FANG - Earnings call transcript Q1 2024 | Diamondback Energy, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Diamondback Energy First Quarter 2024 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 Adam Lawlis, VP of Investor Relations. Please go ahead.

Adam Lawlis

Jose. Thanks, welcome First and Call. XXXX Diamondback to morning, Quarter Energy's Conference Good

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

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

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

Travis Stice

I of again in an Adam, the We we there's that night last you, letter continue time this issued of stockholders' way that. lot letter together, everyone to find lot you hope and a spend efficient communicate. to Thank material putting I in that morning. appreciate a and joining

brief with that open operator, for would line questions? the So as introduction, a please you

Operator

first [Operator Mehta Neil Sachs. Instructions] question Goldman Our comes from of the of line

Neil Mehta

the stuff in quick follow-ups. Two good letter. of lot A

First, just on natural gas.

of of gas? taken relates on do lot the time Permian Can You mitigate that, you've as spend pricing. talking seeing of some the think And about it steps that you spent a that? we're the Waha timing you how in debottlenecking of about time some to to softness more

Travis Stice

XX produce clear right this going X of now goes it. Kaes, is think waste associated out that what rest with some gas need in we gas? Well, months a gas the zone and of million we've continue Natural I we've like to that -- of the to out about built been perspective, you we'll to from do every a them Permian the barrels that accommodate But that XX day a to we're fall, give pretty pipes being product, some being along to macro the doing here. workup we're almost description of This see matter want got when just reverse.

Kaes Van't Hof

kind want areas Yes, mean, able Matterhorn. to we on Neil, that We've to be to other of that commitments taking and with term, contribute to couple more to in I long other built. commit the in Whistler will rights this done last pipes pipes. years relinquished We've be were

and do we going markets Travis to leadership that works position think our or we people a roll we're to and gas of on working this the and of and As past keep should will But the help today, more basin. have the with out side, on I in it ability control pipes. sheet, to our flows the off, We've et there said, we pipes are just control this end be projects taking size on contracts of more to as as scale are lot seems on And new that need them talked a more. these balance that pushing year. more cetera, bottleneck

Neil Mehta

efficiency. Yes. the And then is capital second

per You that lateral foot. you're expecting talked about XX% the improvement

of what your time think in driving of the terms So steps about then in just deflation. those what structure lower about talk fleet? are also, of next you're efficiency And as real seeing cost we terms

Travis Stice

those But to completion the continue will look deflationary push to we feet pressures think in we crews of decline to impacts, see this the deflationary the envelope D&C then the count. through we in on our being are the the think also averaged in Those period. us this we almost tailwinds year. rest count continue as I the we're continue feet faster to crew without for the get are for completion rig the operations lateral number regards to driven decline by and continue a year, where be Permian and Well, I push quarter on that completed of envelope -- the we XX,XXX in and these our getting wells drilled the XX-hour

for the way us. So denominator the the the really sets the we're working and and like numerator year rest efficiency of of capital on up

Operator

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

Arun Jayaram

the $XXX And including highlighted transaction Basin, in to up you million the Basin million are you XXX-foot synergy a in any to cost and seeing as longer? in in but follow-up had the you to to you team where lateral bit $XXX see push to the leading-edge million of those links Midland Travis, Midland question, decline. do Neil's continue a capture Midland that kind the $XXX of Basin cost annualized a range? today Maybe

Kaes Van't Hof

this Kaes. Yes, is

we XX,XXX-plus that feel side weren't that going with $XXX to a softening on the of efficiencies some the laterals, service us the as longer as those makes the of side Basin. good $XXX in that combination we're into half the some lower think probably well year foot on pretty expecting in Midland I completion the

that basin. As is know, of allocated XX% our you being capital to

as good real-time a close. we targets and I this costs about some a we into and Very clearly, a plan. So foot, really very, direction, strong trending and very laid feel plan, plan as XXXX in that we capital-efficient with those still feel in XXXX. closer really, strong The QX think into synergy confident deal on out basis, very momentum a Endeavor well that year our carrying $XXX the to right

