Diamondback Energy addresses Q1 2024 results By Investing.com

Diamondback (NASDAQ:) Vitality, Inc. (NASDAQ: FANG) mentioned its first quarter 2024 outcomes, highlighting methods to mitigate pricing softness and enhance capital effectivity. The corporate’s executives additionally offered updates on synergy seize following a transaction within the Midland Basin and addressed the timing of non-core asset gross sales in mild of market modifications. Throughout the name, forward-looking statements have been made, and non-GAAP measures have been referenced, with reconciliations obtainable within the earnings launch.

Key Takeaways

• Diamondback Vitality is engaged on methods to alleviate the impression of soppy Waha pure fuel pricing.
• The corporate expects a ten% enchancment in capital effectivity per lateral foot as a result of deflationary pressures and operational developments.
• There’s a deal with contributing to the development of extra pipelines to debottleneck Permian fuel.
• 90% of Diamondback’s capital is allotted to the Midland Basin, the place prices are trending in the direction of the decrease half of the $600 to $650 per foot vary.
• The Delaware Basin represents 10% of the corporate’s program, with selective high-quality initiatives deliberate.
• The Endeavor transaction is ready to shut in This autumn 2024, with synergy targets and a capital-efficient plan for 2025 remaining sturdy.
• Asset gross sales thought of non-core are nonetheless deliberate however have been delayed, with an $8 billion money consideration to be decreased by free money circulate till the Endeavor deal closes.

Firm Outlook

• Diamondback Vitality is assured in sustaining sturdy synergy targets and a capital-efficient plan for 2025.
• The corporate is taking a management position in facilitating new pipeline initiatives to assist fuel manufacturing within the Permian Basin.

Bearish Highlights

• The corporate is dealing with challenges with delicate pure fuel pricing within the Waha market.

Bullish Highlights

• Diamondback Vitality sees deflationary pressures as tailwinds for the yr forward.
• Operational efficiencies and longer lateral lengths are driving down prices within the Midland Basin.

Misses

• There have been no particular “misses” talked about within the offered context of the earnings name.

Q&A Highlights

• Discussions on the decision included the timing of Permian fuel debottlenecking and the impression of longer lateral lengths on capital effectivity.
• The corporate mentioned the Delaware Basin’s position of their portfolio and the anticipated closing of the Endeavor transaction.

Diamondback Vitality’s strategy to navigating market challenges and its dedication to enhancing operational efficiencies and capital effectiveness have been central themes within the Q1 2024 earnings name. The corporate stays centered on sustaining a robust place within the Midland Basin, whereas additionally managing its Delaware Basin property selectively. The anticipated closing of the Endeavor transaction and subsequent synergy advantages are key parts of Diamondback’s strategic outlook for 2025.

InvestingPro Insights

Diamondback Vitality, Inc. (NASDAQ: FANG) has been navigating by means of a risky market, with its strategic deal with the Midland Basin and operational efficiencies. Listed here are some vital insights from InvestingPro that may present further context to the corporate’s efficiency and future outlook:

InvestingPro Information:

• The corporate’s market capitalization stands at $34.96 billion, reflecting its important presence within the power sector.

• Diamondback Vitality’s P/E ratio is at present 11.34, suggesting that the inventory could also be moderately valued in relation to its earnings.

• With a dividend yield of 4.25%, the corporate has proven a dedication to returning worth to shareholders, which is bolstered by its 7-year historical past of constant dividend funds.

InvestingPro Suggestions:

• Analysts have a optimistic outlook on Diamondback Vitality, with 12 analysts revising their earnings upwards for the upcoming interval. This might point out a positive view of the corporate’s future profitability.

• The inventory has skilled a big value uptick over the past six months, with a 27.74% whole return, demonstrating sturdy current efficiency that traders could discover encouraging.

For traders searching for a deeper dive into Diamondback Vitality’s financials and future prospects, InvestingPro gives a wealth of further suggestions and insights. Subscribers can entry these helpful sources to make extra knowledgeable funding selections. Use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Professional and Professional+ subscription, and uncover why Diamondback Vitality is an organization to look at within the power sector. With a complete of 13 further InvestingPro Suggestions obtainable, there is a complete evaluation ready for these seeking to discover past the surface-level metrics.

