8-K 1 pxdderiv8-k20170630.htm 8-K 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):  July 17, 2017
 

PIONEER NATURAL RESOURCES COMPANY
(Exact name of registrant as specified in its charter)
 
 
Delaware
1-13245
75-2702753
(State or other jurisdiction of
incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
 
 
 
5205 N. O'Connor Blvd., Suite 200, Irving, Texas
 
75039
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 

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 the impact of changes in the fair values of derivative instruments on its results of operations for the three and six months ended June 30, 2017 and certain other information regarding its derivative instruments.

The following table summarizes the net derivative gains that the Company expects to report in its earnings for the three and six months ended June 30, 2017:

DERIVATIVE GAINS, NET
(in millions)

 
 
 
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2017
Noncash changes in fair value:
 
 
 
 
Oil derivative gains
$
103

 
$
220

 
NGL derivative gains
—

 
3

 
Gas derivative gains
10

 
29

 
Diesel derivative losses
(1
)
 
—

 
Interest rate derivative losses
(1
)
 
(1
)
 
 
Total noncash derivative gains, net
111

 
251

 
 
 
 
 
 
 
Net cash receipts on settled derivative instruments:
 
 
 
 
Oil derivative receipts
21

 
33

 
NGL derivative receipts
1

 
1

 
Gas derivative receipts
1

 
—

 
Diesel derivative receipts
1

 
1

 
 
Total cash receipts on settled derivative instruments, net
24

 
35

 
 
 
Total derivative gains, net
$
135

 
$
286









Item 7.01  Regulation FD Disclosure

Oil, NGL and gas price derivatives. The following table presents the Company’s open commodity oil, NGL and gas derivative positions as of July 14, 2017:
 
 
2017
 
Year Ending December 31,
 
 
Third
Quarter
 
Fourth Quarter
 
2018
 
2019
Average Daily Oil Production Associated with Derivatives (Bbl):
 
 
 
 
 
 
 
 
Collar contracts:
 
 
 
 
 
 
 
 
Volume
 
6,000

 
6,000

 
—

 
—

NYMEX price:
 
 
 
 
 
 
 
 
Ceiling
 
$
70.40

 
$
70.40

 
$
—

 
$
—

Floor
 
$
50.00

 
$
50.00

 
$
—

 
$
—

Collar contracts with short puts:
 
 
 
 
 
 
 
 
Volume
 
147,000

 
155,000

 
71,000

 
—

NYMEX price:
 
 
 
 
 
 
 
 
Ceiling
 
$
62.03

 
$
62.12

 
$
60.38

 
$
—

Floor
 
$
49.81

 
$
49.82

 
$
50.07

 
$
—

Short put
 
$
41.07

 
$
41.02

 
$
40.00

 
$
—

Average Daily NGL Production Associated with Derivatives:
 
 
 
 
 
 
 
 
Butane collar contracts with short puts (a):
 
 
 
 
 
 
 
 
Volume (Bbl)
 
2,000

 
—

 
—

 
—

Index price:
 
 
 
 
 
 
 
 
Ceiling
 
$
36.12

 
$
—

 
$
—

 
$
—

Floor
 
$
29.25

 
$
—

 
$
—

 
$
—

Short put
 
$
23.40

 
$
—

 
$
—

 
$
—

Ethane collar contracts (b):
 
 
 
 
 
 
 
 
Volume (Bbl)
 
3,000

 
3,000

 
—

 
—

Index price:
 
 

 
 

 
 

 
 

Ceiling
 
$
11.83

 
$
11.83

 
$
—

 
$
—

Floor
 
$
8.68

 
$
8.68

 
$
—

 
$
—

Ethane basis swap contracts (c):
 
 
 
 
 
 
 
 
Volume (MMBtu)
 
6,920

 
6,920

 
6,920

 
6,920

Index price
 
$
1.60

 
$
1.60

 
$
1.60

 
$
1.60

Average Daily Gas Production Associated with Derivatives (MMBtu):
 
 
 
 
 
 
 
 
Collar contracts with short puts:
 
 
 
 
 
 
 
 
Volume
 
290,000

 
300,000

 
62,329

 
—

NYMEX price:
 
 
 
 
 
 
 
 
Ceiling
 
$
3.57

 
$
3.60

 
$
3.56

 
$
—

Floor
 
$
2.95

 
$
2.96

 
$
2.91

 
$
—

Short put
 
$
2.47

 
$
2.47

 
$
2.37

 
$
—

Basis swap contracts:
 
 
 
 
 
 
 
 
Mid-Continent index swap volume (d)
 
45,000

 
45,000

 
—

 
—

Price differential ($/MMBtu)
 
$
(0.32
)
 
$
(0.32
)
 
$
—

 
$
—

Permian Basin index swap volume (e)
 
6,739

 
26,522

 
39,945

 
—

Price differential ($/MMBtu)
 
$
0.26

 
$
0.30

 
$
0.30

 
$
—

__________
(a)
Represent collar contracts with short puts that reduce the price volatility of butane forecasted for sale by the Company at Mont Belvieu Texas-posted prices.
(b)
Represent collar contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices.
(c)
Represent basis swap contracts that reduce the price volatility of ethane forecasted for sale by the Company at Mont Belvieu, Texas-posted prices. The basis swaps fix the basis differential on a NYMEX Henry Hub MMBtu equivalent basis. The Company will receive the NYMEX Henry Hub price plus the price differential on 6,920 MMBtu per day, which is equivalent to 2,500 Bbls per day of ethane.
(d)
Represent swap contracts that fix the basis differentials between the index price at which the Company sells its Mid-Continent gas and the NYMEX Henry Hub index price used in collar contracts with short puts.
(e)
Represent swap contracts that fix the basis differentials between Permian Basin index prices and southern California index prices for Permian Basin gas forecasted for sale in southern California.

Marketing derivatives. Periodically, the Company enters into buy and sell marketing arrangements to fulfill firm pipeline transportation commitments. Associated with these marketing arrangements, the Company may enter into index swaps to mitigate price risk. As of July 14, 2017, the Company did not have any marketing derivatives outstanding.

Diesel derivatives. Periodically, the Company enters into diesel derivative swap contracts to mitigate fuel price risk. The diesel derivative swap contracts are priced at an index that is highly correlated to the prices that the Company incurs to fuel drilling rigs and its




fracture stimulation fleet equipment. As of July 14, 2017, the Company was party to diesel derivative swap contracts for 1,000 Bbls per day for the remainder of 2017 at an average per Bbl fixed price of $63.00.

Interest rate derivatives. As of July 14, 2017, the Company was party to interest rate derivative contracts whereby the Company will receive the three-month LIBOR rate for the 10-year period from December 2017 through December 2027 in exchange for paying a fixed interest rate of 1.81 percent on a notional amount of $100 million on December 15, 2017.
    
    

    





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, 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 and refining 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 and derivative contracts and the purchasers of Pioneer's oil, NGL and gas production, uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future, the assumptions underlying production forecasts, quality of technical data, environmental and weather risks, including the possible impacts of climate change, 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.


 
PIONEER NATURAL RESOURCES COMPANY
 
 
 
 
 
 
 
 
 
 
By:
/s/ Margaret M. Montemayor                                                                                
 
 
 
Margaret M. Montemayor,
 
 
 
Vice President and Chief Accounting Officer
 
 
 
 
 
 
 
 
 
Dated: July 17, 2017