FANG - Earnings call 2 2023 | Diamondback Energy, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Diamondback Energy Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to the VP of Investor Relations, Adam Lawlis. Please go ahead.

Adam Lawlis

Thank you, Jules, Good morning, and welcome to Diamondback Energy's Second Quarter 2023 Conference Call.

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

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

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

Travis Stice

Good and you, morning, thank Adam.

that, last conjunction in useful. our we've mentioned, find hope to shareholder Adam this to improves our improving our know is with quarter it important you our night, for you of a shareholders tried transparency in we a is have story who release, how directly a the and those believe row also long efficiency, and I second released letter As efficiency but time this. only We us. press increases not it followed

into that, if with move you'll right operator, questions, So let's open the line.

Operator

Neal Truist Securities. of Dingmann Our Instructions] of from question first line [Operator the comes

Neal Dingmann

service impact 'XX the of are you this how is And the ago? about quarter. in the and maybe significantly. environment Travis, it what year, maybe frac speak right heard on you all to and importantly, current cost rate of cost and today Nice a change versus my months question couple of the Could more first a assuming levels? we've remainder the to for rig lot chatter get maybe could

Travis Stice

Permian increase service Basin from rig on with Neal, believe have softening the business our the E&P we we're -- that's continue continues to the will decline. to and we spending, seeing reluctance count, side, a rig to the the declining increasing that discipline look see on across question. friends the When at on in responsive cost side. good service partners our and And a been they space with to you our count always

Now the with part that, only of that's calculus.

The see part, equation on side, the with as view which continue steel, drive in we like about continued other other cost And coming costs we more efficiency. we input down items. of we cement the also talked increased May, to out variable and

definitely to efficiently, quarter-over-quarter. of rely to future, half that And of hard we're we forecast from seen see we also softening more to year. a do continue they which the going the that to do into believe but on things the first to So the many it's costs we've organization continue the in

Neal Dingmann

too it any is next call point? Travis, early to deflation So for this year at

Kaes Van't Hof

it's the think to headed call from the it deflation premature we're I Neal. end of year, where at

back all quarters, where and market, probably like Again, a exit ride bit. $XXXs a in X level, we a low calling the drilling that's little or it complete down we'll and the equipped for costs, a of the for year cratering earth X entered went service for calling we're the and foot up costs I the in of only in $XXXs think to materials into just service Basin rationalization Midland high not low raw a foot. and in for now the we're year the coming lines

pretty XXXX. and of enter kind of $XXXs good for feels rest foot low XXXX can in Basin. per XXXX That the we a in Midland So the like baseline

Neal Dingmann

second my spend. point, And on guys. capital then Great Great. question

little for the color this are midstream, like see around guidance especially it the very, allocated I'm slight I'm wondering, this noticeable slightly. upstream both, in how curious give cost, with very will upturn? and maybe then around CapEx could you just upstream Specifically, benefits that but and from we push on potential maybe But And a this looked midstream? the midstream increased both able you any benefits be slightly to

Travis Stice

start I'll wells wells year with amount drilled XXX. That we're almost upstream. We've Yes. in wells, a QX, in We right? lot the would record imply at a guidance versus drilling drilled a wells quarter. of XX of XXX the

a almost million of X.X X lot million a -- lateral a lateral lot footage in pipe the of So little ground, drilled, feet. over

a few year operations-wise, the the second is which we're in building the pace was quarter it good So a DUCs. and drilling of half why slowing down

does spend have we extra water few if And needs neighbor that and of we DC&E the kind a dispose the that's in will a the most have that needs on to lot then water is Basin capacity, side, capacity. to Midland infrastructure on or part So of it of side. And the midstream have the connect person. main to the that of we dollars bump

opportunities the up unique Martin County last few a that's a of spend. dollars to X came lot and we're barrels, payback, to high throughout and months, X midstream get So or spend in going high-return

Operator

the Our Goldman Neil Mehta of from question line Sachs. of next comes

Neil Mehta

about, consolidator also The you role then in to on basin? the for continue for first update in an asset to you on well sales, question, gone very that a provide landscape the the be And Travis, could just the see program Permian. has is maybe guys? talk Diamondback if And do you M&A a