Arun Jayaram

what's on really on looking the you year I TILs Can we as [ moving half terms in didn't the year? XX% Delaware your how the thoughts program? at about Basin. many of -- ] quarter, us Kaes, Delaware activity next give some you Great. in the the but thoughts and back the it's of on program, know think of into Delaware this into

Kaes Van't Hof

are projects coming good really Yes. Listen, QX. still up program. there's some the in still Delaware a place There for

we I County area, be in East think a have to very that project going Northern Romeo that's good.

in going consistent to high keep X you're development pads wells, over large that capital be see multiple the multiple and with the efficiency all simul-frac Midland generally, are in at go want development than complete of to pockets crews development, row times. where to a or there we because going versus and rather think pad X Delaware Basin I running

Operator

line David comes question of TD next the Cowen. Our of from Deckelbaum

David Deckelbaum

now both end deal But of this will Maybe Endeavor. close debt with expectation that a early is positioning you month, the for with year that guys. considering the this bit you raised the the earlier the of at the question

of noncore last the an questions. of that around changed of a especially the some you asset kind and about maybe the synergy timing you're cash consideration considering those sort talked bit, of portion? the market's update Can how in expectations the about updated target initial sale You on thoughts, thinking series us give around

Kaes Van't Hof

Yes.

to to on be right. think to the X that have They a is fit mineral a I the strategy a if execute It's trades asset we Endeavor I business businesses just with noncore think subsidiaries asset I those have midstream really sales see And not JV. our would the those our right? changer has game is going Viper well to changed just what's pushed still we business sales midstream timing, or is think the out projects that changed. as same. good has combined. for are significant been

on top close. consideration, worked continues be with of flow there's between that $X and that, cash free So an to billion cash down sign

the because close cash have just I pony we means, the a had be at were we potentially were. deal, money today. Unfortunately, the regulatory and raised deal less weeks to to as fund deal to think ago early out has to close been that's in of where up as due but preparing review, ready And the we that we to pushed QX. couple we

actually We're deal of we couple that the the today, was carry at and when have ready minimal it be negative on Fortunately, in to we cash bond use quarters. banks close earning very a pretty the sitting we'll well-timed.

David Deckelbaum

the side. to little more follow just just a Maybe on pipeline up gas bit

some just clarity. Just own for my edification,

have highlighted you with any issues you egress. didn't Just

You be proactive more is that? the capacity firm coming active a quarter. pipelines? role look Is you you more forward, as with future where third to Matterhorn to beyond on get involved have this in there anticipate need a to you Or Do issues? taking online more appearing just in point egress take

Kaes Van't Hof

Yes. mean, it's right, but them egress I issues, really on now, Well, facing side. physical we're the right not side, price the on

versus we the to I aspect pricing them can modules So think on a fixed paying and that pipe. Diamondback That makes Waha fee sense in downstream a strategy further mitigation for risk us just if of is the pricing shareholders. pricing remove

increase. to see gas we the continuing think I So forecast

production gas big If public you and be been all services was XXXX, to what thought do they've in back wrong. third-party going the they look

sooner. always gas it's So been more

balance us, we size and for know those long sign scale, time. to physically that XX-year be can. with need a we so around to our we're And sheet to handle we deals where because going for produce very, And very we and can

Operator

of question RBC line from comes Our Markets. the next of Hanold Scott Capital

Scott Hanold

going do the basis program on me it well Endeavor with maybe shut-ins guys as just you capacity, on that's just at and opine wrong, some just stand-alone with stick least it well if because Permian development feel correct? and broader about general, just you to correct gas get your a out I'm operators constraints gas but could good for confirm and to that? you like, expect being their able I'm team sounds is as gas related other as topical, to also very Diamondback the not foreseeable future see to physical if in on And potential

Kaes Van't Hof

Yes, confident in Scott, our we're XXX% plan.

we visibility. have lot a think of I

and blame we're date. our more to who's shape. good move I not. I'm to going coming be able like to Every going way. be don't moved in focused the the and on in Diamondback, to molecule really more have speculation We space or about is game Permian physical

