10-Q 1 pxd-20220930.htm 10-Q pxd-20220930

Washington, D.C. 20549 
FORM 10-Q 
For the quarterly period ended September 30, 2022
For the transition period from ________ to ________
Commission File Number: 1-13245
(Exact name of Registrant as specified in its charter)
Delaware 75-2702753
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
777 Hidden Ridge
Irving, Texas 75038
(Address of principal executive offices and zip code)
(972) 444-9001
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $.01 per sharePXDNew York Stock Exchange
Not applicable
(Former name, former address and former fiscal year, if changed since last report) 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
Yes      No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No  
Number of shares of Common Stock outstanding as of October 27, 2022    237,598,733


Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021
Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021
Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021
Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

Definitions of Certain Terms and Conventions Used Herein
Within this Report, the following terms and conventions have specific meanings:
"Bbl" means a standard barrel containing 42 United States gallons.
"Bcf" means one billion cubic feet and is a measure of gas volume.
"BOE" means a barrel of oil equivalent and is a standard convention used to express oil and gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the relative energy content method by using the ratio of six thousand cubic feet of gas to one Bbl of oil or natural gas liquid.
"BOEPD" means BOE per day.
"MMBOPD" means one million barrels of oil per day.
"Btu" means British thermal unit, which is a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.
"MBbl" means one thousand Bbls.
"MBOE" means one thousand BOEs.
"Mcf" means one thousand cubic feet and is a measure of gas volume.
"MMBbl" means one million Bbls.
"MMBOE" means one million BOEs.
"MMBtu" means one million Btus.
"MMcf" means one million cubic feet.

"Brent" means Brent oil price, a major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
"Dutch TTF" means Dutch Title Transfer Facility, a virtual trading hub for gas in the Netherlands and the primary gas pricing hub for the European gas market.
"HH" means Henry Hub, a distribution hub in Louisiana that serves as the delivery location for gas futures contracts on the NYMEX.
"Houston Ship Channel" is a benchmark pricing hub for South Texas gas.
"MEH" means Magellan East Houston, an oil index benchmark price of WTI at Magellan East Houston.
"SoCal" is a benchmark pricing hub for Southern California gas.
"WAHA" is a benchmark pricing hub for West Texas gas.
"WTI" means West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil used as a benchmark in oil pricing.

General terms and conventions.
"DD&A" means depletion, depreciation and amortization.
"ESG" means environmental, social and governance.
"Field fuel" means gas consumed to operate field equipment (primarily compressors) prior to the gas being delivered to a sales point.
"GAAP" means accounting principles generally accepted in the United States of America.
"GHG" means greenhouse gases.
"NGLs" means natural gas liquids, which are the heavier hydrocarbon liquids that are separated from the gas stream; such liquids include ethane, propane, isobutane, normal butane and natural gasoline.
"NYMEX" means the New York Mercantile Exchange.
"NYSE" means the New York Stock Exchange.
"OPEC" means the Organization of Petroleum Exporting Countries.
"Pioneer" or the "Company" means Pioneer Natural Resources Company and its subsidiaries.
"Proved developed reserves" means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.

"Proved reserves" means those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
(i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons ("LKH") as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a highest known oil ("HKO") elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty.
(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities.
(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.
"Proved undeveloped reserves" means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.
(ii) Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.
(iii) Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.
"SEC" means the United States Securities and Exchange Commission.
"Standardized Measure" means the after-tax present value of estimated future net cash flows of proved reserves, determined in accordance with the rules and regulations of the SEC, using prices and costs employed in the determination of proved reserves and a ten percent discount rate.
"U.S." means United States.
With respect to information on the working interest in wells, drilling locations and acreage, "net" wells, drilling locations and acres are determined by multiplying "gross" wells, drilling locations and acres by the Company's working interest in such wells, drilling locations or acres. Unless otherwise specified, wells, drilling locations and acreage statistics quoted herein represent gross wells, drilling locations or acres.
"WASP" means weighted average sales price.
All currency amounts are expressed in U.S. dollars.

