Diamondback Energy, Inc. Announces Fourth Quarter and Full Year 2023 Financial and Operating Results

MIDLAND, Texas, Feb. 20, 2024 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the fourth quarter and full year ended December 31, 2023.

FOURTH QUARTER 2023 HIGHLIGHTS

• Average production of 273.1 MBO/d (462.6 MBOE/d)
• Net cash provided by operating activities of $1.6 billion; Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $1.6 billion
• Cash capital expenditures of $649 million
• Free Cash Flow (as defined and reconciled below) of $910 million
• Increased annual base dividend by 7% to $3.60 per share; declared Q4 2023 base cash dividend of $0.90 per share and a variable cash dividend of $2.18 per share, in each case payable on March 12, 2024; implies an 6.9% annualized yield based on February 16, 2024 closing share price of $179.42
• Repurchased 872,667 shares of common stock in Q4 2023 for $129 million, excluding excise tax (at a weighted average price of $148.15/share); repurchased 279,266 shares of common stock to date in Q1 2024 for $42 million, excluding excise tax (at a weighted average price of $149.50/share)
• Total Q4 2023 return of capital of $683 million; represents ~75% of Q4 2023 Free Cash Flow (as defined and reconciled below) from stock repurchases and the declared Q4 2023 base-plus-variable dividend
  

FULL YEAR 2023 HIGHLIGHTS

• Average production of 263.5 MBO/d (447.7 MBOE/d)
• Net cash provided by operating activities of $5.9 billion; Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $5.6 billion
• Cash capital expenditures of $2.7 billion
• Generated Free Cash Flow (as defined and reconciled below) of $2.9 billion
• Declared total base-plus-variable dividends of $8.12 per share for the full year 2023
• Repurchased 6,237,893 shares of common stock in 2023 for $838 million, excluding excise tax (at a weighted average price of $134.37/share)
• Total full year 2023 return of capital of $2.3 billion from stock repurchases and declared base-plus-variable dividends; represents ~79% of FY 2023 Free Cash Flow (as defined and reconciled below)
• Proved reserves as of December 31, 2023 of 2,178 MMBOE (1,144 MBO, 53% oil), up 7% year over year; proved developed producing ("PDP") reserves of 1,497 MMBOE (744 MBO, 50% oil, 69% of proved reserves), up 7% year over year

2024 GUIDANCE HIGHLIGHTS

• Full year 2024 oil production guidance of 270 - 275 MBO/d (458 - 466 MBOE/d)
• Full year 2024 cash capital expenditures guidance of $2.30 - $2.55 billion
• The Company expects to drill between 265 - 285 gross (244 - 263 net) wells and complete between 300 - 320 gross (273 - 291 net) wells with an average lateral length of approximately 11,500 feet in 2024
• Q1 2024 oil production guidance of 270 - 274 MBO/d (458 - 464 MBOE/d)
• Q1 2024 cash capital expenditures guidance of $580 - $620 million
  

OPERATIONS UPDATE

The tables below provide a summary of operating activity for the fourth quarter of 2023.

During the fourth quarter of 2023, Diamondback drilled 80 gross wells in the Midland Basin and four gross wells in the Delaware Basin. The Company turned 50 operated wells to production in the Midland Basin and nine gross well in the Delaware Basin with an average lateral length of 11,457 feet. Operated completions during the fourth quarter consisted of 14 Lower Spraberry wells, 14 Wolfcamp A wells, 13 Wolfcamp B wells, nine Jo Mill wells, four Third Bone Spring wells, three Middle Spraberry wells and two Wolfcamp D wells.

For the year ended December 31, 2023, Diamondback drilled 315 gross wells in the Midland Basin and 35 gross wells in the Delaware Basin. The Company turned 263 operated wells to production in the Midland Basin and 47 operated wells to production in the Delaware Basin. The average lateral length for wells completed during the year ended December 31, 2023 was 11,236 feet, and consisted of 83 Lower Spraberry wells, 78 Wolfcamp A wells, 54 Wolfcamp B wells, 41 Jo Mill wells, 21 Middle Spraberry wells, 19 Third Bone Spring wells, eight Second Bone Spring wells, two Upper Spraberry wells, two Wolfcamp D wells and two Barnett wells.

FINANCIAL UPDATE

Diamondback's fourth quarter 2023 net income was $960 million, or $5.34 per diluted share. Adjusted net income (as defined and reconciled below) was $854 million, or $4.74 per diluted share.

Fourth quarter 2023 net cash provided by operating activities was $1.6 billion. For the year ended December 31, 2023, Diamondback's net cash provided by operating activities was $5.9 billion.

