Diamondback previews slight production increase for 2024

Aug. 1, 2023
Executives guide to capex drop during what remains of this year and no meaningful rise next year.

Diamondback Energy Inc., Midland, drilled a record number of new wells and topped its production estimates for the second quarter but will slow down its growth in the second half of this year. Executives also are forecasting low-single-digit output increases for 2024.

Diamondback averaged oil production of a little more than 263,000 b/d in the 3 months ended June 30, which was an increase of 19% from the same period in 2022. Daily combined volumes climbed 18% year over year to nearly 450,000 boe/d. In the Permian basin, the company drilled 86 wells in the Midland basin as well as 12 in the Delaware basin, activity that has led chief executive officer Travis Stice and president and chief financial officer Kaes Van’t Hof to lift full-year guidance for gross wells drilled to 335-350 from 325-345.

Those numbers will not be repeated in the third or fourth quarters, though. For third-quarter 2023, Diamondback’s leaders are looking for production to be flat to up slightly from the last 3 months and rise only marginally from there late this year and in 2024.

“It was a good quarter operations-wise, which is why we’re slowing down the drilling pace in the second half of the year,” Van’t Hof told analysts on a conference call Aug. 1.

That relative slowdown also will translate into less capital spending: After spending $711 million in the second quarter, Diamondback’s leaders are forecasting their capex budget will shrink about 5% this quarter and then dip further in the fourth quarter to about $600 million—which also is the early assumption for spending in 2024. Those declines are based both on lower activity forecasts and drops in the prices of raw materials and other categories.

“We’ll put that [low $600 million figure] in pencil and see where service costs shake out,” Van’t Hof said. “But certainly, things tend to be moving our way from a well cost perspective.”

Diamondback produced net income of $586 million in the second quarter, a drop from a bumper profit of more than $1.4 billion in the same period of 2022. Total revenues fell to $1.9 billion from nearly $2.8 billion and operating profits were cut in half to $1.0 billion as the company’s combined average price fell to $46.31/boe from nearly $80.

Shares of Diamondback (Ticker: FANG) were down about 1% to $145.30 in late-morning trading Aug. 1. Year to date, shares have climbed about 10%, growing the company’s market capitalization to more than $26 billion.