Scott Hanold

the it's my is buybacks. mid-cycle next Obviously, on about company? Fair value the bit post-merger sounds us stock but what with that? Endeavor, makes on enough. like can And closes you intrinsic you underpin question how give going until to more Okay. then your think be and to And the tempered of a combined little buybacks process deal sense thought it price

Kaes Van't Hof

Yes.

also right? more distribute to don't back cash quarter down the free debt a buybacks, on the faster, on part really returned you're of allows big XX% philosophically, but cash flow, I of if the the the at move to XX% bet single In buyback make make bets to build free of pay time. having flow your think you us bigger to cash, right get quarter, every

the will market. I to that expect upon second little in stay Clearly, buybacks about announcing since so would And same do that. deal. the to we've on allow third this the limited been here a flexibility quarters us and the depending

some If that's we're we see in X-figure, want stock. we want on longer capital on flexibility at return. buybacks But support the to step make we the time, term, bets weakness, to the going the and and XX-figure right

see still we range. kind think of the mid-cycle I $XX $XX in to

for gas. of NAV And closer $XX think XX significant were accretion. have time. of I a we in the at Endeavor, you we We're amount $X inventory and look to and there's what firmly $XX, or with business, a lot probably $X long combined a

combined and -- lower a cost of So capital. probably

So like raise up close. we be we we're we little I but think feel to bit, a buyback cautious probably that until going can

Scott Hanold

Yes.

Just to points. of clarify couple a

capital, do it you of more how a like XX% flat? like of Endeavor intrinsic kind you about of a And Was of were Just before with Or a you when you bit scientific added? you think you feel little accretion when sense can do kind much what speaking, get like value. that? did us cost give broadly thinking all

Kaes Van't Hof

a than been higher little always We've XX%. Yes.

a loop [PV-XX] in we back felt all price very trapped after-tax price, of back to into like buy get shares. like And also feedback a felt don't makes shares buying think I to the a way that at top. mid-cycle conservative the sure positive

return that a an think and keeps good I rate after in good cycle. rate the mid-cycle at XX% tax, spot you return through this business really of in So a price, of is a

Operator

line the Fargo from Roger Our Securities. of Wells next comes Read of question

Roger Read

year alter over on call lower or where you some diesel Endeavor, efficiency are continued do and the what in efficiencies the of you a costs. to some wells maybe doing I'd crew running let's maybe of the of the look methods think on as we post come Yes. terms improvements that, e-fracs of say, X with lowering terms of alter as see underlying there the, the and Obviously, through you you the efficiencies continued of we, mentioned, like was crew cite danger out line at kind of let's of equipment, part if competition, you gains. as service here it, rig, crossing in frac, kind But rig to back a costs. on

Daniel Wesson

question. Yes. Good

business plan We are continuing the of drive our operational to costs through out and execution.

and gains -- wells A side, try fleets lot asymptotic than we in to of form some to going off can the significantly to of that completion of of of on power grid variable of generated kind a the the efficiency the the of the are a we're of We're that's come our of getting drive way source cost recognize point getting On to lower on energy where cost. where significant out continuing execution, a power the we of slope portion larger cost fixed and days cost. are well that the to any

nickels have that we're to to get to cost far we're things not think going much as are wells what the the chunks, doing wells. as those going of consume impact physical and for about as to the as large So a dollars the costs the pennies fixed of point we differently going we're getting part and to plan our anymore variable the and and where to

Travis Stice

the with going a announcement was fluids. we foot really, and other really, almost envelope. $XX today. to with pipe with simply Roger, Endeavor, spending said and keep a side during from together they're the time are drilling acquisition guys unscreen a $XXX that you going to bit announcement together go they they're little the was frac they pipe the the what lateral, foot. and we where $XXX about talked we're screwing than on pushing them but merger some I of quite, what the give actual clear to back just joke And more hours point a doing not that's rotating the certainly And because foot simul if our to

doing we new So simply just doing time. the well. a we're as emphasized stretch. in It's not And spot we're assets. what of comments, set That's at a Dan's big on today on

Roger Read

you. Got

just need up somebody mousetrap functions. we out next the come for that. So step there I better to appreciate with the

