Diamondback Energy, Inc. Announces First Quarter 2016 Financial and Operating Results
HIGHLIGHTS
- Diamondback has increased its 2016 production guidance to a range of 34.0 to 38.0 Mboe/d, up from 32.0 to 38.0 Mboe/d, as a result of retaining its third horizontal rig and adding a second dedicated completion crew to decrease its backlog of drilled but uncompleted wells ("DUCs").
- Diamondback's Q1 2016 production was 38.3 Mboe/d (76% oil), up 2% from 37.6 Mboe/d (76% oil) in Q4 2015.
- Lease operating expenses ("LOE") per boe declined 36% from
$8.14 /boe in the first quarter of 2015 to$5.23 /boe in the first quarter of 2016. The Company has lowered its full year 2016 LOE guidance range to$5.50 to$6.50 per boe from a prior range of$6.00 to$7.00 per boe.
- Leading-edge costs to drill, complete and equip are currently trending below
$5.0 million for a 7,500 foot lateral and between$6.0 and$6.5 million for a 10,000 foot lateral well.
- Diamondback continues to decrease drilling times and achieve new Company records:
- During the first quarter of 2016, the Company drilled a 9,800 foot lateral well in
Howard County in less than 11 days from spud to total depth ("TD"). - Diamondback drilled a 7,300 foot lateral well in
Spanish Trail in less than 10 days from spud to TD, a new record for the Company inMidland County . - In
April 2016 , the Company drilled two 10,000 foot lateral wells inAndrews County in 25 days from spud of the first well to rig release of the second well.
- During the first quarter of 2016, the Company drilled a 9,800 foot lateral well in
- Diamondback has completed a two-well pad in
Glasscock County targeting the Wolfcamp A and Wolfcamp B with an average lateral length of 7,465 feet. The two wells achieved a combined average peak 30-day 2-stream initial production ("IP") rate of 2,312 boe/d (84% oil) and an average of 2,096 boe/d (83% oil) over the first 75 days of production.
- In
March 2016 , Moody's reaffirmed Diamondback's B1 corporate family rating with a positive outlook. InFebruary 2016 ,Standard & Poor's raised its issue-level rating on Diamondback's senior notes to BB- from B+.Standard & Poor's had previously reaffirmed Diamondback's B+ corporate credit rating.
"During the first quarter of 2016, we witnessed commodity prices falling to levels not seen in many years. As we have discussed in the past, we slow down activity when our returns to stockholders decline. As such, we completed fewer horizontal wells during the first quarter of 2016 than in any quarter since the first half of 2013. With recent improvement in oil prices, we have retained our third operated horizontal rig and picked up a second dedicated completion crew to complete our backlog of nearly 30 DUCs. Increasing activity allows us to raise the lower end of our production guidance to 34.0 Mboe/d from 32.0 Mboe/d. We anticipate some lumpiness in
production during the second quarter of 2016, with the production response from the increased completion activity expected in the second half of 2016. Furthermore, we are prepared to pick up a fourth horizontal rig early in the third quarter of 2016 should oil prices continue to strengthen. We have over
HORIZONTAL DRILLING UPDATE
In
Diamondback is currently operating three horizontal rigs and is running two completion crews to work through its inventory of nearly 30 DUCs with a production response expected in the second half of this year.
Diamondback drilled 16 gross horizontal wells during the first quarter of 2016. Eight operated horizontal wells were completed in the first quarter of 2016, consisting of three Lower Spraberry wells, two Wolfcamp A wells and three Wolfcamp B wells. The Company also participated in one non-operated completion in the first quarter of 2016. Diamondback elected not to complete a number of wells during the first quarter of 2016 as a result of low commodity prices.