Travis Stice

say we're currently deals of I The acquired did if more rigs in we continues to that I'll no than running were the take integrated order. they've companies trend. in we that -- the be running earlier those the about you're year, those again now, which issue. seamlessly talking both absolutely been reverse will with

now, certainly acquisitions you occur, quarters. seen on in get just to limited. deals equity as into the it's there There's to last really right rigs few see what on side I are dropping mean what opportunities couple to very increased the As relative out are there, a market. relative that the very, primarily operators Neil, rush focus acquiring And profitability. The we landscape, see was they private we've of

our of value not but noteworthy It's through deal. bigger, every have to shareholder M&A FANG's to too. us in also important win It's a well, to created win As but discipline as important better. role make deals not M&A, has lot been that we

And seen so ourselves basis. always hold half the pretty to we'll that continue to a it's But on accountable the year, that. to back go-forward comment we've parse to of first earlier my go what I'll relative in

Neil Mehta

is just this will And level, help cash the us is it talked the business? And profile capital what about We've years, do think of level of over structure. optimal the sort return company you the the in follow-up how calls but the just optimal calibrate for about capital for leverage too.

Travis Stice

cash countercyclical continues opportunistic of But but of I I having The think obviously capital bit X X around also we of the a around. model be in Diamondback a way. little to is our the do those that oil with Sure. of for less build order ratio repurchases return moves are for that sheet of the on appropriate building size. scale think structure in a kind a than balance share company price, leverage size leverage make and and sense to the inputs

Operator

Our next from JPMorgan. comes line Arun question of from Jayaram the

Arun Jayaram

which decline questions question could was the My XQ my us understand guiding the in versus on you're CapEx pegging if XQ, to I updated new in the you're relate your $XX first sequential drivers in CapEx help is baseline. versus to guide, XQ CapEx. wondering as Both million of an of you lower XQ?

Kaes Van't Hof

lower activity say XQ a and would costs going lower combination of is I Arun. system. versus XQ through the Yes,

few a generally, okay and As a quarter I that certainly months. can you baseline probably a $XXXs kind in $XXX CapEx year. next certainly for a what million looking cash would of okay, say the in know, CapEx rate we're see think is so run a down the run months out of for payer, advance coming XXXX. that's a we like end low low rate feels quarter feels the I

of a that It X, costs well going But is kind targets that from kind the put year, for our in very the achievable, feels of see Basin language low still service $XXXs gave we're the things to our by pencil way year. earlier perspective. where cost be cost August of tend sets Midland and and out. the to foot upcoming shake the per certainly, some end in moving down I on the to so

Arun Jayaram

thunder modeling like CapEx, today, but something the question, on of we XXXX there to but drive second $XXXs. million And case quarter as in Street you're growth. at Great. is here stole the is per digits single I low know sounds my oil in around $XXX it outlook stand your kind low comfortable the now

Kaes Van't Hof

as basin the out, well quality Obviously, kind in and I'd a still plan. Yes, deals. the machine undeveloped to in I have coming execution this the sections We've we of The that up of inventory lot a to, the benefits mineral today. but high the completely that those now highlighting like core very of think interest bring we shake of a years. of as lot couple say units feels things inventory can last in and of seeing of a transactions guide large-scale QEP capital-efficient undeveloped provided we're on of the couple for been that the

Travis Stice

forecast our out Arun, X it we the of quarter by And CapEx sort like. just year lower what investor as looks play half, seeing of all now. of reminder, kind out and laid in for we've a we're a guiding deck, Slide long back been that of as on

Operator

Our next Derrick comes question of Stifel. from of line Whitfield the

Derrick Whitfield

on quarter. a strong Congrats

Travis Stice

Derrick. Thanks,

Derrick Whitfield

XXXX, what rig integrated FireBird a base support activity now Staying level right the would frac that spread fully you've is outlook on perspective? that Lario, XXXX from between and and of

Kaes Van't Hof

highlight feels Yes. of good in think allocation. like I'll not for capital and forward baseline about forever, we done how kind but the plan, a that what XXXX, we've

run -- business be XX would the the efficiently, which us, of value crew profit we're allows the capital is a price, can in the business efficient running we that and over this volumes, a execute also plan, on plan major simul-frac perspective. where model us completes possible plan allows Absent simul-frac completion commodity focused in wells And of crews that CapEx crew new business the cost at simul-frac the their side and to from on lowest to that's and about efficiency plan a X have change a most We year. And X teams right? for plan.

us. of good that for really feels kind XX-ish So a crews baseline and simul-frac X like rigs

