FANG - Earnings call transcript Q4 2021 | Diamondback Energy, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Diamondback Energy Fourth Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. now today, hand of Adam would to conference Investor I speaker your Lawlis, Instructions] like the to over Relations. [Operator Vice President

Adam Lawlis

Energy’s call. Earlis. quarter you, Good and to Thank morning XXXX Diamondback conference welcome fourth

presentation, During our will Stice, Diamondback be Danny we and call Chairman Representing COO. and on website. are Van’t Wesson, which Hof, CFO; updated Diamondback’s President reference found today can an today, investor Travis CEO; Kaes and

the could with company’s During a indicated businesses. variety are SEC. forward-looking to the differ in this actual factors conference statements in to Information factors. plans, statements operations, found may concerning the these due We that and those conditions, certain make materially of from financial objectives, can call, filings participants you these results performance company’s of that be results relating future forward-looking the caution

reference I’ll make appropriate our non-GAAP will afternoon. yesterday GAAP we the Travis can Stice. The the earnings be measures addition, to found in call over now reconciliation issued with to certain In turn release measures.

Travis Stice

strength, an buoyed of environmental price $X.X on by we alone, license return our our and commitment flow Adam, This quickly; shareholders generated and our this framework our fourth In accelerate prices XXXX XX% year Diamondback to exceeding return increased billion, which million the by returns return made quarter us great shareholders; a our up dividend We of earnings of Diamondback our flow cash ambitious expectations. of both to at quarterly. three, you, majority returned cash positively environmental earn allocated base as which and to repair sheets free was significant XX% and Diamondback’s Diamondback, and fourth now a was vast of free flow with $XXX quarter, shares under yield growing of the of environmental debt make one for on higher and above nearly current we cash welcome to annualized stockholders, to basis, base least with help price our per purchases a allowing share At a production to in capital improve capital average $XXX free and objectives. X% industry product was balance call. share. Thank $XXX back industry absolute an bought million dividend, to goals million commodity announced to every represents initiated reduced X.X share two, approximately quarter our at to operate. just progress $XXX million at $X.XX designed of

levels. as our reopening the to by a equity which our period I’m for at value Two and of cements We are this beginning putting above shift incredible returns model. capital rapidly of capital We the demand, creation capital an of us are discipline if a months be itself the pre-pandemic to near-term best the is And as we that not consumer path shareholders XXXX long-term in demonstrated to will believe continue XXXX, peers economies to creation the and from into therefore our stoking close value first. confident of believe net world around distributor business industry.

global spare to those XXXX to subsided levels. OPEC+ we OPEC any around capacity side, to this spare cited XXXX oil issues U.S. have company global as growth, from demand, supply appear and public witnessing and approaching some capacity now to into calling underperformance inventories now. impediments numbers meet are oil increasing the inventory for question We On both discussion with

therefore and Iranian barrels oil, U.S. and sometime before supply factors or put have and companies these by higher board to importantly returns. potentially that recently balance to barrels believe led global measures. more growth this private signals the continuing of remains tenuous be for Both best expectations million online team with year at of day Diamondback’s growth per no climb up more However, to a bearish we coming could additional reason

Our a year. will we shareholders, keeping to production our disciplined, oil flat be this agreed. the result, our company continue And of as owners

such our simple. base to the our nearly permanent again our billion by back XXX,XXX to for XX% flow, returns reduction to As are equates minimum continue which capital same is it current between day plan billion Maintain $X we this increasing by $X.X our why spending into oil of this production this per a billion. framework At and returns time, billion committed we to lean gives of At cash investors, free our of barrels spend to year $X dividend, approximately cash of investors. is $X.XX which pricing, quarter. and to strip

base market year, Today, conditions this a is be and since end share of XX% our capital the growing primary our a would has predictable of volatile Our quarterly $X macro always the that return. distributable by environment means of dividend and was through constant XX%, free shareholder flow this have would in we’ve of cash taught remain which XXXX. XXXX form History that us we returning commodity favorable, if favorable. it will by over initiated this our CAGR is mean not be allocated oil sight to increased dividend get to of it of line

in to on are the environment. and extreme any our focus By book, to be of dividend $XX our to sheet to this in strategic to have dividend to on to that down fortress protected our layering a if just capital balance budget really and WTI maintenance our So continuing debt perform our we we positions is plus hedge view ability a with work derivative continue base downside. towards confident protecting our form

we variable distributed at on also base While a tool returning quarterly free share and will of primary flow reach the dividend basis. is of capital, cash the to potentially least XX% utilize repurchases dividends

beyond not our quarter, cash does we least at free hold via flow a by distributing particular at the dividend. flow mid-cycle shares investors free make XX% cash assumed around will these our through of of rest commodity then that spent or that capital authorized cash repurchase of we’ve equal to repurchases prices, the This for volatility base program is million of the be variable XX% while Board us dividend quarter, $XX well $XXX the returns which of of be least Through our and $X continue advantage and strategy allows and of returned. be free base when opportunistic returned today generating XX% dividend excess taking end cash If cost We importantly distributing fourth flow above the program in gives repurchase opportunistically, flow billion at to ability WTI. flexible and the our September. last of to on capital free most our to

