In the first half of 2024, Diamondback Energy increased its production guidance and lowered its annual capex due to improved operational efficiencies. The merger with Endeavor Energy Resources is progressing, with expected closure in Q3 or Q4. Q2 highlights include drilling 80 wells, exceeding production guidance with 276.1 MBO/d, and generating $841 million in Adjusted Free Cash Flow. The company declared dividends totaling $2.34 per share and repurchased 19.3 million shares, with a strong focus on cost control and capital discipline.
Drilling Overview
In the second quarter of 2024, Diamondback Energy drilled 80 wells and brought 86 wells online across its positions. In the first half of the year, the company drilled 64% of its total planned lateral feet and brought 60% of the budgeted wells online, spending only 51% of the midpoint of its original capital budget. The company is now modeling one rig to drill at least 26 wells per year, up from the initial estimate of 24 wells, and achieved a new record by drilling over 20,000 feet with a single bit run. Due to these efficiencies, Diamondback reduced drilling activity from 12 rigs to 10 in July.
Completions Overview
In the second quarter of 2024, Diamondback Energy achieved efficiency gains in completions, increasing the per crew annual completion rate to nearly 100 wells, up from the original budget of 80 wells per year. As a result of these improvements, the company reduced its frac fleet count from four simulfrac crews to three in July while simultaneously raising full-year production guidance. These efficiencies allowed the company to complete more wells with fewer resources, contributing to overall cost reductions and enhanced operational performance.
Diamondback Energy, Inc. Stockholder Letter Summary
First Half 2024 Achievements
- Increased Full Year Production Guidance: Based on strong performance in Q1 and Q2, Diamondback has raised its production targets.
- Lowered Capex Guidance: Achieved cost reductions and increased efficiencies, leading to decreased capital expenditure projections.
Endeavor Energy Resources Merger Update
- Stockholder Approval: Received in April 2024, merging to form a leading independent oil company in North America.
- FTC Review: Cooperation with the FTC ongoing; expected closure of the transaction in Q3 or Q4 2024.
Q2 2024 Operational Performance
- Wells Drilled: 80 wells drilled; 86 wells brought online.
- Efficiency Improvements: Increased average drilling speed by 10% and per crew annual completion rate to nearly 100 wells.
- Production: Exceeded guidance with 276.1 MBO/d.
- Cost Reduction: Operating costs at $11.67 per BOE; LOE lowered to $5.88 per BOE.
Financial Performance
- Net Income: $837 million ($4.66 per diluted share); Adjusted Net Income: $813 million ($4.52 per diluted share).
- Cash Flow: Generated $1.5 billion net cash from operations; $841 million Adjusted Free Cash Flow.
- Capital Expenditures: Spent $637 million, reducing future capex guidance to $2.35 – $2.45 billion.
- Debt Management: Completed $5.5 billion Senior Notes offering; total debt at $12.2 billion, net debt at $5.3 billion.
Return of Capital
- Dividends: Declared Q2 base cash dividend of $0.90 per share and variable cash dividend of $1.44 per share.
- Stock Repurchase: Repurchased 19,337,765 shares at an average price of $124.52, with $1.6 billion remaining for buybacks.
Full Year 2024 Guidance
- Production Increase: Raised total and net oil production guidance.
- Capex Reduction: Lowered midpoint of capital expenditures due to cost control and efficiency gains.
- Activity Levels: Increased the number of wells anticipated to be drilled and completed.
Key Metrics for Q2 2024
- Average Production: 276.1 MBO/d (474.7 MBOE/d).
- Operating Cash Flow: $1.5 billion.
- Free Cash Flow: $816 million.
- Capital Expenditures: $637 million.
- Dividends: Total of $2.34 per share (base + variable).
- Debt: Total debt $12.2 billion; net debt $5.3 billion.
Diamondback Energy’s efforts in operational efficiency, strategic mergers, and financial discipline have positioned the company for continued success and shareholder value creation in 2024.
In conclusion, Diamondback Energy’s strong operational performance and strategic initiatives have set a robust foundation for sustained growth and shareholder value creation in 2024. The company’s ability to increase production guidance while lowering capital expenditures underscores its commitment to operational excellence and financial discipline. The pending merger with Endeavor Energy Resources is poised to create a leading independent oil company with significant long-term free cash flow potential. As Diamondback continues to execute on its strategic goals, it remains well-positioned to deliver consistent returns and maintain its competitive edge in the industry.