Kaes Van't Hof

that. on-site to those the to good second I thick faster drilling side to other half side is mean mean how the versus I are the say, They're Roger, is I to Listen, one and comment the threading drilling "Can screw what guys on now. reduce together variable between the so on on casing I used it that pipe a down do." costs. absolute measuring second

Operator

John Our Raymond next question comes James. from the line of Freeman of

John Freeman

Just But in XX all the of following point on lateral up the line XX,XXX you full efficiency Obviously, obviously, in these still what $XX,XXX that that your Midland right were on original a for problem But these that Is longer you're that the XXX quarter, that guidance the over year should the on we than all around efficiency applicable? laterals. use the seeing was that the full out for average longer all moving wells significantly completed, they guide the year? foot, XX,XXX-foot capital in we year the wells relative should you drivers. that guide? that you of Or drilled feet. consider to probably given length first-class wells, up Basin the were obviously, still

Daniel Wesson

Yes, John.

we wells were of of first function to the longer rest I that expect is the where we laterals were XX,XXX the for the think quarter, in really length lateral completing of just a those see average year. what

John Freeman

out, just the you a sort like do necessarily initial to a closing. efficiencies that topic chain, bit of that able things things get initial are deal in on maybe supply advance I'm sense of gears then And all of like, how those you weren't laid power into Okay. of, the much in little those shifting trying that like I priced pricing even know And Endeavor synergies. to

to of in your entity So service some a in things like of in you I'm with in all providers sort get a sense combined much can buying trying terms of negotiating how all, of sit larger bulk, advance do of advance anticipation of kind stuff? to like until on that kind much just closes in running of or the deal have of kind of how and if that, like you get do can to that, at you wait

Travis Stice

got company, to things and will the certainly come those until can't influence Yes, to of deal operate separate we closes, deals but the benefits John, as companies until outcomes the combined closed. any were

Operator

Our next the line of comes from of Dingmann question Neal Truist Securities.

Neal Dingmann

side. question for my Travis, the marketing just okay, is on you,

from guess size, realized larger but seems with not better what takeaway, sort just I'm I looking efficiency, capital or wondering, only like you are closes, continue You all when it the of now from to a better margin. type of get margins that improve. a on continue Because that the the seeing and been you see of the just marketing all your lot like benefits seems it side noticeable back company? to a you've the will to that on benefits end on continue and

Kaes Van't Hof

don't Yes, -- Neal, think going more we're I see to mean, improvement. much I think I

our I more -- aversion, it's right, risk about go and markets barrels having molecules bigger us, it's different, to downstream. and for think

So oil Coast refineries Houston Gulf Corpus good to and is the going of now We we lot have there. of exported. amount that have to feed oil goes a in a

and as years we've a May X, think very grown I X, marketing. looking for again. terms Permian to make clearly, So ago mistakes company X mistakes we're the of when And those just in got of tight, not kind up

gas scale, with be So pipes, we're going new contributing size to pipes. oil and to our to contributing

investments our on the here commercial midstream but made side, investments on protected and us throughout made money gatherers that in to the side. investment many the We've processors shareholders' years some and X

we continue expect I'd So bigger. that to trend as get

Neal Dingmann

contracts marketing longer-term those then? of more contract to continue you'll saying you're Kaes, That

Kaes Van't Hof

Yes.

has most our to been liquid also in Midland market when not barrels market I the is always selling but bigger the loose, beneficial to the or very where shareholders. gets very, and time it Midland clearly, think within most our very are are our of periods pockets philosophy There to Midland very the there market get is tight.

So the sure protection is marketing barrels the long-term way this see right move to to insurance make our we physical a policy market.