Travis Stice

we've laser-like to, to quarters been just add have this allocation an demonstrate I that, focused and of the multiple now that industry profitability profitability. has to hope in is on a that's that model row efficient demonstrating capital able Derrick, to growth been And for volume we output pivoted

August allocation value the maximizes growth for on an our of output as that So allocation entertaining questions capital we're XXXX, be X, here capital will the decisions. volume on as efficient

Derrick Whitfield

on few Page When highlighted wanted as XXXX, as about my I deep relative then over do guys out guys that you like feels years. to to how to productivity, a the how has a of look well And that positive. which XX you And rightly follow-up, on XXXX? Understood. productivity portfolio quite touch the does a you've years? think stability well several you over next bit next have It very project

Kaes Van't Hof

Derrick. Yes,

generally, forward for I feel think, confident in the outlook very we productivity.

I 'XX. very, one going deals timed be if can and now, in guys. think baseline, We've good see flat the a we within made North than productivity position that's levels unique resulting XXXX American ago I and that's for to say that's or X% already steady would X very it's we've that, the to just very co-development shale. in better as years like you X well, the shift been of and feels in -- And

Travis Stice

our being of ability increase our about our our continually in and future indication to about our couldn't as inventory dividend. future in And of I to in like. be look mean deck that's, business on owners dividend. our our increase is the into I I from base reason fact, the confident future, we we're confidence confident that inventory. Slide management of quality the inventory the to in the is me, part what this out Derrick, long-term lay of quality looks continue plan base more the that clearest able XX to the And business to our

think we dividend it initiated in I for our XX% CAGR increases is XXXX. quarterly around since

So I hope that helps.

Operator

Meade Charles next of Johnson Our question the Rice. comes from line of

Charles Meade

to like possibilities. times know, wonder a the is that I couple that's laterals bit which or don't have increased something performance? to you the -- I your rigs have perhaps quicker. about Is year. can something of there? more your that like, drill cycle fleet this if you this driver for increase widespread allowing on every that's that just What's their improved could well whole Travis, rig a gross you few rig down think this a selection Or through is bit I count something the just across that's little something the where get Is letting

Travis Stice

of allocation in competitive with relative that I And phrased thousands reason decided measures. And they do, of again, does are incentivized wish makes not efficiency and items going And one across control it's we make It's that, you to you but technology I gains gains to to individual it's do that. I'm It's Diamondback some peers. much X Charles, monetarily what control cost -- those to but is an our it's become culture not was focus dollar we that decisions, has our capital do look, our in could answer different ways entire that? transferable the specifics rigs that and examples. question that that's or Dan, in competing why efficiencies, upon rig we for which of that's healthy same always let unchanged. want get specific future about part that competition on our than say crews lot, -- more to more remains add But give because have our items. some we Danny have efficiencies. And for among us every important culture X that's the the when we're completion we the these and extreme a those a rigs. and piece fleet, on one it's it this subtle permanent cost

Daniel Wesson

Yes.

on reduced for our think we days sub we've month, down some that operational records to right days improvements wells things results they've couple rig wells X,XXX-foot trending. all-time a ever past and about continues in measuring well trending it a we boils when are measurable can company I've those by I anything seen, metrics this that we that us is the team's what Those for drilled it is the way direction, are certainly output our they fervor unlike percentage. every And measuring one's downward. had year-over-year seen over attack just thing a of in execution And which the execution. And to little to and day-to-day talk with those year-over-year can and they at -- results that drive do remarkable, X were continue TD. but that the of to don't individual the X-day at our laterals of the the lot, in that not are continue

Travis Stice

that. versus several to we but Daniel add just measurement almost completed that measure that physically matter. the of And is one about, was which X present do our trip make. quarterly minutes is, was how you And bit talking X per you pipe just screwing doesn't stunning our that long to us It in they that to every up. bit that several together well. details levels the of just rig But every Charles, that And that's takes quarter. level adds next think ago. do We focuses weeks in it runs organization trips, reviews for teams minutes, that me, XXXx to on for they simply pipe efficiency. almost measurement screw together of it the And over

alluded and morning, to that I Diamondback deliver work just and that And to X X,XXX-foot that call proud employees continue of hear of I'm that this wells those want of into we to. this results days, lot have do listening a them Danny they

Charles Meade

you structure the no view that's guys a could buybacks. saying shareholder. the done. share decision return like you the ask kind to the buybacks, gets that cash good second did to I'd between some me the of prices, it see capital wanted to not But gets in -- lost because -- to the measured it The is those get question. but and this looks gets how I buybacks returns it's trade-off no or sometimes like technically shareholders, to and It what and reminds question, perhaps but

