Diamondback Energy’s Q3 2025 commentary delivered one of the clearest signals yet about where the Permian is heading—and who is best positioned to win. The company emphasized that the Midland Basin is its core engine, backed by unmatched cost structure, full-zone co-development, record-breaking drilling efficiency, and a deep inventory of high-return locations. While other operators accelerate activity, Diamondback is staying disciplined, prioritizing capital efficiency, returns per section, and long-term value creation across the Permian.
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What Diamondback Said About the Permian & Midland Basin
1. Diamondback’s Position in the Permian
Diamondback made it clear they believe they hold the most coveted asset base in North America and that their execution + cost structure is unmatched.
They repeatedly reinforced:
- They track what every operator is doing in the Permian.
- They believe they have the lowest cost structure and best execution in the basin.
- Their reinvestment rate is only ~36% at mid-$60s oil, which they claim no one else is close to achieving.
They stressed they are not changing activity based on other Permian operators accelerating; they remain disciplined.
2. Midland Basin Focus (Co-Development Model)
🟩 The Entire Development Strategy Is Centered on the Midland Basin
Diamondback emphasized that Midland Basin development quality is the company’s biggest differentiator:
Co-Development of All Zones
- They are now co-developing all zones in the Midland (Spraberry + Wolfcamp stack).
- This is a continuation of their shift in 2019 to full co-development instead of single-bench wells.
Why this matters
- Produces higher total oil per section/DSU
- Minimizes child-well degradation
- Allows more wells per section → lower cost per well
- Drives the “best PV-10 per acre” in the basin
Diamondback said the Endeavor acquisition materially improved their Midland position, adding inventory quality and raising PV-10 per well by ~20%.
3. Permian (Midland vs Delaware)
🟥 Delaware Basin Will NOT Get Attention
They were extremely clear:
“The Delaware is going to get less attention even than this year… most development sits further down the stack.” Diamondback Energy, Inc. (FANG)…
They are essentially pausing incremental Delaware development because:
- Midland offers higher total returns per DSU
- Delaware development is held-by-production
- The priority is capital efficiency, not growth
4. Drilling Performance in the Midland Basin
Ultra-Fast Drilling in the Permian
Diamondback highlighted record-setting drilling performance:
- 10% of wells reached TD in under 5 days this quarter
- Previous quarters: only 1–2 wells <5 days
- Continuous pumping improving frac-cycle efficiency
Long Laterals are Expanding
In the Midland Basin:
- 20%–25% of 2025 wells = 3-mile laterals
- 6% = 17,500’ to 20,000’ laterals
- They see a pathway to stretching laterals further through new DSU designs (U-turn & J-hook concepts)
Diamondback said they are evaluating whether they can convert:
- 10,000’ DSUs → 20,000’ DSUs
“Never doubt us” was the CEO’s response when asked if 50% of wells could eventually be extended laterals.
5. Inventory Quality (Midland Basin Core)
Diamondback stated:
- They have 5,000–5,500 core Midland Basin locations
- They complete ~500 wells/year → ~10–12 years of core inventory
Importantly:
- New zones being added: Upper Spraberry, Wolfcamp D
- Resource expansion zones: Barnett & Woodford
- Results have been strong
- Diamondback suggested Barnett/Woodford may become Tier 1 development zones soon
6. Gas Strategy in the Permian
Diamondback is aggressively shifting gas away from WAHA:
- Today: 70% of gas sold at WAHA
- By end of 2026: 40% WAHA exposure
They are booking capacity on:
- Whistler
- Matterhorn
- Blackcomb
- Eastbound Energy Transfer pipeline
- Potential westbound route tied to power projects
They also signed a supply agreement with a new 1.3 GW power plant in Ward County (Basin Ranch).
This directly ties to the Permian-based power + data center buildout story.
7. Permian Macro View
🟡 “Yellow Light” on Permian Activity
They see:
- Global supply uncertainty
- No demand collapse
- Cautious macro outlook headed into 2026
They will hold Permian oil production flat at 505,000 bbl/d unless macro improves.
They will not add rigs to chase barrels.
8. Maintenance Mode (Permian Development)
To hold ~505–510 kbbl/d oil production:
- Capex required: $875M–$975M per quarter
- Huge DUC backlog gives flexibility
- Well costs trending lower despite steel tariffs
They emphasized they can increase or decrease Permian activity quickly, depending on oil prices.
9. Base Production Optimization (Permian PDP Tail)
Diamondback is investing meaningful capital into:
- Workovers
- Acidization
- Oxidation
- Stimulation
- Downhole chemical treatments
They said these treatments may reduce reinvestment rates by shifting dollars from drilling to PDP optimization—a new high-return lever for the Midland Basin long-term.
🔥 Bottom-Line Summary
Permian Priority: The Midland Basin is everything.
Diamondback:
- Leads the Permian in cost structure, reinvestment rate, and capital efficiency
- Focuses ~all growth CapEx in the Midland
- Continues to add new zones and test deeper horizons
- Is pushing lateral lengths further than ever before
- Has 10–12 years of Tier 1 inventory
- Is pivoting gas away from WAHA into premium markets (power, data centers, new pipes)
Delaware Basin:
- Largely deprioritized
- Held-by-production
- Minimal near-term capital allocation
General Permian Outlook:
- Demand strong
- Supply uncertain
- Discipline continues
- Yellow-light macro, not green
- No aggressive drilling response to competitors’ actions
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