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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to the Pioneer Natural Resources First Quarter Earnings Conference Call. Joining us today will be Scott Sheffield, Chief Executive Officer; Rich Dealy, President and Chief Operating Officer; and Neal Shah, Senior Vice President and Chief Financial Officer.
Pioneer has prepared presentation slides to supplement comments made today. These slides can be accessed on the Internet at www.pxd.com. Again, the Internet website to access slides presented in today's call is www.pxd.com. Navigate to the Investors tab found at the top of the web page and then select Investor Presentations. Today's call is being recorded. A replay of the call will be archived on www.pxd.com, through May 31, 2022.
The company's comments today will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements and the business prospects of Pioneer are subject to a number of risks and uncertainties that may cause actual results in the future periods to differ materially from forward-looking statements. These risks and uncertainties are described in Pioneer's news release on Page 2 of the slide presentation and in Pioneer's public filings made with the Securities and Exchange Commission.
At this time, for opening remarks, I would like to turn the call over to Pioneer's Senior Vice President and Chief Financial Officer, Neal Shah. Please go ahead.
Thank you, Jake. Good morning, everyone, and thank you for joining us for Pioneer's first quarter earnings call. Today, we will be discussing our excellent first quarter results, which underscore the power of our investment framework. We will also highlight our leading return of capital strategy and the value that we are creating for shareholders while simultaneously providing the world with affordable, reliable and low emissions intensity oil and gas. We will then open up the call for your questions. With that, I will turn it over to Scott.
Thank you, Neal. Good morning. Before we discuss the results of the quarter, I want to acknowledge the terrible situation in Ukraine that is impacting the safety and freedom of millions of people, which is the direct result of Russia's unprovoked invasion. We recognize that a path to peace could take an extended period of time, during which more innocent people will suffer. Pioneer stands with Ukraine. We've committed $20 million to humanitarian relief organizations in Ukraine to help those most in need. During this time, we stand resolute knowing that we are providing the world a much needed source of affordable energy with one of the lowest emissions per barrel produced and can do so for decades to come.
Shifting our focus to Pioneer's quarterly results. I'll begin on Slide 3. Pioneer delivered a strong first quarter, generating significant value for our shareholders. Our high-quality assets, top-tier margins, unhedged oil position drove significant free cash flow generation during the first quarter of more than $2.3 billion, of which we are returning $2 billion to the shareholders.
This translates to Pioneer returning $7.38 per share to our stockholders through our second quarter dividend. This peer-leading return of capital framework reflects a 13% annualized dividend yield, which represents a 95% increase from last quarter's base plus variable dividend. That 13% is calculated based on the stock price of April 26. Based on today's stock price, it's about 12% annualized dividend yield.
In addition to the strong dividend payout, Pioneer repurchased $250 million of stock in the first quarter. When you annualize the first quarter share repurchases and second quarter dividends, we delivered a 15% total return yield. Our robust free cash flow is underpinned by our strong corporate returns. We forecast 2022 return on capital employed to be greater than 30%.
Going to Slide 4. Pioneer's strong execution continued during the first quarter, with total production in the upper half of our guidance range supporting significant free cash flow generation of $2.3 billion. Additionally, we forecast our top-tier leverage profile will be strengthened further by year-end at approximately 0.15 net debt to EBITDA that's based on the forward strip.
Going to Slide 5. Pioneer's capital return program is best-in-class. This is underpinned by our strong and growing base dividend, a peer-leading variable dividend payout, which represents up to 75% of post base dividend free cash flow. Resulting base plus variable reflects approximately 80% of our quality free cash flow being returned to shareholders. This compelling cash return is enhanced by opportunistic share repurchases, which provides additional shareholder returns. Again, our total return yield is approximately 15% when you annualize the first quarter share repurchases and the second quarter dividend.
Going to Slide 6. Pioneer's capital return framework is resilient through cycle, resulting in significant dividend payouts over a wide range of commodity prices, even when including the impact of cash taxes. As seen on the graph, if oil prices were to average $60 for the remainder of the year, Pioneer's shareholders would receive approximately $17 in dividends per share. At $120, approximately $31. Shareholders have significant upside on higher oil prices as we have 0 2022 oil hedges. We expect to return dividends in excess of $27 a share, representing a 12% or greater dividend if oil prices remain above $100 a barrel.