cash However, generated. discretion it XX% to do on the with Board is that important other the also free the of retains flow what

cash the to balance comfortable have was ability associated quarter, return sheet fourth have and we shareholders. cash, with case and a and for beyond As will if do the distribute to the threshold not our we that use our cash feel in aggressively balance above XX% we excess

the Some of return free flow, will but quarters, distribute in more, to have we we in cash did XX% will like quarter. others the just fourth we ability

fluid XX%. lowered framework an That’s in drilling ourselves for we forward, but to fully achievement clear consistent design the average differentiate the Midland astounding our not our year, days Going execution our importantly drilling more department. our our returns by by only approximately in Last through field. expect Basin

time simul-frac reduce continue now our On X,XXX day the four-well with as we frac operations side, pad to simul-frac our feet averaging are per on our design.

related will As completion deck, seen these substantial noted giving due consumables to gains us out these helped control and cost the our labor permanent, pressures and us times. be to we’ve we’ve in mitigate more as we quarter, our cost than drilling laid industry-leading investor variable have operational efficiencies and peers these last

these this you our with equates year-over-year, baked offset and our about into increases is cost bake to of gain, in additional them which capital when Now XX% guidance. spend efficiency

this offset implementing by best, and to inflation drilling better technology try do new will innovating, doing efficient we what more and wells. We

mentioned, same we offset our contracts dedications year. and we’re innovation. are this increases to maintain capital to through this pieces in faced and type At the and sand year of multiple can structure our cost with pricing fortunate our As best-in-class water majority were we time, cost of last locked structure supply. a have like we efficiency of capital vast we confident And able

continue labor and services, count margin As and be climbs, to the rig in particularly our to the cash products continuing Permian will work control to while other we the consumable structure, components capital cost in leader efficiency. of

expectation practices. which had Finally, close strides goals four a by I’d social our five begin, made short-term management’s the governance To and Unfortunately, of intensity, XX% total and met we gross targets related of to in weighting flaring, environmental we gas year XXXX, not like recycling, in less in meet to our environmental, we’ve detailing did our and liquid specific X% this produced than GHG incidents. produced. recordable spills of compensation included flaring emission water

legacy goal which the was Diamondback which While QEP how missed incorporating we QEP we assets, met acreage, goal this asset October. the acquired was Bakken target divested included our our when in we set, on

performance-based our to also midstream penalties structure to to Permian takeaway partner acquired and the not then on apply flaring. improve companies price-agnostic We and but will in incentives incentivize related environments, our contracts continue acreage only with takeaway

over home to XX% flaring of our the as reducing routine the Midland, positions XX% being respectively, by progress and hold long-term the These environmental and by all XXXX. our All of heart publicly to we Basin. our and hit methane the XX%, us our in recycling well goals intensity unique and in XXXX E&P of of only GHG hit close traded eliminating headquartered goals in of water title by XXXX, Permian

XXXX work our substantially distributed flow shareholders, XX% debt continued reducing industry. load programs incredibly proud to as efforts. largest their enormous the $XXX,XXX of recently feel camps, the million Wheels We public work instructional of we better Meals play. the an responsibility cash projects. As I’m reading free record barrels Arguably park important, Midland’s in and sheet and our a and is of more of company. team’s however, great cleanest we a to on live, year cost-effective absolute balance Midlands host our as generated redesign the produce it program. $X.X public in to complete our to such, and and continue give and for over to time which strengthened social one We employees and for by to committed sponsor well community most

and are consistent execution Looking in operational generate ahead, returns. we peer-leading ability to confident the continued

now operator, the line With these comments open for please complete, questions.

Operator

Instructions] question Arun JPMorgan. from [Operator Jayaram is sir. you, from first Thank Your

Arun Jayaram

get little and bit team. But valuation just but Travis with we variable while some trading to think be if I free how of buybacks, this the powder allocate above have assuming opportunities. you thoughts probably in keep cash the dividends morning, plan, debt, that obviously, your variable broader dry the XXXX, stock to to Good and strip a on a dividends, more to get some your I’m thoughts assuming wanted want A&D deck, to flow for to holds on mid-cycle billion, the pivot wanted year? could you’re $X going I and allocated the stock, Travis,

Travis Stice

penny again. that flow to going the decision, spend our it’s other share we M&A share good we’re return to investment But Listen, like when Arun, tell if comes how visiting Whatever repurchasing, repurchases, hasn’t Sure. in of do to it drill any is free just We activity. we view barrel. we flow so, much shareholders. fall cash you like back generate around what Look, it May, a has has the commitment. you any. that I’ll But on I’ll oil that going which as guarantee to has at when return. our positive if well, cash don’t a then on tell $XX a oil to to what free undervalued. changed, be look averaged with you bought portion And that Arun, going our is the for shares $XX a our that to barrel. oil above, And of price you go XXXX mentioned, a price and of be $XX at And disciplined. me or averaged you since mid-cycle are price, is you we’re us repurchases can

share every any don’t we our dividend to repurchase back other be and going what just to shareholders form our going to it return opportunistic to variable shares of allocation when we’re programs repurchase capital quarter. like in in comes We’re the

Kaes Van’t Hof

Yes.

