as a result of the failure to obtain approval of the Parsley merger proposal by Parsley stockholders, Parsley would be obligated to reimburse Pioneer for $45.0 million of its expenses in connection with the merger agreement;

Regulatory Approval. The Parsley board considered that the mergers and the related transactions require regulatory approval to complete such transactions and the risk that the applicable governmental entities may seek to impose unfavorable terms or conditions, or otherwise fail to grant, such approval;

Interests of Certain Parsley Directors and Executive Officers and Other Concerns Related to Conflicts or the Potential Appearance of Conflicts. The Parsley board considered that Parsley’s directors and executive officers may have interests in the mergers that may be different from, or in addition to, those of Parsley stockholders. For more information about such interests, see the section titled “—Interests of Certain Parsley Directors and Executive Officers in the Mergers.” In addition, the Parsley board considered the possibility of increased scrutiny of the mergers, given the familial relationship between Scott Sheffield, the President and Chief Executive Officer of Pioneer, and Bryan Sheffield, the Executive Chairman of Parsley and Scott Sheffield’s son;

Merger Costs. The costs associated with the completion of the mergers, including Parsley management’s time and energy and potential opportunity cost that will be incurred by the combined company as a result of the mergers, such as the TRA termination payments that will become due, as described in the section titled “The Mergers—Interests of Certain Parsley Directors and Executive Officers in the Mergers”;

Taxable Transaction for Parsley LLC Unitholders. The Parsley board considered that the mergers and the related transactions would be a taxable event for Parsley LLC unitholders and that certain Parsley LLC unitholders would not receive a TRA termination payment; and

Other Risks. The Parsley board considered risks of the type and nature described under the sections titled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

The Parsley board believed that, overall, the potential benefits of the mergers to Parsley stockholders outweighed the risks and uncertainties of the mergers.

The foregoing discussion of factors considered by the Parsley board is not intended to be exhaustive, but includes the material factors considered by the Parsley board. In light of the variety of factors considered in connection with its evaluation of the mergers, the Parsley board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the Parsley board applied his or her own personal business judgment to the process and may have given different weight to different factors. The Parsley board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Parsley board based its recommendation on the totality of the information presented.

Certain Pioneer Unaudited Prospective Financial and Operating Information

Pioneer does not as a matter of course make public long-term forecasts or internal projections as to future performance, revenues, production, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with its evaluation of the mergers, Pioneer’s management prepared certain unaudited internal financial forecasts with respect to Pioneer, which were provided to the Pioneer board and Parsley, as well as Pioneer’s and Parsley’s respective financial advisors, in connection

 

82


Table of Contents

with the proposed mergers (collectively, the “Pioneer projections”). Certain of the Pioneer projections were also provided to Pioneer’s financial advisors for their use and reliance in connection with the financial analyses that Goldman Sachs and Morgan Stanley performed in connection with their respective opinions described in “—Opinions of Pioneer’s Financial Advisors.” In addition, Pioneer provided to Parsley management certain projected production and operating data relating to Pioneer prepared by Pioneer’s management, summarized below. The inclusion of this information should not be regarded as an indication that any of Pioneer, Parsley, their respective advisors, or other representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such summary projections set forth below should not be relied on as such.

This information was prepared solely for internal use and is subjective in many respects. While presented with numeric specificity, the unaudited prospective financial and operating information reflects numerous estimates and assumptions that are inherently uncertain and may be beyond the control of Pioneer’s management, including, among others, Pioneer’s and Parsley’s future results, oil and gas industry activity, commodity prices, demand for crude oil and natural gas, the availability of financing to fund the exploration and development costs associated with the respective projected drilling programs, general economic and regulatory conditions, and other matters described in “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.” The unaudited prospective financial and operating information reflects both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Pioneer and Parsley can give no assurance that the unaudited prospective financial and operating information and the underlying estimates and assumptions will be realized. In addition, since the unaudited prospective financial and operating information covers multiple years, such information by its nature becomes less predictive with each successive year. Actual results may differ materially from those set forth below, and important factors that may affect actual results and cause the unaudited prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to its business, industry performance, the regulatory environment, general business and economic conditions, and other matters described in “Risk Factors.” Please also see “Cautionary Statement Regarding Forward-Looking Statements” and “Where You Can Find More Information.”

