Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Diamondback Energy Inc (NASDAQ:FANG) achieved significant free cash flow improvements, reducing the breakeven oil price from $76 to $67 per barrel.
• The company successfully integrated the Endeavor acquisition, resulting in a 10% plus free cash flow per share accretion.
• Diamondback Energy Inc (NASDAQ:FANG) plans to leverage its strong inventory position to focus on share repurchases, enhancing shareholder value.
• The company is implementing efficiencies in drilling and completion operations, with SimulFRAC fleets increasing well completions from 80 to 100 wells per year.
• Diamondback Energy Inc (NASDAQ:FANG) is exploring innovative power solutions, potentially reducing operational costs and enhancing sustainability.

Negative Points

• The company faces challenges in maintaining the $9 per barrel reduction in free cash flow breakeven annually.
• There is a potential pause in M&A activities, which may limit growth opportunities in the near term.
• Diamondback Energy Inc (NASDAQ:FANG) has a significant DUC drawdown planned, which could impact future production levels.
• The company is dealing with a concentrated shareholder base post-Endeavor transaction, which may affect share liquidity.
• Capitalized interest has been increasing, impacting the company's financial metrics and potentially affecting investor perception.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with FANG.

Q: Can you discuss the drivers behind achieving the same free cash flow at $67 a barrel this year compared to $76 last year? A: Kaes Van't Hof, President and CFO, explained that the decrease in the breakeven oil price for free cash flow is due to improved capital efficiency and accretive deals like the Endeavor acquisition. The goal is to continue lowering this number through a lower share count, reduced cost structure, and quality inventory.

Q: What are your plans regarding M&A activity and share repurchase programs following the Double Eagle acquisition? A: Travis Stice, CEO, stated that the Double Eagle acquisition might be the last significant opportunity in the Midland Basin, suggesting a pause in M&A. Kaes Van't Hof added that the focus will shift towards share repurchases, as the current stock price presents a good opportunity for capital allocation.

Q: How do you plan to manage your DUC (drilled but uncompleted wells) inventory and drilling plans? A: Kaes Van't Hof mentioned that there is a significant DUC drawdown planned in the CapEx budget. If ahead of schedule, they might reduce the drawdown and drill more wells, as drilling costs are currently low. The company aims to maintain flexibility in its drilling plans.

Q: Can you provide insights into your asset sale divestiture program and its impact on your financials? A: Kaes Van't Hof indicated that the company plans to execute non-core asset sales without selling operated acreage. The focus will be on monetizing equity method investments and midstream assets acquired from Endeavor, aiming to reach a $1.5 billion target.

Q: How do you view the potential for synergies and cost savings from the Double Eagle acquisition? A: Kaes Van't Hof noted that Double Eagle was already a good operator, but Diamondback expects to achieve cost savings through its lower cost structure. The acquisition allows for infrastructure efficiencies and aligns with Diamondback's long-term development plans.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.