I of Arun, top certainly want think fortress balance we that, on sheet. a

for when do XXXX open debt XXXX And I for I this some door pay think higher us notes stuff our good. that down to with there’s year, and things returns. are could the think

in as the the cash XX% well think don’t we if that and is key flow back I have to the other XX%, fourth proved to going do back is shareholders. of we coming anything the with free quarter. it’s And

Arun Jayaram

Great. And I Permian had one follow-up in general. on the

estimate scrapes the Bcf be a gas about what current a headwinds future are around Just day thinking will capacity. is industry, growth day. takeaway, about We takeaway of the potential just are Bcf XX for XX there

production occur in early So I XXXX? B think do get Travis, X.X your Diamondback thoughts, this manage to you to how that and could positioned is is wanted late your net XXXX or tightness approaching

Travis Stice

Yes. the it the now Arun, I make think and unlike happens. mean I pipelines to I contribute have past, sure think, scale and size we to

to the certainly that part, generally, balance pipeline, capacity strong is We’re commitment earnings. wish other WTG was the the NGL with less really but takeaway. to basin. doing that which different make just a and pipeline, with committed we sure topic. pipeline of I sheet our announced to -- Whistler growing. our Permian grow trying our people committed not gathering too coming on And But to BANGL And out is the would in this just put that’s gas work this to processing,

see we’ll flaring. aligned out when way last gas we on a announcements to with of new Permian. we prices up, here particularly the of we were to can’t industry And incentivized be week back gas that soon. flows make should the pretty think go comes think to couple some Saw sure is generally but I the all I things it pipes,

be but to it’s tight through continues So XXXX, XXXX. optimistic going on I’m growth if pretty

Arun Jayaram

Okay.

add you one those two are pipes, pipes? of two capacity the So looking on to

Kaes Van’t Hof

we Yes, would.

to rights to to able do have have You taken that. kind be

to our incentivizing the relinquish the contribute kind to putting balance sheet on partners we taking of pressure pipeline our so us contribute And did them midstream so or pipe, on that lot we to rights either can a to putting we’re like themselves. to our work Whistler

and it to that’s work need But a both with G&P’s. I -- would we So put game think our out of to this bit group to be chicken figure as message make little sheet willing we is our a to of a balance happen.

Arun Jayaram

Great lot. a thanks

Kaes Van’t Hof

Arun. you, Thank

Travis Stice

Arun. Thanks,

Operator

Your of next Neil Mehta Goldman Sachs. is question from

Neil Mehta

Good morning, promotions the Diamondback. new team on and congratulations everyone to at over

is sense the thereby and run hedging you Does the layer well lock do open? you hedging curve’s returns? question think, $XX trading it view, the given talked balance more Or strategy. WTI through to The strength the of in a you opportunistically business can that. Travis, first in long-term capital about of obviously make sheet, more

Travis Stice

more business sense. your the though, balance make makes that, the As have But I having comment protect sheet Look, running strengthens, our impossible think to we in said about sure a bit we XXXX. the little open that extreme downside. happened

that’s to think ever to happen don’t insurance we that we again, to provide accordingly. While sure going make want got we’ve

try while well. strategy, that deferred I accomplishing, in on kind sets our as our do preferred price the all upside giving hedging premium us think protection puts of to we shareholders which place for as

Kaes Van’t Hof

still Yes. as much flow worst. above as well the that puts I to upside protected, is for mean the and is doesn’t free for our the blow we buying but out, try for prepare the worst leave hope best at best possible. The for balance sheet And $XX. dividend preparing cash

Neil Mehta

is about think said, the do was I Yes. consolidator. sense. Diamondback value has your follow-up famously thought mid-cycle view Permian? very since logical Do a obviously stock The above of that, And and has market. how on Travis, M&A oil was was equity line a the think you And strengthened. That What’s last view with it August the makes as done especially seller’s you well it environment you your then prices? your in time that

Travis Stice

wish the could all how hard of a gets to And for oil that question. be going good as strategy in whistling $XX value allows it’s at companies Permian, sell a later, future get the said, and barrel couple grave. That in foot to And one on is flows to barrel. out on $XX it’s now consolidation years is and that the on the mentioned, it’s they’re the share what because with in of the the in price it’s needed lot right? is a G&A bid going clearly of a mid-cycle of exists see that our I kind between how that the consolidated. articulate expecting I our buybacks, industry. at and occur, of be activity catalyst Permian. the close to same M&A being the the $XX graveyard that’s ask in to If here oil me hard cash And then excess through to there’s one barrel, Neil, I really a spread occur foot still -- to had that a much-needed has Yes,

value think like Guidon oil Diamondback did we unreasonable It’s frothy and our we’re that these QEP for I’d while the acquisition. to the hard expectations like create with seeing could with price So, today. shareholders, on

Neil Mehta

you, No, that’s clear. very Kaes. Travis, Thank

Kaes Van’t Hof

Thank you.

Travis Stice

Neil. Thanks,

Operator

Neal question Your Dingmann of from is Truist next Securities.