The depth of Pioneer's high-quality inventory provides durability to this compelling free cash flow generation beyond 2022. For example, Pioneer's 5-year cumulative free cash flow, in combination with 5% oil growth, is forecasted to exceed over $30 billion at current strip prices, and current strip prices that are dropping about $35 from the current price over the next 5 years.
Going to Slide 7. The significant dividend payouts outlined previously resulted in an annualized dividend yield of approximately 13%. As I mentioned, that was the stock price on April 26. This yield exceeds all peers, majors and the average yield of the S&P 500. This top-tier yield demonstrates the cash flow generation power, underlying quality of Pioneer's assets and the strength of our peer-leading return of capital strategy.
Going to Slide 8. Pioneer's 13% dividend again surpassed the S&P 500 average by nearly 8x. When looking beyond our peer group to the broader market, Pioneer's dividend yield far surpasses every S&P 500 sector and is higher than any individual company in the S&P 500. With our double-digit dividend yield, complementary share repurchase at 5% oil growth, the case for owning Pioneer stock is compelling.
Going to Slide 9. This third-party data substantiates Pioneer as the premier independent oil and gas company with the longest high-quality inventory of our peers. As gathered from this slide, the Midland Basin, where Pioneer exclusively operates is home some of the highest quality acreage in the world. Represented on the right, the Midland Basin has more than 2x the remaining top-tier inventories in the Delaware Basin. As seen on the left, Pioneer has the longest duration of high-quality inventory when compared to peers, resulting from our expansive position within the core of the Midland Basin.
On Slide 10, again, long-term total return outperformance. Pioneer's legacy Midland Basin position has been the foundation of the company since its founding 25 years ago, has been a major contributor to our success. Pioneer has outperformed large cap peers and U.S. majors over the previous 3-, 10- and 20-year periods, with returns over the 20-year period exceeding the peer group by nearly 80%. Our deep inventory, decades of development experience and consistent performance positions Pioneer to outperform for years to come.
I'll now turn it over to Rich.
Thanks, Scott, and good morning, everybody. I'm going to start on Slide 11, where you can see that we are reiterating our plan for 2022 with full year production and capital guidance at the same levels we announced in February. Based on the midpoints of both capital and production guidance and current strip pricing, we expect this plan to generate greater than $12.5 billion of operating cash flow, which results in more than $9 billion of forecasted free cash flow for 2022.
This represents an increase of approximately $2 billion in free cash flow since our last update in February. Consistent with our investment framework, we are modestly growing production this year with a reinvestment rate of less than 30%, returning over 80% of our free cash flow back to shareholders via dividends and share repurchases.
Our average activity level for the year remains unchanged. We plan to run between 22 and 24 drilling rigs and approximately 6 frac fleets, of which 2 of those are simulfrac fleets. This activity results in placing roughly 475 to 505 new wells on production during the year.
As we outlined last week, we are temporarily adding a frac fleet during the second quarter to mitigate the sand disruption that we experienced during the latter part of the first quarter. This will increase second quarter capital, which is expected to be our highest capital spend quarter of the year.
Assuming current inflationary pressures persist, we would expect our capital to migrate towards the upper half of our full year capital budget of $3.3 billion to $3.6 billion, primarily driven by higher steel and diesel prices. Despite these inflationary pressures, the improved operating cash flow more than offsets these increases given the strong commodity price outlook.
Thanks to the continued hard work of our teams across the company, Pioneer has established a track record of continued operational improvement as demonstrated on Slide 12. These operational efficiencies are helping to dampen the effects of inflation in 2022. One contributing factor to our efficiency gains is our history of consistently increasing our average lateral length, driving drilling and completion cost per foot lower. Looking to the future, we expect further lateral feet gains as we add more 15,000-foot laterals to our program.
In 2022, we expect to place approximately 50 wells with 15,000-foot laterals on production with that well count increasing to over 100 wells that are longer than 15,000 feet in 2023. Additionally, you can see from the graph on the right, we have nearly doubled our completed feet per day since 2018, and we've consistently outperformed peers on a completed feet per day basis. The gap with peers has even further widened with the deployment of 2 simulfrac fleets in 2021, and we have the goal of adding a third simulfrac fleet later this year or early next year.