Neal Dingmann

project And size. Okay. just quickly then on

nature, to the continue on call oftentimes you average, going all pads, seem let's not to do flexibility a You larger X, projects. fantastic or the you the don't that projects, majors that you all job to on you'll on on it, that hit forward maintain projects flexibility that and on of things X-well and only larger standard larger the that briefly. those the have have but just that be maybe you could these for where Will continue -- sort

Kaes Van't Hof

I benefit Yes. biggest the on dynamic culture now large go can right? for mean you I ties small at that a about we culture, hours mean, base that's Diamondback is that. with growing larger. a our have asset And company that

are fully So quick, to capital oil a a first make numbers, we at think sure and have to going to big the crews ground a that within these larger keep we year, adaptive I to sometimes million, I'm to $XXX and employee quarter, move keep before that doing base million, a a to and confident upwards long we of asset within maintain $XXX have lot scale. being going as Endeavor you of ability in the And put as projects, that larger hitting that. the but rigs gritty do base. at to both exec team there's have culture fast-moving Diamondback we're

Travis Stice

always stay a an grow And maintain we encourage much that constants. well unreasonable of is keep is way effectively of maintained can going silos. as going real employees a company. we you the organization, this too. of be over, and Neal, that a level no But the years, organization be flat as non-siloed XX we're demonstrating that to level the flat couple our we to -- as part And high keep important to this company over One only Endeavor fact last have an And we've our as evolving a organization built the it's same, trust organization. because the very X those trust. of to we things And come will a culture larger

Neal Dingmann

forward the to assets, new guys. Look

Operator

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

Derrick Whitfield

brand. second that. on of that it? question, FTC Congrats my first on most the With wanted focus how transactions the larger with to another have Art level. solid Is Research received about I request indicates you're that from high at consistent thinking the a

Kaes Van't Hof

Yes, that's consistent.

Derrick Whitfield

ops. All shifting Terrific. right. And then over to

on could to if in added completed Based quarter, Upper the during how likely inventory you year, the results competes get it's So on some and charts to additional from XX? X interval Page wells. Spraberry and you those your speak last to portfolio your

Daniel Wesson

initial X we with North We Upper following with up had QX in think Spraberry completions that And future. perspective, followed that development Martin like -- think this year seeing the we're Yes, in up those that I adding look test. from additional kind probably to competitive. we be costs the with first cost those area of from Derrick. in the I results success at subsequent And pretty And we'll wells. that developments really that a

Kaes Van't Hof

I up think of to the fill this that, top to Derrick.

Upper Spraberry, to Wolfcamp D those start add in good some zones like you Wolfcamp pads. of in same tests we've got some really D, If

and inventory basis If to every terms in year. the those so add cume at a That's that existing of extension see our in corporate you you curves everyone degradation on looks don't start in in with only the Endeavor, into D adding of here And the extends like we and base. combination Wolfcamp the what Basin. us of Upper Midland zones duration in full-scale can asset do Spraberry, development, closely the

Operator

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

Paul Cheng

attention that or be a you pay new much and over division -- Or the that have a you? Are are presentation, too in result elaborate on new you emissions. you income-generating your offset Can small expect bit is a eventually you interesting in business pretty first directly the going invest is question. an to of more that more Scope scale investment? is the that intend little expecting to in to ESG, X statement it how for of become kind big the that that. on to when remaining That's terms Travis, is projects

now going really number productivity. producer, that service is the revenue talking question the E&P it's of to and productivities it's brand to the AI second allow about drive The the going to and AI, about one start much is how of provider, improvement EUR say, they -- well no but their interestingly

that the and guys you tested you that Have always application see just on EUR on going your is been AI to So Diamondback, or be curious change whether a technology. do you well have lot that your productivities. the meaningfully

Travis Stice

the information to Well, first been using on a AI, data has AI degenerative process not quicker. emphasis lot but AI

of And whether we're of I we now really AI using improvements fast This so, to on is look, or be improvements one AUR efficiencies can right industry, hopefully we're But excited yet about the long-term are more in in followers implications incredibly electric it's our frac than or fast. our to think, that translates on. of actually that industry trying arena we're both, determined. that those process. These be accumulating is fleets moving that's information things to

in more and information tech hoping AI use smart storing and help us first that that. Kaes, income-generating fashion. more a that to offset or algorithms this question information the was to of we're usable to process some So real-time

