What happened

Stocks endured a brutal bear market last year. The S&P 500 peaked on January 3rd and declined 20% by December 31st. 

However, not every stock fell victim to the bear market. Shares of Pioneer Natural Resources (PXD 0.87%) have risen more than 22% since the start of the bear market through the end of last year, according to data provided by S&P Global Market Intelligence. Here's a look at what fueled the oil stock's outperformance and whether it can keep winning in 2023. 

So what

Pioneer Natural Resources feasted on higher oil prices last year. The oil company was on track to produce more than $12 billion of operating cash flow for the year. That's enough cash to cover its capital budget with over $8 billion to spare.

The oil company returned most of that windfall to shareholders. It established a fixed-plus-variable dividend policy in late 2021, setting a target of paying out 75% of its free cash flow after covering the base dividend through variable dividends. Because of that, it paid out over $26 per share in dividends last year, giving it an annualized dividend yield of more than 12%. Pioneer used most of the remaining cash to repurchase shares. It has repurchased $1.5 billion of its stock since the fourth quarter of 2021, reducing its outstanding shares by over 3%. Overall, it returned $7.5 billion to shareholders last year, helping fuel the rise in its share price.

The company ended the year in excellent shape. It has one of the strongest balance sheets in the sector, with only $3.9 billion of net debt at extraordinarily low interest rates. Meanwhile, it has enough drilling inventory to last more than 20 years at its current pace. Because of that, it should continue generating significant free cash flow in the future.

Now what

Pioneer benefited from higher oil prices last year, realizing an average of more than $94 per barrel sold through the third quarter. If oil prices remain robust, the oil company will continue producing a gusher of cash, the bulk of which it will likely return to shareholders via its dividend program.

CEO Scott Sheffield believes oil will remain high. He thinks OPEC will keep a firm floor under oil prices. Meanwhile, he sees several catalysts that could cause crude to spike. These factors lead him to believe that oil will find a base at around $90 a barrel, with the potential to skyrocket to as much as $150 a barrel if demand strengthens and supplies become a problem. If he's right, the stock will likely keep winning even if the bear market persists.