Pioneer's Variable Dividend Plan May Attract Investors Back To The Energy Patch

Seeking AlphaPioneer's Variable Dividend Plan May Attract Investors Back To The Energy PatchAug. 17, 2020 3:18 PM ET|| About: Pioneer Natural Resources Company (PXD), Includes: COP, XOMby: Michael FitzsimmonsMichael Fitzsimmons Renewable energy, oil & gas, dividend investing, goldSummaryIn its Q2 investor presentation, Pioneer announced its intention to adopt a variable dividend policy next year.
This is exactly what an upstream only oil company should do in order to give investors a fair-shake and attract them back to the sector.
But the devil is in the details and since management apparently will take an entire year to put the plan in place, we'll have to wait to see those details.
Meantime, Pioneer generated $165 million in free-cash-flow during Q2, significantly reduced LOE qoq, and will keep 2020 production relatively flat despite a big cut in cap-ex.
Permian shale oil producer Pioneer Resources (PXD) recently announced a pretty solid Q2 EPS report highlighted by generating $165 million in free-cash-flow (~$1/share). But what caught my eye was the company's intention to adopt a new "investment thesis" - one that includes a variable dividend policy starting next year.
Source: Q2 Presentation
For years now I've been clamoring that energy companies don't allocate enough capital directly back to investors in the form of dividends. In the bad times, energy investors take it on the chin with a lower share price. In the good times (like 2019, for example), energy company executives all to often put a higher priority on share buybacks that typically turn out to be a huge waste of shareholder capital.
Exxon (XOM) is a case in point. The company has spent $10's of billion of dollars on share buybacks at prices considerably higher than where the stock began the year, let alone where it is today. While ConocoPhillips (COP) has implemented a great strategic plan to deal with the "era of energy abundance" and high volatility in the price of oil,... Read more