UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
/ x / ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 333-39249
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Pioneer Natural Resources Company
5205 North O'Connor Blvd., Suite 900
Irving, Texas 75039
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
Financial Statements and Supplemental Schedule
As of December 31, 2005 and 2004 and for the year ended December 31, 2005
With Report of Independent Registered Public Accounting Firm
2
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
Table of Contents
Page
Report of Independent Registered Public Accounting Firm ............. 4
Statements of Net Assets Available for Benefits as of
December 31, 2005 and 2004........................................ 5
Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 2005.............................. 6
Notes to Financial Statements........................................ 7
Schedule H; Line 4i - Schedule of Assets (Held At End of Year)
as of December 31, 2005........................................... 12
Signatures........................................................... 13
Index to Exhibits.................................................... 14
3
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Participants and the Plan Administrator of
Pioneer Natural Resources USA, Inc. 401(k) and Matching Plan:
We have audited the accompanying statements of net assets available for
benefits of Pioneer Natural Resources USA, Inc. 401(k) and Matching Plan (the
"Plan") as of December 31, 2005 and 2004, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2005. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Plan's internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Plan's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan at
December 31, 2005 and 2004, and the changes in its net assets available for
benefits for the year ended December 31, 2005, in conformity with United
States generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedule of
assets (held at end of year) as of December 31, 2005, is presented for purposes
of additional analysis and is not a required part of the financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
Ernst & Young LLP
Dallas, Texas
May 18, 2006
4
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
Statements of Net Assets Available for Benefits
December 31,
------------------------------
2005 2004
------------ -------------
Investments at fair value:
Vanguard PRIMECAP Fund................................. $ 34,091,847 $ 33,937,417
Vanguard Windsor II Fund............................... 21,642,342 18,051,885
Vanguard 500 Index Fund................................ 18,776,792 17,473,864
Vanguard Prime Money Market Fund....................... 10,167,173 9,872,070
Vanguard Retirement Savings Trust...................... 7,341,854 4,745,263
Vanguard International Growth Fund..................... 6,978,276 3,743,138
Vanguard Explorer Fund................................. 6,962,508 4,664,506
Vanguard Short-Term Investment-Grade Fund.............. 5,557,397 6,154,323
Vanguard Total Bond Market Index Fund.................. 4,805,461 3,694,790
Vanguard Asset Allocation Fund......................... 4,347,249 3,537,314
Vanguard Inflation-Protected Securities Fund........... 3,326,835 2,693,544
Sarofim Equity Fund.................................... 11,627,682 12,558,831
Pioneer Stock Fund..................................... 8,494,027 5,652,423
----------- -----------
144,119,443 126,779,368
Participants loans receivable............................ 2,665,817 2,420,298
----------- -----------
146,785,260 129,199,666
Contributions receivable................................. - 9,789
Unallocated accrued administrative expenses.............. (11,137) (12,620)
----------- -----------
Net assets available for benefits...................... $146,774,123 $129,196,835
=========== ===========
See accompanying notes to financial statements.
5
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2005
Additions to net assets available for benefits:
Interest and dividend income................................. $ 4,623,191
Employer contributions....................................... 8,614,039
Participants' contributions.................................. 7,172,380
Net appreciation in fair value of investments................ 6,101,006
Rollovers.................................................... 552,918
Other income................................................. 1,840
-----------
27,065,374
-----------
Deductions from net assets available for benefits:
Distributions to participants................................ 9,420,276
Administrative expenses...................................... 67,810
-----------
9,488,086
-----------
Net increase in net assets available for benefits.............. 17,577,288
Net assets available for benefits, beginning of year........... 129,196,835
-----------
Net assets available for benefits, end of year................. $146,774,123
===========
See accompanying notes to financial statements.
6
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
Note 1. Description of Plan
The following description of the Pioneer Natural Resources USA, Inc. 401(k)
and Matching Plan (the "Plan") provides only general information. Participants
should refer to the Summary Plan Description for a complete description of the
Plan, a copy of which is available to each participant from the Pioneer Natural
Resources USA, Inc. 401(k) and Matching Plan Committee (the "Plan
Administrator"). The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
General
The Plan is a defined contribution plan established on January 1, 1990
under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code").
The Plan was established for the benefit of the employees of Pioneer Natural
Resources USA, Inc. (the "Employer"), a wholly-owned subsidiary of Pioneer
Natural Resources Company (the "Company"). All regular full-time and part-time
employees of the Employer are eligible to participate in the Plan on the first
day of the month following their date of hire. The Plan's assets are held in a
trust and certain administrative functions are performed by Vanguard Fiduciary
Trust Company, the trustee of the trust (the "Trustee").
