Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 29, 2019
PIONEER NATURAL RESOURCES COMPANY
(Exact name of registrant as specified in its charter)
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Delaware | 1-13245 | 75-2702753 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
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5205 N. O'Connor Blvd., Suite 200, Irving, Texas | | 75039 |
(Address of principal executive offices) | | (Zip Code) |
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Registrant’s telephone number, including area code: (972) 444-9001
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ¨
Item 2.02. Results of Operations and Financial Condition
Explanatory note: Pioneer Natural Resources Company and its subsidiaries ("Pioneer" or the "Company") presents in this Item 2.02 certain information regarding (i) the impact of changes in the fair values of derivative instruments on its results of operations for the three and twelve months ended December 31, 2018 and certain other information regarding its derivative instruments, (ii) the average realized prices for oil, NGLs and gas for the three months ended December 31, 2018 and (iii) the net effect of third party purchases and sales of oil and gas for the three months ended December 31, 2018.
Derivative Activity
The following table summarizes the net derivative gains and losses that Pioneer expects to record in its earnings for the three and twelve months ended December 31, 2018:
DERIVATIVE GAINS (LOSSES), NET
(in millions)
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| | | | | | | | |
| | Three Months Ended December 31, 2018 | | Twelve Months Ended December 31, 2018 |
Noncash changes in fair value: | | | | |
Oil derivative gains | | $ | 554 |
| | $ | 283 |
|
NGL derivative gains | | 8 |
| | — |
|
Gas derivative gains (losses) | | 14 |
| | (18 | ) |
Marketing derivative gains | | — |
| | 4 |
|
Total noncash derivative gains, net | | 576 |
| | 269 |
|
| | | | |
Net cash payments on settled derivative instruments: | | | | |
Oil derivative payments | | (148 | ) | | (531 | ) |
NGL derivative payments | | (4 | ) | | (5 | ) |
Gas derivative payments | | (15 | ) | | (22 | ) |
Marketing derivative payments | | — |
| | (3 | ) |
Total cash payments on settled derivative instruments, net | | (167 | ) | | (561 | ) |
Total derivative gains (losses), net | | $ | 409 |
| | $ | (292 | ) |
Cash payments on liquidated derivative positions. During the fourth quarter, the Company liquidated its NYMEX WTI collar contracts with short puts, its Brent swap contracts and its ethane basis swap contracts for cash payments of $85 million to better align the Company's derivative positions with its expected price index exposure.
Commodity Price Realizations
During the fourth quarter, the average realized price for oil was $49.80 per barrel. The average realized price for NGLs was $26.88 per barrel and the average realized price for gas was $1.75 per thousand cubic feet. These prices exclude the effects of derivatives.
Sales of Purchased Oil and Gas
The Company enters into pipeline capacity commitments in order to secure available oil, NGL and gas transportation capacity from the Company's areas of production. The Company enters into purchase transactions with third parties and separate sale transactions with third parties to diversify a portion of the Company's oil sales to the Gulf Coast refinery or international export markets and to satisfy unused pipeline capacity commitments. The net effect of third party purchases and sales of oil and gas for the three months ended December 31, 2018 was income of $173 million. The fourth quarter of 2018 included $170 million of income associated with transporting oil from the Permian Basin to the Gulf Coast where it was sold into either the Gulf Coast refinery market or exported to international refinery markets.
Item 7.01 Regulation FD Disclosure
Oil and gas price derivatives. The following table presents Pioneer’s open commodity oil and gas derivative positions as of January 28, 2019:
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| | 2019 |
| | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
Average Daily Oil Production Associated with Derivatives (Bbl): | | | | | | | | |
Brent collar contracts with short puts: | | | | | | | | |
Volume | | 15,000 |
| | 15,000 |
| | 15,000 |
| | 15,000 |
|
Price: | | | | | | | | |
Ceiling | | $ | 89.90 |
| | $ | 89.90 |
| | $ | 89.90 |
| | $ | 89.90 |
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Floor | | $ | 75.00 |
| | $ | 75.00 |
| | $ | 75.00 |
| | $ | 75.00 |
|
Short put | | $ | 65.00 |
| | $ | 65.00 |
| | $ | 65.00 |
| | $ | 65.00 |
|
Average Daily Gas Production Associated with Derivatives (MMBtu): | | | | | | | | |
Swap contracts: | | | | | | | | |
Volume | | 102,622 |
| | 50,000 |
| | 50,000 |
| | 16,848 |
|
NYMEX price | | $ | 3.39 |
| | $ | 2.94 |
| | $ | 2.94 |
| | $ | 2.94 |
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Basis swap contracts: | | | | | | | | |
Permian Basin index swap volume (a) | | 57,378 |
| | 60,000 |
| | 60,000 |
| | — |
|
Price differential ($/MMBtu) | | $ | (1.47 | ) | | $ | (1.46 | ) | | $ | (1.46 | ) | | $ | — |
|
Southern California index swap volume (b) | | 100,000 |
| | 80,000 |
| | 80,000 |
| | 80,000 |
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Price differential ($/MMBtu) | | $ | 0.40 |
| | $ | 0.31 |
| | $ | 0.31 |
| | $ | 0.31 |
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Call option contracts sold: | | | | | | | | |
Volume (c) | | 50,000 |
| | — |
| | — |
| | — |
|
NYMEX price | | $ | 3.93 |
| | $ | — |
| | $ | — |
| | $ | — |
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__________
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(a) | The referenced basis swap contracts fix the basis differentials between the index price at which the Company sells its Permian Basin gas and the Henry Hub index price used in swap contracts and collar contracts with short puts. |
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(b) | The referenced basis swap contracts fix the basis differentials between Permian Basin index prices and southern California index prices for Permian Basin gas forecasted for sale in Arizona and southern California. |
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(c) | The premium associated with selling these call option contracts was utilized to improve the swap contract prices for April through October 2019 swap volumes. |
Other derivatives. Periodically, the Company enters into gas swap contracts to mitigate gas price risk. As of January 28, 2019, the Company was party to gas swap contracts for 4,500 MMBtu per day through March 2019 at an average fixed price of $1.58 per MMBtu. The Company will receive Permian Basin index prices in exchange for paying the fixed price.
Cautionary Statement Concerning Forward-Looking Statements
Except for historical information contained herein, the statements in this Current Report on Form 8-K are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements and the business prospects of the Company are subject to a number of risks and uncertainties that may cause the Company's actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, volatility of commodity prices, product supply and demand, competition, the ability to obtain environmental and other permits and the timing thereof, other government regulation or action, the ability to obtain approvals from third parties and negotiate agreements with third parties on mutually acceptable terms, completion of planned divestitures, litigation, the costs and results of drilling and operations, availability of equipment, services, resources and personnel required to perform the Company's drilling and operating activities, access to and availability of transportation, processing, fractionation, refining and export facilities, Pioneer's ability to replace reserves, implement its business plans or complete its development activities as scheduled, access to and cost of capital, the financial strength of counterparties to Pioneer's credit facility, investment instruments and derivative contracts and the purchasers of Pioneer's oil, natural gas liquid and gas production, uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, cyber security risks, the ability to implement planned stock repurchases, the risks associated with the ownership and operation of the Company's industrial sand mining and oilfield services businesses and acts of war or terrorism. These and other risks are described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse impact on it. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. The Company undertakes no duty to publicly update these statements except as required by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| PIONEER NATURAL RESOURCES COMPANY | |
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| By: | /s/ Margaret M. Montemayor | |
| | Margaret M. Montemayor, | |
| | Vice President and Chief Accounting Officer | |
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Dated: January 29, 2019 | | | |