Pioneer Natural Resources Company

of the Midland Basin. On slide number 10, again, long-term total return outperformance. Pioneer's legacy Midland Basin position has been the foundation of the company since its founding 25 years ago, has been a major contributor to our success. Pioneer has outperformed large-cap peers in U.S. majors over the previous three 10- and 20-year periods, with returns over the 20-year period exceeding the peer group by nearly 80%. Our deep inventory, decades of development experience, and consistent performance positions pioneer to outperform for years to come. I'll now turn it over to Rich. Thanks, Scott.

Good morning, everybody. I'm going to start on slide 11, where you can see that we are reiterating our plan for 2022 with full-year production and capital guidance at the same levels we announced in February. Based on the midpoints of both capital and production guidance and current strip pricing, We expect this plan to generate greater than $12.5 billion of operating cash flow, which results in more than $9 billion of forecasted free cash flow for 2022. This represents an increase of approximately $2 billion in free cash flow since our last update in February. Consistent with our investment framework, we are modestly growing production this year with a reinvestment rate of less than 30%, returning over 80% of our free cash flow back to shareholders via dividends and share repurchases. Our average activity level for the year remains unchanged. We plan to run between 22 and 24 drilling rigs and approximately six frac fleets, of which two of those are simul-frac fleets. This activity results in placing roughly 475 to 505 new wells on production during the year. As we outlined last week, we are temporarily adding a frac fleet during the second quarter to mitigate the sand disruption that we experienced during the latter part of the first quarter. This will increase second quarter capital which is expected to be our highest capital spend quarter of the year. Assuming current inflationary pressures persist, we would expect our capital to migrate towards the upper half of our full year capital budget of 3.3 to 3.6 billion, primarily driven by higher steel and diesel prices. Despite these inflationary pressures, the improved operating cash flow more than offsets these increases given the strong commodity price outlook. Thanks to the continued hard work of our teams across the company, Pioneer has established a track record of continued operational improvement as demonstrated on slide 12. These operational efficiencies are helping to dampen the effects of inflation in 2022. One contributing factor to our efficiency gains is our history of consistently increasing our average lateral length, driving drilling and completion costs per foot lower. Looking to the future, we expect Further lateral feet gains as we add more 15,000-foot laterals to our program. In 2022, we expect to place approximately 50 wells with 15,000-foot laterals on production, with that well count increasing to over 100 wells that are longer than 15,000 feet in 2023. Additionally, you can see from the graph on the right, we have nearly doubled our completed feet per day since 2018, and we've consistently outperformed peers on a completed feet per day basis. The gap with peers has even further widened with the deployment of two Simulfrac fleets in 2021, and we have the goal of adding a third Simulfrac fleet later this year or early next year. Turning to slide 13, Pioneer continues to have the best-in-class cash margins. You can see on the left chart that Pioneer maintained the highest realized price per BOE amongst our peers in 2021, which demonstrates the great work by our marketing team and the value of our oil-weighted production. Looking to the right chart, We additionally maintain best-in-class cash costs in 2021, resulting from the combination of our highly efficient operations, low corporate overhead, and inexpensive borrowing rates. This combination of high revenue and low cost translates into peer-leading margins, the strong corporate returns that Scott discussed, and significant free cash flow generation as demonstrated by our Q1 results. Turning to slide 14, I think this slide fits nicely with the prior slide, highlighting that the combination of our peer-leading margins and our efficient capital program generate best-in-class free cash flow per BOE. Most importantly, though, is that it's sustainable for decades, given Pyron's extensive inventory depth with a low break-even cost. With that, I'm going to turn it over to Neil.

Thank you, Rich. Turning to slide 15, the graph on the right demonstrates the strength of our balance sheet, highlighting the combination of our low-leverage and peer-leading average coupon rate. This financial discipline supports our strong cash margins, robust corporate returns, and strong free cash flow profile. Maintaining this fortress-like balance sheet provides Pioneer the financial flexibility for opportunistic share repurchases, supplementing our peer-leading dividend program. Turning to the next page, this is one of my favorite slides in the deck. We believe our high-quality inventory, efficient operations and best-in-class cash margins are key drivers to our strong corporate returns. When looking across the broader S&P 500, Pioneer's projected ROCE exceeds all other sectors within the S&P 500, yet trades at a discounted valuation relative to these various sectors. We believe this combination of market-leading ROCE and discounted valuation makes Pioneer a compelling investment opportunity when compared to the broader market. I'll now turn it over back to Scott.