Contributions
Participants may elect to contribute to the Plan an amount of not less than
two percent nor more than 30 percent of their pre-tax annual salary and bonus.
Additionally, participants may elect to make after-tax contributions to the
Plan. A participant's combined pre-tax and after-tax contributions to the Plan
(the "Participant Contributions") may not exceed 50 percent of the participant's
annual salary and bonus. Certain participants may make catch-up contributions to
the Plan in accordance with Section 414(v) of the Code. Matching contributions
are made in cash to the Plan at an amount equal to 200 percent of the first five
percent of pre-tax annual salary contributed by a participant to the Plan (the
"Matching Contributions").
Participants Accounts
Participant's accounts are credited with the Participant Contributions, the
Matching Contributions and an allocation of Plan earnings and charged
administrative expenses of each fund and possibly the Plan. Plan earnings and
administrative expenses are allocated to each participant's accounts by fund in
proportion to their fund balance relative to the total fund balance.
Participants may borrow from their accounts a minimum of $1,000 up to a
maximum of $50,000 (reduced by the excess, if any, of the highest total
outstanding balance of all other Plan loans to the participant during the
one-year period ending on the day before the date a new loan is made, over the
outstanding balance of those other loans on the date the new loan is made) or 50
percent of their accounts' vested balances, whichever amount is less. The loans
are secured by the balance in the participant's accounts. Participants loans
bear interest at an annual rate equal to the prime borrowing rate at the
inception of the loan plus one percent. Loan principal and interest is paid
ratably through payroll deductions over a period not to exceed five years unless
the loan is for the purpose of acquiring the principal residence of the
participant.
Investment Options
During the Plan year ended December 31, 2005, participants were able to
allocate their contributions among the following registered investment company
funds, common/collective trusts and Pioneer Stock Fund:
7
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
Note 1. Description of Plan (continued)
Registered Investment Company Funds:
o Vanguard PRIMECAP Fund - Invests in stocks of companies with above-
average prospects for continued earnings growth, strong industry
positions and skilled management teams.
o Vanguard Windsor II Fund - Invests in a diversified group of large-
capitalization companies whose stocks are considered by the fund's
advisors to be undervalued or out-of-favor. The stocks generally sell
at prices considered by the fund's advisors to be below their overall
market average compared to their dividend income and future return
potential.
o Vanguard 500 Index Fund - Invests in all of the 500 stocks that make
up the Standard & Poor's 500 Composite Stock Price Index, a widely
recognized benchmark of United States stock market performance.
o Vanguard Prime Money Market Fund - Invests in high-quality, short-term
money market instruments issued by financial institutions, non-
financial corporations, the United States government and United States
federal agencies.
o Vanguard International Growth Fund - Invests in stocks of seasoned
companies located outside the United States with above-average growth
potential.
o Vanguard Explorer Fund - Invests in a diversified group of small-
company stocks with prospects for above-average growth.
o Vanguard Short-Term Investment-Grade Fund - Invests in short-term
bonds, including investment-grade corporate and United States Treasury
securities.
o Vanguard Total Bond Market Index Fund - Invests in a large sample of
securities that match key characteristics of the Lehman Brothers
Aggregate Bond Index.
o Vanguard Asset Allocation Fund - Invests in common stocks, long-term
United States Treasury bonds and money market instruments.
o Vanguard Inflation-Protected Securities Fund - Invests in inflation-
indexed bonds issued by the United States government, its agencies and
instrumentalities, and corporations.
Common/Collective Trusts:
o Vanguard Retirement Savings Trust - Invests in high-quality, fixed-
income securities with financial backing from insurance companies and
banks.
o Sarofim Equity Fund - Invests in a diversified group of large, high-
quality, multinational companies with favorable growth prospects and
high incremental returns on investment.
Pioneer Stock Fund - The Pioneer Stock Fund is designed to provide for
investment in the common stock of the Company. Dividends are reinvested to
purchase more shares.
8
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
Note 1. Description of Plan (continued)
See Note 3 for additional information regarding investment risks and
uncertainties.
Vesting
Participants are immediately vested in their Participant Contributions made
into the Plan, plus the actual Plan earnings thereon. Participants vest in the
Matching Contributions, plus the actual Plan earnings thereon, proportionately
for each full year of completed service over a four-year period that begins with
the participant's date of hire. Participant's account balances that were merged
into the Plan from predecessor plans are fully vested.
Payments of Benefits
Vested balances > $5,000. If the total value of the vested portion of the
participant's account exceeds $5,000, payments will begin at age 70-1/2 unless
the participant terminates, retires or becomes disabled prior to age 70-1/2 and
consents to an earlier distribution date by filing a written request to the Plan
Administrator. Distributions to terminated, retired or disabled participants
will be annuities, but may be installments or lump-sum payments if so directed
by the participant.