The information in this Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements that involve risks and uncertainties. When used in this document, the words "believes," "plans," "expects," "anticipates," "forecasts," "models," "intends," "continue," "may," "will," "could," "should," "future," "potential," "estimate," or the negative of such terms and similar expressions as they relate to the Company are intended to identify forward-looking statements, which are generally not historical in nature. The forward-looking statements are based on the Company's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond the Company's control. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.
These risks and uncertainties include, among other things, volatility of commodity prices; product supply and demand; the impact of a widespread outbreak of an illness, such as the COVID-19 pandemic, on global and U.S. economic activity and oil and gas demand; the impact of armed conflict and political instability on economic activity and oil and gas supply and demand; competition; the ability to obtain drilling, environmental and other permits and the timing thereof; the effect of future regulatory or legislative actions on Pioneer or the industries in which it operates, including potential changes to tax laws; the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms; potential liability resulting from pending or future litigation; the costs, including the potential impact of cost increases due to inflation and supply chain disruptions, and results of development and operating activities; the risk of new restrictions with respect to development activities, including potential changes to regulations resulting in limitations on the Company's ability to dispose of produced water; availability of equipment, services, resources and personnel required to perform the Company's development and operating activities; access to and availability of transportation, processing, fractionation, refining, storage and export facilities; Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled; the Company's ability to achieve its emissions reductions, flaring and other ESG goals; access to and cost of capital; the financial strength of (i) counterparties to Pioneer's credit facility and derivative contracts, (ii) issuers of Pioneer's investment securities and (iii) purchasers of Pioneer's oil, NGL and gas production and downstream sales of purchased oil and gas; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying forecasts, including forecasts of production, operating cash flow, well costs, capital expenditures, rates of return, expenses, and cash flow from downstream purchases and sales of oil and gas, net of firm transportation commitments; tax rates; quality of technical data; environmental and weather risks, including the possible impacts of climate change on the Company's operations and demand for its products; cybersecurity risks; the risks associated with the ownership and operation of the Company's water services business and acts of war or terrorism. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse effect on it.
Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part 1, Item 3. Quantitative and Qualitative Disclosures About Market Risk" and "Part II, Item 1A. Risk Factors" in this Report and "Part I, Item 1. Business — Competition," "Part I, Item 1. Business —Regulation," "Part I, Item 1A. Risk Factors," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for a description of various factors that could materially affect the ability of Pioneer to achieve the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Pioneer undertakes no duty to publicly update these statements except as required by law.

(in millions, except share data)
September 30, 2022December 31, 2021
Current assets:
Cash and cash equivalents$1,316 $3,847 
Restricted cash6 37 
Accounts receivable, net1,938 1,685 
Inventories420 369 
Investment in affiliate134 135 
Short-term investments, net372 58 
Other97 42 
Total current assets4,283 6,173 
Oil and gas properties, using the successful efforts method of accounting:
Proved properties37,217 34,454 
Unproved properties5,943 6,063 
Accumulated depletion, depreciation and amortization(14,199)(12,335)
Total oil and gas properties, net28,961 28,182 
Other property and equipment, net1,668 1,694 
Operating lease right-of-use assets360 348 
Goodwill243 243 
Other assets231 171 
$35,746 $36,811 
Current liabilities:
Accounts payable:
Trade$2,328 $2,380 
Due to affiliates151 179 
Interest payable21 53 
Income taxes payable45 45 
Current portion of long-term debt986 244 
Derivatives304 538 
Operating leases128 121 
Other207 513 
Total current liabilities4,170 4,073 
Long-term debt4,228 6,688 
Derivatives1 25 
Deferred income taxes3,301 2,038 
Operating leases246 243 
Other liabilities851 907 
Common stock, $.01 par value; 500,000,000 shares authorized; 244,694,426 and
   244,144,444 shares issued as of September 30, 2022 and December 31, 2021, respectively
2 2 
Additional paid-in capital18,911 19,123 
Treasury stock, at cost; 6,958,828 and 1,366,610 shares as of September 30, 2022 and
   December 31, 2021, respectively
Retained earnings5,561 3,960 
Total equity22,949 22,837 
Commitments and contingencies
$35,746 $36,811 

The financial information included as of September 30, 2022 has been prepared by management
without audit by independent registered public accountants.