During the fourth quarter of 2023, Diamondback spent $603 million on operated and non-operated drilling and completions, $31 million on infrastructure and environmental and $15 million on midstream, for total cash capital expenditures of $649 million for the quarter. For the year ended December 31, 2023, Diamondback spent $2.4 billion on operated and non-operated drilling and completions, $153 million on infrastructure and environmental and $119 million on midstream, for total cash capital expenditures of $2.7 billion.

Fourth quarter 2023 Consolidated Adjusted EBITDA (as defined and reconciled below) was $1.7 billion. Adjusted EBITDA net of non-controlling interest (as defined and reconciled below) was $1.6 billion.

Diamondback's fourth quarter 2023 Free Cash Flow (as defined and reconciled below) was $910 million. For the year ended December 31, 2023, Diamondback's Free Cash Flow was $2.9 billion.

Fourth quarter 2023 average unhedged realized prices were $76.42 per barrel of oil, $1.29 per Mcf of natural gas and $19.96 per barrel of natural gas liquids ("NGLs"), resulting in a total equivalent unhedged realized price of $50.87 per BOE.

Diamondback's cash operating costs for the fourth quarter of 2023 were $10.83 per BOE, including lease operating expenses ("LOE") of $5.97 per BOE, cash general and administrative ("G&A") expenses of $0.59 per BOE, production and ad valorem taxes of $2.44 per BOE and gathering, processing and transportation expenses of $1.83 per BOE.

As of December 31, 2023, Diamondback had $556 million in standalone cash and no borrowings under its revolving credit facility, with approximately $1.6 billion available for future borrowing under the facility and approximately $2.2 billion of total liquidity. As of December 31, 2023, the Company had consolidated total debt of $6.8 billion and consolidated net debt of $6.2 billion, up from consolidated total debt of $6.4 billion and net debt of $5.6 billion as of September 30, 2023.

DIVIDEND DECLARATIONS

Diamondback announced today that the Company's Board of Directors declared a base cash dividend of $0.90 per common share for the fourth quarter of 2023 payable on March 12, 2024, to stockholders of record at the close of business on March 5, 2024.

The Company's Board of Directors also declared a variable cash dividend of $2.18 per common share for the fourth quarter of 2023 payable on March 12, 2024, to stockholders of record at the close of business on March 5, 2024.

Future base and variable dividends remain subject to review and approval at the discretion of the Company's Board of Directors.

COMMON STOCK REPURCHASE PROGRAM

During the fourth quarter of 2023, Diamondback repurchased 872,667 shares of common stock at an average share price of $148.15 for a total cost of approximately $129 million, excluding excise tax. To date, Diamondback has repurchased 19,337,765 shares of common stock at an average share price of $124.52 for a total cost of approximately $2.4 billion and has approximately $1.6 billion remaining on its current share buyback authorization. Diamondback intends to continue to purchase common stock under the common stock repurchase program opportunistically with cash on hand, free cash flow from operations and proceeds from potential liquidity events such as the sale of assets. This repurchase program has no time limit and may be suspended from time to time, modified, extended or discontinued by the Board at any time. Purchases under the repurchase program may be made from time to time in privately negotiated transactions, or in open market transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and will be subject to market conditions, applicable legal requirements and other factors. Any common stock purchased as part of this program will be retired.

RESERVES

Estimates of Diamondback's proved reserves as of December 31, 2023 were prepared by Diamondback's internal reservoir engineers and audited by Ryder Scott Company, L.P., an independent petroleum engineering firm. Reference prices of $78.22 per barrel of oil and $2.64 per Mmbtu of natural gas were used in accordance with applicable rules of the Securities and Exchange Commission. Realized prices with applicable differentials were $77.62 per barrel of oil, $1.53 per Mcf of natural gas and $24.40 per barrel of natural gas liquids.

Proved reserves at year-end 2023 of 2,178 MMBOE represent a 7% increase over year-end 2022 reserves. Proved developed reserves increased by 7% to 1,497 MMBOE (69% of total proved reserves) as of December 31, 2023, reflecting the continued development of the Company's horizontal well inventory. Proved undeveloped reserves ("PUD" or "PUDs") increased to 681 MMBOE, an 8% increase over year-end 2022, and are comprised of 802 locations, of which 727 are in the Midland Basin. Crude oil represents 53% of Diamondback's total proved reserves.

Net proved reserve additions of 308 MMBOE resulted in a reserve replacement ratio of 189% (defined as the sum of extensions and discoveries, revisions, purchases and divestitures, divided by annual production). The organic reserve replacement ratio was 184% (defined as the sum of extensions and discoveries and revisions, divided by annual production).

