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Diamondback Energy, Inc. Announces Third Quarter 2023 Financial and Operating Results

MIDLAND, Texas, Nov. 06, 2023 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ:FANG) ("Diamondback" or the "Company") today announced financial and operating results for the third quarter ended September 30, 2023.

THIRD QUARTER 2023 HIGHLIGHTS

  • Average production of 266.1 MBO/d (452.8 MBOE/d)
  • Net cash provided by operating activities of $1.4 billion; Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $1.5 billion
  • Cash capital expenditures of $684 million
  • Free Cash Flow (as defined and reconciled below) of $820 million; Adjusted Free Cash Flow (as defined and reconciled below) of $884 million
  • Declared Q3 2023 base cash dividend of $0.84 per share and a variable cash dividend of $2.53 per share, in each case payable on November 24, 2023; implies an 8.3% annualized yield based on November 3, 2023 closing share price of $162.10
  • Repurchased 406,700 shares of common stock in Q3 2023 for $56 million (at a weighted average price of $136.59/share); repurchased 217,900 shares of common stock to date in Q4 2023 for $32 million, excluding excise tax (at a weighted average price of $146.97/share)
  • Total Q3 2023 return of capital of $663 million; represents ~81% of Q3 2023 Free Cash Flow and 75% of Adjusted Free Cash Flow from stock repurchases and the declared Q3 2023 base-plus-variable dividend
  • As previously announced, completed joint venture transaction with Five Point Energy LLC, forming Deep Blue Midland Basin LLC ("Deep Blue"), contributing certain Midland Basin water assets for gross proceeds of $516 million and 30% equity ownership in the new joint venture entity
  • In September, completed divestiture of Delaware Basin oil gathering assets for gross proceeds of $75 million
  • Since initiating our non-core asset sale program, have closed transactions with $1.7 billion of gross proceeds, exceeding our year-end 2023 target of $1.0 billion
  • Ended Q3 2023 with consolidated total debt of $6.4 billion and consolidated net debt (as defined and reconciled below) of $5.6 billion, down from $6.7 billion as of the end of Q2 2023

OPERATIONS UPDATE

The tables below provide a summary of operating activity for the third quarter of 2023.

Total Activity (Gross Operated):      
  Number of Wells Drilled   Number of Wells Completed
Midland Basin 79   73
Delaware Basin 7   1
Total 86   74


Total Activity (Net Operated):      
  Number of Wells Drilled   Number of Wells Completed
Midland Basin 69   70
Delaware Basin 6   1
Total 75   71


During the third quarter of 2023, Diamondback drilled 79 gross wells in the Midland Basin and seven gross wells in the Delaware Basin. The Company turned 73 operated wells to production in the Midland Basin and one gross well in the Delaware Basin with an average lateral length of 11,864 feet. Operated completions during the third quarter consisted of 25 Lower Spraberry wells, 20 Wolfcamp A wells, 11 Jo Mill wells, eight Wolfcamp B wells, seven Middle Spraberry wells, one Third Bone Spring well, one Upper Spraberry well and one Barnett well.

For the first nine months of 2023, Diamondback drilled 235 gross wells in the Midland Basin and 31 gross wells in the Delaware Basin. The Company turned 213 operated wells to production in the Midland Basin and 38 operated wells to production in the Delaware Basin. The average lateral length for wells completed during the first nine months of 2023 was 11,184 feet, and consisted of 69 Lower Spraberry wells, 64 Wolfcamp A wells, 41 Wolfcamp B wells, 32 Jo Mill wells, 18 Middle Spraberry wells, 15 Third Bone Spring wells, eight Second Bone Spring wells, two Upper Spraberry wells and two Barnett wells.

FINANCIAL UPDATE

Diamondback's third quarter 2023 net income was $915 million, or $5.07 per diluted share. Adjusted net income (as defined and reconciled below) was $990 million, or $5.49 per diluted share.

Third quarter 2023 net cash provided by operating activities was $1.4 billion. Through the first nine months of 2023, Diamondback's net cash provided by operating activities was $4.3 billion.

