Pioneer of natural resources (NYSE:PXD) announced one of the best quarters in the company’s 25-year history last week, with revenue more than doubling from the same quarter a year earlier.
Rising crude oil prices are behind this decision. After hitting historic lows during the pandemic, oil prices hit their highest level since 2014. As countries around the world rolled back coronavirus restrictions, consumers hit the road – making plans to trip that have been postponed by the pandemic.
High oil prices have generated record profits
For the fourth quarter (period ended Dec. 31), Pioneer’s earnings per share increased 11% from the prior quarter to $4.58, beating the consensus estimate of $0.53 or 13 %. Revenue was $4.3 billion, compared to $1.9 billion in the same quarter a year ago. The reason for the upward earnings surprise? The ongoing crude oil rally. Pioneer achieved an average oil price of $76.38/barrel during the quarter. The price of oil is notoriously volatile. Sometimes dictated by supply and demand, other times by geopolitics.
According to figures compiled by the Transportation Security Administration, more than 2 million people passed through airport security on February 21. That’s more than double the figure from a year ago, but similar to 2020’s pre-pandemic level.
|Travel numbers at TSA checkpoints||Year|
|Air passengers screened||2022||2021||2020|
|the 21st of February||2,215,453||963 280||2,267,382|
However, Pioneer will not hedge its crude reserves. CEO Scott Sheffield was explicit on Pioneer’s latest earnings call that he expects oil to continue to rise – perhaps as high as $150/barrel to meet anticipated demand.
Even if oil prices simply stay where they are, Pioneer is well positioned to deliver strong results. Wall Street analysts predict revenue growth of 63.7% in 2022 and earnings per share of $21.70, a 120% increase. This is how Pioneer plans to return shareholder value is the second big takeaway from its earnings report: a massive dividend and share buyback.
Pioneer is ready to pay dividends – lots of them
Pioneer’s shareholder return strategy is threefold:
- The company pays a regular quarterly allowance dividend, currently $0.78/share. This regular dividend has grown from $0.56 in the last year alone.
- Pioneer has a variable-yield (i.e. special) dividend program. Last week, the company announced that it would pay a variable dividend of $3.00/share in March. This follows a variable dividend of $3.02/share in November 2021 and a variable dividend of $1.51/share in September 2021.
- The board has authorized a new $4 billion share buyback program. In the fourth quarter, Pioneer spent $250 million on stock buybacks, reducing the number of outstanding shares available and driving up the company’s stock price.
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 the fourth quarter, more than $1.1 billion, or 101% of its free cash flow, was returned through dividends or share buybacks. actions.
Investors seem to like the plan. This year, Pioneer was a star, gaining 23%, while the S&P500 decreased by 10%. With a forward price/earnings ratio of 11.2 and an effective dividend yield of almost 7%, Pioneer still looks attractive.
If you’re an income investor looking for big dividends and bullish on oil, it might be time to tie up with Pioneer.
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Jake Lerch has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.
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