10-QPeriod: Q2 FY2016

Diamondback Energy, Inc. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 9, 2016For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) reported its Q2 2016 results amidst a challenging but improving commodity price environment. While revenues saw a year-over-year decrease due to lower oil prices, production volumes increased, signaling operational growth. The company successfully raised significant capital through equity offerings in January and July 2016, strengthening its financial position and providing funds for strategic acquisitions. A key development is the pending acquisition of leasehold interests in the Southern Delaware Basin for $560.0 million, expected to close in September 2016. This acquisition, coupled with recent acquisitions by its subsidiary Viper, demonstrates Diamondback's commitment to expanding its Permian Basin footprint and future growth. Despite a substantial non-cash impairment charge of $199.2 million for oil and gas properties due to commodity price declines, the company ended the quarter with a strong liquidity position and no outstanding borrowings under its revolving credit facility, while actively managing its capital expenditures and rig cadence.

Financial Highlights

39 data points
Beta

Net Income

-$155.49M

EPS (Diluted)

$-2.17

Total Assets

$2.84B

Cash & Equivalents

$218.79M

Free Cash Flow

$49.02M

Financial Statements
Beta
SG&A Expenses$9.52M
Operating Expenses$247.27M
Operating Income-$134.79M
Net Income-$155.49M
EPS (Basic)$-2.17
EPS (Diluted)$-2.17
Shares Outstanding (Basic)71.72M
Shares Outstanding (Diluted)71.72M

Key Highlights

  • 1Revenues decreased by 6% to $112.5 million in Q2 2016 compared to Q2 2015, primarily due to lower average sales prices, although production volumes increased by 22.9%.
  • 2The company raised approximately $254.5 million in net proceeds from an equity offering in January 2016 and approximately $551.8 million in net proceeds from another offering in July 2016.
  • 3Diamondback entered into an agreement to acquire leasehold interests in the Southern Delaware Basin for $560.0 million, a transaction expected to close in September 2016 and financed by recent equity proceeds.
  • 4A non-cash impairment of oil and gas properties of $199.2 million was recorded for the six months ended June 30, 2016, due to declining commodity prices.
  • 5Production increased to an average of 36,841 BOE/d in Q2 2016, up from 29,972 BOE/d in Q2 2015, reflecting increased drilling activity and acquisitions.
  • 6Lease operating expenses decreased by 9% to $5.57 per BOE in Q2 2016 compared to $7.51 per BOE in Q2 2015, indicating improved operational efficiency.
  • 7As of June 30, 2016, the company had $500.0 million available for future borrowings under its revolving credit facility and no outstanding borrowings, with a borrowing base set at $700.0 million.

Frequently Asked Questions

For the three months ended June 30, 2016, Diamondback reported revenues of $112.5 million, a decrease of 6% from $119.1 million in the same period of 2015. This decline was driven by lower average sales prices, partially offset by a 22.9% increase in average daily production volumes to 36,841 BOE/d. The company recorded a net loss of $155.5 million attributable to Diamondback Energy, Inc. for Q2 2016, compared to a net loss of $212.3 million in Q2 2015.

Diamondback successfully raised significant capital through equity offerings in January ($254.5 million net) and July 2016 ($551.8 million net). The company is pursuing growth through a pending $560.0 million acquisition in the Southern Delaware Basin and has also seen strategic acquisitions by its subsidiary Viper. The company's 2016 capital budget for drilling and infrastructure was increased to $350.0 million - $425.0 million, reflecting confidence in improved commodity prices and operational execution.

The challenging commodity price environment in early 2016 led to a non-cash impairment charge of $199.2 million for oil and gas properties for the six months ended June 30, 2016. While commodity prices improved in Q2 2016, they remain volatile, impacting revenues and potentially future impairments. The company's revenue is heavily reliant on oil prices, with oil sales comprising 90% of revenues in Q2 2016.

Diamondback maintains a strong liquidity position, with no outstanding borrowings under its $2.0 billion revolving credit facility as of June 30, 2016, and $500.0 million in elected commitments available. The borrowing base was set at $700.0 million. Cash flow from operations, cash on hand, and available credit are expected to be sufficient to fund operations through year-end 2016. The company also has $450.0 million in senior notes outstanding.