Diamondback raises production guidance citing efficiency gains

Diamondback Energy Inc., Midland, Tex., has increased its full year production guidance and lowered its annual capital expenditures budget, citing efficiency gains and cost control in this year’s first half.

Increased efficiencies are a major talking point, said Raymond James analysts in an Aug. 5 investors’ note. Diamondback accounted for “64% of drilled feet in [first-half 2024] while only committing 51% of yearly capital to do so,” the analysts said. Further, rigs are drilling about 10% faster and completion crews operating 25% better, according to the analysts, “leading [Diamondback] to drop two rigs [to 10 from 12] and one simulfrac crew [to three from four]” for this year’s second half, while increasing overall production guidance.

More with less

“We are clearly doing more with less and becoming more operationally efficient each quarter,” said Travis D. Stice, chairman and chief executive officer, Diamondback Energy, in an Aug. 5 letter to shareholders.

Early in the year, the company expected a rig to drill 24 wells/year. Now, the company is modeling one rig drilling at least 26 wells/year. “On average, we are drilling wells approximately 10% faster than at the beginning of the year, primarily due to bit and bottom hole assembly improvements,” Stice noted. 

Diamondback produced 276,100 b/d of oil (474,700 boe/d) in this year’s second quarter, above the high end of the guidance of 271,000- 275,000 b/d.

During the quarter, the operator drilled 71 gross wells in Midland basin and nine gross wells in Delaware basin. The company turned 79 operated wells to production in Midland basin and seven gross wells in Delaware basin. Operated completions during the quarter consisted of 21 Lower Spraberry wells, 20 Wolfcamp A wells, 16 Wolfcamp B wells, 10 Middle Spraberry wells, nine Jo Mill wells, five Dean wells, three Wolfcamp D wells, one Second Bone Spring well and one Barnett well.

“We continue to target maintaining fourth quarter 2023 oil production levels and have kept our quarterly guidance range of 271,000-275,000 b/d of oil flat for the third quarter. For 2024, we raised our oil production guidance range to 273,000-276,000 b/d (about 2,000 b/d) to account for accelerated first-half 2024 activity and positive well performance year to date,” Stice continued.

The company expects to complete 310-330 gross wells with an average lateral length of 11,800 ft this year.

The revised guidance does not take into account the pending acquisition of Endeavor Energy Resources (OGJ Online, Feb. 12, 2024). While the US Federal Trade Commission on Apr. 29, 2024, sent a second request for information and documents regarding the $26-billion deal, Stice said he expects the transaction to close in the third or fourth quarter of this year. 

Financials

The total 2024 capital expenditures budget has been lowered to $2.35-2.45 billion from $2.3-2.55 billion, largely the result of improved cycle times and reduced activity planned in second-half 2024, the company said.

In this year’s second quarter, Diamondback spent $637 million, above the high end of guidance of $580-620 million due to accelerated activity.

Diamondback's second-quarter 2024 net income was $837 million, and adjusted net income was $813 million.

Second quarter 2024 net cash provided by operating activities was $1.5 billion. Through the first half of 2024, Diamondback's net cash provided by operating activities was $2.9 billion.