This Is How Important Oil Prices Are to Pioneer Natural Resources
Pioneer Natural Resources (NYSE: PXD) operates in the energy sector, producing oil and natural gas in the onshore U.S. market. The company has adopted a performance-linked dividend payment plan that leads to higher dividend payments when energy prices are elevated (and lower when energy prices are depressed). So it is important for investors to understand the biggest driver of financial performance, which is, without a doubt, energy prices.
Pioneer Natural Resources drills for and sells commodities. It doesn't get to set the price of what it sells -- the market does that. This is one of the reasons why oil and natural gas prices tend to be very volatile, often moving dramatically in surprisingly short periods of time. Demand for these key energy sources is also pushed higher and lower by economic activity, which complicates the pricing picture even more, adding a cyclical component.
As oil and prices go up and down, so goes the financial results of Pioneer Natural Resources. Adding to the importance of this fact, Pioneer has tied its dividend payments to its financial performance. There's a base dividend that is expected to be resilient across time that is supplemented by a variable payment that will rise and fall with the company's results.
Source Fool.com