The unaudited prospective financial and operating information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, published guidelines of the SEC, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither Pioneer’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the unaudited prospective financial and operating information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm to Pioneer contained in its Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this joint proxy statement/prospectus, relates to historical financial information of Pioneer, and such report does not extend to the projections included below and should not be read to do so.

Furthermore, the unaudited prospective financial and operating information does not take into account any circumstances or events occurring after the date it was prepared. Pioneer and Parsley can give no assurance that, had the unaudited prospective financial and operating information been prepared either as of the date of this joint proxy statement/prospectus or as of the date of the Pioneer special meeting and the Parsley special meeting, similar estimates and assumptions would be used. Except as required by applicable securities laws, Pioneer and Parsley do not intend to, and disclaim any obligation to, make publicly available any update or other revision to the unaudited prospective financial and operating information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, including with respect to the accounting treatment of the mergers under GAAP, or to reflect changes in general economic or industry conditions. The unaudited prospective financial and operating information does not take into account all the possible financial and other effects on Pioneer or Parsley

 

83


Table of Contents

of the mergers, the effect on Pioneer or Parsley of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions which would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed, or not taken in anticipation of the mergers. Further, the unaudited prospective financial and operating information does not take into account the effect on Pioneer or Parsley of any possible failure of the mergers to occur. None of Pioneer, Parsley or their respective affiliates, officers, directors, advisors, or other representatives has made, makes, or is authorized in the future to make any representation to any Pioneer or Parsley stockholder or other person regarding Pioneer’s or Parsley’s ultimate performance compared to the information contained in the unaudited prospective financial and operating information or that the forecasted results will be achieved. The inclusion of the unaudited prospective financial and operating information herein should not be deemed an admission or representation by Pioneer, Parsley, their respective advisors or other representatives or any other person that it is viewed as material information of Pioneer or Parsley, particularly in light of the inherent risks and uncertainties associated with such forecasts. The summary of the unaudited prospective financial and operating information included below is not being included to influence your decision whether to vote in favor of the Pioneer stock issuance proposal, or any other proposal to be considered at the special meetings, but is being provided solely because it was made available to the Pioneer board, Parsley, and Pioneer’s and Parsley’s respective financial advisors in connection with the mergers.

In light of the foregoing, and considering that the special meetings will be held several months after the unaudited prospective financial and operating information was prepared, as well as the uncertainties inherent in any forecasted information, Pioneer stockholders and Parsley stockholders are cautioned not to place undue reliance on such information, and Pioneer and Parsley urge all Pioneer stockholders and Parsley stockholders to review Pioneer’s most recent SEC filings for a description of Pioneer’s reported financial results and Parsley’s most recent SEC filings for a description of Parsley’s reported financial results. Please see “Where You Can Find More Information.”

In preparing the prospective financial and operating information described below, the management team of Pioneer used the following oil and natural gas price assumptions, which are based on New York Mercantile Exchange (“NYMEX”) strip pricing available on September 22, 2020:

 

     Q4 2020E      2021E      2022E      2023E      2024E  

Brent Oil ($/bbl)

   $ 41.93      $ 44.29      $ 46.67      $ 48.48      $ 49.91  

WTI Oil ($/bbl)

   $ 39.83      $ 41.80      $ 43.38      $ 44.52      $ 45.61  

Henry Hub Gas ($/Mcf)

   $ 2.52      $ 2.93      $ 2.65      $ 2.51      $ 2.47  

Waha Gas ($/Mcf)(1)

     —        $ 2.60      $ 2.26      $ 2.06      $ 2.02  

 

(1)

Waha gas price assumptions were used by Pioneer exclusively with respect to the Pioneer projections for Parsley.

