Pioneer Natural Resources (PXD 0.10%) paid out a gusher of dividends last year. The oil company capitalized on higher crude prices to generate a massive amount of free cash flow. It paid out about $26 per share, giving the stock more than a 10% yield.

The oil company could have an even bigger dividend in 2023. Fueling that view is the possibility that crude prices could skyrocket as OPEC keeps a tight lid on supplies even as Asian demand recovers when those economies fully reopen from pandemic-related lockdowns.

An oil-fueled dividend

Pioneer established a fixed-plus-variable dividend toward the end of 2021. It pays a fixed base quarterly amount that it aims to grow each year. On top of that, there's a variable dividend of up to 75% of its excess free cash flow (FCF) each quarter after the base payment. That contributed to one of the highest payout ratios in the sector.

That policy led to boom in dividends last year. The company earned an average of more than $94 per barrel of oil produced through the third quarter, putting it on track to produce more than $12 billion of operating cash flow in 2022.

With planned capital expenses below $4 billion, the company was on pace to generate more than $8 billion of FCF. It returned $7.5 billion of that money to shareholders, adding up to more than $26 per share.

There's potential for an even bigger payout in 2023

Pioneer Natural Resources could hand out an even larger dividend this year. The primary catalyst is the prospect of even higher oil prices in 2023.

CEO Scott Sheffield recently offered his view on oil prices at a conference held by Goldman Sachs. Sheffield said he believes that OPEC won't allow oil prices to stay as low as their current levels, in the $75-a-barrel range. The CEO said he wouldn't be surprised if that organization cut its output again to push up crude prices. Because of that and other catalysts, he sees $80 as the floor for oil prices, with a ceiling as high as $150 a barrel. 

Sheffield thinks OPEC has the confidence it can push crude prices higher because the U.S. doesn't have the supply-growth potential it once had. Oil companies have drilled through the bulk of their best inventory in the Permian. Because of that, producers in the U.S. will respond slower to higher oil prices since they want to avoid burning through more inventory by drilling additional wells. 

Pioneer's CEO isn't the only one who believes oil prices are heading higher this year. Many analysts and investors see crude prices into the triple digits. For example, hedge fund manager Pierre Andurand thinks oil may top $140 this year, past last year's peak. Contributing to that view is the potential for Asian economies to fully reopen after years of pandemic-driven lockdowns. 

Andurand said in an interview with Bloomberg that the market is "underestimating the scale of the demand boost [that a fully open Asian economy] will bring." He believes it could add 4 million barrels of oil demand this year, or a 4% increase from current consumption.

With OPEC keeping a tight lid on supplies and the U.S. unable to respond, the industry could struggle to meet that demand. On top of that catalyst, the U.S. likely won't release additional supplies from the Strategic Petroleum Reserve and might instead replenish its emergency stockpile this year. Meanwhile, there's still a lot of uncertainty about Russian supplies, given the impact of sanctions following its invasion of Ukraine.

Put everything together, and crude prices will likely strengthen this year. That would enable Pioneer to generate even more FCF, over 75% of which it will pay out to investors via dividends.

A potentially high-octane investment

Pioneer Natural Resources became a monster dividend stock in 2022, thanks to higher oil prices and the establishment of its fixed-plus-variable dividend framework. It could pay out an even bigger bonanza this year if crude prices strengthen, as many expect. Because of that, it's an attractive option for investors seeking a high-upside income opportunity in 2023.