Turning to Slide 13. Pioneer continues to have the best-in-class cash margins. You can see on the left chart that Pioneer maintained the highest realized price per BOE amongst our peers in 2021, which demonstrates the great work by our marketing team and the value of our oil-weighted production. Looking to the right chart, we additionally maintained best-in-class cash costs in 2021, resulting from the combination of our highly efficient operations, low corporate overhead and inexpensive borrowing rates.
This combination of high revenue and low costs translates into peer-leading margins, the strong corporate returns that Scott discussed and significant free cash flow generation, as demonstrated by our Q1 results.
Turning to Slide 14. I think this slide fits nicely with the prior slide, highlighting that the combination of our peer-leading margins and our efficient capital program generate best-in-class free cash flow per BOE. Most importantly, though, is that it's sustainable for decades given Pioneer's extensive inventory depth with a low breakeven cost. So with that, I'm going to turn it over to Neal.
Thank you, Rich. Turning to Slide 15. The graph on the right demonstrates the strength of our balance sheet, highlighting the combination of our low leverage and peer-leading average coupon rate. This financial discipline supports our strong cash margins, robust corporate returns and strong free cash flow profile. Maintaining this fortress-like balance sheet provides Pioneer the financial flexibility for opportunistic share repurchases, supplementing our peer-leading dividend program.
Turning to the next page. This is one of my favorite slides in the deck. We believe our high-quality inventory, efficient operations and best-in-class cash margins are key drivers to our strong corporate returns. When looking across the broader S&P 500, Pioneer's projected ROCE exceeds all other sectors within the S&P 500, yet trades at a discounted valuation relative to these various sectors. We believe this combination of market-leading ROCE and discounted valuation makes Pioneer a compelling investment opportunity when compared to the broader market. I'll now turn it over back to Scott.
Thank you, Neal. Slide 17. Late last year, we published our updated 2021 sustainability and climate risk reports, which outlined our leading ESG strategies, including the ones you see on this slide. Our focus on ESG has established Pioneer as a leader in the industry, which continues to be reflected by many third-party rating agencies. While the initiatives to date are some of the best in our sector, we are working on many more that we will highlight in our updated sustainability and climate risk reports later this year.
On Slide 18, Pioneer is focused on maintaining one of the lowest Scope 1 and Scope 2 emission intensity than that of our peers. As seen in this graph, the Scope 1 and 2 emissions intensity reduction targets of our peers are significantly higher than Pioneer. Our commitment is demonstrated through 2030 emissions intensity goals, representing one of the strongest emission reduction targets in the industry.
On Slide 19. Again, this is one of the favorite charts by several long-term shareholders. Pioneer is producing some of the lowest emission barrels in the world, helping to supply the world with affordable energy while minimizing emissions per barrel produced, combined with low maintenance breakeven oil price of $30 per barrel. Our production remains resilient, and we expect our products to have a place in the global market for a very, very long time.
Slide 20 again, summarizes the fact that Pioneer is committed to driving value and returning capital for our shareholders. We'll now open it up for Q&A.
[Operator Instructions]. We will begin with Jeanine Wai with Barclays.
First question is maybe on inflation because it's obviously top of mind. We just want to kind of hit on the maybe medium-term implications of all this. So your 5% -- 0% to 5% medium-term growth plan that requires adding a modest amount of activity every year. And so can you talk about your latest take on how the current service supply, labor market, et cetera, how that tightness is really causing you to either think differently about contracting next year or just overall implications for 2023? It sounds like from peers that people are just getting a lot earlier start to '23, and it sounds like E&Ps are starting to term up deals longer.
Yes, Jeanine, I think you're exactly right. I think us, like others, are starting to focus on '23 and really, we look at -- and our contracting strategy is such that -- we already have a lot of our services locked in for '23, but we are looking at those services that aren't locked in to make sure that we've got ample supply. We're not concerned about it, but it is something that we want to start earlier this year than maybe in years past, just given the inflationary pressure that's out there. I think most of the inflation that we're seeing is really on steel and diesel, as I mentioned.