 

84


Table of Contents

Pioneer Projections for Pioneer

The following table sets forth certain summarized prospective financial and operating information regarding Pioneer on a standalone basis for the fourth quarter of 2020 and for the years 2021 through 2024, based on the price assumptions indicated above, which information was prepared by Pioneer management and authorized by Pioneer to be used and relied upon by Pioneer’s financial advisors in connection with the financial analyses that Goldman Sachs and Morgan Stanley performed in connection with their respective opinions described in “—Opinions of Pioneer’s Financial Advisors.” The following unaudited prospective financial and operating information should not be regarded as an indication that Pioneer considered, or now considers, it to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such information does not take into account any circumstances or events occurring after the date it was prepared, including, among other things, Pioneer’s anticipated or actual capital allocation relating to the Pioneer assets post-closing of the mergers.

 

     Unaudited Pioneer Financial and Operating Forecast
Provided by Pioneer Management
 
($ in millions, except production)    Q4 2020E(5)      2021E      2022E      2023E      2024E  

Production (Mboe/d)

     363        389        414        437        459  

EBITDAX(1)

   $ 592      $ 2,764      $ 3,039      $ 3,335      $ 3,656  

Discretionary cash flow(2)

   $ 571      $ 2,685      $ 2,964      $ 3,265      $ 3,586  

Capital expenditures(3)

   $ 374      $ 1,955      $ 1,833      $ 2,041      $ 2,250  

Unlevered free cash flow(4)

   $ 318      $ 622      $ 1,043      $ 1,212      $ 1,350  

 

(1)

EBITDAX is defined as earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense, stock-based compensation, non-cash derivative amortization, geological and geophysical and seismic expenses, accretion of discount on asset retirement obligations and other non-cash items. EBITDAX is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(2)

Discretionary cash flow is defined as EBITDAX, less cash interest expense. The discretionary cash flow used by Credit Suisse and provided by Pioneer reflected immaterial adjustments to the amounts set forth in the table above. Discretionary cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(3)

Capital expenditures includes expenses related to certain other property, plant and equipment and other assets, and excludes geological and geophysical and seismic expenses, general and administrative expenses and asset retirement obligations. Capital expenditures used by Credit Suisse and Wells Fargo Securities, which were derived from the projections provided by Pioneer, exclude expenses related to certain other property, plant and equipment and other assets and include geological and geophysical and seismic expenses, general and administrative expenses and asset retirement obligations.

(4)

Unlevered free cash flow was used by Goldman Sachs and Morgan Stanley and calculated as discretionary cash flow, less changes in working capital, cash geological and geophysical and seismic expenses, capital expenditures, and other income and other cash flow items, plus cash interest expense. For purposes of Goldman Sachs’ financial analysis and opinion, unlevered free cash flow also excluded stock-based compensation of $75 million per annum (which compensation is included in the amounts set forth in the table above). Unlevered free cash flow as used by Credit Suisse and Wells Fargo Securities was calculated at Parsley’s instruction.

(5)

Q4 2020E forecasts were used exclusively by Goldman Sachs and Credit Suisse with respect to their respective financial analyses and opinions.

 

85


Table of Contents

Pioneer Projections for Parsley

Pioneer management also provided to the Pioneer board certain unaudited prospective financial and operating information with respect to Parsley on a standalone basis, which was generally derived from information provided by Parsley management (the “Pioneer projections for Parsley”). Such forecasts with respect to Parsley also were provided to Pioneer’s financial advisors and were authorized by Pioneer for their use and reliance in connection with the financial analyses that Goldman Sachs and Morgan Stanley performed in connection with their respective opinions described in “—Opinions of Pioneer’s Financial Advisors.” The following table sets forth a summary of this prospective financial and operating information regarding Parsley for the fourth quarter of 2020 and for the years 2021 through 2024 as prepared by Pioneer management based on the price assumptions indicated above. The following unaudited prospective financial and operating information should not be regarded as an indication that Pioneer considered, or now considers, it to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such information does not take into account any circumstances or events occurring after the date it was prepared, including, among other things, Pioneer’s anticipated or actual capital allocation relating to the Parsley assets post-closing of the mergers.