Vested balances < $5,000. If the total value of the vested portion of the
participant's accounts is $5,000 or less, payment will be made in one lump sum
as soon as administratively possible.
In either case, vested amounts that are invested in the Pioneer Stock Fund
may, at the election of the participant, be distributed in the form of the
Company's common stock with cash distributed in lieu of fractional shares of
stock. Under the Plan, a participant's beneficiary will receive the
participant's account balances in the event of a participant's death.
Withdrawal of Benefits
Current employees of the Employer may withdraw (i) all or a portion of
their account balances derived from after- tax Participant Contributions or
rollover contributions; (ii) their vested assets in the Plan under certain
hardship conditions as defined in the Plan agreement; or (iii), if the
participant has attained the age of 59-1/2, all or a portion of their account
balances derived from Participant Contributions and Plan earnings thereon.
Terminated participants may withdraw their vested assets in the Plan.
Forfeitures
Upon termination of employment, the unvested portion of a participant's
Matching Contributions is forfeited to the Plan. Forfeitures are used to pay for
administrative expenses incurred by the Plan or used on an annual basis to
reduce the total amount of Matching Contributions made to the Plan by the
Employer.
Plan Termination
Although it has not expressed any intent to do so, the Employer has the
right under the Plan, subject to the provisions of ERISA, to discontinue its
contributions at any time or to terminate the Plan. In the event of the Plan's
termination or the complete discontinuance of Matching Contributions to the
Plan, participants will immediately become fully vested in their accounts.
9
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared under the accrual
basis of accounting in accordance with United States generally accepted
accounting principles ("GAAP").
Payment of Benefits
Benefit payments made to participants are recorded when paid.
Investment Valuation
The Plan's investments are stated at fair value in the Statements of Net
Assets Available for Benefits as of December 31, 2005 and 2004, as determined by
the Trustee. Investment fair values are determined as follows:
1. Investments in registered investment company funds are valued using
published market prices which represent the net asset value of shares
or units held by the Plan as of December 31.
2. Investments in common/collective trusts are valued based upon the fair
values of the underlying net assets of the trusts, as determined by the
Trustee.
3. Investments in the Company's common stock are valued at the last
reported sales price on December 31.
4. Participants loans receivable are valued at their unpaid principal
balance, which approximates fair value.
Security Transactions and Investment Income
Security transactions are accounted for on a trade-date basis. Expenses
incurred with transactions, if any, are added to the purchase price or deducted
from the selling price at the time of the transactions. Dividend income is
recorded on the ex-dividend date. Interest income is recorded as earned on an
accrual basis.
Use of Estimates
The preparation of the accompanying financial statements in conformity with
GAAP requires the Plan's management to make estimates that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
Note 3. Investments
The Trustee holds the Plan's investments and executes all investment
transactions.
During the year ended December 31, 2005, the fair value of the Plan's
investments (including investments purchased, sold and held) appreciated as
follows:
Registered investment company funds..................... $ 2,811,982
Common/collective trusts................................ 589,521
Pioneer Stock Fund...................................... 2,699,503
----------
Net appreciation in fair value of investments....... $ 6,101,006
==========
10
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
Note 3. Investments (continued)
The fair values of the Plan's investments are subject to a number of risks
and uncertainties. These risks and uncertainties include, among other things,
interest rate risk, credit risk, political risk, general business risks and
overall market volatility risk. As described in Note 1, participants have
investment options to which they may allocate their contributions and account
balances. Those investment options have individual risk profiles that cause them
to respond differently to changes in the risks and uncertainties described
above. Due to the level of risk associated with the Plan's investments, it is
reasonably possible that changes in the fair values of the Plan investments may
occur during the near term, and that such changes could cause the Plan's net
assets available for benefits and the participants' account balances to differ
materially from those reported as of December 31, 2005.
Note 4. Administrative Expenses
The Employer may pay certain expenses incurred in the administration of the
Plan, including expenses and fees of the Trustee, but is not obligated to do so.
Any Plan expenses not paid by the Employer are paid from the Plan's earnings or
from qualifying account forfeitures. Administrative expenses paid by the Plan
were $67,810 for activity related to the year ended December 31, 2005, of which
$62,370 was paid via qualifying account forfeiture balances and $5,440 was paid
via Plan earnings for participant loan transaction fees. Of the amounts paid via
qualifying account forfeiture balances, $11,137 was accrued at December 31,
2005.
