10-QPeriod: Q2 FY2014

Diamondback Energy, Inc. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 7, 2014For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) delivered a strong operational and financial performance for the second quarter of 2014, driven by significant production growth and strategic acquisitions. The company reported a substantial increase in revenues and net income compared to the prior year period, reflecting successful expansion efforts in the Permian Basin. Production volumes saw a remarkable surge, driven by increased drilling activity and the integration of newly acquired assets. The company also successfully executed significant capital market transactions, including equity offerings and the formation of Viper Energy Partners LP, which strengthened its liquidity position and provided capital for future growth. Diamondback continues to focus on developing its oil-weighted reserves in West Texas, underscoring its commitment to increasing shareholder value through organic development and strategic growth initiatives.

Financial Highlights

39 data points
Beta

Net Income

$27.75M

EPS (Diluted)

$0.54

Total Assets

$2.05B

Cash & Equivalents

$36.99M

Free Cash Flow

$88.24M

Financial Statements
Beta
SG&A Expenses$3.61M
Operating Expenses$63.81M
Operating Income$63.19M
Interest Expense$7.74M
Net Income$27.75M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)50.78M
Shares Outstanding (Diluted)51.14M

Key Highlights

  • 1Revenue surged by 180% to $127 million for Q2 2014 compared to $45.4 million in Q2 2013, driven by a 171% increase in average daily production to 17,836 BOE/d.
  • 2Net income attributable to Diamondback Energy, Inc. more than doubled to $27.8 million in Q2 2014 from $14.5 million in Q2 2013.
  • 3The company completed significant acquisitions in Martin County, Texas, adding 4,785 net acres, and entered into an agreement to acquire an additional 13,136 net acres in the Permian Basin.
  • 4Diamondback successfully launched its master limited partnership, Viper Energy Partners LP (VNOM), raising approximately $137.2 million in net proceeds.
  • 5Total financing activities provided $385.4 million in net cash for the six months ended June 30, 2014, primarily from equity offerings and the Viper IPO, supporting acquisitions and development.
  • 6Lease Operating Expenses (LOE) per BOE decreased from $9.16 in Q2 2013 to $6.47 in Q2 2014, indicating improved operational efficiency despite increased production.
  • 7The company had $304 million available for future borrowings under its $600 million revolving credit facility as of June 30, 2014, demonstrating strong liquidity.

Frequently Asked Questions

The significant increase in revenue was primarily driven by a substantial rise in production volumes, up 171% year-over-year, due to increased drilling activity and strategic acquisitions. This higher production, combined with favorable average prices for oil and natural gas, led to the revenue growth.

The formation and initial public offering (IPO) of Viper Energy Partners LP allowed Diamondback to raise approximately $137.2 million in net proceeds, which strengthened its liquidity. Viper focuses on acquiring and exploiting oil and natural gas properties, providing a dedicated vehicle for certain asset types and potentially unlocking additional value.

Diamondback's strategy centers on the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin. They aim to grow reserves and production through continued development drilling, exploitation activities on their extensive acreage, and opportunistic acquisitions that align with their strategic and financial objectives, with a focus on oil-weighted reserves.

Despite a substantial increase in production and acquisitions, Diamondback has managed to improve its operational efficiency. Lease Operating Expense (LOE) per BOE decreased from $9.16 in Q2 2013 to $6.47 in Q2 2014. This improvement was partly due to initiatives like moving produced water by pipeline, reducing trucking costs, and spreading fixed costs over a larger production base.