 

     Unaudited Parsley Financial and Operating Forecast
Provided by Pioneer Management
 
($ in millions, except production)    Q4 2020E      2021E      2022E      2023E      2024E  

Production (Mboe/d)

     178        177        175        182        180  

EBITDAX(1)

   $ 326      $ 1,271      $ 1,320      $ 1,416      $ 1,404  

Discretionary cash flow(2)

   $ 287      $ 1,123      $ 1,173      $ 1,269      $ 1,256  

Capital expenditures(3)

   $ 145      $ 591      $ 656      $ 591      $ 594  

Unlevered free cash flow(4)

   $ 181      $ 641      $ 639      $ 800      $ 785  

 

(1)

EBITDAX is defined as earnings before interest, income taxes, depreciation, depletion, amortization, and exploration expense. EBITDAX is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(2)

Discretionary cash flow is defined as EBITDAX, less other expense and interest expense. Discretionary cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net cash provided by operating activities, net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(3)

Capital expenditures excludes costs related to property, plant and equipment and other assets of $39 million for 2021E, $25 million for 2022E, $25 million for 2023E and $25 million for 2024E.

(4)

Unlevered free cash flow was used by Goldman Sachs and Morgan Stanley, and calculated as EBITDAX, less capital expenditures and total acquisition and divestiture and other property, plant and equipment expenses.

(5)

Q4 2020E forecasts were used exclusively by Goldman Sachs with respect to its financial analysis and opinion.

Pioneer Management Projections for Expected Synergies and Cost Savings

Pioneer management provided to the Pioneer board, Pioneer’s financial advisors, Parsley and Parsley’s financial advisors certain estimates of the amounts and timing of expected synergies anticipated by Pioneer management to result from the mergers, which included general and administrative expense cost savings of approximately $95 million for 2021, $90 million for 2022, $82 million for 2023 and $77 million for 2024 and annual interest savings of approximately $79 million for the years 2021 through 2024 (collectively, the “Pioneer expected synergies”).

In addition to the Pioneer expected synergies above, Pioneer management also provided to the Pioneer board as part of its consideration of the strategic, financial, and operational merits of a merger with Parsley estimates regarding anticipated refinancing costs as a result of the proposed mergers, totally approximately $174 million in 2021 (the “Pioneer refinancing costs”). The Pioneer refinancing costs were also provided to

 

86


Table of Contents

Pioneer’s financial advisors. The Pioneer expected synergies and the Pioneer refinancing costs were authorized by Pioneer to be used and relied upon by Pioneer’s financial advisors in connection with the financial analyses that Goldman Sachs and Morgan Stanley performed in connection with their respective opinions described in “—Opinions of Pioneer’s Financial Advisors.”

Certain Parsley Unaudited Prospective Financial and Operating Information

Parsley as a matter of course does not make public long-term projections as to its future production, earnings or other results given, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the Parsley board’s evaluation of the proposed mergers, Parsley management prepared and provided to the Parsley board certain unaudited prospective financial and operating information relating to Parsley, which is referred to as the “Parsley projections for Parsley.” The Parsley projections for Parsley include financial forecasts reflecting a current operating model for Parsley under two alternative price decks, as further described as Parsley Case A and Parsley Case B below, and a net asset value reserve-based model for Parsley under two alternative price decks, as further described as Parsley Case C and Parsley Case D below. In addition, Pioneer provided to Parsley management certain of the Pioneer projections, which are summarized in “—Certain Pioneer Unaudited Prospective Financial and Operating Information,” and projected production and operating data relating to Pioneer prepared by Pioneer’s management (which were adjusted to reflect, among other things, associated riskings and alternative commodity price assumptions agreed by Parsley management), which are referred to herein as the “Pioneer adjusted production and operating projections”, based on certain oil and gas reserve information prepared by Pioneer’s management regarding its oil and gas reserves. The Parsley projections for Parsley, the Pioneer adjusted production and operating projections and the Pioneer projections were provided to Parsley’s financial advisors, Credit Suisse and Wells Fargo Securities, which were authorized by Parsley to use and rely upon the Parsley projections for Parsley, the Pioneer adjusted production and operating projections and the Pioneer projections, and, at Parsley’s instruction, Credit Suisse relied upon the Parsley projections for Parsley, the Pioneer adjusted production and operating projections and the Pioneer projections and Wells Fargo Securities relied upon Parsley Case A and the Pioneer projections in connection with their respective analyses and opinions described in the section titled “—Opinions of Parsley’s Financial Advisors.”