Extensions and discoveries of reserves were the primary contributor to the increase in reserves totaling 356 MMBOE followed by net purchases of reserves totaling 6 MMBOE, with downward revisions of 54 MMBOE. PDP extensions were the result of 954 new wells in which the Company has an interest, and PUD extensions were the result of 344 new locations in which the Company has a working interest. Net purchases of reserves of 6 MMBOE were the net result of acquisitions of 70 MMBOE and divestitures of 64 MMBOE. Downward revisions of 54 MMBOE were primarily the result of 62 MMBOE associated with lower commodity prices partially offset by positive performance revisions and other adjustments.

The SEC PUD guidelines allow a company to book PUD reserves associated with projects that are to occur within the next five years. With its current development plan, the Company expects to continue its strong PUD conversion ratio in 2024 by converting an estimated 38% of its PUDs to a Proved Developed category, and develop approximately 83% of the consolidated 2023 year-end PUD reserves by the end of 2026.

Diamondback's exploration and development costs in 2023 were $2.7 billion. PD F&D costs were $9.73/BOE. PD F&D costs are defined as exploration and development costs, excluding midstream, divided by the sum of reserves associated with transfers from proved undeveloped reserves at year-end 2022 including any associated revisions in 2023 and extensions and discoveries placed on production during 2022. Drill bit F&D costs were $9.06/BOE including the effects of all revisions including pricing revisions. Drill bit F&D costs are defined as the exploration and development costs, excluding midstream, divided by the sum of extensions, discoveries and revisions.

FULL YEAR 2024 GUIDANCE

Below is Diamondback's guidance for the full year 2024, which includes first quarter production, cash tax and capital guidance.

CONFERENCE CALL

Diamondback will host a conference call and webcast for investors and analysts to discuss its results for the fourth quarter of 2023 on Wednesday, February 21, 2024 at 8:00 a.m. CT. Access to the webcast, and replay which will be available following the call, may be found here. The live webcast of the earnings conference call will also be available via Diamondback’s website at www.diamondbackenergy.com under the “Investor Relations” section of the site.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties, and assumptions. All statements, other than statements of historical fact, including statements regarding Diamondback’s: future performance; business strategy; future operations (including drilling plans and capital plans); estimates and projections of revenues, losses, costs, expenses, returns, cash flow, and financial position; reserve estimates and its ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures); and plans and objectives of management (including plans for future cash flow from operations and for executing environmental strategies) are forward-looking statements. When used in this news release, the words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “model,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions (including the negative of such terms) as they relate to Diamondback are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Although Diamondback believes that the expectations and assumptions reflected in its forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond Diamondback’s control. Accordingly, forward-looking statements are not guarantees of future performance and Diamondback’s actual outcomes could differ materially from what Diamondback has expressed in its forward-looking statements.

Factors that could cause the outcomes to differ materially include (but are not limited to) the following: changes in supply and demand levels for oil, natural gas, and natural gas liquids, and the resulting impact on the price for those commodities; the impact of public health crises, including epidemic or pandemic diseases, and any related company or government policies or actions; actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments, including any impact of the ongoing war in Ukraine and Israel-Hamas war on the global energy markets and geopolitical stability; instability in the financial sector; concerns over a potential economic slowdown or recession; inflationary pressures; rising interest rates and their impact on the cost of capital; regional supply and demand factors, including delays, curtailment delays or interruptions of production, or governmental orders, rules or regulations that impose production limits; federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations; physical and transition risks relating to climate change and the risks and other factors disclosed in Diamondback’s filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the Securities and Exchange Commission’s web site at http://www.sec.gov.

In light of these factors, the events anticipated by Diamondback’s forward-looking statements may not occur at the time anticipated or at all. Moreover, Diamondback operates in a very competitive and rapidly changing environment and new risks emerge from time to time. Diamondback cannot predict all risks, nor can it assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements it may make. Accordingly, you should not place undue reliance on any forward-looking statements made in this news release. All forward-looking statements speak only as of the date of this news release or, if earlier, as of the date they were made. Diamondback does not intend to, and disclaims any obligation to, update or revise any forward-looking statements unless required by applicable law.