Full transcript – Diamondback Vitality Inc (FANG) Q1 2024:

Operator: Good day, and thanks for standing by. Welcome to the Diamondback Vitality First Quarter 2024 Earnings Convention Name. Presently, all members are in a listen-only mode. After the audio system’ presentation, there might be a question-and-answer session. [Operator Instructions]. Please be suggested that as we speak’s convention is being recorded. I might now like at hand the convention over to Adam Lawlis, VP of Investor Relations. Please go forward.

Adam Lawlis: Thanks, Jules. Good morning, and welcome to Diamondback Vitality’s first quarter 2024 convention name. Throughout our name as we speak, we are going to reference an up to date investor presentation and Letter to Stockholders, which could be discovered on Diamondback’s web site. Representing Diamondback as we speak are Travis Stice, Chairman and CEO; Kaes Van’t Hof, President and CFO; and Danny Wesson, COO. Throughout this convention name, the members could make sure forward-looking statements referring to the corporate’s monetary situation, outcomes of operations, plans, goals, future efficiency and companies. We warning you that precise outcomes may differ materially from these which are indicated in these forward-looking statements as a result of a wide range of components. Data regarding these components could be discovered within the firm’s filings with the SEC. As well as, we are going to make reference to sure non-GAAP measures. The reconciliations with the suitable GAAP measures could be present in our earnings launch issued yesterday afternoon. I will now flip the decision over to Travis Stice.

Travis Stice: Thanks, Adam, and I recognize everybody becoming a member of once more this morning. I hope you proceed to seek out the stockholders letter that we issued final evening an environment friendly technique to talk. We spent a number of time placing that letter collectively, and there is a number of materials in that. So operator, with that as a short introduction, would you please open the road for questions? So with that operator, would you please open the road for questions?

Operator: Thanks. Presently, we are going to conduct a question-and-answer session. [Operator Instructions]. Our first query comes from the road of Neil Mehta of Goldman Sachs. Your line is now open.

Neil Mehta: Sure. Good morning. Travis, Kaes and crew. Lots of great things within the letter. Two fast observe ups. First, simply on pure fuel. You spent a number of time speaking about some steps you have taken to mitigate a number of the softness that we’re seeing in Waha pricing. Are you able to spend extra time on that? And because it pertains to that, how do you consider the timing of debottlenecking Permian fuel?

Travis Stice: Effectively, from a macro perspective, I believe we have been fairly clear that we’ll proceed to wish pipes being constructed about each 12 to 18 months out of the Permian to accommodate the related fuel that goes together with the 6 million barrels a day that we produce out right here. Pure fuel is true now being virtually handled like a waste product and we have this — when Matterhorn comes on this fall, we’ll see a few of that reverse. However Kaes, you need to give them some description of what we’re doing with the remainder of the fuel.

Kaes Van’t Hof: Sure, Neil, long run, we wish to have the ability to contribute to extra pipes. We have achieved that within the final couple of years with commitments on Whistler and Matterhorn. We have relinquished taking chondrites in different areas to decide to different pipes that have been constructed. As Travis mentioned, we simply must do extra. And I believe with our dimension and scale and steadiness sheet, we needs to be taking a management place on these new pipes. We have talked to lots of people which are engaged on them as we speak. And plainly there are initiatives within the works that may assist debottleneck previous the tip of this yr. However as we management or have the power to regulate extra fuel flows on our aspect, as contracts roll off, et cetera, we’ll hold pushing on extra pipes and extra markets out of this basin.

Neil Mehta: Sure. Thanks, each. After which the second is capital effectivity. You talked in regards to the 10% enchancment that you just’re anticipating per lateral foot. So simply speak about what you are seeing in actual time by way of deflation after which additionally what are the subsequent steps by way of driving your price construction decrease as we take into consideration effectivity of fleet?