I think as we think about our 0% to 5%, also it's adding 1 to 2 rigs per year. So it's a modest amount of activity increases. And hopefully, with efficiency gains, we can minimize what we have to add just by getting more efficient on the work that we're doing. That's really the key things that we're focused on as we think about '23 and the program, but it hasn't changed our thought process in terms of growing at around 5% for 2023.
Okay. Great. And then maybe hitting on cash returns, which clearly are very attractive for Pioneer. You framed your buybacks as being opportunistic. We've noticed that they've been consistent for the past 2 quarters now at this $250 million. Is that just a coincidence that Q1 was the same level as Q4 and -- or should we kind of think about that level as being a minimum on a quarterly basis?
Yes, Jeanine. We'll continue to buy shares on a quarterly basis as our balance sheet has strengthened. Our long-term objective is continuing to reduce the share count. And we have the balance sheet and the authorization to repurchase a significant amount of stock opportunistically. So that will be the continued strategy.
Now moving to your next question, which will come from Neil Mehta with Goldman Sachs.
Yes. Great dividend distribution here this quarter. Scott, I just wanted to start with a macro question and get your perspective. On the Permian specifically, which is, given the bottlenecks that exist, whether it's around natural gas or pressure pumping, how much of a constraint is that going to be in terms of the Permian broadly growing. And as you think about to exit U.S. production, there's been a wide range of numbers thrown out there from 0.5 million barrels a day to over 1 million barrels a day. Where do you fit within that range for oil?
Yes, Neil, I've always been probably toward the 500,000 to 600,000. And what's interesting, if you look at EIA data, what they published now in January and February, and we've had several months now of just flat production. So the rig count, as you know, has moved up several months ago. And the rig count in the Permian and the U.S., we should have already seen some production growth. And so I think too many think tank firms are way too high on U.S. production. And then you put on top of it what's happening now in regard to labor constraints, frac fleet constraints, inflation constraints. I just think it's going to be tough to hit some of the numbers. So it even -- makes me even more bullish about some of the oil price numbers that are out there.
All right. Great. And then, Scott, would love your perspective on the natural gas takeaway situation in the Permian. It seems like a resolvable problem, but it could be -- get a little tight here in '23. So how do you see the fix here? How do you see Pioneer positioned to mitigate some of those risks?
Yes, there's a good -- Rusty Brazil always puts out a good morning briefing. For the people that don't have access to it, it summarizes all the takeaways in today's report. There's 2 large compression deals that are adding, I think, 0.5 billion a day and 650 million a day that will be towards the third -- fourth quarter of '23 that will help the situation.
And then there's three pipelines that are vying for 2 Bcf each that are vying for to come on in early '24. And so it's going to get soft. I'm not really concerned and Pioneer will obviously participate, obviously, in some of those upgrades and also in one of those 3 pipelines. So I think it will be resolved fairly quickly, and then we'll have room to add more pipelines about every 2, 2.5 years going forward. So not really concerned and the problem will get solved fairly quickly.
Now we'll hear from John Freeman with Raymond James.
Just a follow-up on Jeanine's question on the cost inflation. Rich, you said that you all have a lot of the budget that's already sort of locked in for '23, just the nature of how you all source your materials and services. I know going into this year, about 50% of your CapEx budget was locked in. Can you give me a sense of just at this point, I guess, both for the rest of '22, how much do you view as sort of locked in versus exposed to inflation? And then sort of the same question for '23.
Yes, John, I'd say we're probably right around 60% that were locked in now for all of '22 and really the biggest items that are still subject to inflation are steel, diesel, chemicals and to a much smaller extent, sand. So those are the kind of the key items where we'll face some potential for incremental inflation.
When you look at '23, I'd say we're probably locked in on 25% to 30% being mostly on the drilling side and on sand supply because we've locked that in way in advance. But a lot of the other ones that we have contracts such that we're assured supply, it still could be subject to some inflation, but we're assured the supplies. So I'm not worried about the execution of the program, but we still got -- some of it may be subject to inflation that's not -- that we've locked out or locked in for 2022. Hopefully, that helps.
That does. And then looking at the 15,000-foot laterals, which you mentioned will be 50 this year and 100 next year. So just sort of as a percentage of your total activity it's about 10% this year and I guess, kind of closer to 20% next year. Can you give us kind of an idea of how much of your inventory is applicable to these kind of extra-long laterals? Or maybe just said differently, how large a percentage of your drilling activity would it be reasonable to assume if I sort of look out 4 or 5 years?
