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Texas independent oil and natural gas company Diamondback Energy reported better than expected first quarter earnings after the market close Monday. $FANG said it will cut oil production further due to the demand collapse from the Covid-19 lockdown.

Diamondback Drilling

Diamondback operates exclusively in the Permian basin.

Diamondback Energy Inc (NASDAQ): $FANG Reported Earnings after Close Monday

$0.15 (adj) Beat Exp $0.12 EPS AND $425M Missed $586 Billion forecast in revenue 

Earnings

Diamondback Energy (FANG) released second quarter earnings on Monday with Non-GAAP EPS of $0.15 beats by $0.12 the consensus estimate of $0.03 per share. This compares to earnings of $1.70 per share a year ago. These figures are adjusted for non-recurring items. Diamondback said net attributable loss to the company was $2.39 billion, or $15.17 per share, for the second quarter ended June 30, from a profit of $349 million, or $2.11 per share, last year. GAAP EPS of -$15.28 misses by $15.37. Revenue of $425M (-58.4% Y/Y) missed by $161.01M. .

 Viper Energy Update

Viper Energy Partners LP, a subsidiary of Diamondback energy reported second quarter earnings after the market close also. $VNOM reported a a second-quarter loss of $21.8 million, after reporting a profit in the same period a year earlier. On a per-share basis the company said it had a loss of 32 cents. Losses, adjusted for non-recurring costs, were 4 cents per share. The results surpassed Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for a loss of 14 cents per share

Viper Assets

 

Diamondback Energy Inc (NASDAQ): $FANG

Market Reaction - After hours $39.70 −0.31 (-0.77%))

 

Viper Energy Partners LP NASDAQ: VNOM

Market Reaction - After hours $10.45 −0.10 (-0.95%))

Highlights

“Diamondback’s operated rig count declined rapidly in the second quarter of 2020, from 20 rigs on March 31 to six rigs today. In response to historically low commodity prices, we made the decision to complete as few wells as possible in the second quarter, with zero wells turned to production in the month of June. We also curtailed 5% of our oil production during the second quarter.

This curtailed production has been restored and is now receiving significantly higher realized prices than it would have received when the decision was made to curtail.

We have three completion crews working to stem production declines to meet our fourth quarter production target of between 170,000 and 175,000 barrels of oil per day. Diamondback decreased activity levels throughout the second quarter while not spending excessive dollars on early termination fees or other ‘one time’ expenses that are headwinds to cash generation.

Our cash operating costs declined dramatically in the second quarter, and we expect some of this decrease to become permanent,” stated Travis Stice, Chief Executive Officer of Diamondback.

  • Average production of 294,126 Mboe/day , +4.9% Y/Y, compared with 280,365 boepd last year
  • Generated second quarter cash flow from operating activities of $324 million.
  • Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) was $390 million Q2 2020 cash
  • operating costs of $6.44 per BOE; including cash general and administrative ("G&A") expenses of $0.41 per BOE and lease operating expenses ("LOE") of $3.85 per BOE
  • Declared Q2 2020 cash dividend of $0.375 per share payable on August 20, 2020; implies a 3.8% annualized yield based on the July 31, 2020 share closing price of $39.86.
  • Standalone liquidity of $1.9 billion as of June 30, 2020

 

  • Current drilling and completion costs in the Midland Basin are between $450 and $500 per lateral foot, with an estimated additional $80 to $100 of equip costs per lateral foot
  • Current drilling and completion costs in the Delaware Basin are between $650 and $700 per lateral foot, with an estimated additional $100 to $150 of equip costs per lateral foot
  • Completed a four well pad in Spanish Trail in 10.5 days, completing approximately 4,000 lateral feet per day using 25% recycled water versus prior completions at 1,500 to 2,000 lateral feet per day
  • Using new rotary steerable technology, Diamondback set a Permian Basin record for most footage drilled in a 24 hour period with 8,150 lateral feet drilled in 24 hours
  • Reduced flaring as a percentage of net production to 0.3%, down 82% from Q1 2020 and down 84% from 2019

Hedging

Q2 2020 average realized hedged prices of $35.21 per barrel of oil, $7.17 per barrel of natural gas liquids and $0.33 per Mcf of natural gas, resulting in a total equivalent price of $22.95 per BOE.

Diamondback realized total hedging gains of $211 million in the second quarter, including $11 million of realized gains from the early termination of 10.0 MBO/d of Q3 2020 oil hedges

Q2 2020 average unhedged realized prices of $21.99 per barrel of oil, $7.17 per barrel of natural gas liquids and $0.63 per Mcf of natural gas, resulting in a total equivalent price of $15.39 per BOE

Outlook

Lowering LOE and G&A unit guidance by a combined $0.35 per BOE at the midpoint of each guidance range, implying estimate of total cash cost savings of over $38 million for full year 2020

Assuming a continuation of current market conditions, Diamondback plans to operate between five and six operated drilling rigs and between three and four completion crews for the remainder of 2020. Below is Diamondback's guidance for the full year 2020.

Diamondback narrowed its full year 2020 guidance for LOE to between $4.20 to $4.60 per BOE, cash G&A expense to between $0.50 to $0.70 per BOE, gathering and transportation expense to between $1.25 to $1.35 per BOE and interest expense to $1.75 per BOE.

About Diamondback

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 in the Permian Basin in West Texas. Diamondback's activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline formations..

Source Diamondback Energy

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