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

(in millions, except per share data)
 Three Months Ended September 30,
Nine Months Ended September 30,
Revenues and other income:
Oil and gas$4,224 $3,282 $12,794 $7,787 
Sales of purchased commodities1,833 1,679 6,416 4,507 
Interest and other income (loss), net(12)2 57 42 
Derivative gain (loss), net13 (501)(187)(2,024)
Gain on disposition of assets, net35 1 105 14 
6,093 4,463 19,185 10,326 
Costs and expenses:
Oil and gas production562 323 1,457 890 
Production and ad valorem taxes260 179 755 445 
Depletion, depreciation and amortization641 704 1,874 1,825 
Purchased commodities1,968 1,762 6,502 4,644 
Exploration and abandonments8 10 32 40 
General and administrative90 72 252 216 
Accretion of discount on asset retirement obligations4 2 12 5 
Interest30 41 100 122 
Other36 34 118 384 
3,599 3,127 11,102 8,571 
Income before income taxes2,494 1,336 8,083 1,755 
Income tax provision(510)(291)(1,719)(400)
Net income attributable to common stockholders$1,984 $1,045 $6,364 $1,355 
Net income per share attributable to common stockholders:
Basic$8.29 $4.27 $26.36 $5.88 
Diluted$7.93 $4.07 $25.11 $5.60 
Weighted average shares outstanding:
Basic239 244 241 230 
Diluted250 257 253 242 
Dividends declared per share$8.57 $2.07 $19.73 $3.19 

The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.

(in millions, except share data and dividends per share)
Total Equity
(in thousands)
Balance as of December 31, 2021242,778 $2 $19,123 $(248)$3,960 $22,837 
Dividends declared ($3.78 per share)
— — — — (922)(922)
Exercise of long-term incentive stock options
6 — — 1 — 1 
Purchases of treasury stock(1,175)— — (276)— (276)
Stock-based compensation:
Vested compensation awards, net350 — — — —  
Compensation costs included in net income— — 19 — — 19 
Net income— — — — 2,009 2,009 
Balance as of March 31, 2022241,959 2 19,142 (523)5,047 23,668 
Dividends declared ($7.38 per share)
— — — — (1,788)(1,788)
Convertible senior note conversions:
Conversion premium— — (2)— — (2)
Capped call proceeds— — 26 — — 26 
Issuance fees and deferred taxes— — (6)— — (6)
Purchases of treasury stock(2,126)— — (499)— (499)
Stock-based compensation:
Vested compensation awards, net5 — — — —  
Compensation costs included in net income— — 20 — — 20 
Net income— — — — 2,371 2,371 
Balance as of June 30, 2022239,838 2 19,180 (1,022)5,630 23,790 
Dividends declared ($8.57 per share)
— — — — (2,053)(2,053)
Convertible senior note conversions:
Conversion premium— — (319)— — (319)
Capped call proceeds— — 45 — — 45 
Issuance fees and deferred taxes— — (13)— — (13)
Employee stock purchases
41 — (2)8 — 6 
Purchases of treasury stock(2,338)— — (511)— (511)
Stock-based compensation:
Vested compensation awards, net195 — — — —  
Compensation costs included in net income— — 20 — — 20 
Net income— — — — 1,984 1,984 
Balance as of September 30, 2022237,736 $2 $18,911 $(1,525)$5,561 $22,949 
The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.

(in millions, except share data and dividends per share)
Total Equity
(in thousands)
Balance as of December 31, 2020164,477 $2 $9,323 $(1,234)$3,478 $11,569 
Dividends declared ($0.56 per share)
— — — — (122)(122)
Cumulative effect of accounting change on convertible senior notes:
Equity component— — (230)— 28 (202)
Deferred tax component— — 50 — (6)44 
Exercise of long-term incentive stock options
55 — (2)8 — 6 
Purchases of treasury stock(99)— — (13)— (13)
Shares issued or reissued for Parsley Energy, Inc. ("Parsley") acquisition51,655 — 5,644 1,238 — 6,882 
Stock-based compensation:
Vested compensation awards, net623 — — — —  
Compensation costs included in net loss— — 19 — — 19 
Compensation costs included in net loss associated with Parsley acquisition— — 33 — — 33 
Net loss— — — — (70)(70)
Balance as of March 31, 2021216,711 2 14,837 (1)3,308 18,146 
Dividends declared ($0.56 per share)
— — — — (138)(138)
Purchases of treasury stock(2)— — (1)— (1)
Shares issued for Double Eagle III Midco 1 LLC ("DoublePoint") acquisition
27,187 — 4,234 — — 4,234 
Stock-based compensation:
Vested compensation awards, net63 — — — —  
Compensation costs included in net income— — 17 — — 17 
Net income— — — — 380 380 
Balance as of June 30, 2021243,959 2 19,088 (2)3,550 22,638 
Dividends declared ($2.07 per share)
— — — — (508)(508)
Employee stock purchases53 — (2)7 — 5 
Purchases of treasury stock(34)— — (5)— (5)
Stock-based compensation costs:
Vested compensation awards, net144 — — — —  
Compensation costs included in net income— — 18 — — 18 
Net income— — — — 1,045 1,045 
Balance as of September 30, 2021244,122 $2 $19,104 $ $4,087 $23,193 

The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.