FINANCIAL HIGHLIGHTS
During the first quarter of 2016, the Company incurred an impairment charge of
The Company's first quarter 2016 adjusted net income attributable to
First quarter 2016 Adjusted EBITDA (as defined and reconciled below) was
As of
During the first quarter of 2016, capital spent for drilling and completion was
FULL YEAR 2016 GUIDANCE
Below is Diamondback's full year 2016 guidance, which has been updated to account for the increased
production guidance range of 34.0 to 38.0 Mboe/d, up from prior range of 32.0 to 38.0 Mboe/d. As a result of increased completion activity, the Company now expects to complete 35 to 70 gross horizontal wells in 2016, up from prior range of 30 to 70 gross horizontal wells. Diamondback has also lowered its LOE per boe guidance for 2016 to a range of
| 2016 Guidance | ||||||
| Total Net Production - MBoe/d | 34.0 - 38.0 | 6.0 - 6.5 | ||||
| Unit costs ($/boe) | ||||||
| Lease operating expenses, including workovers | n/a | |||||
| Gathering & Transportation | ||||||
| G&A | ||||||
| Cash G&A | ||||||
| Non-cash equity-based compensation | ||||||
| DD&A | ||||||
| Interest expense (net of interest income) | ||||||
| Production and ad valorem taxes (% of revenue)(a) | 8.0 | % | 8.0 | % | ||
| ($ - million) | ||||||
| Gross horizontal well costs(b) | n/a | |||||
| Horizontal wells completed (net) | 35 - 70 (29 - 58) | |||||
| Capital Budget ($ - million) | ||||||
| Horizontal drilling and completion | n/a | |||||
| Infrastructure | n/a | |||||
| Non-op and other | n/a | |||||
| 2016 Capital Spend | n/a | |||||
(a) Includes production taxes of 4.6% for crude oil and 7.5% for natural gas and NGLs and ad valorem taxes.
(b) Assumes a 7,500' average lateral length.
CONFERENCE CALL
Diamondback and Viper will host a joint conference call and webcast for investors and analysts to discuss their results for the first quarter of 2016 on
About
Diamondback is an independent oil and natural gas Company headquartered in
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than historical facts, that address activities that Diamondback assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements, including specifically the statements regarding the acquisitions
announced above. The forward-looking statements are based on management's current beliefs, based on currently available information, as to the outcome and timing of future events. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Diamondback. Information concerning these risks and other factors can be found in Diamondback's filings with the
| Consolidated Statements of Operations | |||||||
| (unaudited, in thousands, except share amounts and per share data) | |||||||
| Three Months Ended | |||||||
| 2016 | 2015 | ||||||
| Revenues | |||||||
| Oil, natural gas liquids and natural gas | 87,481 | 101,401 | |||||
| Operating Expenses | |||||||
| Lease operating expense | 18,223 | 22,456 | |||||
| Production and ad valorem taxes | 7,962 | 8,395 | |||||
| Gathering and transportation expense | 2,789 | 1,030 | |||||
| Depreciation, depletion and amortization | 42,069 | 59,677 | |||||
| Impairment of oil and natural gas properties | 30,816 | — | |||||
| General and administrative | 12,979 | 8,236 | |||||
| Asset retirement obligation accretion expense | 246 | 170 | |||||
| Total expenses | 115,084 | 99,964 | |||||
| Income (loss) from operations | (27,603 | ) | 1,437 | ||||
| Other income | 563 | 515 | |||||
| Net interest expense | (10,013 | ) | (10,497 | ) | |||
| Non-cash loss on derivative instruments | (3,691 | ) | (25,206 | ) | |||
| Gain (loss) on derivative instruments | 5,117 | 43,560 | |||||
| Total other income (expense), net | (8,024 | ) | 8,372 | ||||
| Income (loss) before income taxes | (35,627 | ) | 9,809 | ||||
| Provision for income taxes | — | 3,370 | |||||
| Net income (loss) | (35,627 | ) | 6,439 | ||||
| Less: Net income (loss) attributable to noncontrolling interest | (2,715 | ) | 590 | ||||
| Net income (loss) attributable to | (32,912 | ) | 5,849 | ||||
| Basic earnings per common share | $ | (0.46 | ) | $ | 0.10 | ||
| Diluted earnings per common share | $ | (0.46 | ) | $ | 0.10 | ||
| Weighted average number of basic shares outstanding | 71,026 | 58,386 | |||||
| Weighted average number of diluted shares outstanding | 71,026 | 58,626 | |||||
| Selected Operating Data | |||||||||||
| (unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| 2016 | 2015 | ||||||||||
| Production Data: | |||||||||||