During the third quarter of 2023, Diamondback spent $611 million on operated and non-operated drilling and completions, $34 million on infrastructure and environmental and $39 million on midstream, for total cash capital expenditures of $684 million for the quarter. During the first nine months of 2023, Diamondback has spent $1.8 billion on operated and non-operated drilling and completions, $122 million on infrastructure and environmental and $104 million on midstream, for total cash capital expenditures of $2.1 billion.

Third quarter 2023 Consolidated Adjusted EBITDA (as defined and reconciled below) was $1.8 billion. Adjusted EBITDA net of non-controlling interest (as defined and reconciled below) was $1.7 billion.

Diamondback's third quarter 2023 Free Cash Flow (as defined and reconciled below) was $820 million. Adjusted Free Cash Flow (as defined and reconciled below) was $884 million. Through September 30, 2023, Diamondback's Free Cash Flow was $2.0 billion, with $2.1 billion of Adjusted Free Cash Flow over the same period.

Third quarter 2023 average unhedged realized prices were $81.57 per barrel of oil, $1.62 per Mcf of natural gas and $21.02 per barrel of natural gas liquids ("NGLs"), resulting in a total equivalent unhedged realized price of $54.37 per BOE.

Diamondback's cash operating costs for the third quarter of 2023 were $10.51 per BOE, including lease operating expenses ("LOE") of $5.42 per BOE, cash general and administrative ("G&A") expenses of $0.51 per BOE, production and ad valorem taxes of $2.83 per BOE and gathering and transportation expenses of $1.75 per BOE.

As of September 30, 2023, Diamondback had $680 million in standalone cash and no borrowings under its revolving credit facility, with approximately $1.6 billion available for future borrowing under the facility and approximately $2.3 billion of total liquidity. As of September 30, 2023, the Company had consolidated total debt of $6.4 billion and consolidated net debt of $5.6 billion, down from consolidated total debt and net debt of $6.7 billion as of June 30, 2023.

DIVIDEND DECLARATIONS

Diamondback announced today that the Company's Board of Directors declared a base cash dividend of $0.84 per common share for the third quarter of 2023 payable on November 24, 2023, to stockholders of record at the close of business on November 16, 2023.

The Company's Board of Directors also declared a variable cash dividend of $2.53 per common share for the third quarter of 2023 payable on November 24, 2023, to stockholders of record at the close of business on November 16, 2023.

Future base and variable dividends remain subject to review and approval at the discretion of the Company's Board of Directors.

COMMON STOCK REPURCHASE PROGRAM

During the third quarter of 2023, Diamondback repurchased 406,700 shares of common stock at an average share price of $136.59 for a total cost of approximately $56 million, excluding excise tax. To date, Diamondback has repurchased 18,403,732 shares of common stock at an average share price of $123.28 for a total cost of approximately $2.3 billion and has approximately $1.7 billion remaining on its current share buyback authorization. Diamondback intends to continue to purchase common stock under the common stock repurchase program opportunistically with cash on hand, free cash flow from operations and proceeds from potential liquidity events such as the sale of assets. This repurchase program has no time limit and may be suspended from time to time, modified, extended or discontinued by the Board at any time. Purchases under the repurchase program may be made from time to time in privately negotiated transactions, or in open market transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and will be subject to market conditions, applicable legal requirements and other factors. Any common stock purchased as part of this program will be retired.

FULL YEAR 2023 GUIDANCE

Below is Diamondback's guidance for the full year 2023, which includes fourth quarter production, cash tax and capital guidance. The Company is raising both total and net oil production for the full year 2023 due to production outperformance year-to-date as well as narrowing unit costs, capital expenditures and activity levels.

