10-QPeriod: Q3 FY2020

Diamondback Energy, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 5, 2020For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) reported its third-quarter and year-to-date results for 2020, a period heavily impacted by the COVID-19 pandemic and the resulting collapse in commodity prices. The company posted a significant net loss for the quarter, largely driven by a substantial non-cash impairment charge of $1.5 billion related to oil and natural gas properties due to lower commodity prices. Despite the challenging operating environment, Diamondback demonstrated resilience through cost management and strategic operational adjustments. The company has hedged a significant portion of its remaining 2020 oil production and a portion of its 2021 production to mitigate price volatility. While capital expenditures were reduced, the company maintained production levels and is focusing on generating free cash flow, managing debt, and returning capital to shareholders through its dividend. The company ended the quarter with a strong liquidity position, characterized by substantial availability under its revolving credit facility.

Financial Highlights

44 data points
Beta

Revenue

$720.00M

Net Income

-$1.11B

-154.6% Net Margin

EPS (Diluted)

$-7.05

Total Assets

$18.76B

Cash & Equivalents

$92.00M

Free Cash Flow

$542.00M

Financial Statements
Beta
Revenue$720.00M
SG&A Expenses$20.00M
Operating Expenses$1.98B
Operating Income-$1.26B
Net Income-$1.11B
EPS (Basic)$-7.05
EPS (Diluted)$-7.05
Shares Outstanding (Basic)157.83M
Shares Outstanding (Diluted)157.83M

Key Highlights

  • 1Net loss of $1.1 billion for the third quarter of 2020, significantly impacted by a $1.5 billion impairment charge on oil and gas properties.
  • 2Total revenues for the third quarter decreased by 26% to $707 million compared to $956 million in the prior year quarter, reflecting lower commodity prices and reduced production volumes.
  • 3The company maintained a strong liquidity position with $2.0 billion available under its revolving credit facility and $92 million in cash as of September 30, 2020.
  • 4Capital expenditures for the nine months ended September 30, 2020, were $1.6 billion, a decrease from $2.2 billion in the same period of 2019, reflecting reduced spending due to market conditions.
  • 5Diamondback hedged approximately 100% of its remaining expected 2020 oil production and approximately 50% of its expected 2021 oil production.
  • 6The company maintained its quarterly dividend payment of $0.375 per share for the third quarter of 2020, signaling a commitment to returning capital to shareholders.

Frequently Asked Questions

The primary driver of the net loss was a significant non-cash impairment charge of $1.5 billion related to oil and natural gas properties. This impairment was a result of the sharp decline in commodity prices experienced throughout the year, which impacted the carrying value of the company's assets.

Diamondback significantly reduced its capital expenditures. For the nine months ended September 30, 2020, capital expenditures were $1.6 billion, down from $2.7 billion in the same period of 2019. The company also updated its full-year 2020 capital budget to a range of $1.8 billion to $1.9 billion, reflecting a 36% decrease from its initial budget, to preserve liquidity and adapt to the challenging commodity price environment.

Diamondback actively uses derivative instruments to manage commodity price risk. For the remaining expected 2020 oil production, approximately 100% is hedged. For expected 2021 oil production, about 50% is hedged through swaps and collars. The company's hedging strategy aims to reduce price volatility and protect its financial performance from adverse market movements.

Diamondback maintained a strong liquidity position, with $2.0 billion of availability under its revolving credit facility and approximately $92 million in cash and cash equivalents as of September 30, 2020. This provides the company with ample resources to fund its operations and meet its financial obligations.