Yes. We've got -- I think we've talked about 1,000 locations that we've identified and clearly with land trades and small acquisitions of incremental working interest or just extensions to our acreage out there, we're hoping to continue to add to that because it's the capital efficiency of getting that 15% reduction in drilling and completion costs on a per foot basis is important. So we're going to go to the 100 in 2023. I would expect it will be 150 in the future program. So it's in that, like you said, 20% to 25% of our program will be those longer laterals for the foreseeable next 5 to 7 years probably.
Now moving to our next question, and that will come from Charles Meade with Johnson Rice.
Rich, maybe this is a question for you. It's about the spot frac fleet that you picked up. I have no doubt that as one of the big operators on the Midland Basin, you guys are able to get equipment to come to your location. But I wonder if you could just share with us a little bit what that process was like getting the spot crew because most of the service companies messaging has been there are no spot crews available, especially right where you are. So I wonder if you could just share what that was like as a means of kind of delivering some insight about what the -- how tight the service market is and how that might carry into next year.
Yes, Charles, I think it really was relatively easy to be transparent about it in the sense that one of the benefits of Pioneer that some of the other operators in the basin have is just our security of sand and diesel supply was such that really a number of companies why they're tight, they still have availability if companies have sand and diesel and chemicals, and we have all that stuff lined up. And so it's really the ancillary services that go along with it that really were the benefit of Pioneer and allowed us to attract that spot fleet relatively easy. And I think we had multiple choices. It was really a case of timing of when they could get there. And so the one we chose was because we could get there the quickest. And that was really the defining thing that made it -- why that one came versus another one, but we could have had a couple of other ones on a spot basis if we needed it. But it's really about the other supplies, having those available that really drove the ability to get a spot fleet.
That's interesting detail. And then one other question, if I could ask. Can you remind us what -- this is with respect to the convertible notes you guys have out there? Can you kind of remind us what your posture is with respect to those in the context of the overall share buyback and delevering and where that sits in your stack and what your plans are?
Charles, this is Neal. I mean our expectation is similar to when we engage in the convert and we spoke about it previously. It's our expectation to settle that in cash. The free cash flow generation is strong. We're paying out 80% through the dividend. We've got the remainder of that 20% that we utilized and placed on the balance sheet, of which we use a small percent or a certain amount to repurchase shares and do that opportunistically as Scott articulated earlier. So we'll be in a position to settle that with cash. And as we sit now, that's our intention.
Any time frame do you want to communicate on that, Neal, or...
No. I mean, we're not -- the ability to even call it back is until May of 2023, and it matures in 2025. So I think we'll view it as that time comes closer to see what those options are and what's the most economic and financial decision to make. But again, reiterating it's our intention to put out in cash.
And Bertrand Donnes with Truist has the next question.
This might be just a little nuanced but given your dividend payout is -- your yield is a little bit higher than the group. Can you maybe talk about keeping it that high versus maybe hypothetically just a few percent above the group and pushing more buybacks? Just hypothetically, it's -- do you think of it as an output of your free cash flow? Or is it an intentional strategy to kind of show the market that you can push these yields to get stock appreciation?
Yes. The primary goal really is to attract dividend and value income funds in the retail sector. And we've been spending a lot of time with both. That feels like is our market growth that we're targeting and now having the highest paying dividend, the S&P 500, it gives us a leg up on people that want dividends, especially going into an inflationary environment. So I think that we'll continue to attract more and more retail. We still have a very, very small retail sector in Pioneer. So we're focused on that retail sector. And we're focused on dividend funds. We are getting some growth funds to buy into the sector also, but that's where our focus is.
That makes sense. And then maybe just shifting gears. On divestitures, I think as of the last update, you guys still had some noncore stuff you were going to get rid of. Maybe some of your peers have signaled that they're stepping away from the M&A market, at least large-scale stuff. Is that put a hold on divestitures? Or are you just kind of willing to meet in the middle with potential buyers to get these products sold?