Neal Dingmann

of The have. you’ll you at production. include Kaes, guys, What the think different all think thanks And show question My pay out is capital group you the is, the all possibilities to of that have do a really maybe you for on some your those caught you I’m not Kaes free question see is glad choices cash Good you this -- little to mentioned morning shareholder out I’d getting higher best you is from have there to allocators investors while how time. you, there suggestion say for I’m gotten all be with to angle anything that point of continue investors first, flow. a on one return. got lot of allocation in my

Kaes Van’t Hof

good Neil, question. Yes,

day, time. to going free cash in at controlling kind a But partnership long free lost same going that whether the that with flow for going think to that going generate value lot sight one a F&D the is have more get of that all back you’re expectations metrics to and E&Ps. it. XX% inputs distribute there’s of flow, cash to you partners. can And flow Street more more and XX% cash commitment and return the as we the cash has the other free free those out to to end I matters. if keep shareholders. creation on flow of is of ton think business, if value matter, I flow It’s of PDP not to But cash period us, the more Execution of the cost a partnership. matters, a a just XX% over creating do cash create value, sit matter, of with cash or this we’re cash of of free We going we’re creates shareholders, means unreasonable about of to it’s has quarter something XX% we’ll for another.

is at of coming that commitment back. only the Just is least cash XX%

Neal Dingmann

mean hear. just question, probably color more then to on can you I is, Slides my the Travis, I’m driver cash XX wondering and primary you XX to. that second leading that’s would it little Great for newish what a design maybe the XX-day give point you that driving maybe on margins well that? of primarily drilling talk about sort just margin. costs. of specifically, Or And is and I like

Travis Stice

And lateral we to our data what’s XX,XXX-foot weekly lateral. and meeting, about lateral, But in that which well a I three XX,XXX-foot out getting the as in year for benefit just in for the three-mile we that amazing going seven drilled we’ve TD. impact a a this certainly, a that a effects. and the just we’re drilling spend that’s half us What’s Midland a about made that, which updated outstanding as even been Neal, about -- lateral. the days, Basin year, in drilled we an Basin. XX% mentioned, improvement a in the we to amazing XXXX, we’ve that days -- TD get of drill We points, full area, record side, A to find half don’t just in on got yesterday days. helping most. couple of in the is I and offset nine Delaware and of was and us We that it inflationary occurrence. another drilled It’s Yes, improvements times, is the we’re

used steerable we replicate. Now possible. rotary steerable But sometimes technology what’s a a rotary and that’s harder to is little

emphasize an back. that’s organization that’s at we’ve side. to got the And become this can always of you When it’s I continues table, something good that Neal ground variable taken So, expense side and enough for efficient is what the given that’s on more into and that lean your guys. never

kind is environment. couldn’t there, machine of And machine humming off that -- little really more very, efficiently more and know you hear want and our than it’s is efficiently. but in So, to organization loaded, very right bit important humming locked you are this a a I that’s couldn’t want an -- now inflationary topic we

Neal Dingmann

always hear want those Kaes. No, thanks, Travis, updates. I to Thanks

Travis Stice

Thanks, Neal.

Operator

from Your of Derrick is next Stifel. question Whitfield

Derrick Whitfield

Good and Congrats your on morning quarter all. update.

Kaes Van’t Hof

Derrick. you, Thank

Travis Stice

Derrick. Thanks,

Derrick Whitfield

the experienced With QX. in my I on you first wanted question, to flaring focus

can With to the future on you compensation. with mitigate partners? flaring speak based full understanding you that of your its importance experienced? Could incentive to guys and the your even And steps to what mandate you in the ESG take you higher-than-expected

Travis Stice

Yes.

point you to aside, look expects say XX, Slide management laid of And this something bit but lead good slide. specifically. lead also it And you’ve quite environmental measures, our But me just think Derrick, Board we not with before, an industry I disclosure. a heard the detail. let a just in XX out industry as me the in on pretty If only is to

a job about top if of you business better flaring talks third-party and that If And the on. planned source. maintenance, our by volumes XX% in unplanned with we’ve particularly the our flaring in look unplanned on of take slide, third-party XXXX. side, it just is partners got to maintenance you that’s that something which do right And

penalizes said performance. prepared changed where remarks, incentivizes flaring in we and we’ve both that I contracts actually my Now, can

an asking of calling their that to our we’re concept we’re that’s Slide also XX. we’re across attention So, performance industry help on And to on to this gatherers midstream this that us of effort. as the intentionally part but expand all looking reason gatherers, our to

we set and goal Now, the didn’t assets the we we that I tried acquired statistics much goal out, to miss, it treat on performance. was lay that we but And did. we We it. flaring before worse we But we honor because absorb -- our right cost flaring the than Once We tried QEP it, to to it. the had goal did like our Guidon. just way for annual is to bought us that particular that’s absorb felt adjust set, our it.