Travis Stice: Effectively, I believe the deflationary pressures we proceed to see within the Permian are being pushed by the decline within the rig depend and the decline within the completion crew depend. These might be tailwinds for us as we glance by means of the remainder of this yr. But additionally, with out regards to these deflationary impacts, we proceed to push the envelope on our D&C operations the place we’re getting — I believe we averaged virtually 13,000 ft for the quarter this yr. And we proceed to get these wells drilled sooner. After which our completion crews proceed to push the envelope on the variety of lateral ft which are accomplished in a 24-hour interval. So we’re engaged on the numerator and the denominator of capital effectivity and actually like the best way the remainder of the yr units up for us.

Neil Mehta: Okay. Thanks, Travis.

Travis Stice: Thanks, Neil.

Operator: Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Arun Jayaram of JPMorgan Securities LLC. Your line is now open.

Arun Jayaram: Sure. Good morning. Travis, you and the crew had highlighted as much as 550 million of annualized synergy seize within the transaction within the Midland Basin, together with 150-foot decline in D&C and ECOS [ph] within the Midland Basin to that 600 to 650 vary. Possibly a observe as much as Neil’s query, however have been you seeing type of vanguard type of price as we speak within the Midland Basin as you proceed to push these lateral hyperlinks a bit longer?

Kaes Van’t Hof: Arun, it is Kaes. I believe the mix of these longer laterals, 12,000 plus, with some efficiencies on the completion aspect that we most likely weren’t anticipating going into the yr, in addition to some softening on the service aspect, makes us really feel fairly good that we’re within the decrease half of that 600 to 650 a foot within the Midland Basin. As you understand, 90% of our capital is being allotted to that basin. So with these prices trending the suitable path, I believe on a real-time foundation, nearer to 600 a foot, we really feel actually, actually good about our plan this yr in addition to carrying that momentum right into a This autumn shut of the Endeavor deal and into 2025. Very clearly, we laid out some sturdy synergy targets and a really sturdy capital environment friendly 2025 plan, and we nonetheless really feel very, very assured in that plan.

Arun Jayaram: Nice. Kaes, trying on the quarter, you did not actually — what number of exercise by way of tills within the Delaware Basin. Are you able to give us some ideas on the Delaware program? I do know it is 10% of this system, however what are your ideas on the Delaware as we take into consideration transferring into the again half of this yr and into subsequent yr?

Kaes Van’t Hof: Sure, hear, there’s nonetheless a spot for the Delaware program. There’s nonetheless some actually good initiatives arising in Q2. I believe we’ve got a undertaking in that [indiscernible] space, Northern Ridge County that is going to be superb. I believe typically, with massive pad growth, you are going to see pockets of growth within the Delaware reasonably than constant growth as a result of we need to go over there and full a number of wells, a number of pads in a row, and hold that capital effectivity excessive versus the Midland Basin the place three or 4 simul-frac crews are going to be working always.

Arun Jayaram: Nice. Thanks quite a bit.

Kaes Van’t Hof: Thanks, Arun.

Operator: Our subsequent query comes from the road of David Deckelbaum of TD Cowen. Your line is now open.

David Deckelbaum: Good morning, Travis, Kaes and crew. Thanks on your time as we speak.

Travis Stice: You are welcome, David. Good morning.

David Deckelbaum: Possibly, this query is for each of you guys. However contemplating the positioning a bit early with the debt that you just raised earlier this month, now the expectation that the deal will shut on the finish of the yr with Endeavor. You talked about type of the synergy expectations within the final sequence of questions. Are you able to give us an replace on the way you’re excited about that preliminary type of non-core sale asset goal and perhaps a number of the up to date timing round these ideas contemplating the markets modified a bit, particularly across the solid consideration portion?

Kaes Van’t Hof: Sure. I believe what’s modified is simply timing, proper? I believe the initiatives we see as non-core asset gross sales or the asset gross sales to subsidiaries we’ve got, it is nonetheless the identical. Endeavor has a extremely good midstream enterprise that may match properly with our midstream JV. They’ve a major mineral enterprise that I believe goes to be a recreation changer for Viper, if these two companies are mixed. And our technique to execute on these trades has not modified. It is simply been pushed out to the suitable. So, on high of that, there’s an $8 billion money consideration. That continues to be labored down with free money circulate between signal and shut.

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