Pioneer Natural Resources (PXD 1.18%) reported one of the best quarters in the company's 25-year history last week, with revenues more than doubling from the same quarter a year earlier.
Rising prices for crude oil are behind the move. After hitting historic lows during the pandemic, oil prices have reached their highest level since 2014. As countries around the world have rolled back coronavirus restrictions, consumers have hit the road -- making good on travel plans that were postponed by the pandemic.
High oil prices drove record earnings
For Q4 (period ended Dec. 31), Pioneer's earnings per share grew 11% from the prior quarter, coming in at $4.58 -- beating the consensus estimate by $0.53 or 13%. Revenues were $4.3 billion, up from $1.9 billion in the same year-ago quarter. The reason for the upside surprise in earnings? The ongoing rally in crude oil. Pioneer realized an average price of $76.38/barrel for oil during the quarter. The price of oil is notoriously volatile. Sometimes driven by supply and demand -- other times by geopolitics.
According to figures compiled by the Transportation Security Administration, over $2 million people cleared airport security on Feb. 21. That's more than double the figure from a year ago but similar to the pre-pandemic level from 2020.
| TSA checkpoint travel numbers | Year | ||
|---|---|---|---|
| Air passengers screened | 2022 | 2021 | 2020 |
| Feb. 21 | 2,215,453 | 963,280 | 2,267,382 |
Source: Transportation Security Administration.
Nevertheless, Pioneer won't be hedging their crude reserves. CEO Scott Sheffield was explicit on Pioneer's most recent earnings call: He expects oil to continue to go higher -- perhaps all the way to $150/barrel to meet the anticipated demand.
Even if oil prices simply stay where they are, Pioneer is well-positioned to deliver solid results. Wall Street analysts expect revenues to grow 63.7% in 2022, and earnings per share of $21.70 -- an increase of 120%. That's how Pioneer is planning to return value to shareholders is the second big takeaway from their earnings report: a massive dividend and share buyback.
Image source: Getty Images.
Pioneer is ready to pay out dividends -- lots of them
Pioneer's shareholder return strategy has three parts:
- The company pays a regular quarterly dividend, currently $0.78/share. This regular dividend has been increased from $0.56 over the last year alone.
- Pioneer has a variable return (i.e., special) dividend program. Last week, the company announced that it will pay a $3.00/share variable dividend in March. This follows a $3.02/share variable dividend in November 2021 and a $1.51/share variable dividend in September 2021.
- The board of directors authorized a new $4 billion share repurchase program. In Q4, Pioneer spent $250 million on share buybacks -- reducing the number of outstanding shares available and driving up the price of the company's stock.
It all adds up to a comprehensive plan to return profits to shareholders. Pioneer notes that $1.9 billion was returned to shareholders in 2021. In Q4, over $1.1 billion, or 101% of its free cash flow, was returned via dividends or stock buybacks.
Investors seem to like the plan. This year, Pioneer has been a star, gaining 23%, while the S&P 500 has dropped 10%. With a forward price-to-earnings ratio of 11.2 and an effective dividend yield of nearly 7%, Pioneer still looks attractive.
If you're an income investor looking for big dividends and you're bullish on oil, it might be time to hitch your wagon to Pioneer.
