Diamondback targets 16% oil production growth in 2023

March 6, 2023

Continued service cost inflation will add $200 million to the 2023 capital expenditures budget of Diamondback Energy Inc., Midland, as it looks to capitalize on two recent acquisitions and grow oil production 16% from 2022.

Diamondback executives told analysts Feb. 21 that they expect to spend $2.5-2.7 billion this year on capital projects, up from a little more than $1.9 billion last year and enough to grow net drilled lateral feet by more than a quarter to nearly 3.2 million and production to 256,000-262,000 b/d. Total net production is expected to be 430,000-440,000 boe/d versus 386,000 boe/d for all of 2022.

Of the capex hike, $400 million will go toward the acquired operations of the former FireBird Energy LLC and Lario Permian LLC (OGJ Online, Oct. 11, 2022; Nov. 16, 2022). Those transactions boosted Diamondback’s footprint in the Midland Basin by more than 80,000 acres and were valued at more than $3 billion combined.

The extra $200 million from inflation continues a trend from last year but chairman and chief executive officer Travis Stice and president and chief financial officer Kaes Van‘t Hof said on a conference call that inflation news in 2023 won’t be all bad. Increases in casing costs continue to be the biggest headwind, he said, but Diamondback is increasing its use of simulfrac crews and other efficiency tools and indicators suggest some price pressures will begin to ease soon.

“Some things are coming our way,” Van’t Hof said. “Not every line item will go up.”

Diamondback produced a fourth-quarter profit of $1.0 billion, in line with fourth-quarter 2021, as revenues also were flat at just over $2 billion. For the year, the company had net income of nearly $4.4 billion, more than double its 2021 performance.

On the production outlook, Stice and Van’t Hof said output should rise incrementally as 2023 progresses. From about 226,000 b/d in fourth-quarter 2022 (a number impacted slightly by winter storms), oil production is forecast to grow to roughly 250,000 b/d in first-quarter 2023 and hit a full-year target around 260,000 b/d. Executives are planning for drilling and completion of roughly 300 net wells.

The “steady state of activity has produced good results to date,” Van’t Hof said.