Yes, I'd say we're still entertaining people that are coming to us on small acreage divestitures here and there that are what we call Tier 3-related acreage. So you'll see in the first quarter, we had some amount of those that we did, we'll continue to look at DrillCos as an option as well. So I think we're still planning that they'll have a modest amount each year of divestitures that will happen that are nonstrategic or Tier 3 type acreage that we can accelerate value on, but that's really the focus right now, nothing of size.
And now we'll take our next question that will come from Doug Leggate with Bank of America.
Scott, I think in prior calls, you've talked about Pioneer having 15-year inventory. And I realize you're using third-party data this morning, which shows more than 20 years. I'm just wondering if you could speak to that. Obviously, the macro backdrop has changed dramatically. How has your view of your sustainable inventory changed dramatically?
No. I think in a higher price environment, Doug, I mean I think everybody's inventory goes up. But we've advertised over 15,000 locations. We're drilling 500 a year. So all we've changed is instead of using greater than 15,000, we've said greater than 20 years. It could be 30 years, it could be 25 years. It all depends a lot on what the oil price is. Also, we are looking at going into over the next 2 or 3 years, obviously, testing some of the deeper zones. So you'll see us do that. We have another 6 zones we've advertised over the last few years. And so we have some gas and gas condensate zones. So you'll probably see us test some of those over the next couple of years also. So there really hasn't been a change. Just emphasizing instead of getting away from locations, we're focused more on greater than 20 years.
Okay. I just wanted to check the sovereignty of the presentation. Scott, my follow-up is maybe for Rich or for Neal, but I want to ask you about the inflection in cash taxes. In this commodity environment, obviously, it's kind of rounding out of performance, but nevertheless, a meaningful change in where we've been historically. So can you just give us an update with the steepness of the forward curve we have today? When do you anticipate that Pioneer will be in a full cash [indiscernible] position, rule of thumb with your current of spending, what would that look like as a kind of go-forward guide?
Doug, it's Neal. Yes, if you think about how we spoke about cash taxes last quarter, call our NOL balance is approximately $6 billion at year-end 2021. We'll utilize the extent of that NOL balance for the most part through 2022. I think when I last spoke, I spoke of cash taxes, of course, the oil price was lower being about $150 million to $200 million for the year. That's more of a $500 million number for the full year. So $500 million for the full year.
Now if you look at our guidance on cash taxes for this quarter, we'll start prepaying, so to speak, our estimated tax burden, full year tax burden. So we'll be paying that here this quarter and next quarter and again in the fourth quarter. But if you look at it in the fourth quarter -- excuse me, in the full year and fullness based on current strip prices, it's $500 million. Now fast forward to 2023, looking at strip prices, you're more in the range of, let's call it, $1.3 billion to $1.5 billion.
Now we'll move to David Deckelbaum with Cowen.
I just wanted to follow up and just confirm the added frac fleet that's coming in, in the second quarter, how long is that term that's not staying in the full year?
No, we're just doing a couple of pads and then it will be released. And so it's already on location and working.
And I guess -- I appreciate that. And my follow-up would just be, Scott, I know -- when you presented in front of Congress, you had discussed the changing in lead times now being 18 to 24 months for sort of long-term planning or planning around growth, which might have doubled or tripled from a few years ago. How is that changing? I guess the way that you guys are approaching things now, whether it be contracting for services, and -- are you looking at anything on the vertical integration side to kind of alleviate some of the planning and procurement process?
No. I mean I think Rich has already covered it all. I mean, I think it's obvious that based on comments from the 3 large service companies, starting with Jeff Miller's comments that things are pretty much even with John Lindsay at H&P., I mean the frac fleets are pretty much used up. The good spec rigs are pretty much used up. And you can always do new builds, but you're going to pay significantly higher pricing, and you're going to have to sign 3-year type contracts.
So I think in this world of returning capital to shareholders, I just don't see that happening. So it's -- really, I don't think the growth profile that EIA has and some of the other think tank firms, I think it's too aggressive over the next 2 years for U.S. oil production. And so Rich has already commented on some of the things that we're doing in regard to '22, '23 and '24 in regard to locking up service cost.
[Operator Instructions]. We'll now move to Scott Hanold with RBC Capital Markets.
A couple of things. One -- first on the conversation earlier on the budget, obviously, with inflation, it's tending towards the higher end of the range? And also you all talked about sort of 5% growth cap as you think about 2023 and beyond. And just to clarify 2 things with that. Number one, is adding a couple of rigs in the back half of this year to prepare for a 5% growth in 2023 in the budget at this point, is that -- would get you say as part to the top end of the '22 spending?