Account forfeiture balances in the Plan qualifying to be used to defray
future Plan administrative expenses totaled $201,592 as of December 31, 2005.
Note 5. Tax Status of the Plan
The Plan has received a determination letter from the Internal Revenue
Service ("IRS") dated March 19, 2003, stating that the Plan is qualified under
Section 401(a) of the Code and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. Subsequent to this determination by the IRS,
the Plan was amended to bring the Plan into compliance with applicable law and
to make other desired changes. The Plan Administrator believes that the Plan is
currently designed and being operated in compliance with the applicable
requirements of the Code. The Plan Administrator has indicated that it will take
the necessary steps, if any, to maintain the Plan's qualified status.
Note 6. Related Party Transactions
Certain Plan investments are in shares or units of registered investment
company funds and common /collective trusts that are managed by the Trustee or
for which the Trustee provides services. These funds and the Pioneer Stock Fund
qualify as party-in-interest transactions.
11
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
Schedule H; Line 4i - Schedule of Assets (Held At End of Year)
EIN: 75-2516853
Plan Number: 001
As of December 31, 2005
(c)
Description of
(b) investment including
Identity of issuer, maturity date, rate of (e)
borrower, lessor, interest, collateral, par Current
(a) or similar party or maturity value Value
------ -------------------------------- ------------------------------------- -------------
* Vanguard Fiduciary Trust Company Vanguard PRIMECAP Fund -
522,000 shares $ 34,091,847
* Vanguard Fiduciary Trust Company Vanguard Windsor II Fund -
690,787 shares 21,642,342
* Vanguard Fiduciary Trust Company Vanguard 500 Index Fund -
163,390 shares 18,776,792
* Vanguard Fiduciary Trust Company Vanguard Prime Money Market Fund -
10,167,173 shares 10,167,173
* Vanguard Fiduciary Trust Company Vanguard Retirement Savings Trust -
7,341,854 shares 7,341,854
* Vanguard Fiduciary Trust Company Vanguard International Growth Fund -
332,299 shares 6,978,276
* Vanguard Fiduciary Trust Company Vanguard Explorer Fund -
92,697 shares 6,962,508
* Vanguard Fiduciary Trust Company Vanguard Short-Term Investment-Grade
Fund - 528,772 shares 5,557,397
* Vanguard Fiduciary Trust Company Vanguard Total Bond Market Index Fund -
477,680 shares 4,805,461
* Vanguard Fiduciary Trust Company Vanguard Asset Allocation Fund -
171,625 shares 4,347,249
* Vanguard Fiduciary Trust Company Vanguard Inflation-Protected Securities
Fund - 273,588 shares 3,326,835
* Fayez Sarofim & Co. Sarofim Equity Fund -
218,196 shares 11,627,682
* Pioneer Natural Resources Company Pioneer Stock Fund - 462,386 units 8,494,027
* Participants loans receivable Interest rates range from 5.0% to 10.5% 2,665,817
-----------
$146,785,260
===========
--------------------------
*Party-in-interest
Note: Column (d) is not applicable since all investments are participant
directed.
12
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
PIONEER NATURAL RESOURCES USA, INC.
401(k) AND MATCHING PLAN
Date: June 27, 2006 By: /s/ Larry N. Paulsen
-----------------------------------------------
Larry N. Paulsen
Chairman of Pioneer Natural Resources USA, Inc.
401(k) and Matching Plan Committee
Date: June 27, 2006 By: /s/ Richard P. Dealy
-----------------------------------------------
Richard P. Dealy
Member of Pioneer Natural Resources USA, Inc.
401(k) and Matching Plan Committee
Date: June 27, 2006 By: /s/ Kerry D. Scott
-----------------------------------------------
Kerry D. Scott
Member of Pioneer Natural Resources USA, Inc.
401(k) and Matching Plan Committee
Date: By:
-----------------------------------------------
Kevin Schepel
Member of Pioneer Natural Resources USA, Inc.
401(k) and Matching Plan Committee
Date: June 26, 2006 By: /s/ David W. Simpson
-----------------------------------------------
David W. Simpson
Member of Pioneer Natural Resources USA, Inc.
401(k) and Matching Plan Committee
Date: June 27, 2006 By: /s/ Susan A. Spratlen
-----------------------------------------------
Susan A. Spratlen
Member of Pioneer Natural Resources USA, Inc.
401(k) and Matching Plan Committee
13
PIONEER NATURAL RESOURCES USA, INC. 401(k) AND MATCHING PLAN
INDEX TO EXHIBITS
Exhibit
Number Description Page
------- ----------- ----
23.1 (a) Consent of Independent Registered Public Accounting Firm 15
--------------
(a) Filed herewith.
14