The summary of the unaudited prospective financial and operating information below is not included to influence the decision of Parsley stockholders or Pioneer stockholders whether to vote in favor of the Parsley merger proposal, the Pioneer stock issuance proposal or any other proposal to be considered at the special meetings, but is provided solely because it was made available to the Parsley board and Parsley’s financial advisors in connection with the mergers. The inclusion of the below information should not be regarded as an indication that any of Parsley, Pioneer, their respective advisors or other representatives or any other recipient of this information considered—or now considers—it to be necessarily predictive of actual future results, or that it should be construed as financial guidance.

This information was prepared solely for internal use and is subjective in many respects. While presented with numerical specificity, the unaudited prospective financial and operating information reflects numerous estimates and assumptions that are inherently uncertain and may be beyond the control of Parsley’s or Pioneer’s management, including, among others, Parsley’s and Pioneer’s future results, oil and gas industry activity, commodity prices, demand for crude oil and natural gas, the availability of financing to fund the exploration and development costs associated with Parsley’s and Pioneer’s respective projected drilling programs, general economic and regulatory conditions, and other matters described in “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

The unaudited prospective financial and operating information also reflects assumptions as to certain business decisions that are subject to change and subjective judgment that is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Parsley can give no assurance that the unaudited prospective financial and operating information and the underlying estimates and

 

87


Table of Contents

assumptions will be realized. In addition, because the unaudited prospective financial and operating information covers multiple years, such information by its nature becomes less predictive with each successive year. This information constitutes “forward-looking statements” and actual results may differ materially and adversely from those projected. The unaudited prospective financial and operating information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither Parsley’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial and operating information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm to Parsley contained in its Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this joint proxy statement/prospectus, relates to historical financial information of Parsley, and such report does not extend to the projections included below and should not be read to do so.

Furthermore, the unaudited prospective financial and operating information does not take into account any circumstances or events occurring after the date it was prepared. Parsley can give no assurance that, had the unaudited prospective financial and operating information been prepared as of the date of this joint proxy statement/prospectus, similar estimates and assumptions would be used. Except as required by applicable securities laws, Parsley does not intend to, and disclaims any obligation to, make publicly available any update or other revision to the unaudited prospective financial and operating information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be inappropriate, including with respect to the accounting treatment of the mergers under GAAP, or to reflect changes in general economic or industry conditions. The unaudited prospective financial and operating information does not take into account all the possible financial and other effects on Parsley or Pioneer of the mergers, the effect on Parsley or Pioneer of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions which would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the mergers. Further, the unaudited prospective financial and operating information does not take into account the effect on Parsley or Pioneer of any possible failure of the mergers to occur. None of Parsley, Pioneer or their respective affiliates, officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any stockholder or other person regarding Parsley’s or Pioneer’s ultimate performance compared to the information contained in the unaudited prospective financial and operating information or that the forecasted results will be achieved. The inclusion of the unaudited prospective financial and operating information herein should not be deemed an admission or representation by Parsley, Pioneer or their respective advisors or other representatives or any other person that it is viewed as material information of Parsley or Pioneer, particularly in light of the inherent risks and uncertainties associated with such forecasts.

In light of the foregoing, and considering that the special meetings will be held several months after the unaudited prospective financial and operating information was prepared, as well as the uncertainties inherent in any forecasted information, Parsley stockholders and Pioneer stockholders are cautioned not to place undue reliance on such information and are encouraged to review Parsley’s and Pioneer’s most recent SEC filings for a description of Parsley’s and Pioneer’s respective reported financial results. See the section titled “Where You Can Find More Information.”