So notes that approach on how look shares? do you versus back buying guys

Travis Stice

we you be quarter, our at we earlier I base a Board increased it as to how discussed dividend. base this talk in about put primary in return we place the not a talked only of level. me dividend. The to is growing but sustainable, shareholder dividend And form that our base And X%. about Let another

covered And look that to believe into base have of you so us, dividend and to that paramount future, a as base dividend importance of barrel we the that will $XX remain down we oil.

just you to confidence give as dividend. I'll So that base some

our cash buybacks where of determined we stock piece shares buybacks, on we a future can equation turned price second repurchase The are to is into future share expectation back. that share and want and based of so flows the measure

the to what cash tell in base repurchases. won't several us. you wants that specific, general purchase price, shares. dividend you quarters, to less. say we're And we've so using, you more sense quarter flow from And tend lower we the price get our last higher But everybody our the because stock of all the The and until is leaned not stock a which can in behind know free fact discretionary the stock the share to the price, repurchase after

of to sense. And we made anything in So calculus, over is makes the flow. that left from distributed I going that dividend cash a Charles, a our variable XX% would then we form owners that free to hope of our be commitment because return

that hope sense. makes So I

Operator

of comes Subhash question Company. Chandra from line next the Our Benchmark from

Subhasish Chandra

the acreage capture, how into other of or gas et going like the you're is that factors forward cetera? maybe perhaps zones function located? of just Or where cuts oil question you first think 'XX? a The Is drilling spatially is

Kaes Van't Hof

it's particularly a the early allocating very where we're oily, capital time. Listen, Midland Northern lot of question. Good Basin to Yes.

to guide kind people I of XX% think oil. XX%, we

I beginning in oil of not good the comes we of slightly a little good company. think overall, for in wells a gas that's next down because we're In few faster couple gas a the cut oil flat stays Basin for be good higher piece. a world growing where that generally, the declines the of XXs, cut as would probably XX% baseline high boosted But But range a Delaware kind and years. fairly a as oil had that much, production than cut. a the the year quarter in gas this

Subhasish Chandra

Right. Terrific. And the follow-up is, on sales. guess, asset I

largely upstream assets purchases. market think $XX they've oil $XXX that to How for flow now the returned bid million asset think now of So the midstream. the do And I is in cash $XXX you statement, million, been there was has back in ask?

if flow from deals the already curious just just overflow that's acquisitions? Just -- quarter a or immaterial on first announced

Kaes Van't Hof

to Yes. take I'll the of involved little up. in We bit on ways. make leasing try purchase a own a we've that as making on those offers side, little our development. been They're doing our non-op don't Generally, we asset as that bit interests pieces of undeveloped X well in BD. teams netting and

been I'd of we've on we divestitures at what we're received sidelines the they're amount XX very we're announced rights Basin those divestiture on noncore some more in compete across what on side, in good some and midstream-type on that's unique a today this the the statement. And offer. capital of deeper there. doing we of acreage, leasing would in divested earnings. outside to We've purchases a be So kind development prices the focused say the side there. acreage like doesn't the non-core good for divestiture of have tied OMOG next years the of of more Midland deem Instead, some divestiture the flow of the work positions, looking cash then our some so

sale non-core We our to asset likely some we'll along assets that increase sense sell, controlling make more process. have didn't certainly just the not be tagging most We target. and

Operator

[Operator of Instructions] Leo comes from next Mariani Our line question the MKM. of ROTH

Leo Mariani

a I here. talk about to production bit want little

versus guidance. beat a So second quarter, the nice very

that think a the you drilled wells guys of quarter. kind of you said record I in number

of in bit drilling last quarter production it down you be little bit of Maybe that turning total record you happening there? some third through down? at production them that terms should Looking a but year? on a line a just think indicate little help What's off in in of of kind this is of holding are until dynamic guide, kind quarter, coming with production us later quarter. Can kind does the basis, wells guys kind

Kaes Van't Hof

side kind Yes, kind the see at about kind drives see we decisions is few Leo. quarter of a was from up little QX. was the a But completions really the profile. back year well the cadence good QX first DUCs as bit drive -- to I year. set flat of perspective. year. QX a very think oil Completion up to the also the were doesn't the The half I of building what half We of a here drilling guidance production for the in company. maybe probably from high next the in of us

