Texas independent oil and natural gas company Diamondback Energy reported better than expected second quarter earnings after the market close Monday. FANG reported adjusted gains of $7.07 per share beating the expected $6.66. The release follows last week’s earning from oil and gas heavyweights Chevron, Exxon, Shell and Phillps 66. Goldman Sachs named the stock among its top five picks for 2022 shortly before the earnings release. FANG shares are down over 20% from their June peak like many in the space as oil and gas prices have pulled back. Rattler Midstream LP buy-in transaction expected to close in late August 2022
Diamondback operates exclusively in the Permian basin.
Diamondback Energy Inc (NASDAQ): $FANG Report Earnings after Close Monday
$7.07 Beat Exp $6.68 EPS AND $2.77 Billion Beat $2.43 Billion forecast in revenue
Earnings
Diamondback Energy (FANG) released second-quarter of 2022 net income of $1.42 billion or $7.93 per share. This compares with $0.31 billion, or $1.70 per share, in last year’s second quarter. Excluding items, Diamondback Energy, Inc. reported adjusted earnings of $1.26 billion or $7.07 per share for the period on Monday with consensus estimates of $6.68 EPS and $2.43 billion.
- Q2 net income of $7.93 per share, adjusted for non-recurring gains, were $7.07 per share.
- Q2 revenue of $2.77 billion up 64.9% from $1.68 billion last year.
- Diamondback Energy has beaten earnings and revenue estimates in 4 of the past 8 quarters.
- Average production of 221.1 MBO/d (380.5 MBOE/d)
- Cash flow from operating activities of $1.7 billion.
- Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $1.8 billion
- Cash capital expenditures of $468 million
- Free Cash Flow of $1.3 billion
“Diamondback continued to build on its execution track record in the second quarter. The Company generated a record $1.3 billion in Free Cash Flow, exceeding last quarter’s prior Company record by 35%. We used the cash to reduce our net debt by 5% quarter over quarter, pay a total dividend of $3.05 per share and buy back over 2.3 million shares,” stated Travis Stice, Chairman and Chief Executive Officer of Diamondback. “We continue to focus on operational excellence and cost control in this inflationary operating environment, working to mitigate and offset the persistent inflationary pressures we are seeing across our business. Diamondback has a strong track record of cost control, and we expect to continue to improve on this track record in the coming quarters.”
Dividends and Capital
- (As previously announced) increasing annual base dividend by 7% to $3.00 per share; declared Q2 2022 base cash dividend of $0.75 per share payable on August 23, 2022; implies a 2.3% annualized yield based on July 29, 2022 closing share price of $128.02
- Announcing a variable cash dividend of $2.30 per share payable on August 23, 2022; total base-plus-variable dividend of $3.05 per share implies a 9.5% annualized yield based on July 29, 2022 closing share price of $128.02
- Repurchased 2,368,816 shares of common stock in Q2 2022 for $303 million (at a weighted average price of $127.61/share); repurchased 1,761,363 shares of common stock to date in Q3 2022 for $200 million (at a weighted average price of $113.70/share)
- Total Q2 2022 return of capital of $837 million; represents 63% of Q2 2022 Free Cash Flow (as defined and reconciled below) from stock repurchases and the declared base-plus-variable dividend
- Repurchased ~$337 million in aggregate principal amount across multiple tranches of Diamondback’s Senior Notes at an average cost of 95.5% of par (~$322 million)
- Board approved a $2.0 billion increase to share repurchase program authorization to $4.0 billion from $2.0 billion previously
Guidance for 22
- Total net production – MBOE/d 374 – 380 (v 369.0 – 376.0 Mboe/d)
- Oil production – MBO/d 220 – 222
- Q3 2022 oil production – MBO/d (total – MBOE/d) (370 – 378)
- Q3 2022 Capital expenditures $470 – $510
Where Diamondback was 12 months ago:
CEO Mr. Stice last year said “As we have stated in the past, an increased return will not hinder our efforts to continue to pay down gross debt, and we have proven that again today with our second dividend increase this year, bringing our year-to-date dividend growth to 20%. Additionally, beginning in 2022, we plan to return 50% of our Free Cash Flow to our stockholders. The form of this additional capital return will be decided by the Board at the appropriate time, but we intend to be flexible based on which opportunities we believe present the best return to our stockholders at that time.”