Kaes Van’t Hof

thing half is, One Yes. XXX,XXX because million BOEs, barrels barrels of do a add million half to also last trying of of we oil deferred deferred our to year. Derrick. I We we’re mean here, oil a part flaring.

this just of and kind to that issue. upstream midstream We’re together asking industry get both sides, solve

Travis Stice

for opposed operate simply emissions way I environmental And the That’s key stewardship, flaring particularly a on and barrels to philosophy, a operating an basis. that an methane to Derrick. to deferred business that. a just narrative get the over behavior is which as about represents cycle that our historically Derrick, are a full think And there you’re if last our be companies as eliminating for hope you’re believe and eliminating that’s And million pivot that was an it flaring. philosophy for as a more year expense, Diamondback operating industry. avoid substantial and shouldn’t lost, an stewardship half We more important out seeing, a environmental what it that’s or of a volumes. our is And I industry substantial viewing point. seeing makes And follow a hit Think very pivot I suit sense. push to -- around peers

Derrick Whitfield

your And commitment does. clear. it, to quite It it’s

my in XXXX you? growth could a if As concern Permian if by ask ask rates on growth that’s in and in a majors follow-up, and your macro bit the outlined expectations the for share wanted Permian side I for you to the more the in if the dig

Travis Stice

producing I the a that even barrels total supply-demand on I’m the the with into out sense, announced not that growing the they’re global global tenuous. is look, equation. the pointed majors, And Well, that growth sure are from pretty

of So that’s kind a plus.

right about Now, window, know is out look the XXX that to now. right here running my rigs Permian I

I been front us and there, oil strategic to is what away on shape, But charged you’re alliances our going foot, great getting pressures. in We’re is that be to And I about charge of probably talked an which of on on That’s and industry’s a little basis risk. -- issues manage of some inflationary think I your at think our Diamondback by the of is about Permian. in rigs how on of playbook. rigs shareholder by gas pipeline Permian CapEx a it year. take rigs or to takeaway you’re XXX the this majors. create the operated seeing kind inflationary some how from those environment will large but bit go-forward the program way end been We’ve to return put not the that’s the But has have portion XXX growth and already of and total NGLs, think a all

Derrick Whitfield

you great have And a done guys Great. with that. job

again for time. your thanks So

Travis Stice

Derrick. Thank you,

Operator

Your next of of Bank America. question from is Doug Leggate

Doug Leggate

cleanup that just post an if morning inventory it bit the Good Guys, latest grading everybody. your the you. little Thank of gone on disclosure. could wonder I looks you’ve like of guess, deals, a last year, laid through through you high of if you looked I walk lateral It longer inventory to sitting better today. that inventory like. just slightly on what you’re of the define out looks about kind you us us than that a XX-year core

us walk about and it the thinking just way? what that I’m you can process right if So, was, through

Kaes Van’t Hof

operated try extend not laterals, be trades the have lot laterals. we the do of that a post to generally, interest mean, sometimes I or Doug, up, block Yes. inventory, shorter at inventory may expense extend deals to of working lower

on. focused in both we’ve that tackling So piece Delaware and blocking on we’re very gone the that’s the wider a inventory, and Midland Basins. little the And second,

wells. Midland per inventory wells four section towards wells of kind five the the in I being spacing. kind in per eight six six of a Basin numbers think primary seven Delaware versus kind wells reflect our move tightest the updated zones of zone wells to in to into that the versus moving XXX-foot section And

what much much found of wider, unit efficiency. is we think a better EUR not a are from by returns we little and I going ton that but capital sacrificing generating we’re better

couple from I So, of offset a present loss the outweighs locations. the of think value a perspective

Doug Leggate

it the have with this about the ex is I of I obviously, But mean, than we’re little guys know a years just trying So drilling. right growth portfolio think it’s at way of outlook, strategy you your to you to the inventory XX precise. on I’m bit think about maintain longevity better the looking too if today.

Kaes Van’t Hof

and we -- completing decline but as midpoint of XXXX. we that’s we us And in small have little Yes, in at on were fair. the Robertson less of number, base I better to over going Ranch, a helping a capital percentage is coming here than add five look out, the will wells are shallows significant out the a get active efficiency it’s years. that XXXX that minerals sale we where

Doug Leggate

My if that don’t down kind of on to balance you, the of variable you a as chance balance say, to to gone I’m just you follow-up, haven’t then mentioned to in the the the opportunities a you a buyback, by differentiated continuing assume out sheet let’s see it, variable at I prioritizing is has wayside, or giving back get a pay question. cycle, gone commentary, variable. sheet, as fall a you’re that Okay. correction dividend cash from path. top cash out let’s hate dividend you it’s how get intrinsic What really take the been should and but oil paid variable, prices stock the you comments value buy M&A cash has variable back? get do the your curious, When indeed out you setting we that those

Travis Stice

Yes.