(in millions)
Nine Months Ended September 30,
Cash flows from operating activities:
Net income$6,364 $1,355 
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation and amortization1,874 1,825 
Exploration expenses6 3 
Deferred income taxes1,248 371 
Gain on disposition of assets, net(105)(14)
Loss on early extinguishment of debt, net47 2 
Accretion of discount on asset retirement obligations12 5 
Interest expense7 6 
Derivative-related activity(95)636 
Amortization of stock-based compensation59 87 
Investment valuation adjustments(17)(21)
Other69 106 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(253)(601)
Operating lease right-of-use assets(12)81 
Other assets(84)(57)
Accounts payable(260)515 
Interest payable(32)(76)
Income taxes payable 25 
Operating leases9 (83)
Other liabilities(32)(247)
Net cash provided by operating activities8,750 3,825 
Cash flows from investing activities:
Proceeds from disposition of assets293 59 
Proceeds from short-term investments727  
Purchase of short-term investments, net(1,020) 
Cash used in acquisitions, net of cash acquired (826)
Additions to oil and gas properties(2,806)(2,181)
Additions to other assets and other property and equipment(105)(77)
Net cash used in investing activities(2,911)(3,025)
Cash flows from financing activities:
Proceeds from issuance of senior notes, net of discount 3,247 
Borrowings under credit facility 650 
Repayment of credit facilities (1,287)
Repayment of long-term debt(2,097)(3,371)
Proceeds from capped call on convertible notes71  
Payments of other liabilities(183)(153)
Payments of financing fees (32)
Purchases of treasury stock(1,286)(19)
Exercise of long-term incentive plan stock options and employee stock purchases7 11 
Dividends paid(4,913)(720)
Net cash used in financing activities(8,401)(1,674)
Net decrease in cash, cash equivalents and restricted cash(2,562)(874)
Cash, cash equivalents and restricted cash, beginning of period3,884 1,501 
Cash, cash equivalents and restricted cash, end of period$1,322 $627 
The financial information included herein has been prepared by management
without audit by independent registered public accountants.
The accompanying notes are an integral part of these consolidated financial statements.

September 30, 2022

NOTE 1. Organization and Nature of Operations
Pioneer is a Delaware corporation whose common stock is listed and traded on the NYSE. The Company is a large independent oil and gas exploration and production company that explores for, develops and produces oil, NGLs and gas in the Midland Basin in West Texas.
NOTE 2. Basis of Presentation
Presentation. In the opinion of management, the unaudited interim consolidated financial statements of the Company as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 include all adjustments and accruals, consisting only of normal, recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods in conformity with GAAP. The operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the SEC. These unaudited interim consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Use of estimates in the preparation of financial statements. Preparation of the Company's consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Depletion of oil and gas properties is determined using estimates of proved oil and gas reserves. There are numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves, commodity price outlooks and estimates of development and production costs. Actual results could differ from the estimates and assumptions utilized.
NOTE 3. Acquisition and Divestiture Activities
Acquisitions. The Company regularly seeks to acquire or trade for acreage that complements its operations, provides exploration and development opportunities, increases the lateral length of future horizontal wells and provides superior returns on investment.
DoublePoint acquisition. On May 4, 2021, the Company acquired Double Eagle III Midco 1 LLC ("DoublePoint") pursuant to a definitive membership interest purchase agreement dated April 1, 2021 (the "DoublePoint Acquisition") in exchange for 27 million shares of Pioneer common stock and $1.0 billion of cash. The Pioneer stock consideration transferred had a fair value of $4.2 billion.
Parsley acquisition. On January 12, 2021, the Company acquired Parsley Energy, Inc., a Delaware corporation that previously traded on the NYSE under the symbol "PE" ("Parsley"), pursuant to the Agreement and Plan of Merger, dated as of October 20, 2020, among Pioneer, certain of its subsidiaries, Parsley and Parsley Energy, LLC (the "Parsley Acquisition").
As part of the Parsley Acquisition, each eligible share of Parsley Class A common stock and each membership interest unit of Parsley Energy, LLC were automatically converted into the right to receive 0.1252 (the "Exchange Ratio") shares of Pioneer common stock. As a result, the Company issued 52 million shares of Pioneer common stock upon the consummation of the Parsley Acquisition, representing total stock consideration transferred of $6.9 billion.
Both the Parsley Acquisition and the DoublePoint Acquisition were accounted for using the acquisition method under ASC Topic 805, Business Combinations, which requires all assets acquired and liabilities assumed to be recorded at fair value at the acquisition date.

