10-QPeriod: Q3 FY2019

Diamondback Energy, Inc. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 6, 2019For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) reported strong financial and operational performance for the third quarter and first nine months of 2019. Revenue significantly increased year-over-year, driven by substantial growth in oil and natural gas production volumes, despite slightly lower average commodity prices. The company demonstrated effective cost management, with lease operating expenses and production taxes per BOE showing favorable trends or improvements. Significant investments were made in capital expenditures, primarily focused on drilling and completion activities in the Permian Basin, which are expected to drive continued production growth. Diamondback also returned capital to shareholders through dividends and a substantial share repurchase program, underscoring a commitment to shareholder value.

Financial Highlights

43 data points
Beta

Revenue

$975.00M

Net Income

$368.00M

37.7% Net Margin

EPS (Diluted)

$2.26

Total Assets

$23.55B

Cash & Equivalents

$100.00M

Free Cash Flow

$809.00M

Financial Statements
Beta
Revenue$975.00M
SG&A Expenses$19.00M
Operating Expenses$626.00M
Operating Income$349.00M
Net Income$368.00M
EPS (Basic)$2.27
EPS (Diluted)$2.26
Shares Outstanding (Basic)162.54M
Shares Outstanding (Diluted)162.78M

Key Highlights

  • 1Total revenues increased by 82% to $975 million for the three months ended September 30, 2019, compared to $537 million in the prior year period, driven by higher production volumes.
  • 2Net income attributable to Diamondback Energy, Inc. rose to $368 million ($2.26 per diluted share) for the third quarter of 2019, up from $157 million ($1.59 per diluted share) in the same period of 2018.
  • 3Capital expenditures for the nine months ended September 30, 2019, were $2.74 billion, primarily focused on drilling and completion activities ($1.88 billion) and acquisitions of leasehold and mineral interests.
  • 4The company's share repurchase program remained active, with $400 million repurchased during the first nine months of 2019, and $1.6 billion available under the program as of September 30, 2019.
  • 5Diamondback Energy generated strong operating cash flow of $1.85 billion for the first nine months of 2019, a significant increase from $1.15 billion in the comparable period of 2018.
  • 6The company declared a cash dividend of $0.1875 per share for the third quarter of 2019, demonstrating a commitment to returning capital to shareholders.
  • 7The midstream segment, primarily through Rattler Midstream LP, contributed positively, with total revenues from midstream services showing an increase and total assets for this segment growing significantly.

Frequently Asked Questions

The primary driver for the substantial revenue increase was a significant rise in oil, natural gas, and natural gas liquids production volumes. Despite a slight decrease in average realized commodity prices, the higher volumes more than compensated, leading to an 82% year-over-year revenue increase.

Diamondback Energy is actively investing in its growth, with capital expenditures totaling $2.74 billion for the first nine months of 2019. The primary focus is on drilling and completing horizontal wells in the Permian Basin, particularly in the Delaware and Midland Basins, and also includes acquisitions of leasehold and mineral interests, and midstream infrastructure additions.

Diamondback Energy employs a dual strategy for returning capital to shareholders. This includes a regular quarterly cash dividend, which was declared at $0.1875 per share for the third quarter of 2019, and a substantial stock repurchase program. The company repurchased $400 million in common stock during the first nine months of 2019, with $1.6 billion remaining under its authorized repurchase program.

Diamondback Energy uses derivative instruments primarily to reduce price volatility for its oil and natural gas sales. For the three months ended September 30, 2019, the company reported a net gain on derivative instruments of $177 million, significantly contributing to its overall income, primarily due to changes in the fair value of open non-hedge derivative instruments.