So which dividend the shown initiated get that it’s really straightforward, It’s $X conditions quarter we’re we’ve in to every into the a And market don’t we Doug. since base lean change. the pretty dividend, going back if XXXX. up share to

in there’s is investment decision second repurchases. share a an calculus share The But that’s again, for repurchases. involved

remaining, But XX% at can the return So to we repurchases to that’s up flow we’ll good the consume dislocation our free flow price, variable do. of or in XX% the quarter then we share XX% between extent within commodity pivot a the on to a what if at -- see we’ll least a form repurchases, share cash free pay cash dividend. of of out the quickly

last some maintain best to as more. as quarters, like least it did shareholder to just end at be return. this going generate some Doug, we’re the of day, in And XX%. maintain the XX% we flexibility to in we’re quarter, So trying much the be trying But the to or could greatest it’s quarters, at

Doug Leggate

the did apologize. fourth you with in the quarter? XX%? do I What Travis, do XX% other You

Travis Stice

a and down sheet like Well, fortress to now, sheet balance on cash an balance to that right inevitable for having having work on cycle. fortress we’d continue

pay yet, Doug. think on I So, to most of overall from the be That return lot But can mid-decade shareholder we it’s don’t if them. we’re of and the step put something kind our of focused sheet for a also we’re there. on them, up more cash down but then some extend maturities there way the think balance clears I

Doug Leggate

Thanks, Travis.

Travis Stice

Doug. Thanks,

Operator

Deckelbaum David from is Your next with question Cowen.

David Deckelbaum

this morning morning. Thanks Good the guys. time for

Travis Stice

David. Hi,

David Deckelbaum

wanted point the revisit sheet. last on Just to balance that

You the of mid-cycle absolute can debt that mid-decade sort a there in Is if an you remind talked is -- us, you have there $XX you’re target maturities. price? about factoring

Kaes Van’t Hof

Yes. $X Diamondback think $X.X and about at subs. to billion-ish of getting I billion-ish absolute down the at kind

So total. million $X.X

would very importantly, note to because think be average well keeps our be next so. more I getting going now the is for important that extended even mid-cycle and or maturity turn that clears returns protected between But at way when shareholder big due. XXXX you a price more

David Deckelbaum

just And I paying where XX% to inflation were swimming people it we point about quarter were appreciate overall. think XXXX, of like third you The rolled slide looked reference second referencing in stick The to oil was pools. the I then cost my up that. where question.

that since with XX% outlook in, there’s now? do still So can you then. offset time curious relatively you And the into efficiencies? factoring I’m you’re you’re in – is that benign seems inflation do what right line. you are And and contracting XXXX, would XXXX of what your cost services how terms for what room on to you changing think

Travis Stice

time continue I we’re in look and to know continue in because for side. organization And the those And to good it. the lead efficiency these hard wants And but for equation, going the to incentivize on is on not XXXX long been looks your that you, want can’t the consumables to for very forecast term back efficiencies to to have that time the to Contracting going efficiencies. try our typically those the to a lock the the they’re performance always are. the service operator past that to But you on gains. is I tell it’s continue if Well, of I look difficult know what provider doesn’t. of culture those it’s XXXX, we’ll what indication, variable hard type the to like of look side for industry fixed for more the

ends odds of spectrum. always We’re and the at

So to like high to would consumable the do guys in the so. on lock prices. are these right love reluctant service now, all-time side Operators

providers has And with six manage chosen very we’ve the way over we’ve to of meaningful those margin quarterly good most size that. months. and to we’ve have business partners the that to for with service our So understand our a that’s remains had now too. got best-in-class scale we have on five have But the And be And Look, margins their Diamondback them. expand. side. the commitment well, and that business and conversation the every unchanged to years, relationship. highest really our relationship service as or We

so. out we very And But for will straightforward you a it. you. to we’ll the certainly that lay be lean able organization can to tell calculus, do I that I’m that continue XXXX into So it’s can David, I confident for not

Kaes Van’t Hof

exactly frac rates as that the well page we’re fixed David. XX line or the The the half fuel like rig line, like you up, Slide seen comment tells been costs of efficiencies or up, stimulation of risen have those but casing. costs one cement and are And in top saying, gained not rig have means that pieces on are rates the what Slide the XX, right?

David Deckelbaum

out congrats on for and Absolutely, promotions. the all that pointing and thanks Thanks for the answers.

Kaes Van’t Hof

David. Thanks,

Travis Stice

Thanks, David.

Operator

question Jeoffrey Holt. from Tudor Pickering of is Your next Lambujon

Jeoffrey Lambujon

my Good morning taking for thanks question. and

on on already. focused to investing hit about of in yourselves bit projects me be on for you further this what highlighted. just you September flaring make just And at was out progress continue on see set deck it you’re I I report you looking one sustainability then that know interesting would if your with year. lot thinking offsetting of slide a out, you on of what that could progress wondering the that section could made Just sort and you Obviously, emissions. ESG. to about the in talk initiatives hear a

Travis Stice

significantly emissions. gas We’ve don’t clear for batteries so reconfiguring or acquired flaring pretty tank and methane to of mostly that’s Yes. old, our tactically, $XX on the I years a And been that year million committing, overhauling the side eliminate we’re translated and several pneumatics. reduce methane know, next per that to to lot have

slide those halfway been we’ve third on think Yes. focus getting And what changed, gas a got Slides XX. is there I that batteries to through? we’re But is that that in through probably the out. halfway see pneumatics. the and pneumatics, points you Gas can XX actually area first that’s Danny,

Danny Wesson

the ago. out three four framework years, laid to them years of in kind We all get a through couple to of Yes.

methane detection battery the and with main working and and of flaring our repair emissions. still leak on through halfway about drivers is then initiatives, upgrades we’re So

