10-QPeriod: Q3 FY2012

Diamondback Energy, Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 16, 2012For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) reported its third-quarter results for the period ending September 29, 2012. This filing is significant as it follows the company's recent initial public offering (IPO) which closed on October 17, 2012, raising approximately $235.3 million. The IPO proceeds were largely used to repay debt and fund operations. The company's core focus remains on the acquisition, development, and exploitation of oil and natural gas reserves in the Permian Basin, targeting oil-weighted reserves. Financially, Diamondback demonstrated revenue growth driven by increased production volumes, despite a slight decrease in average commodity prices compared to the prior year. Expenses, particularly depreciation, depletion, and amortization, and general and administrative costs, saw increases, partly due to increased drilling activity and IPO-related expenses. The company's liquidity was bolstered by the IPO, enabling debt repayment and continued investment in its drilling program. Significant strategic transactions, including the contribution of Windsor UT and the acquisition of Gulfport Energy's Permian Basin assets, substantially increased the company's acreage position just prior to the IPO, positioning it for future growth.

Financial Highlights

32 data points
Beta

Net Income

$452K

EPS (Diluted)

$0.02

Total Assets

$307.77M

Cash & Equivalents

$1.44M

Free Cash Flow

$10.80M

Financial Statements
Beta
SG&A Expenses$1.32M
Operating Expenses$12.73M
Operating Income$4.09M
Interest Expense$1.13M
Net Income$452K
EPS (Basic)$0.02
EPS (Diluted)$0.02

Key Highlights

  • 1Completed initial public offering (IPO) on October 17, 2012, raising approximately $235.3 million, which was used to repay debt and fund operations.
  • 2Substantially increased net acreage position in the Permian Basin to approximately 51,709 acres through the contribution of Windsor UT and acquisition of Gulfport Energy assets shortly before the IPO.
  • 3Reported a 51% increase in oil, natural gas liquids, and natural gas revenues for the three months ended September 30, 2012, compared to the same period in 2011, primarily driven by higher production volumes.
  • 4Increased capital expenditures significantly, with $71.9 million spent on drilling and completion of wells during the first nine months of 2012.
  • 5Net cash provided by operating activities more than doubled to $31.8 million for the nine months ended September 30, 2012, compared to $14.0 million in the prior year.
  • 6Secured a $250 million revolving credit facility, which was amended to include new guarantors and adjust covenants in anticipation of the IPO and related transactions.
  • 7Management concluded that disclosure controls and procedures were effective as of September 30, 2012.

Frequently Asked Questions

Prior to the IPO, Diamondback Energy significantly expanded its operational footprint. On October 11, 2012, the company completed two major transactions: the contribution of all outstanding equity interests in Windsor UT LLC, and the acquisition of oil and natural gas properties from Gulfport Energy Corporation. These transactions collectively increased the company's net acreage position in the Permian Basin to approximately 51,709 acres.

The net proceeds of approximately $235.3 million from the IPO were primarily used for debt repayment and operational funding. Specifically, $100.0 million was used to repay the outstanding borrowings under the revolving credit facility, approximately $63.6 million to repay the Gulfport transaction note, and $30.0 million to repay borrowings under a subordinated note with an affiliate of Wexford Capital. The remaining balance is intended for exploration and development activities and general corporate purposes.

The company's revenues increased significantly due to higher production volumes across oil, natural gas liquids, and natural gas. For the three months ended September 30, 2012, production increased by 1,116 BOE/d compared to the same period in 2011, driving a 51% increase in revenue. While average commodity prices saw a slight decrease, the substantial increase in the volume of oil, natural gas liquids, and natural gas produced more than compensated for this, leading to higher overall revenues.

Diamondback Energy is an independent oil and natural gas company focused on the acquisition, development, exploration, and exploitation of unconventional, long-life, onshore oil and natural gas reserves in the Permian Basin of West Texas. Its strategy centers on growing reserves and production through development drilling, exploitation activities on its identified drilling locations, and strategic acquisitions, with a target of increasing its oil-weighted reserves.