Kaes Van't Hof

we But it's company Ventures, not I'll kind huge of mean snake, call I new subsidiary Yes. business have snake Cottonmouth called today. ventures our a that's it. a

basin will where going that's Verde with Fuels into gas of a of building Clean cubic we're more day I in That day working partnership exciting gas, be the of think is one are XX gas are that our of of a barrels pipelines in a feet phase the the plant participant million tapped the scoping lean convert one in. X,XXX plant, -- on a gasoline we plant to into projects gasoline. we natural

expertise if not of fits and going We're be in but I look for the to value. can FID day little model works, drive I them. contribute we going to to might if that other just would up that, say running build be we're XX capital, our at project that a project, and of it gas. And the of a things, So by molecules and of, of a might end and think, year it. offtake years, this a million more good couple to

Travis Stice

small capital $X to on projects going Paul, at to spend is of percent the pretty to $X a it's and to move noticeable spending $X going income-generating wouldn't basis. I a pro it that billion when a The a we're company that, expect billion that's have year probably on you to and the between between look in will and allocate a program, sense, $X probably level larger an individual billion it that billion impact, year. but forma up

Operator

of comes next the Leo Our question Mariani ROTH of MKM. from line

Leo Mariani

the some quicker XX% year expected that on there completions. a I to kind budget first guys about looks seem like It pretty in in of on of the pace slowdown than year. cadence activity I sort this touch XX Is maybe but wanted you your that's just here full year quarter. base had anticipation some percentage, as like a quarter of the Midland, first goes completions, and all healthy just

Kaes Van't Hof

Yes, couple Leo, a of things.

so I pushed a into of QX, good pretty QX. completions think having the end we year year and we're last into

and quarter towards we're of efficiencies the down because well to over XX relative drill number high as high a by wells. crew XX, QX a little time But the a going little complete reduce of overall that kind the case. completion bit drilling ahead -- about the rigs our of think period I a as plan the there. looks be you base of QX might can think XX in So to little end terms generally summer to timing for a as count frac to that same probably into side XX we're on of X get

setting more the I think, activity, generally, team. we less overall potential the with planning QX capital weekly almost look for And led in this the plan efficiencies well to here up So us close with Endeavor. at efficiency have and

Leo Mariani

color. that's asset No, then sales. over shifting just helpful to And

on. sort when are midstream about into anything assets asset drop-down some You you Endeavor there of is and JV working the Deep a sales, else your obviously the moving Endeavor-related Outside closes, of Blue maybe that sort of little a talked bit guys Viper. of deal some also to

about if to cash here deal handful in are for, raising at the talked until get over from looking cash just the of sales a But the sense interim. You months asset flow next other closes. guys free trying just you

Kaes Van't Hof

we into sold what we've balance to go do of on our $XXX deal be cash We Viper a exactly million the and that we many. of Not Yes. plugged think that certainly back want structured to when sheet. assets, so not I cash and We a to put had piece deal. Endeavor much with done. I'll seller another first ownership the in of And quarter, this the that's

Now the price it's in And flow help the last to I months the of be price think portion sense cash any sale, be cash we've to it's Blue, to for going patient that the of got transaction. think I be the asset or those think And had got I post-close. free the has we're assets boosted here reduced and listen, do right has in hands, couple Deep make value. some Viper right otherwise. whether other but

Leo Mariani

of to tax your then here. kind Okay. helpful. That's just wanted severance ask about And production

quarters, in X% guiding of last to kind below the that You kind come closer give to revenue. X% It's of the of to handful X%. of

of was kind what and the anomalous last forward? was of going to right of in X% there. handful that Maybe wanted kind quarters see the number going Just on

Kaes Van't Hof

We basis been higher number to X% just XX that to work working before but a quarters was on for be be for to has had on is off years. going accruals. It higher that, before Yes. then, us, the annual was longer consultant average. it a us than had we that and no X% year, That told going it's last that consultant of and an couple

Operator

to question-and-answer over hand Travis Stice. the This call like concludes the now I back would session. to

Travis Stice

everyone participating to in today's again you Thank call.

you've the great a information have out to any Thank please contact provided. got and questions, you, us reach If using day.

Operator

for today's conclude program. your Thank you This conference. participation in does the

disconnect. now may You

Diamondback Energy (FANG) 1 May 242024 Q1 Earnings call transcript