Travis Stice

winner, got to haven’t And probably coming don’t emissions, sensors winner in there’s a service leading test been an that the emissions six monitor edge of yet. innovative And methane order in technology field five on has then them. methane but all know approach clear Jeff, of that’s or been from not to there’s I amazing technology field a time. methane monitor the out We’ve we’re side. amount these picked things, just – real in our we

as we can’t emissions. to hard get we’re eliminating reducing G&P And is on we defined side, very flaring alongside flaring can on that if industry mentioned, our emphasize can going goal but to enough these investing or World be to the side we’re So Bank. as everything our don’t our something midstream and I it’s partners do difficult into technology leaning Danny really meet then of our participate the companies by for methane on routine we

work collaboratively today So a presentation we’re to our reason flaring G&P the there asking about pointed partners with is in on being our side.

Jeoffrey Lambujon

Great. you. Thank

Danny Wesson

Thanks, Jeoff.

Operator

Kumar from Fargo. Nitin next Your of Wells question is

Nitin Kumar

Hi, has I for good cash morning the covered check return the want A taking dividend. my lot side. on guys. of base on been Thanks to ground But questions.

what you the of limit? good that a cash in it increases earlier about beyond drive could free cash that? mentioned could the about thinking would per of be that return You share. Is free it see flow portion are we in XX% How $X flow of Or more XXXX.

Travis Stice

it. market financial point. forever, XX% over to at $XXX continue I conditions look I is that right? it per that’s the at $X Well, what on really year depends like how a look grow quarter At can’t we mean million debt share, at of a

a So I’m a is get but that, I’m $X that’s saying certainly not near-term focus to saying that that’s limit, share. what our to

Nitin Kumar

how I is price? cash what flow a with there do at percentage level? like of you’re guess targeting a mid-cycle or was was I that Like And that that something you asking come up

Kaes Van’t Hof

the more it on at look breakeven side. We Yes.

right breakeven $XX pre-dividend barrel. now, So a

less over want they efficiency fairly said above our number base that, now, was That are stays strong, reduced. oil. coming Right a below that’s debt. $XX. shareholders And $XX universally consistent declines over go the large dividend base time, over I that years up capital will protected here protected base have stays at time, you the shares less think but as have also then dividend might

making that’s up Travis So only long-owned But universally support, large to have from heard some returns with that year-end thing should frees widely is base get to a why we have to cash by go to sooner. more the last quarters. been overall, the over leases cash of couple dividend more three conditions the dividend. Board remain. commitment And discussed And

Nitin Kumar

or XXX talked that challenges NGL we what of other you year I takeaway basin a mentioned growth? Got you rigs We’ve and Permian it. here, in kind be you And think Travis, do if positioned question in to side. Permian on so. face the gas about but a very the are bit – ahead the that here that? quick little But could of see are And how the

Travis Stice

boots again, again, of going those XXXX, we going earlier, that going anything going have and And our back be service And in part we’ll with tight. the increases a us the means tires in focus And But you some translate that But what attract you’re are the the the constraints we’ll brush. prepare cost we’re get asking much Well, all on into what workers costs. going going relationship did if side, like that’s to an to for to Danny, see to are Permian to to industry, can what goes to in that? out we here going Basin XXX or requires tried increase – we’re we about. highlight – XXX, XXXX. things to Basin pretty paint those to if doing is that to to as you’re Permian to focus, more Permian. to long-standing have do in same with variable But do is partners. I it I like an to peak of to attract continue Diamondback Well, have secondarily, think be of something the we actually at labor

Danny Wesson

around pre-pandemic rigs. XXX XXX, and like Particularly we exited

Travis Stice

the those are a at approaching end little today even will think then, by bit where the of we’re – I efficient of than they though end approach or more year were we’re of this were rigs So we XXXX. sort

Nitin Kumar

for Thanks guys. answers the Okay.

Travis Stice

Nitin. Thanks,

Danny Wesson

Thanks, Nitin.

Operator

of [Operator is KeyBanc. Mariani next Leo from question Instructions] Your

Leo Mariani

of ask guys. for potential point. growth the to a bit to production a little just return I FANG some Hi question wanted on to at

mentioned looming clearly very from based but maybe comments, issues with of it pre-pandemic of demand You quite on not Iranian was back guys in we’re we’re the close. away XXXX key to that your And you the was that keeping also, one growing. threat barrels here certainly

and one see growth way you And from eventually? we Iranian if next right we time or level the we where as has the that levels maybe FANG? be some the above look modest is about year, how So growth resolved itself situation demand what could other, think are pre-pandemic into do the of

Travis Stice

is at being going one Yes. a the volume occur. or right growth, program not with industry shareholder when to now, for total. to wants definitively growth return shareholder our tell be I see of will risk you for level our in can investors no what’s that I Diamondback what it’s valued specifically don’t by right put And return know program.

have the calling capital been for not and to respond spent of We’ve for have industry now that little to point waiting look, future. can bit we’ve us investors figure this our growth at got decade shareholder some while consuming that putting be our And capital the to going is in to right return will oil world the the last out return. in sometimes So the a way risk. at return where we patiently impatiently sunshine and program