(1)   Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl.
(2)   Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices and include gains and losses on cash settlements for matured commodity derivatives, which we do not designate for hedge accounting. Hedged prices exclude gains or losses resulting from the early settlement of commodity derivative contracts.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as net income (loss) attributable to Diamondback Energy, Inc., plus net income (loss) attributable to non-controlling interest ("net income (loss)") before non-cash (gain) loss on derivative instruments, net, interest expense, net, depreciation, depletion, amortization and accretion, depreciation and interest expense related to equity method investments, (gain) loss on extinguishment of debt, non-cash equity-based compensation expense, capitalized equity-based compensation expense, merger and integration expense, other non-cash transactions and provision for (benefit from) income taxes, if any. Adjusted EBITDA is not a measure of net income as determined by United States generally accepted accounting principles ("GAAP"). Management believes Adjusted EBITDA is useful because the measure allows it to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. The Company adds the items listed above to net income (loss) to determine Adjusted EBITDA because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of the Company’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets. The Company’s computation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts.

The following tables present a reconciliation of the GAAP financial measure of net income (loss) attributable to Diamondback Energy, Inc. to the non-GAAP financial measure of Adjusted EBITDA:

ADJUSTED NET INCOME

Adjusted net income is a non-GAAP financial measure equal to net income (loss) attributable to Diamondback Energy, Inc. plus net income (loss) attributable to non-controlling interest ("net income (loss)") adjusted for non-cash (gain) loss on derivative instruments, net, other non-cash transactions and related income tax adjustments, if any. The Company’s computation of adjusted net income may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts. Management believes adjusted net income helps investors in the oil and natural gas industry to measure and compare the Company's performance to other oil and natural gas companies by excluding from the calculation items that can vary significantly from company to company depending upon accounting methods, the book value of assets and other non-operational factors.

The following table presents a reconciliation of the GAAP financial measure of net income (loss) attributable to Diamondback Energy, Inc. to the non-GAAP measure of adjusted net income:

(1) The Company’s earnings (loss) per diluted share amount has been computed using the two-class method in accordance with GAAP. The two-class method is an earnings allocation which reflects the respective ownership among holders of common stock and participating securities. Diluted earnings per share using the two-class method is calculated as (i) net income attributable to Diamondback Energy, Inc, (ii) less the reallocation of $6 million in earnings attributable to participating securities, (iii) divided by diluted weighted average common shares outstanding.

OPERATING CASH FLOW BEFORE WORKING CAPITAL CHANGES, FREE CASH FLOW AND ADJUSTED FREE CASH FLOW

Operating cash flow before working capital changes, which is a non-GAAP financial measure, represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities. The Company believes operating cash flow before working capital changes is a useful measure of an oil and natural gas company’s ability to generate cash used to fund exploration, development and acquisition activities and service debt or pay dividends. The Company also uses this measure because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements that the Company may not control and may not relate to the period in which the operating activities occurred. This allows the Company to compare its operating performance with that of other companies without regard to financing methods and capital structure.

Free Cash Flow, which is a non-GAAP financial measure, is cash flow from operating activities before changes in working capital in excess of cash capital expenditures. Adjusted Free Cash Flow, which is a non-GAAP financial measure, is Free Cash Flow adjusted for early termination of commodity derivative contracts and the tax impact of certain divestitures. The Company believes that Free Cash Flow and Adjusted Free Cash Flow are useful to investors as they provide measures to compare both cash flow from operating activities and additions to oil and natural gas properties across periods on a consistent basis as adjusted for non-recurring early settlements of commodity derivative contracts and impacts of non-recurring divestitures. These measures should not be considered as an alternative to, or more meaningful than, net cash provided by operating activities as an indicator of operating performance. The Company's computation of operating cash flow before working capital changes, Free Cash Flow and Adjusted Free Cash Flow may not be comparable to other similarly titled measures of other companies. The Company uses Free Cash Flow to reduce debt, as well as return capital to stockholders as determined by the Board of Directors.

The following tables present a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP measure of operating cash flow before working capital changes and to the non-GAAP measures of Free Cash Flow and Adjusted Free Cash Flow:

(1) The year ended December 31, 2023 includes the tax impact of the disposal of certain Midland Basin water assets and Delaware Basin oil gathering assets.

NET DEBT

The Company defines the non-GAAP measure of net debt as total debt (excluding debt issuance costs, discounts, premiums and fair value hedges) less cash and cash equivalents. Net debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. The Company believes this metric is useful to analysts and investors in determining the Company's leverage position because the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt.

(1)  Excludes debt issuance costs, discounts, premiums and fair value hedges.

DERIVATIVES

As of February 19, 2024, the Company had the following outstanding consolidated derivative contracts, including derivative contracts at Viper Energy, Inc. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate pricing and Crude Oil Brent pricing and with natural gas derivative settlements based on the New York Mercantile Exchange Henry Hub pricing. When aggregating multiple contracts, the weighted average contract price is disclosed.

Investor Contact:
Adam Lawlis
+1 432.221.7467
alawlis@diamondbackenergy.com

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