  2023 Guidance 2023 Guidance
  Diamondback Energy, Inc. Viper Energy Partners LP
     
Net production - MBOE/d ~447 (from 435 - 445) ~39.25
Oil production - MBO/d ~263 (from 260 - 262) ~22.00
Q4 2023 oil production - MBO/d (total - MBOE/d) 269 - 273 (455 - 460) 24.25 - 24.75 (43.25 - 44.25)
     
Unit costs ($/BOE)    
Lease operating expenses, including workovers $5.10 - $5.40 (from $4.90 - $5.40)  
G&A    
Cash G&A $0.55 - $0.65 (from $0.60 - $0.75) $0.50 - $0.60
Non-cash equity-based compensation $0.30 - $0.40 (from $0.35 - $0.45) $0.10 - $0.15
DD&A $10.50 - $10.75 (from $10.00 - $10.75) $9.50 - $10.00
Interest expense (net of interest income) $1.10 - $1.25 (from $1.20 - $1.30) $3.00 - $3.25
Gathering and transportation $1.65 - $1.80 (from $1.80 - $2.00)  
     
Production and ad valorem taxes (% of revenue) ~7% (from ~8%) ~7%
Corporate tax rate (% of pre-tax income) 23% 20% - 22%
Cash tax rate (% of pre-tax income) 15% - 17% (from 10% - 15%)  
Q4 2023 Cash taxes ($ - million) $190 - $230 $13.0 - $17.0
     
Capital Budget ($ - million)    
Drilling, completion, capital workovers, and non-operated properties $2,370 - $2,390 (from $2,330 - $2,365)  
Midstream (ex. equity method investments) $120 - $130 (from $100 - $120)  
Infrastructure and environmental $170 - $180 (from $170 - $190)  
2023 Capital expenditures $2,660 - $2,700 (from $2,600 - $2,675)  
Q4 2023 Capital expenditures $610 - $650  
     
Gross horizontal wells drilled (net) 340 - 350 (306 - 315) (from 335 - 350 (302 - 315))  
Gross horizontal wells completed (net) 325 - 335 (305 - 315) (from 330 - 345 (305 - 320))  
Average lateral length (Ft.) ~11,000' (from ~10,800')  
FY 2023 Midland Basin well costs per lateral foot $620 - $680  
FY 2023 Delaware Basin well costs per lateral foot $900 - $1,000  
Midland Basin net lateral feet (%) ~85%  
Delaware Basin net lateral feet (%) ~15%  


CONFERENCE CALL

Diamondback will host a conference call and webcast for investors and analysts to discuss its results for the third quarter of 2023 on Tuesday, November 7, 2023 at 8:00 a.m. CT. Access to the webcast, and replay which will be available following the call, may be found here. The live webcast of the earnings conference call will also be available via Diamondback's website at www.diamondbackenergy.com under the "Investor Relations" section of the site.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties, and assumptions. All statements, other than statements of historical fact, including statements regarding Diamondback's: future performance; business strategy; future operations (including drilling plans and capital plans); estimates and projections of revenues, losses, costs, expenses, returns, cash flow, and financial position; reserve estimates and its ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures); and plans and objectives of management (including plans for future cash flow from operations and for executing environmental strategies) are forward-looking statements. When used in this news release, the words "aim," "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "future," "guidance," "intend," "may," "model," "outlook," "plan," "positioned," "potential," "predict," "project," "seek," "should," "target," "will," "would," and similar expressions (including the negative of such terms) as they relate to Diamondback are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Although Diamondback believes that the expectations and assumptions reflected in its forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond Diamondback's control. Accordingly, forward-looking statements are not guarantees of future performance and Diamondback's actual outcomes could differ materially from what Diamondback has expressed in its forward-looking statements.

Factors that could cause the outcomes to differ materially include (but are not limited to) the following: changes in supply and demand levels for oil, natural gas, and natural gas liquids, and the resulting impact on the price for those commodities; the impact of public health crises, including epidemic or pandemic diseases, and any related company or government policies or actions; actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments, including any impact of the ongoing war in Ukraine and Israel-Hamas war on the global energy markets and geopolitical stability; instability in the financial sector; concerns over a potential economic slowdown or recession; inflationary pressures; rising interest rates and their impact on the cost of capital; regional supply and demand factors, including delays, curtailment delays or interruptions of production, or governmental orders, rules or regulations that impose production limits; federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations; physical and transition risks relating to climate change and the risks and other factors disclosed in Diamondback's filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the Securities and Exchange Commission's web site at http://www.sec.gov.

