10-QPeriod: Q1 FY2022

Diamondback Energy, Inc. Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 5, 2022For Securities:FANG

Summary

Diamondback Energy, Inc. (FANG) reported a strong first quarter for 2022, demonstrating significant financial and operational improvements. The company saw a substantial increase in total revenues to $2.4 billion, up from $1.2 billion in the prior year's first quarter, driven by higher commodity prices and increased production volumes. Net income surged to $779 million, resulting in a diluted EPS of $4.36, a marked improvement from $220 million and $1.33, respectively, in Q1 2021. Operationally, Diamondback continued its development activities, drilling and completing a significant number of horizontal wells in the Permian Basin. The company also focused on strengthening its balance sheet by repaying substantial amounts of debt, including the redemption of $1.5 billion in senior notes. Management remains committed to capital discipline, planning to hold oil production flat for 2022 and prioritizing debt reduction and shareholder returns over aggressive expansion.

Financial Highlights

43 data points
Beta

Revenue

$2.41B

Net Income

$779.00M

32.4% Net Margin

EPS (Diluted)

$4.35

Total Assets

$23.33B

Cash & Equivalents

$149.00M

Free Cash Flow

$1.25B

Financial Statements
Beta
Revenue$2.41B
SG&A Expenses$36.00M
Operating Expenses$748.00M
Operating Income$1.66B
Net Income$779.00M
EPS (Basic)$4.35
EPS (Diluted)$4.35
Shares Outstanding (Basic)177.56M
Shares Outstanding (Diluted)177.57M

Key Highlights

  • 1Revenue nearly doubled year-over-year, reaching $2.4 billion in Q1 2022, primarily driven by increased oil, natural gas, and natural gas liquid sales.
  • 2Net income attributable to Diamondback Energy, Inc. soared to $779 million ($4.36 per diluted share) in Q1 2022, compared to $220 million ($1.33 per diluted share) in Q1 2021.
  • 3The company generated substantial operating cash flow of $1.25 billion in Q1 2022, significantly higher than $624 million in Q1 2021.
  • 4Diamondback actively managed its debt, issuing $750 million in new senior notes and redeeming $1.5 billion of existing notes, resulting in a net reduction in long-term debt.
  • 5Capital expenditures, excluding acquisitions, were $437 million in Q1 2022, focused on drilling and completing wells in the Permian Basin.
  • 6The company declared a significant cash dividend of $3.05 per share for Q1 2022, reflecting its commitment to returning capital to shareholders.
  • 7Operational costs, including lease operating expenses and gathering/transportation, saw increases, partly due to integrating acquisitions from prior periods and rising service costs.

Frequently Asked Questions

The substantial increase in revenue and net income was primarily driven by higher commodity prices for oil, natural gas, and natural gas liquids, coupled with an increase in production volumes. The company also benefited from recognizing a full quarter's production from acquisitions completed in late Q1 2021 (Guidon Acquisition and QEP Merger).

Diamondback actively managed its debt by issuing $750 million in new 4.250% Senior Notes due 2052 and using the proceeds, along with cash on hand, to redeem $1.5 billion in outstanding senior notes (4.750% notes due 2025 and 2.875% notes due 2024). This strategy reduced their overall debt burden and potentially lowered their average interest cost.

Diamondback plans to hold its oil production levels flat for 2022. The company is prioritizing the use of excess cash flow for debt repayment and returning capital to shareholders through dividends and share repurchases, rather than expanding its drilling program. The approved 2022 capital budget is focused on drilling and completion activities in its core Permian Basin assets and midstream infrastructure.

No new impairment charges were recorded in the first quarter of 2022. The filing notes that in Q1 2021, an SEC waiver allowed the exclusion of properties acquired in the QEP Merger and Guidon Acquisition from the ceiling test calculation, avoiding a potential $1.1 billion impairment charge. Management affirms no decline in the fair value of these acquired assets.