Leo, question it’s it’s to we shareholders. for conjunction good you, which Diamondback can’t our be the creating – to to can unreasonable I’ll but ask, in you a value So give I time tell do, industry with or I going But at when growth. going respond the is to

Kaes Van’t Hof

If do. we

Travis Stice

do. we If

Leo Mariani

here. Okay. some billion wanted It’s Understood. And here. to Maybe locked just fairly $X.XX CapEx. on having describe you in range, billion services of the guidance the a for did with I $X.X year XXXX the percentage ask starting of good the quickly just a to

won’t it of math Because every on oil growth. thoughts sounds my here you So looks actually very end variability $XXX If side in at of the then XXXX? just guidance. just in of the change million quarter XXXX the production going the to additionally, of and looking or the your kind kind is like high really beat it. definitely were not what either guys right, there be get production could the to wanted be it you’re program like And

kind guide be that conservatism go you have always bit XXXX, So that for should things thinking you’re of that the to as we allow at in in of wrong could a field. looking slight

CapEx on guide to color more little wanted a and Just get bit the production XXXX. in

Kaes Van’t Hof

Drilling plan. conservatism I field look might actually easy an the number doing completing always think wells the AFE at impressive. Excel but XXX the me my a a is not It darn take – is your in little our easy at guys good model pretty task. we for for in for year and into it

room pressure guys very there’s on service fixed also I for cost So in number do If count want to give we number they going but Travis field, going this the some mentioned costs in are what the high do to in rig that be a costs all the comes up. fruition, variable and to Permian. mean, certainly to basin. the

rigs we So need. we have fortunately, the XX

– us, might little eight back of We rigs have to high keep have the in crews go not simul-frac three to them half year or but the crews. end pay risk to eight a the more and the for a the we for This crews We that’s need three year. working need. is where find we

Leo Mariani

it’s Okay, Thanks guys. definitely helpful.

Kaes Van’t Hof

Leo. Thanks,

Operator

question next Meade Johnson Rice. of Charles from Your is

Charles Meade

and Kaes rest and of team morning, the there. Good Travis the

Travis Stice

Charles. morning, Good

Charles Meade

earlier comments price? Travis, right linchpin like mid-cycle – this for about price, a what goes of the oil strategy, seems your really idea this your the back to some of why is a $XX

Travis Stice

know that our that hasn’t may And continuing And of ask Yes. asked got But it. We be there’s I about in month And you that’s when $XX right for industry fact, to resolved but zero there’s to the easy end not price the think but performed I Iranian $XX-plus are in year, in oil. seen for that geopolitically, We are barrels this that up production But think you I’m that’s their dollars getting I to is, what know average price increases, it’s day. per their Basin in every question, closer OPEC oil they’re And one don’t barrels but Permian production yet. to I of of day per God you and – XXX,XXX while conflict. last probably at surplus think got it by commentary willing I arms seeing the in forecast. U.S. today’s we lift the responses question that further said, on, I’ve without that we’ve what certainly there. one month. the the fork that’s will the coming be end some know of was It’s that really now, get was, out things the – barrel. of years, a the that’s seven I do this

is together you of those all our them and generate actually and we’ve higher, a to of get other decisions. that free And optimistic. bit made crude to protected more investors a we’ve to things, of the me, And flow, bearish seem be we’re thing price is wrong we’re going add to then oil little So be to if does it I’m our lot for and the if to right, are a return right lot going than cash investments, them.

at but I which we So that of it’s or hard on start it’s $XX, whether don’t know M&A the investments, wells drilling fast buybacks. our or share all and it’s of decisions a number, aperture kind

Charles Meade

kind you That’s Quick said I any more as your of any me. helpful, of that guys change think the rate or there drilled was just drilled as good on guessing seems I to that and hear that completed we’ve acreage. a wanted of It number other the – I Barnett was Was you that there the Limelight well thinking. worth in quarter. – Travis. I’m is follow-up. to And on noticed highlighting?

Danny Wesson

Yes. We there. wells drilled a couple of

Midland $XX but our it position. we does It’s at think basis, certainly Basin oil, still phase, I but not Delaware full competes have in including cycle at of entry it this core couple even the the $XX and oil, year. it planned testing cost, a on early competes low with compete yet a

Travis Stice

and with of in that drilling drill four And actually cycle makes raises operations, start simul-frac play. a play compete which drilling Once move the and on can development there’s that a is think for wells items you a other inefficiency combine you like Limelight now, of to single out we’re huge drive cost the wells, the trying to one our you’re economics least that a to right our and add wells. can I is lot single portfolio. cost And when efficient drilling delineate you into full with the us equation, operations, capital at

Charles Meade

the Thanks detail for it. guys. Got

Travis Stice

Charles. you, Thank

Operator

over will for to now turn CEO, it closing Stice, Travis back remarks. I

Travis Stice

today. to Thank everyone listening you again

just questions, the any got provided. reach to using contact us you’ve information out If

Operator

in Thank today’s time, you disconnect. all this you may teleconference. At participating for

Diamondback Energy (FANG) 23 Feb 222021 Q4 Earnings call transcript