September 30, 2022
Divestitures. The Company regularly reviews its asset base to identify nonstrategic assets, the disposition of which would increase capital resources available for other activities, create organizational and operational efficiencies and further the Company's objective of maintaining a strong balance sheet to ensure financial flexibility.
During the nine months ended September 30, 2022, the Company divested certain undeveloped acres and producing wells in the Midland Basin for (i) cash proceeds of $165 million and (ii) ownership interests in certain Midland Basin undeveloped acres and producing wells valued at $8 million. The Company recorded a gain on these sales of $110 million, which is reflected in net gain on disposition of assets in the consolidated statements of operations.
In February 2022, the Company completed the sale of its equity interest in certain gas gathering and processing systems in northern Martin County for cash proceeds of $125 million, after normal closing adjustments (the "Martin County Gas Processing Divestiture"). The sale was treated as a recovery of investment from a partial sale of proved property resulting in no gain or loss being recognized.
In December 2021, the Company completed the sale of its assets in the Delaware Basin (the "Delaware Divestiture") to Continental Resources, Inc. ("Continental") for cash proceeds of $3.0 billion, after normal closing adjustments. The Company's Delaware Basin assets were acquired as part of the Parsley Acquisition.
In October 2021, the Company completed the sale of 20,000 net acres in western Glasscock County to Laredo Petroleum, Inc. ("Laredo") in exchange for $137 million in cash and 960 thousand shares of Laredo's common stock representing total consideration transferred of $206 million, after normal closing adjustments.
In March 2021, the Company sold its well services business to a third party for (i) net cash proceeds of $20 million and (ii) up to $4 million of additional cash proceeds to be earned through March 2024. The Company recorded a gain on the sale of $9 million, which is reflected in net gain on disposition of assets in the consolidated statements of operations.
NOTE 4. Fair Value Measurements
The Company determines fair value based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company's own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.
The three input levels of the fair value hierarchy are as follows:
Level 1 – quoted prices for identical assets or liabilities in active markets.
Level 2 – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – unobservable inputs for the asset or liability, typically reflecting management's estimate of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including discounted cash flow models.

September 30, 2022
Assets and liabilities measured at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows:
As of September 30, 2022
 Fair Value Measurements
 Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
(Level 2)
(Level 3)
 (in millions)
Investment in affiliate$134 $ $ $134 
Deferred compensation plan assets63   63 
Marketing derivatives  81 81 
$197 $ $81 $278 
Commodity price derivatives (a)$ $223 $ $223 
Marketing derivatives  82 82 
$ $223 $82 $305 
As of December 31, 2021
 Fair Value Measurements
 Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
(Level 2)
(Level 3)
 (in millions)
Investment in affiliate$135 $ $ $135 
Deferred compensation plan assets74   74 
Short-term investment58   58 
$267 $ $ $267 
Commodity price derivatives (a)$ $486 $ $486 
Marketing derivatives  77 77 
$ $486 $77 $563 
(a)Includes $84 million and $328 million as of September 30, 2022 and December 31, 2021, respectively, of liabilities recorded in the fourth quarter of 2021 related to entering into equal and offsetting oil and gas commodity derivative trades that had the net effect of eliminating certain of the Company's 2022 derivative obligations.
Investment in affiliate. The Company elected the fair value option for measuring its equity method investment in ProPetro Holding Corp. ("ProPetro"). The fair value of the Company's investment in ProPetro common stock is determined using Level 1 inputs based on observable prices on a major exchange. See Note 11 and Note 13 for additional information.
Deferred compensation plan assets. The Company's deferred compensation plan assets include investments in equity and mutual fund securities that are actively traded on major exchanges. The fair value of these investments is determined using Level 1 inputs based on observable prices on major exchanges.
Short-term investment. In October 2021, the Company acquired 960 thousand shares of Laredo as partial consideration for its divestiture of certain acreage in western Glasscock County to Laredo. The shares were treated as an investment in equity securities measured at fair value. The fair value of the Company's investment in Laredo common stock was determined using Level 1 inputs based on observable prices on a major exchange, resulting in the fair value of the Laredo shares being based on

