Diamondback Energy, Inc. Provides Third Quarter Update
Diamondback Energy (NASDAQ: FANG) reported Q3 2020 average production of 170.0 MBO/d and cash CAPEX of $281 million. The company achieved average realized hedged prices of $38.17 per barrel of oil and $26.22 per BOE. With $2 billion in liquidity and no debt drawn from its revolving credit facility, Diamondback plans to maintain production of 170-175 MBO/d in Q4 2020 while reducing capital expenses by 25%-35% in 2021. The company emphasizes debt repayment over growth amidst an oversupplied market.
- Q3 2020 average production of 170.0 MBO/d, indicating stable output.
- Exited Q3 with $2 billion in liquidity and no debt drawn, signaling strong financial health.
- Reiterated production guidance for Q4 2020 (170-175 MBO/d) and planned lower capital expenditures for 2021.
- Hedged prices remain significantly lower than unhedged at $26.22 vs. $26.75 per BOE.
- The industry remains oversupplied, potentially affecting future growth opportunities.
MIDLAND, Texas, Oct. 13, 2020 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today provided an operational update for the third quarter of 2020.
HIGHLIGHTS
- Q3 2020 average production of 170.0 MBO/d (287.3 MBOE/d)
- Q3 2020 average realized hedged prices of
$38.17 per barrel of oil,$12.09 per barrel of natural gas liquids and$0.95 per Mcf of natural gas, resulting in a total equivalent price of$26.22 per BOE; hedged pricing excludes$5.8 million of realized gains from the early termination of 6.55 MBO/d of Q4 2020 oil hedges - Q3 2020 average unhedged realized prices of
$38.75 per barrel of oil,$12.09 per barrel of natural gas liquids and$1.11 per Mcf of natural gas, resulting in a total equivalent price of$26.75 per BOE - Q3 2020 cash CAPEX of
$281 million . Q3 2020 activity-based CAPEX incurred of approximately$206 million - Exited the third quarter with
$0 drawn on the Company’s revolving credit facility and over$2 billion of liquidity - Drilled 32 gross operated horizontal wells and turned 41 wells to production in the third quarter
- Reiterating Q4 2020 production guidance of 170 – 175 MBO/d (280 – 290 MBOE/d), full year 2020 production guidance of 178 – 182 MBO/d (290 – 305 MBOE/d) and full year 2020 cash CAPEX of
$1.8 -$1.9 billion - Diamondback continues to believe it can maintain Q4 2020 oil production through full year 2021 with a capital budget
25% –35% less than 2020’s capital budget
“After returning curtailed production in a second quarter that included minimal completion activity due to a historic decline in commodity prices, Diamondback returned to work in the third quarter to stem production declines and stabilize our production base. As expected, production bottomed in the third quarter and is set to rise slightly in the fourth quarter to meet our fourth quarter production target of between 170,000 and 175,000 barrels of oil per day. This production level is the proposed baseline for our future activity plans, and we anticipate we can hold this production flat in 2021 while spending
Mr. Stice continued, “While it is important that our industry recovers from this downturn and works to again attract attention and capital from the investment community with well-thought-out long-term investment frameworks, the concept of production growth should not be discussed until commodity prices recover and global inventories return to normalized levels. Our industry, and particularly North American shale producers, must acknowledge two fundamental truths: we have a significant influence on the global oil market, and today that market is oversupplied. As such, if North American producers decide to grow again, even at mid-single-digit rates, we will magnify the issues our industry is fighting today and face repercussions from other global producers. Should the investment community reward companies touting growth, other producers are going to follow suit, and this downturn will carry on longer. To that end, we will consider appropriately growing production again should the global oil market call on growth through a price signal, but that day is not today.”
Mr. Stice continued, “Therefore, Diamondback’s investment framework and capital allocation philosophy at current oil prices remain very simple and have not changed: protect our base dividend, spend maintenance capital to hold oil production flat, and use excess free cash flow to pay down debt, in that order. Our industry has shifted its focus to 2021 breakeven prices. While this is an important metric and Diamondback’s cost structure and asset quality stand out as differential in terms of 2021 breakeven price benchmarking, a breakeven price is just that, and does not mean the industry is generating sufficient returns to attract capital to the sector.”
DERIVATIVES UPDATE
The Company now has an average of 162.2 thousand barrels of oil per day protected in the fourth quarter of 2020, with
As of October 12, 2020, the Company had the following outstanding consolidated derivative contracts, including derivative contracts at Viper. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate pricing and Crude Oil Brent and with natural gas derivative settlements based on the New York Mercantile Exchange Henry Hub pricing. When aggregating multiple contracts, the weighted average contract price is disclosed.