Parsley Management Projections for Parsley

In preparing the Parsley unaudited forecasted financial and operating information described below, the management team of Parsley used the following oil and natural gas prices (with oil prices based on NYMEX WTI pricing, natural gas prices based on Waha or Henry Hub pricing, as specified below, and NGL prices based on Mont Belvieu pricing), based on oil and natural gas strip pricing as of September 22, 2020 and October 15,

 

88


Table of Contents

2020. The management team of Parsley used Parsley management production and capital expenditures projections in connection with oil and natural gas strip pricing.

 

Oil and Gas Strip Pricing (as of September 22, 2020)

 
     2020E      2021E      2022E      2023E      2024E  

Commodity Prices

              

Oil ($/Bbl)

   $ 38.69      $ 41.80      $ 43.38      $ 44.52      $ 45.61  

Gas (Waha)($/Mcf)

   $ 1.11      $ 2.60      $ 2.26      $ 2.06      $ 2.02  

NGL ($/Bbl)

   $ 16.43      $ 17.70      $ 16.70      $ 16.10      $ 15.84  

 

Oil and Gas Strip Pricing (as of October 15, 2020)

 
     2H’20E      2020E      2021E      2022E      2023E      2024E  

Commodity Prices

                 

Oil ($/Bbl)

   $ 41.00      $ 39.01      $ 42.57      $ 43.40      $ 44.04      $ 44.76  

Gas (Waha)($/Mcf)

     —        $ 1.24      $ 2.73      $ 2.31      $ 2.05      $ 2.01  

Gas (Henry Hub)($/Mmbtu)

   $ 2.57        —        $ 3.07      $ 2.70      $ 2.50      $ 2.46  

NGL ($/Bbl)

   $ 18.46      $ 16.77      $ 18.57      $ 17.54      $ 17.12      $ 17.11  

In addition to the assumptions with respect to commodity prices, the Parsley unaudited forecasted financial and operating information is based on various other assumptions, including, but not limited to, the following principal assumptions: no unannounced acquisitions; normal weather in the forward-looking periods; cash general and administrative expenditures of $115 million per year; lease operating expense increasing on a linear basis from $256 million in 2020E to $295 million in 2024E; no debt refinancing or early repayment of debt; and no material fluctuations in interest rate assumptions over the forward-looking periods. The Parsley unaudited forecasted financial and operating information also reflects assumptions regarding the continuing nature of ordinary course operations that may be subject to change.

Parsley management applied the current operating model to two different pricing scenarios, which are referred to in this section as “Parsley Case A” and “Parsley Case B,” and applied the net asset value reserve-based model to two different pricing scenarios, which are referred to in this section as “Parsley Case C” and “Parsley Case D”:

 

   

Parsley Case A: Parsley current operating model forecasts through 2024E based on customary strategic planning and budgeting process utilizing reasonable available estimates and judgments at the time of its preparation, based on oil and gas (Waha) strip pricing as of September 22, 2020.

 

   

Parsley Case B: Parsley current operating model forecasts through 2024E based on customary strategic planning and budgeting process utilizing reasonable available estimates and judgments at the time of its preparation, based on oil and gas (Waha) strip pricing as of October 15, 2020.

 

   

Parsley Case C: Parsley net asset value reserve-based model of existing proved developed producing reserves and undeveloped reserves through the end of their economic lives, based on oil and gas (Henry Hub) strip pricing as of October 15, 2020 through 2024E and thereafter holding pricing flat.

 

   

Parsley Case D: Parsley net asset value reserve-based model of existing proved developed producing reserves and undeveloped reserves through the end of their economic lives, based on oil and gas (Henry Hub) strip pricing as of October 15, 2020 through 2024E and thereafter $50 per barrel oil pricing and holding other pricing flat.

