01—Abstract
Summary
Summary of the 10-K/A filed March 12, 2019. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K/A (Amendment No. 1) for Diamondback Energy, Inc. (FANG), fiscal year ended December 31, 2018, was filed on March 12, 2019, to add a Ryder Scott Company reserve report on the proved reserves of Energen Corporation, a wholly owned subsidiary acquired in the merger completed November 29, 2018.
The amendment contains no financial statements and does not modify the original 10-K filed February 25, 2019. Its purpose is to correct an inadvertent omission, so the document is best read as a supplement to the original filing rather than a standalone update on Diamondback's results or financial condition. The Ryder Scott report, prepared under SEC pricing and reserve rules, estimates total proved reserves of 466,386 MBOE (thousand barrels of oil equivalent) for the Energen properties as of December 31, 2018.
That total comprises 263,329 Mbbl of oil and condensate, 99,348 Mbbl of plant products, and 622,251 MMcf of gas. About 64.6%a of proved reserves (301,423 MBOE) are proved developed producing, 0.01% are proved developed non-producing, and 35.4% (164,921 MBOE) are proved undeveloped. The evaluated properties, located in New Mexico and Texas, represent 99.5% of Energen's total proved reserves on an oil-equivalent basis.
Undiscounted future net income is $10.98 billionb, and discounted future net income at 10% is $5.06 billion. Liquids account for roughly 95% of future gross revenue from proved reserves. Investors should note the price sensitivity embedded in these figures.
Reserves and income were calculated using 12-month average SEC benchmark prices, with WTI at $65.56c/bbl and Henry Hub gas at $3.10/MMBtu. Realized prices after differentials were $56.99/bbl for oil, $22.64/bbl for NGLs, and $1.48/Mcf for gas, so the gas realization discount is wide.
Actual results will vary with commodity prices, costs, and development timing, and 35%d of the reserves are undeveloped. Company-wide metrics such as total production, capital budgets, and Diamondback's own reserve base must be taken from the original 10-K filed February 25, 2019, which this amendment does not restate.
02—Key points
Key Highlights
- Amendment purpose: The 10-K/A was filed solely to add the Ryder Scott reserve report for Energen, which was inadvertently omitted from the original February 25, 2019 filing. It contains no financial statements and does not amend other disclosures.
- Energen proved reserves: Total proved reserves of 466,386 MBOE as of December 31, 2018, including 263,329 Mbbl of oil/condensate, 99,348 Mbbl of plant products, and 622,251 MMcf of gas.
- Reserve quality: About 64.6% of proved reserves (301,423 MBOE) are proved developed producing, while 35.4% (164,921 MBOE) are proved undeveloped and require future capital.
- Value of proved reserves: Undiscounted future net income of about $10.98 billion and discounted future net income at 10% of about $5.06 billion, before income taxes and overhead.
- Commodity mix and pricing: Liquids make up roughly 95% of future gross revenue. Realized oil was $56.99/bbl against a $65.56 WTI benchmark, and realized gas was $1.48/Mcf against a $3.10 Henry Hub benchmark.
- Evaluation coverage: Ryder Scott's review covers 99.5% of Energen's total proved reserves on an oil-equivalent basis, with properties in New Mexico and Texas.
- Market and share data: Non-affiliate market value was about $11.46 billion as of June 29, 2018, and 164,381,522 shares were outstanding as of February 15, 2019.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2018filed March 12, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.18B$1.21B | +80.6% |
| SG&A Expenses | $65.00M$48.00M | +35.4% |
| Operating Expenses | $1.17B$600.00M | +94.2% |
| Operating Income | $1.01B$605.00M | +67.1% |
| Interest Expense | $87.00M$41.00M | +112.2% |
| Net Income | $846.00M$482.00M | +75.5% |
| EPS (Basic) | $8.09$4.95 | +63.4% |
| EPS (Diluted) | $8.06$4.94 | +63.2% |
| Shares Outstanding (Basic) | 104.62M97.46M | +7.4% |
| Shares Outstanding (Diluted) | 104.93M97.69M | +7.4% |
05—Questions
Frequently Asked Questions
Why was this 10-K/A filed, and does it change Diamondback's financial results?
The amendment was filed to include a Ryder Scott reserve report on Energen's proved reserves, which was inadvertently left out of the original 10-K filed February 25, 2019. It contains no financial statements and states that it does not modify any financial or other information in the original filing.
How large are the acquired Energen reserves?
As of December 31, 2018, the evaluated Energen properties hold 466,386 MBOE of total proved reserves. This is about 466 million barrels of oil equivalent, including 263,329 Mbbl of oil and condensate, 99,348 Mbbl of plant products, and 622,251 MMcf of gas. Energen was acquired in a merger completed November 29, 2018.
How much of Energen's reserve base is developed versus undeveloped?
Of the 466,386 MBOE total, 301,423 MBOE (about 65%) is proved developed producing, and 164,921 MBOE (about 35%) is proved undeveloped. Undeveloped reserves depend on future drilling and capital spending, so they carry more execution risk than producing reserves.
How sensitive is the reported value of these reserves to commodity prices?
The values use 12-month average SEC benchmark prices (WTI at $65.56/bbl and Henry Hub at $3.10/MMBtu) and realized prices of $56.99/bbl for oil, $22.64/bbl for NGLs, and $1.48/Mcf for gas. Discounted future net income at 10% is about $5.06 billion. Actual values will move with prices, costs, and production, and the report notes that the reserve quantities may differ significantly from actual recovery.
06—Continue