| Crude Oil (Bbls/day, $/Bbl) | |||||||||||||||||||||||
| Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2022 | ||||||||||||||||||
| Swaps - WTI (Cushing) | 11,000 | — | — | — | — | — | |||||||||||||||||
| $ | 43.47 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Swaps - WTI (Magellan East Houston) | 4,000 | 5,000 | 5,000 | 5,000 | 5,000 | — | |||||||||||||||||
| $ | 61.95 | $ | 37.78 | $ | 37.78 | $ | 37.78 | $ | 37.78 | $ | — | ||||||||||||
| Swaps - Crude Brent Oil(1) | 24,200 | 10,000 | 10,000 | 5,000 | 5,000 | — | |||||||||||||||||
| $ | 47.62 | $ | 41.56 | $ | 41.56 | $ | 41.62 | $ | 41.62 | $ | — | ||||||||||||
| Long Puts - WTI (Cushing) | 4,700 | — | — | — | — | — | |||||||||||||||||
| $ | 46.51 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Short Puts - Crude Brent Oil | — | — | — | — | — | 5,000 | |||||||||||||||||
| $ | — | $ | — | $ | — | $ | — | $ | — | $ | 35.00 | ||||||||||||
| Calls - WTI (Cushing)(2) | 8,000 | — | — | — | — | — | |||||||||||||||||
| $ | 45.00 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Costless Collars - WTI (Cushing) | 45,779 | 10,000 | 10,000 | 10,000 | 10,000 | — | |||||||||||||||||
| Long Put Price ($/Bbl) | $ | 35.92 | $ | 30.00 | $ | 30.00 | $ | 30.00 | $ | 30.00 | $ | — | |||||||||||
| Ceiling Price ($/Bbl) | $ | 42.29 | $ | 43.05 | $ | 43.05 | $ | 43.05 | $ | 43.05 | $ | — | |||||||||||
| Costless Collars - WTI (Magellan East Houston) | 4,000 | — | — | — | — | — | |||||||||||||||||
| Long Put Price ($/Bbl) | $ | 39.00 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Ceiling Price ($/Bbl) | $ | 49.00 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Costless Collars - Crude Brent Oil | 64,710 | 70,000 | 70,000 | 60,000 | 60,000 | — | |||||||||||||||||
| Long Put Price ($/Bbl) | $ | 37.59 | $ | 39.09 | $ | 39.09 | $ | 39.43 | $ | 39.43 | $ | — | |||||||||||
| Ceiling Price ($/Bbl) | $ | 45.63 | $ | 48.57 | $ | 48.57 | $ | 48.12 | $ | 48.12 | $ | — | |||||||||||
| Costless Put Spreads - WTI (Magellan East Houston) | 3,800 | — | — | — | — | — | |||||||||||||||||
| Short Put Price ($/Bbl) | $ | 25.00 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Long Put Price ($/Bbl) | $ | 50.00 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Basis Swaps - WTI (Midland) | 45,087 | — | — | — | — | — | |||||||||||||||||
| $ | (1.33 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Basis Swaps - Argus WTL | 8,000 | — | — | — | — | — | |||||||||||||||||
| $ | (1.31 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Roll Swaps - WTI | 120,000 | — | — | — | — | — | |||||||||||||||||
| $ | (1.05 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| (1) | Includes of 5,000 of swaps in the first half of 2021 whereby the counterparty has the right to extend the hedge into the second half of 2021 at an average price of $51/Bbl | |
| (2) | Includes a deferred premium at a weighted-average price of |
| Natural Gas (Mmbtu/day, $/Mmbtu) | |||||||||||||||||||||||
| Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2022 | ||||||||||||||||||
| Natural Gas Swaps - Henry Hub | 60,000 | 190,000 | 190,000 | 190,000 | 190,000 | — | |||||||||||||||||
| $ | 2.48 | $ | 2.62 | $ | 2.62 | $ | 2.62 | $ | 2.62 | $ | — | ||||||||||||
| Natural Gas Swaps - Waha Hub | 90,000 | — | — | — | — | — | |||||||||||||||||
| $ | 1.58 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Natural Gas Basis Swaps - Waha Hub | 145,000 | 230,000 | 230,000 | 230,000 | 230,000 | 100,000 | |||||||||||||||||
| $ | (1.57 | ) | $ | (0.69 | ) | $ | (0.69 | ) | $ | (0.69 | ) | $ | (0.69 | ) | $ | (0.42 | ) | ||||||
| Natural Gas Liquids (Bbls/day, $/Bbl) | |||||||||||||||||||||||
| Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2022 | ||||||||||||||||||
| Natural Gas Liquids Swaps - Mont Belvieu Ethane | 7,000 | — | — | — | — | — | |||||||||||||||||
| $ | 8.43 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Natural Gas Liquids Swaps - Mont Belvieu Propane | 5,000 | — | — | — | — | — | |||||||||||||||||
| $ | 21.76 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
About Diamondback Energy, Inc.
Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than historical facts, that address activities that Diamondback assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, including domestic and global industry conditions, oil and natural gas inventories, cost structure and liquidity position, capital allocation philosophy, future dividends, production, drilling and capital expenditure plans, commodity prices, effects of hedging arrangements and the impact of the ongoing COVID-19 pandemic. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Diamondback. Information concerning these risks and other factors can be found in Diamondback’s filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the Securities and Exchange Commission’s web site at http://www.sec.gov. Diamondback undertakes no obligation to update or revise any forward-looking statement.
Investor Contact:
Adam Lawlis
+1 432.221.7467
alawlis@diamondbackenergy.com
FAQ
What were Diamondback Energy's Q3 2020 production numbers?
What is the cash CAPEX for Diamondback Energy in Q3 2020?
What is Diamondback Energy's production guidance for Q4 2020?
How much liquidity does Diamondback Energy have?
What is the company's capital expenditure plan for 2021?