September 30, 2022
the trading value of the shares as of December 31, 2022. During the nine months ended September 30, 2022, the Company sold all 960 thousand shares of Laredo common stock. See Note 13 for additional information.
Commodity price derivatives. The Company's commodity price derivatives primarily represent oil and gas swap contracts, collar contracts, collar contracts with short puts, option contracts and basis swap contracts. The asset and liability measurements for the Company's commodity price derivative contracts are determined using Level 2 inputs. The Company utilizes discounted cash flow and option-pricing models for valuing its commodity price derivatives.
The liability values attributable to the Company's commodity price derivatives were determined based on inputs that include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) the implied rate of volatility inherent in the collar contracts and collar contracts with short puts, which is based on active and independent market-quoted volatility factors.
Conversion option derivatives. In May 2020, the Company issued $1.3 billion principal amount of convertible senior notes due 2025 (the "Convertible Notes"). Certain holders of the Convertible Notes exercised their conversion option during the nine months ended September 30, 2022. Per the terms of the notes indenture, the Company elected to settle the conversions in cash, with settlement occurring 25 trading days from the notice of conversion (the "Settlement Period"). The Company's election to settle an exercised conversion option in cash results in a forward contract during the Settlement Period that is accounted for as a derivative instrument not designated as a hedge. The change in fair value of the conversion option derivatives during the Settlement Periods is primarily determined based on Level 2 inputs related to the daily volumetric weighted average prices ("VWAP") of the Company's common stock during the Settlement Period. Conversion option derivative assets and liabilities recorded in the consolidated balance sheets were less than $1 million as of September 30, 2022. See Note 5, Note 7 and Note 17 for additional information.
Marketing derivatives. The Company's marketing derivatives reflect long-term marketing contracts whereby the Company agreed to purchase and simultaneously sell barrels of oil at an oil terminal in Midland, Texas. The price the Company pays to purchase the oil volumes under the purchase contract is based on a Midland oil price and the price the Company receives for the oil volumes sold is a WASP that the non-affiliated counterparty receives for selling oil through a Gulf Coast storage and export facility at prices that are highly correlated with Brent oil prices during the same month of the purchase. Based on the form of the long-term marketing contracts, the Company accounts for the contracts as derivative instruments not designated as hedges. The asset and liability measurements for the long-term marketing contracts are determined using both Level 2 and 3 inputs. The Company utilizes a discounted cash flow model for valuing the marketing derivatives.
The asset and liability values attributable to the Company's marketing derivatives that are determined based on Level 2 inputs include (i) the contracted notional volumes, (ii) independent active market price quotes, (iii) the applicable estimated credit-adjusted risk-free rate yield curve and (iv) stated contractual rates. The Level 3 inputs attributable to the Company's marketing derivatives include the historical monthly differential between Brent oil prices and the corresponding WASP of the counterparty to the marketing derivatives ("WASP Differential Deduction") and, to a lesser extent, an estimated annual cost inflation rate. The average WASP Differential Deduction used in the fair value determination as of September 30, 2022 and 2021 was $1.63 per barrel and $2.07 per barrel, respectively. The WASP Differential Deduction and the estimated annual cost inflation rate reflects management's best estimate of future results utilizing historical performance, but these estimates are not observable inputs by a market participant and contain a high degree of uncertainty. The Company experiences mark-to-market fluctuations in the fair value of its marketing derivatives based on changes in the WASP Differential Deduction if it deviates from historical levels. For example, a 10 percent increase or decrease in the WASP Differential Deduction would impact the fair value of the Company's marketing derivatives recorded by approximately $28 million as of September 30, 2022.
Assets and liabilities measured at fair value on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances. These assets and liabilities can include inventories, proved and unproved oil and gas properties, assets acquired and liabilities assumed in business combinations, goodwill and other long-lived assets that are written down to fair value when they are determined to be impaired or held for sale.

September 30, 2022
Financial instruments not carried at fair value. Carrying values and fair values of financial instruments that are not carried at fair value in the consolidated balance sheets are as follows:
 As of September 30, 2022As of December 31, 2021
 (in millions)
Cash and cash equivalents (a)$1,316 $1,316 $3,847 $3,847 
Restricted cash (a) (b)$6 $6 $37 $37 
Short-term investments, net (c)$372 $372 $ $ 
Current portion of long-term debt:
Convertible senior notes (d)$45 $99 $ $ 
Senior notes (d)$941 $914 $244 $247 
Long-term debt:
Convertible senior notes (d)$