Pioneer Natural Resources (PXD) closed the books on 2018 this week by releasing its fourth-quarter results. It was a solid end to the year, as its Permian production came in toward the top end of its guidance range. However, some costs ran a bit high, which caused the company's adjusted earnings of $1.18 per share to come in slightly below analysts' expectations $1.41 per share.
Unfortunately, most investors focused on that earnings miss, which likely means they overlooked three excellent numbers that the company revealed.
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194,000 barrels of oil per day from the Permian
Pioneer Natural Resources produced an average of 319,633 barrels of oil equivalent per day (BOE/D) during the fourth quarter, including roughly 302,000 BOE/D out of the Permian, which came in toward the high-end of its 293,000-303,000 BOE/D guidance range. That pushed the company's full-year total to 283,000 BOE/D, which was 26% ahead of 2017's level.
Permian oil production, meanwhile, was especially strong at 194,000 barrels of oil per day (BPD), coming in at the top end of the company's 188,000 to 194,000 BPD guidance range. One of the drivers of that high-end result was that well productivity continues to increase as the company uses data to optimize well designs so that it can pump more oil out of each well.
38% year-over-year increase in cash flow
Pioneer's strong oil output during the fourth quarter helped the company generate a gusher of cash flow. Overall, the company produced $915 million in net cash from operating activities during the quarter, which was up 38% year over year after stripping out the impact of commodity hedges.
One reason Pioneer was able to generate such strong cash flow during the quarter -- even as oil prices plunged -- was that it secured firm transportation contracts to move its oil to more lucrative Gulf Coast markets, which enabled it to avoid the pipeline capacity issues plaguing its Permian peers. Those contracts helped net Pioneer an incremental $173 million in cash during the quarter and $458 million for the full year.
100% dividend increase
Pioneer Natural Resources' strong cash flow and balance sheet has put it in an exceptional financial position. Because of that, it has been able to return more cash to shareholders in the past year. The company started forking over more money last February when it boosted its dividend 300%, while also authorizing a small $100 million share-repurchase plan. The company would go on to replace that buyback with a much larger $2 billion authorization in December.
Meanwhile, the company unveiled this week that it's giving investors another raise by increasing its dividend 100%. With that boost, the company has now raised its payout by a jaw-dropping 700% in the past year. While its dividend yield is still paltry at less than 0.5%, it's heading in the right direction and will likely continue growing at a rapid pace in the coming years as Pioneer keeps increasing cash flow.
Check out the latest Pioneer earnings call transcript.
A solid end to another strong year
While Pioneer Natural Resources' earnings might have come in a little light this quarter, it was still a strong one overall. Not only did its Permian oil production hit the high end of the company's guidance range, but it generated a boatload of cash, which is enabling it to return more to shareholders through another big dividend increase, as well as additional share repurchases.
That growing stream of cash flow and capital returns to investors has the potential to create significant value for shareholders in the coming years, which is something they won't want to overlook.
