Last year didn't go quite as Pioneer Natural Resources (NYSE:PXD) anticipated. Initially, the Permian Basin-focused shale driller thought that oil would be in the mid-$50s, which would provide it with the cash flow to increase production 15% to 18%. However, the company ran into an unexpected drilling issue, which, when combined with lower-than-expected oil prices over the summer, forced it to tap the brakes on its drilling plancausing its stock to tumble.

While rebounding oil prices since that time helped pull Pioneer's stock out of its tailspin, the company still ended last year down 4% even though crude was up double digits. Because of that, the oil stock could be volatile if its fourth-quarter results disappoint investors again on Tuesday evening. Here are three things to watch in that report that could set the tone for the stock. 

An oil pumping unit in the evening.

Image source: Getty Images.

Check to see if production met expectations

Despite some unexpected headwinds in the third quarter, Pioneer's production came in just below the mid-point of its guidance range at 276,000 barrels of oil equivalent per day (BOE/D), which was 6.6% higher than the second quarter. However, given the timing of well completions, the company expected its growth rate to accelerate into the end of 2017. Overall, the company anticipated that output would average between 292,000 to 302,000 BOE/D, which would be 7.6% higher than last quarter at the midpoint and up about 15% for the year. 

If the company falls short of its guidance again, it could send shares tumbling. There is some cause for concern heading into the quarter after what fellow Permian peer Laredo Petroleum (NYSE:LPI) reported. Laredo stated last month that its output came in just below the mid-point of its guidance range because it took the company longer to complete wells in a new area, and two new wells encountered operational issues that permanently reduced their production. If Pioneer ran into similar problems, it might cause investors to sell.

Keep an eye on cost inflation

Another thing Laredo noted was that it spent more than initially expected last year. The company had to add $100 million to its budget in the third quarter, boosting it to $630 million to reflect service cost inflation and some other additional expenses. Laredo wasn't the only driller in the region to spend more than expected in 2017 due to cost inflation. Parsley Energy (NYSE:PE) noted in its recent operational update that it spent $1.2 billion last year, which was above the high end of its $1.0 billion to $1.15 billion budget range due to service cost inflation. Further, Parsley Energy said that spending in 2018 would be at the high end of its $1.35 billion to $1.55 billion budget range because of the rapid inflation of service and equipment costs.

Given what Laredo and Parsley already reported, investors should see if Pioneer stuck to its $2.75 billion budget, or if it also went over. If inflation causes it to spend more than expected, that could affect Pioneer's ability to grow in the future.

A drilling rig with the sun setting in the background.

Image source: Getty Images.

Look at the outlook for 2018

Pioneer Natural Resources' 2017 plan had it on pace to increase production at a 15% compound annual rate all the way through 2026, with it expected to finance that growth rate within cash flow at $50 oil by 2020. However, if it went off track last quarter due to operational issues or accelerating cost inflation, it could cause the company to tap the brakes on its ambitious expansion plan.

That's why investors should keep an eye on its 2018 plans to see if it still expects to grow at that 15%-plus annual rate, and if it can do so while living within cash flow at the current oil price. If not, it could take some of the air out of Pioneer stock.

Paying the price for being in a select group

While Pioneer Natural Resources' stock sank last year, it still trades at a premium price compared to second-tier rivals. Because of that, shares could tumble if the market senses that there might be some small cracks in its elite foundation. That sell-off, though, could be an opportunity for long-term investors to buy since Pioneer is transforming into a cash-flow machine even if does experience some bumps along the way.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.