 

89


Table of Contents

The following tables present selected unaudited forecasted financial and operating information of Parsley contained in the Parsley projections for Parsley:

 

Parsley Case A

 
     2020E     2021E     2022E     2023E     2024E  
     ($ in millions)  

Oil and Gas Strip Pricing (as of September 22, 2020)

          

Production (MBoe/d)

     186       177       175       182       180  

EBITDAX(1)

   $ 1,277     $ 1,271     $ 1,320     $ 1,416     $ 1,404  

Discretionary free cash flow(2)

   $ 1,098     $ 1,123     $ 1,173     $ 1,269     $ 1,256  

Capital expenditures(3)

   $ (657   $ (591   $ (656   $ (591   $ (594

Levered free cash flow(4)

   $ 441     $ 532     $ 517     $ 678     $ 663  

Other (5)

   $ (18   $ —       $ —       $ —       $ —    

Interest expense

   $ (161   $ (148   $ (147   $ (147   $ (147

Unlevered free cash flow(6)

   $ 620     $ 680     $ 664     $ 825     $ 810  

 

(1)

EBITDAX is defined as earnings before interest, income taxes, depreciation, depletion, amortization and exploration expense. EBITDAX is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(2)

Discretionary free cash flow is defined as EBITDAX less other expense and interest expense. Discretionary free cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net cash provided by operating activities, net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(3)

Capital expenditures excludes costs related to property, plant and equipment and other assets of $39 million for 2021E, $25 million for 2022E, $25 million for 2023E and $25 million for 2024E.

(4)

Levered free cash flow is defined as EBITDAX less other expense, interest expense, capital expenditures and cash taxes (no cash taxes projected during the forecast period). Levered free cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net cash provided by operating activities, net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(5)

Other expense represents hedge settlements (changes in accrual), restructuring costs, cash exploration and abandonment costs, amortization of debt related costs, including interest income, rig stacking expense, non-cash plugging and abandonment adjustments and other non-cash operating cash flow items.

 

(6)

Unlevered free cash flow is defined as EBITDAX less capital expenditures and cash taxes (no cash taxes projected during the forecast period). Unlevered free cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net cash provided by operating activities, net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

 

Parsley Case B

 
     2020E     2021E     2022E     2023E     2024E  
     ($ in millions)  

Oil and Gas Strip Pricing (as of October 15, 2020)

          

Production (MBoe/d)

     186       177       175       182       180  

EBITDAX(1)

   $ 1,294     $ 1,279     $ 1,332     $ 1,408     $ 1,384  

Discretionary free cash flow(2)

   $ 1,115     $ 1,131     $ 1,185     $ 1,261     $ 1,237  

Capital expenditures(3)

   $ (657   $ (591   $ (656   $ (591   $ (594

Levered free cash flow(4)

   $ 458     $ 540     $ 529     $ 670     $ 643  

Other (5)

   $ (18   $ —       $ —       $ —       $ —    

Interest expense

   $ (161   $ (148   $ (147   $ (147   $ (147

Unlevered free cash flow(6)

   $ 637     $ 689     $ 677     $ 817     $ 790  

 

(1)

EBITDAX is defined as earnings before interest, income taxes, depreciation, depletion, amortization and exploration expense. EBITDAX is not a measure of financial performance under GAAP. Accordingly, it

 

90


Table of Contents
  should not be considered as a substitute for net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.
(2)

Discretionary free cash flow is defined as EBITDAX less other expense and interest expense. Discretionary free cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net cash provided by operating activities, net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(3)

Capital expenditures excludes costs related to property, plant and equipment and other assets of $39 million for 2021E, $25 million for 2022E, $25 million for 2023E and $25 million for 2024E.

(4)

Levered free cash flow is defined as EBITDAX less other expense, interest expense, capital expenditures and cash taxes (no cash taxes projected during the forecast period). Levered free cash flow is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net cash provided by operating activities, net income (loss), operating income (loss) or other measures prepared in accordance with GAAP.

(5)

Other expense represents hedge settlements (changes in accrual), restructuring costs, cash exploration and abandonment costs, amortization of debt related costs, including interest income, rig stacking expense, non-cash plugging and abandonment adjustments and other non-cash operating cash flow items.

(6)

Unlevered free cash flow is defined as EBITDAX less capital expenditures and cash taxes (no cash taxes projected during the forecast perio