10-QPeriod: Q1 FY2016

Diamondback Energy, Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 5, 2016For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) reported a net loss of $32.9 million for the first quarter of 2016, a significant downturn from the $5.8 million net income in the same period of 2015. This loss was primarily driven by a substantial non-cash impairment charge of $30.8 million related to oil and gas properties due to depressed commodity prices. Despite the loss, the company demonstrated resilience by increasing average daily production by 25% year-over-year to 38,308 BOE/d, fueled by increased drilling activity and acquisitions. The company is prioritizing financial discipline amidst a challenging commodity price environment, evidenced by a reduced 2016 capital budget, but is poised to add a fourth rig if oil prices strengthen. Financially, Diamondback successfully raised approximately $254.5 million in net proceeds from a public offering of common stock in January 2016, bolstering its liquidity. While operating cash flow decreased year-over-year due to lower realized prices, the company maintained a strong liquidity position with no outstanding borrowings under its $500 million revolving credit facility commitment as of March 31, 2016. Management expresses confidence in its ability to fund operations through year-end 2016 with existing cash flow and credit facilities, while also acknowledging the need for significant future capital to develop its properties.

Financial Highlights

40 data points
Beta

Net Income

-$32.91M

EPS (Diluted)

$-0.46

Total Assets

$2.94B

Cash & Equivalents

$235.81M

Free Cash Flow

$72.76M

Financial Statements
Beta
SG&A Expenses$12.98M
Operating Expenses$115.08M
Operating Income-$27.60M
Interest Expense$10.01M
Net Income-$32.91M
EPS (Basic)$-0.46
EPS (Diluted)$-0.46
Shares Outstanding (Basic)71.03M
Shares Outstanding (Diluted)71.03M

Key Highlights

  • 1Reported a net loss of $32.9 million for Q1 2016, compared to a net income of $5.8 million in Q1 2015, impacted by a $30.8 million non-cash impairment charge.
  • 2Increased average daily production by 25% year-over-year to 38,308 BOE/d, driven by higher volumes of oil, natural gas, and natural gas liquids.
  • 3Generated $72.8 million in net cash from operating activities, a decrease from $99.1 million in Q1 2015, largely due to lower commodity prices.
  • 4Completed a public offering of common stock in January 2016, raising approximately $254.5 million in net proceeds.
  • 5Maintained a strong liquidity position with no outstanding borrowings under its $500 million revolving credit facility commitment as of March 31, 2016.
  • 6Reduced the 2016 capital budget to $250-$375 million, emphasizing financial discipline over growth in the current commodity price environment.
  • 7Actively managing production capacity by retaining a third rig and planning for a potential fourth rig based on oil price trends.

Frequently Asked Questions

The primary reason for the net loss of $32.9 million in the first quarter of 2016 was a significant non-cash impairment charge of $30.8 million recognized on oil and natural gas properties. This impairment was a direct result of the substantial decline in commodity prices experienced during the period.

Despite facing a challenging commodity price environment, Diamondback Energy saw a 25% increase in average daily production to 38,308 BOE/d compared to the first quarter of 2015. However, total revenues decreased by 14% to $87.5 million, primarily due to significantly lower average sales prices for oil, natural gas, and natural gas liquids, which more than offset the gains from increased production volumes.

Diamondback Energy has adopted a strategy of financial discipline over growth for 2016, with a reduced capital budget of $250-$375 million. While the company has retained its third drilling rig and plans to reduce its backlog of drilled but uncompleted wells, it remains flexible. Management is prepared to add a fourth horizontal rig in the third quarter if oil prices continue to strengthen, while also capable of decelerating its drilling program if commodity prices deteriorate.

Diamondback Energy bolstered its liquidity by raising approximately $254.5 million in net proceeds from a public stock offering in January 2016. As of March 31, 2016, the company had no outstanding borrowings under its $500 million revolving credit facility commitment, indicating a strong liquidity position. Management believes current cash flow from operations and available credit facilities are sufficient to fund operations through the end of 2016.