In light of these factors, the events anticipated by Diamondback's forward-looking statements may not occur at the time anticipated or at all. Moreover, Diamondback operates in a very competitive and rapidly changing environment and new risks emerge from time to time. Diamondback cannot predict all risks, nor can it assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements it may make. Accordingly, you should not place undue reliance on any forward-looking statements made in this news release. All forward-looking statements speak only as of the date of this news release or, if earlier, as of the date they were made. Diamondback does not intend to, and disclaims any obligation to, update or revise any forward-looking statements unless required by applicable law.

Diamondback Energy, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except share amounts)
       
  September 30,   December 31,
    2023       2022  
Assets      
Current assets:      
Cash and cash equivalents $ 827     $ 157  
Restricted cash   3       7  
Accounts receivable:      
Joint interest and other, net   191       104  
Oil and natural gas sales, net   789       618  
Inventories   70       67  
Derivative instruments   1       132  
Income tax receivable   16       284  
Prepaid expenses and other current assets   19       23  
Total current assets   1,916       1,392  
Property and equipment:      
Oil and natural gas properties, full cost method of accounting ($8,239 million and $8,355 million excluded from amortization at September 30, 2023 and December 31, 2022, respectively)   40,647       37,122  
Other property, equipment and land   706       1,481  
Accumulated depletion, depreciation, amortization and impairment   (15,988 )     (14,844 )
Property and equipment, net   25,365       23,759  
Funds held in escrow   50       119  
Equity method investments   519       566  
Assets held for sale         158  
Derivative instruments   1       23  
Deferred income taxes, net   60       64  
Investment in real estate, net   85       86  
Other assets   53       42  
Total assets $ 28,049     $ 26,209  
Liabilities and Stockholders' Equity      
Current liabilities:      
Accounts payable - trade $ 358     $ 127  
Accrued capital expenditures   397       480  
Current maturities of long-term debt         10  
Other accrued liabilities   428       399  
Revenues and royalties payable   782       619  
Derivative instruments   139       47  
Income taxes payable   37       34  
Total current liabilities   2,141       1,716  
Long-term debt   6,230       6,238  
Derivative instruments   199       148  
Asset retirement obligations   240       336  
Deferred income taxes   2,243       2,069  
Other long-term liabilities   12       12  
Total liabilities   11,065       10,519  
Stockholders' equity:      
Common stock, $0.01 par value; 400,000,000 shares authorized; 178,815,302 and 179,840,797 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively   2       2  
Additional paid-in capital   14,149       14,213  
Retained earnings (accumulated deficit)   2,136       801  
Accumulated other comprehensive income (loss)   (7 )     (7 )
Total Diamondback Energy, Inc. stockholders' equity   16,280       15,009  
Non-controlling interest   704       681  
Total equity   16,984       15,690  
Total liabilities and equity $ 28,049     $ 26,209  


Diamondback Energy, Inc.
Condensed Consolidated Statements of Operations
(unaudited, $ in millions except per share data, shares in thousands)
               
  Three Months Ended September 30,   Nine Months Ended September 30,
    2023       2022       2023       2022  
Revenues:              
Oil, natural gas and natural gas liquid sales $ 2,265     $ 2,417     $ 6,063     $ 7,558  
Sales of purchased oil   59             59        
Other operating income   16       20       62       55  
Total revenues   2,340       2,437       6,184       7,613  
Costs and expenses:              
Lease operating expenses   226       183       618       491  
Production and ad valorem taxes   118       156       421       495  
Gathering and transportation   73       71       209       191  
Depreciation, depletion, amortization and accretion   442       336       1,277       979  
Purchased oil expense   59             59        
General and administrative expenses   34       34       111       109  
Merger and integration expense   1       11       11       11  
Other operating expenses   47       32       113       85  
Total costs and expenses   1,000       823       2,819       2,361  
Income (loss) from operations   1,340       1,614       3,365       5,252  
Other income (expense):              
Interest expense, net   (41 )     (43 )     (138 )     (122 )
Other income (expense), net   37       (5 )     69       (3 )
Gain (loss) on derivative instruments, net   (76 )     (24 )     (358 )     (677 )
Gain (loss) on extinguishment of debt         (1 )     (4 )     (59 )
Income (loss) from equity investments   9       19       39

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