Number of Wells Drilled – Number of Wells Completed
- Midland Basin 43 – 44
- Delaware Basin 9 – 14
- Williston Basin 0 – 3
- Total 52 – 61
- During the second quarter of 2021, Diamondback drilled 47 gross horizontal wells in the Midland Basin and nine gross horizontal wells in the Delaware Basin.
- The Company turned 47 operated horizontal wells to production in the Midland Basin, 14 operated horizontal wells to production in the Delaware Basin and four operated horizontal wells in the Williston Basin.
- The average lateral length for the wells completed during the second quarter was 11,137 feet.
- Operated completions during the second quarter consisted of 19 Lower Spraberry wells, ten Wolfcamp A wells, nine Middle Spraberry wells, eight Jo Mill wells, six Wolfcamp B wells, five Third Bone Spring wells, two Second Bone Spring wells, two Dean wells, two Bakken wells and two Three Forks wells.
- In the first half of 2021, Diamondback drilled 88 gross horizontal wells in the Midland Basin and 17 gross horizontal wells in the Delaware Basin.
- The Company turned 89 operated horizontal wells to production in the Midland Basin, 39 operated horizontal wells in the Delaware Basin and four operated horizontal wells in the Williston Basin.
- The average lateral length for wells completed during the first six months of 2021 was 10,729 feet, and consisted of 38 Wolfcamp A wells, 29 Lower Spraberry wells, 15 Middle Spraberry wells, 13 Jo Mill wells, 13 Wolfcamp B wells, eight Second Bone Spring wells, eight Third Bone Spring wells, three Dean wells, two Bakken wells, two Three Forks wells and one Barnett well.
Oil and Natural gas prices
- Second quarter 2021 average unhedged realized prices were
- $63.22 per barrel of oil,
- $2.40 per Mcf of natural gas
- Resulting in a total equivalent unhedged price of $45.63 per BOE.
Diamondback’s cash operating costs for the second quarter of 2021 were $9.33 per BOE, including lease operating expenses (“LOE”) of $4.30 per BOE, cash general and administrative (“G&A”) expenses of $0.63 per BOE, production and ad valorem taxes of $2.87 per BOE and gathering and transportation expenses of $1.53 per BOE.
LOE increased quarter over quarter due to the integration of QEP’s Williston Basin assets which carry a higher expense structure than Diamondback’s Permian Basin assets. LOE is expected to decrease when the previously announced sale of the Williston Basin assets closes.
Cash
As of June 30, 2021, Diamondback had $284 million in standalone cash and no borrowings outstanding under its revolving credit facility, with approximately $1.6 billion available for future borrowing under the facility and $1.9 billion of total liquidity.
During the second quarter of 2021, Diamondback spent $330 million on drilling and completion, $10 million on midstream, $14 million on infrastructure and $12 million on non-operated properties, for total cash capital expenditures of $366 million.
During the first half of 2021, Diamondback has spent $603 million on drilling and completions, $17 million on midstream, $22 million on infrastructure and $20 million on non-operated properties, for total cash capital expenditures of $662 million.
Dividend Diamondback announced that the Company’s Board of Directors declared a cash dividend of $0.45 per common share for the second quarter of 2021 payable on August 19, 2021, to stockholders of record at the close of business on August 12, 2021. Future dividends remain subject to review and approval at the discretion of the Company’s Board of Directors.
Viper Energy Update
Viper Energy Partners LP, a subsidiary of Diamondback energy reported second quarter earnings after the market close also. $VNOM reported:
Viper Energy Partners LP
- Total net production – MBOE/d(a) 363 – 370 26.25 – 27.00
- Oil production – MBO/d(a) 219 – 222 15.75 – 16.25
- Q3 2021 oil production – MBO/d (total – MBOE/d)(a) 233 – 239 (388 – 398)
- Q3 2021 Permian Basin oil production – MBO/d (total – MBOE/d) 218 – 222 (363 – 370)
- Third quarter volumes will be reduced proportionally dependent upon final close date of Williston Basin Sale. (b) Includes production taxes of 4.6% for crude oil and 7.5% for natural gas and NGLs and ad valorem taxes. (c) Includes $20 million of spend related to midstream assets currently owned directly by Diamondback.
Source Diamondback Energy
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