10-QPeriod: Q1 FY2021

Diamondback Energy, Inc. Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 7, 2021For Securities:FANG

Summary

Diamondback Energy, Inc. reported a strong first quarter in 2021, demonstrating significant recovery and growth following a challenging prior year. The company achieved substantial improvements in revenues and profitability, driven by higher commodity prices and the successful integration of recent acquisitions, notably the QEP Resources merger. Significant debt management efforts were undertaken, including a large notes offering and the repurchase of existing debt, aimed at optimizing the capital structure and reducing interest expenses. Operationally, Diamondback maintained robust production levels despite minor weather-related disruptions, continued its development program by drilling and completing numerous wells, and strategically divested non-core assets. The company's financial position was strengthened by positive cash flows from operations, allowing for continued investment in its core assets while also returning capital to shareholders through dividends. The forward-looking outlook appears positive, supported by strategic acquisitions, divestitures, and a focus on operational efficiency and deleveraging.

Financial Highlights

43 data points
Beta

Revenue

$1.18B

Net Income

$220.00M

18.6% Net Margin

EPS (Diluted)

$1.33

Total Assets

$22.00B

Cash & Equivalents

$121.00M

Free Cash Flow

$624.00M

Financial Statements
Beta
Revenue$1.18B
SG&A Expenses$25.00M
Operating Expenses$613.00M
Operating Income$571.00M
Net Income$220.00M
EPS (Basic)$1.34
EPS (Diluted)$1.33
Shares Outstanding (Basic)164.17M
Shares Outstanding (Diluted)164.93M

Key Highlights

  • 1Generated $220 million in net income for the first quarter of 2021, a significant turnaround from a net loss in the prior year.
  • 2Successfully completed the QEP Resources acquisition and the Guidon Operating LLC acquisition, significantly expanding acreage and production.
  • 3Issued $2.18 billion in new senior notes and used proceeds to repurchase $1.7 billion of QEP Notes and $368 million of 2025 Senior Notes, demonstrating proactive debt management.
  • 4Reported average production of 307.4 MBOE/d, with plans to recover minor production losses from winter storms.
  • 5Increased total revenues to $1.184 billion, up from $899 million in Q1 2020, driven by higher oil and natural gas prices.
  • 6Announced plans to divest Williston Basin assets for approximately $745 million, indicating a strategic focus on core Permian Basin operations and debt reduction.
  • 7Declared a cash dividend of $0.40 per share for Q1 2021, signaling confidence in financial performance and commitment to shareholder returns.

Frequently Asked Questions

The significant improvement in financial performance was driven by a substantial increase in commodity prices, leading to higher revenues from oil, natural gas, and natural gas liquids. Additionally, the successful completion and integration of the QEP Resources acquisition and the Guidon Operating LLC acquisition contributed to increased production volumes and operational scale. The company also benefited from proactive debt management, including a large debt issuance and subsequent repurchases, which aimed to lower interest expenses.

Diamondback actively managed its debt by issuing $2.18 billion in new senior notes in March 2021. The proceeds were primarily used to repurchase approximately $1.65 billion of QEP Notes and $368 million of its own 2025 Senior Notes. This strategic move aimed to refinance existing debt at potentially more favorable terms, extend maturity profiles, and reduce overall interest costs, thereby strengthening the balance sheet.

The planned divestitures, including the Williston Basin assets for approximately $745 million and non-core Permian assets for $87 million, indicate Diamondback's strategic focus on optimizing its asset portfolio. By shedding non-core or non-Permian Basin assets, the company aims to concentrate on its core operational areas in the Permian Basin. The proceeds from these sales are intended to be used for debt reduction, further enhancing financial flexibility and reducing leverage.

The acquisitions of QEP Resources and Guidon Operating LLC significantly expanded Diamondback's acreage and production base, primarily in the Midland Basin. This is reflected in the increased property and equipment on the balance sheet. Operationally, these acquisitions contribute to higher revenues and production volumes. The purchase price allocations for these acquisitions have been recorded, with ongoing processes to finalize them. The company also incurred merger and integration expenses related to these transactions in the quarter.