Yes, just for clarity, I mean, when we are building our capital program for '22, it's already forecasting and what we're going to do for 2023. So that was already built into our original guidance range. And so of what activity we need to accomplished the 5% growth for '23. So that's really built into what we've already laid out.
Okay. And then, Scott, and a little bit again on the oil macro, obviously, it's been the important driver here over the course of the last several months. But what is your view of like what the right mid-cycle oil price is right now? Where do you think from a longer-term perspective it should be? Obviously, right now we're a little bit more heightened. And how does that play into your strategy in terms of being opportunistic on the buybacks?
Yes. I mean I think that's the big sixty-four-dollar question. I mean, as you know, the strip drops on down to $70 after 5 years. On WTI, in fact it's below $70 after 5 years. There's got to be a lot more. I think, comfort that, that strip is going to move up. I think it will long term instead of just marching forward. So we still -- I mean, we had a lot of negative items around the world with Chinese lockdown inflation, and we still had over $100 oil over the last 2 or 3 weeks. So -- and now we're seeing the potential ban on Russian crude and a phase-in between now and over the next 6 months and to the end of the year from EU.
So things are going to get tighter. I still think it's going to go higher. And we have to decide, obviously, the intrinsic value at various price stacks of the company and when to obviously opportunistically buy back the stock. So we have the firepower and the balance sheet to do it.
Right. And so I guess, at this point, obviously, with the all buying back, I mean, certainly, you've seen that opportunity. When you've seen kind of the moves in some of these E&P equities, including yourselves, would you continue to bind to that or even though that you're bullish oil, you're going to wait for, I guess, pullbacks through the periods?
We have to realize we're already disbursing 80% of our -- our framework is all back toward the dividend. So it's 80% of our cash flow is going to the dividend. And so we're looking for people that won't stabilize dividends. So I mean over 5 years, you're going to get over half the value of the market cap of the company back its dividends. And so at least you got something whenever the next downturn is in which it's not for a long time, at least look back and say, I've got half my stock price back in dividends that you can do whatever you want to. And that's the big benefit of dividends versus buying back stock.
Right. Part of the total return to shareholders. I appreciate that.
And now we'll take the question from Bob Brackett with Bernstein Research.
I have a question around the dividend yield. It's almost a bit of a half empty half full cup argument, which is to say you've made a pretty compelling case around higher margins than peers, lower OpEx, longer inventory, better geopolitical position in terms of pure-play Texas, yet your peers have had their share prices bid up or their dividend yield bid down to significantly lower levels. So it begs the question, what are you guys being valued on? And if you're not getting full credit for dividends, would that lead you down the path to consider other cash return strategies.
You got to realize, Bob, that we just announced the first unhedged paid dividend. And so it's -- we paid 4 quarters. It's barely creeped up. It was 6% last quarter. So ask me that question 4 quarters from now. If we're continuing at 12% to 13%, I think you'll see -- we should not be trading in at 12%, 13% yield.
But you got to establish history. It's got to be -- it's got to continue. It's got to be -- so we're just now making the first -- in fact, the payment is not going to be made until June. So let's get several quarters of payments in that 12% to 13% yield and see if we continue to trade where we're at on a yield basis. Looking at majors, there's no reason why anybody should be buying a major oil company at a 4% to 5% yield versus buying Pioneer at 12%, 13% yield. We're growing 5% a year at just as long as inventory, better ROCE.
And so just -- we have to reach out to that retail sector. We got to reach out to all those dividend funds. And we just got out on the road for the first time in the last 3 to 4 weeks. So give me about 12 months, and we'll see where it ends up.
Yes. I agree with your logic and yes, I think you'll prove correct with time. I think that's a good answer.
Thanks.
And ladies and gentlemen, that's all the time we have for questions today. I'll turn the call back over to Scott for any additional or closing remarks.
Again, thanks. We appreciate everybody's Q&A and look forward to the next quarter and seeing everybody out on the road. Again, thank you, and everybody, stay safe.
With that, ladies and gentlemen, this will conclude your conference for today. We do thank you for your participation, and you may now disconnect.