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Texas independent oil and natural gas company Diamondback Energy reported better than expected second quarter earnings after the market close Monday. $FANG raised 12.5% dividend of 45 cents per share.

Diamondback Drilling

Diamondback operates exclusively in the Permian basin.

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

$2.40 Beat Exp $2.25 EPS AND $1.68B Beat $1.36 Billion forecast in revenue

Earnings

Diamondback Energy (FANG) released adjusted second quarter earnings 2021 on Monday earnings of $2.40 per share, which surpassed consensus estimate of $2.25 and also the year-ago quarter’s earnings of 15 cents. FANG’s quarterly revenues of $1.68 billion outperformed the Zacks Consensus Estimate of $1.36 billion and also increased from the year-earlier $425 million. Diamondback's second quarter 2021 net income was $311 million, or $1.71 per diluted share. Adjusted net income (a non-GAAP financial measure as defined and reconciled below) was $437 million, or $2.40 per diluted share

The company’s bottom line was aided by better-than-expected production. Overall volumes were 401.5 thousand barrels of oil equivalent per day (MBOE/d), beating consensus estimate of 389.8 MBOE/d.

Highlands

  • Generated Q2 2021 cash flow from operating activities of $954 million;
  • Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $944 million, or $5.19 per diluted share
  • Q2 2021 cash capital expenditures of $366 million;
  • Q2 2021 activity-based capital expenditures incurred of approximately $418 million
  • Generated Q2 2021 Free Cash Flow (as defined and reconciled below) of $578 million, or $3.18 per diluted share
  • Increasing annual dividend by 12.5% to $1.80 per share; declared Q2 2021 cash dividend of $0.45 per share payable on August 19, 2021; implies a 2.3% annualized yield based on the July 30, 2021 share closing price of $77.13
  • Closed previously announced divestitures of non-core Permian assets for net proceeds of $82 million
  • Previously announced divestiture of Williston Basin assets expected to close in late Q3 2021
  • As previously announced, Diamondback fully redeemed the $191 million aggregate principal amount of remaining 4.625% 2021 Energen bonds in June
  • Announced full redemption of $432 million remaining aggregate principal amount of 5.375% bonds due 2025
  • Flared 1.0% (2.0% including QEP) of gross natural gas production in the second quarter of 2021; 0.9% (1.7% including QEP) in the first half of 2021 2021

Guidance Update

  • Increasing full year 2021 oil production guidance to 219 - 222 MBO/d (363 - 370 MBOE/d), up from 212 - 216 MBO/d (350 - 360 MBOE/d) previously
  • Lowering full year 2021 cash CAPEX guidance to $1.525 - $1.625 billion, down 6% at the midpoint from $1.60 - $1.75 billion previously Initiating Q3 2021 oil production guidance of 233 - 239 MBO/d (388 - 398 MBOE/d);
  • includes 15 - 17 MBO/d (25 - 29 MBOE/d) attributable to a full quarter of estimated net Q3 2021 Williston Basin production Initiating Q3 2021
  • Permian Basin oil production guidance of 218 - 222 MBO/d (363 - 370 MBOE/d) Q3 2021 cash
  • CAPEX guidance of $430 - $480 million
  • Diamondback believes it can maintain Q4 2021 Permian Basin oil production through full year 2022 with 10% - 15% more capital than the midpoint of its revised 2021 capital budget

“Diamondback built on its track record of execution in the second quarter, generating $578 million of Free Cash Flow. Operationally, capital efficiency continues to improve. As a result, we are cutting our 2021 capital budget by $100 million due to cost control and volume outperformance. Put simply, we are doing more with less: producing more barrels with less capital, fewer completed wells and fewer drilling rigs,” stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, “From a macro perspective, the world oil market is still artificially undersupplied and there is not a call on shale production growth today. Therefore, Diamondback will maintain capital discipline by holding oil production flat for the foreseeable future. If this maintenance plan continues into 2022, we expect to be able to hold fourth quarter 2021 Permian oil production flat with 10 - 15% more capital than our current 2021 plan, demonstrating our improved capital efficiency that incorporates a full year of spend on the assets we acquired in the first quarter. We still believe the best path to long term value creation for stockholders today is achieved through flat oil production, lower costs and return of Free Cash Flow.”

Mr. Stice continued, “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.”

Operations Updated:

The tables below provide a summary of operating activity for the second quarter of 2021.

Total Activity (Gross Operated):

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.

 

Viper Assets

 

 

Source Diamondback Energy

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