I now think of to come down wells QX in we and QX. QX, XX-ish kind XX for completed

smart I and flow capital-efficient the the output we'd shareholders. accelerator of to free the production think, capital. is instead, we're in was XXXX this But or that spending stepping XXXX, on returning and So the of more on generating more cash cash year focused half If second the decisions. be again,

Leo Mariani

capital here. on just then And helpful. That's Okay.

where So be going peak. kind mean, quarter. it of looks to in kind were guys like you I looking of at the the that's second

to So XQ in cost? be related we guess, to I kind down, expecting and that come service XQ. much in of should CapEx is both of How

$XXXs about fewer year the just a to it start by You talked half, from of where more You see $XXXs per start talked the but low the about year. fourth maybe the kind of cost going quarter service second end really in completions at low is foot you benefit?

starting Just little a A that down here get completions, be a XX, benefit XQ? bit. fair of of here of of on kind So should you bit some that XQ? in number in to us are help similar capital think

Kaes Van't Hof

Yes.

call the after materials of kind the pipe, now, cement, some QX, it's -- the now, decreases system, right think coming mainly through side through numbers. diesel. QX I this the into service of through of benefits seeing rolling true the into And the raw we're

in mentioned, cash paying today, June. a we're activity we're we As for CapEx so payer,

So of kind a we down. coming CapEx good outlook is forward that have

think the cost is than to translate in foot of seeing we're all QX, the the that's lower lower ground a the I cost put well in -- at on to average even the per today and wells going end year.

Operator

next Paul the comes Scotiabank. line question of Our Cheng from of

Paul Cheng

Two questions, please.

about of your recovery based is improve they is pressing One going rate or large much EUR improved is customer doing. has are how to the on the work that

-- Just what based I substantially price, are -- and question. the wondering trying that today's into Travis recoverable That's looking you this way? first that to that Or for it that to economic guys mean, the improve pursue you debate, in that? does commodity is -- on technology

yes. is on question -- Second

Kaes Van't Hof

answer one Why first the don't first. we

is and a line I what the oil, looking lot lot produces fence improving a across secrets of are time Diamondback think we spend EURs. technology not spend Permian that at and time really There's the ton competitors company a peers a of Basin. at of We doing. looking in

if is mousetrap, way a there So to a it. we're find to do going better

it is think lower that a advantage I can cost. our we do at

generally, recoveries, technologies. improving pursuing, constantly improving EURs, So improving we're

a our would that, us spend anything a to we're think there. but to that follower working. don't dollars be instead foot be to of expect front on testing looks on You'd going be I fast ton

Paul Cheng

current and the profitable pursue that activities? technology Yes. can I today what the is mean it pricing, based such on on you you see

Kaes Van't Hof

in people it's for multi-zone money possible returning us we it. Basin. really development think some I And we us, that the think is Midland have that there's allocate spending to certainly high-return, And look But projects today. to to the for best want today. capital don't I at

Paul Cheng

Great.

lateral the on is question second The length.

been to lengthen continue successful it. guys You to very have

to think more on for third that meaningful land changes? Based there's than is the there's position portfolio, to close able be unless think average to here? some XX,XXX that in about feet. max, substantially you pretty length do room you I you to going expecting guys are push that higher portfolio far Or we your the quarter, your existing

Kaes Van't Hof

Yes.

I a longer. think we drill certainly decision, some it's where There areas Paul. risk-reward are can

-- that way footer position out generally, XX,XXX two drill rather on today, average. think a we'd rather to I land footer. footers. footers the range I X,XXX the XX,XXX way and right drill XX,XXX acreage today, versus XX,XXX think But our laid one about is We'd I feels think sits but two XX,XXX than our

the drilling drilling can guys doubt a There's because feet, it's an the on at if side. that. no risk/reward think something that's mistake. about I do it happens But So expensive decision bad XX,XXX

So something goes we'd consistently rather when continue XX,XXX a versus in XX-day risking at days XX, feet to well X, X get down wells wrong.

Operator

I to would Stice At this like remarks. time, back now it turn to Travis closing for

Travis Stice

Appreciate in hope I everyone of you questions. day. fantastic this Good set listening morning. a have

any the reach If us you've questions, at just out number to got provided.

Operator

today's you. conference. At Thank this time, -- that today's concludes

You may now disconnect.

Diamondback Energy (FANG) 1 Aug 232023 Q2 Earnings call transcript