Debt and Interest Expense

9 Months Ended

Sep. 30, 2023

The components of debt, including the effects of issuance costs and net discounts, are as follows:


	As of September 30, 2023		As of December 31, 2022
	(in millions)
Outstanding debt principal balances:

0.550% senior notes due 2023	$	—	$	750
0.250% convertible senior notes due 2025	629		962
5.100% senior notes due 2026	1,100		—
1.125% senior notes due 2026	750		750
7.200% senior notes due 2028	241		241
4.125% senior notes due 2028	138		138
1.900% senior notes due 2030	1,100		1,100
2.150% senior notes due 2031	1,000		1,000
	4,958		4,941
Issuance costs and discounts, net	(34)		(37)
Total debt	4,924		4,904
Less current portion of debt	44		779
Long-term debt	$	4,880	$	4,125

Credit facility. The Company maintains a revolving corporate credit facility (the "Credit Facility") with a syndicate of financial institutions and has aggregate loan commitments of $2.0 billion. On May 26, 2023, Pioneer entered into the Second Amendment to Credit Agreement (the "Second Amendment") with Wells Fargo Bank, National Association, as administrative agent, and the other agents and lenders party thereto. The Second Amendment replaced the London interbank offered rate with a term secured overnight financing rate as the interest rate benchmark, with all other terms, conditions and covenants remaining substantially unchanged. The Credit Facility has a maturity date of January 12, 2026. As of September 30, 2023, the Company had no outstanding borrowings under the Credit Facility. The Credit Facility requires the maintenance of a ratio of total debt to book capitalization, subject to certain adjustments, not to exceed 0.65 to 1.0. As of September 30, 2023, the Company was in compliance with its debt covenants.

Senior notes. In March 2023, the Company issued $1.1 billion of 5.100% senior notes that will mature March 29, 2026 (the "March 2023 Senior Notes Offering"). The Company received proceeds, net of $7 million of issuance costs and discounts, of $1.1 billion. Interest on the notes is payable semiannually on March 29 and September 29.

The Company's 0.550% senior notes, with a debt principal balance of $750 million, matured and were repaid in May 2023 with proceeds from the March 2023 Senior Notes Offering.

The Company's senior notes are general unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company and are senior in right of payment to all existing and future subordinated indebtedness of the Company. The Company is a holding company that conducts all of its operations through subsidiaries; consequently, the senior notes are structurally subordinated to all obligations of its subsidiaries. Interest on the Company's senior notes is payable semiannually.

Convertible senior notes. The Convertible Notes bear a fixed interest rate of 0.250% per year, with interest payable semiannually on May 15 and November 15. The Convertible Notes will mature on May 15, 2025, unless earlier redeemed, repurchased or converted. The Convertible Notes are unsecured obligations ranking equally in right of payment with all other senior unsecured indebtedness of the Company.

As of September 30, 2023, the Convertible Notes are convertible at an adjusted conversion rate of 10.7379 shares of the Company's common shares per $1,000 principal amount of the Convertible Notes (subject to further adjustment pursuant to the terms of the notes indenture, the "Conversion Rate"), which represents an adjusted conversion price of $93.13 per share (subject to adjustment pursuant to the terms of the notes indenture, the "Conversion Price"). Upon conversion, the Convertible Notes will be settled in cash, the Company's common shares or a combination thereof, at the Company's election.

Holders of the Convertible Notes may convert their notes at their option prior to February 15, 2025 under the following circumstances:

•during the quarter following any quarter during which the last reported sales price of the Company's common shares for at least 20 of the last 30 consecutive trading days of such quarter exceeds 130 percent of the Conversion Price;

•during the five-business day period following any five consecutive trading day period when the trading price of the Convertible Notes is less than 98 percent of the product of the last reported sales price of the Company's common shares and the Conversion Rate;

•upon notice of redemption by the Company; or

•upon the occurrence of specified corporate events, including certain consolidations or mergers.

On or after February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. Currently, the Company may redeem the Convertible Notes only if the last reported sale price of the Company's common shares has been at least 130 percent of the Conversion Price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides the notice of redemption. The redemption price is equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest.

In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated capped call transactions with certain financial institution counterparties (the "Capped Call"), the purpose of which was to reduce the potential dilution to the Company's common shares upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such converted notes, with such reduction and offset

subject to a capped price. As of September 30, 2023, the Capped Call transactions have an adjusted strike price of $93.13 per share of common shares and an adjusted capped price of $132.53 per share of common shares.

As of September 30, 2023, the effective annual interest rate on the Convertible Notes is 0.6 percent after giving effect to deferred financing fees relating to the notes.

Convertible Note conversions. During the last 30 consecutive trading days subsequent to the third quarter of 2021 through the third quarter of 2023, the last reported sales price of the Company's common shares exceeded 130 percent of the Conversion Price for at least 20 trading days, causing the Convertible Notes to be convertible at the option of the holders during the period from January 1, 2022 through December 31, 2023.

Certain holders of the Convertible Notes exercised their conversion option resulting in the Company recognizing the following cash payments and cash receipts associated with the conversions:


	Nine Months Ended September 30,
	2023		2022
	(in millions)
Cash payments:
Principal repayments	$	333	$	240
Conversion premiums	422		321
Conversion option derivative payments, net	14		—
Cash payments, net	$	769	$	561
Cash receipts:
Capped Call proceeds	$	104	$	71
Conversion option derivative receipts, net	—		17
Cash receipts, net	$	104	$	88

The Company recorded the conversion premiums paid, Capped Call proceeds and associated issuance fees and deferred taxes attributable to the principal amount of the Convertible Notes converted in additional paid-in-capital.

As of September 30, 2023 and December 31, 2022, $44 million and $29 million, respectively, of the principal amount of the Convertible Notes remained in the Settlement Period and are recorded in the current portion of debt in the consolidated balance sheets for each respective period. The current portion of Convertible Notes as of September 30, 2023 will be cash settled at the end of their respective Settlement Periods during the fourth quarter of 2023.

See Note 4 for additional information.