| Oil (MBbl) | 2,635 | 2,132 | |||||||||
| Natural gas (MMcf) | 2,317 | 1,599 | |||||||||
| Natural gas liquids (MBbls) | 465 | 359 | |||||||||
| Oil Equivalents (1)(2) (MBOE) | 3,486 | 2,757 | |||||||||
| Average daily production(2) (BOE/d) | 38,308 | 30,636 | |||||||||
| % Oil | 76 | % | 77 | % | |||||||
| Average sales prices: | |||||||||||
| Oil, realized ($/Bbl) | $ | 29.99 | $ | 43.59 | |||||||
| Natural gas realized ($/Mcf) | $ | 1.74 | $ | 2.72 | |||||||
| Natural gas liquids ($/Bbl) | $ | 9.54 | $ | 11.53 | |||||||
| Average price realized ($/BOE) | $ | 25.09 | $ | 36.78 | |||||||
| Oil, hedged(3) ($/Bbl) | $ | 31.94 | $ | 64.01 | |||||||
| Average price, hedged(3) ($/BOE) | $ | 26.56 | $ | 52.57 | |||||||
| Average Costs per BOE: | |||||||||||
| Lease operating expense | $ | 5.23 | $ | 8.14 | |||||||
| Production and ad valorem taxes | 2.28 | 3.04 | |||||||||
| Gathering and transportation expense | 0.80 | 0.37 | |||||||||
| General and administrative - cash component | 1.33 | 1.20 | |||||||||
| Total operating expense - cash | $ | 9.64 | $ | 12.75 | |||||||
| General and administrative - non-cash component | $ | 2.39 | $ | 1.79 | |||||||
| Depreciation, depletion, and amortization | 12.07 | 21.64 | |||||||||
| Interest expense | 2.87 | 3.81 | |||||||||
| Total expenses | $ | 17.33 | $ | 27.24 | |||||||
| (1 | ) | Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl. | |||||||||
| (2 | ) | The volumes presented are based on actual results and are not calculated using the rounded numbers in the table above. | |||||||||
| (3 | ) | Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices. Our calculation of such effects include realized gains and losses on cash settlements for commodity derivatives, which we do not designate for hedge accounting. | |||||||||
NON-GAAP FINANCIAL MEASURES
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) plus non-cash (gain) loss on derivative instruments, net, interest expense, depreciation, depletion and amortization, impairment of oil and gas properties, non-cash equity-based compensation expense, capitalized equity-based compensation expense, asset retirement obligation accretion expense and income tax (benefit) provision. Adjusted EBITDA is not a measure of net income (loss) as determined by United States' generally accepted accounting principles, or GAAP. Management believes Adjusted EBITDA is useful because it 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) in arriving at 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 (loss) 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, none of which are components of Adjusted EBITDA. Adjusted net income is a non-GAAP financial measure equal to net income attributable to
The following tables present a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income.
| Reconciliation of Adjusted EBITDA to Net Income | ||||||||
| (unaudited, in thousands) | ||||||||
| Three Months Ended | ||||||||
| 2016 | 2015 | |||||||
| Net income (loss) | $ | (35,627 | ) | $ | 6,439 | |||
| Non-cash loss on derivative instruments, net | 3,691 | 25,206 | ||||||
| Interest expense | 10,013 | 10,497 | ||||||
| Depreciation, depletion and amortization | 42,069 | 59,677 | ||||||
| Impairment of oil and gas properties | 30,816 | — | ||||||
| Non-cash equity-based compensation expense | 11,114 | 7,063 | ||||||
| Capitalized equity-based compensation expense | (2,764 | ) | (2,139 | ) | ||||
| Asset retirement obligation accretion expense | 246 | 170 | ||||||
| Income tax provision | — | 3,370 | ||||||
| Consolidated Adjusted EBITDA | $ | 59,558 | $ | 110,283 | ||||
| EBITDA attributable to noncontrolling interest | (1,421 | ) | (1,752 | ) | ||||
| Adjusted EBITDA attributable to | $ | 58,137 | $ | 108,531 | ||||
Adjusted net income is a performance measure used by management to evaluate performance, prior to non-cash (gains) losses on derivative instruments, impairment of oil and gas properties and related income tax adjustments.
The following table presents a reconciliation of adjusted net income to net income:
| Adjusted Net Income | ||||||||
| (unaudited, in thousands, except share amounts and per share data) | ||||||||
| Three Months Ended | ||||||||
| 2016 | 2015 | |||||||
| Net income (loss) attributable to | $ | (32,912 | ) | $ | 5,849 | |||
| Plus: | ||||||||
| Non-cash loss on derivative instruments, net | 3,691 | 25,206 | ||||||
| Impairment of oil and gas properties | 30,816 | — | ||||||
| Income tax adjustment for above items* | — | (8,660 | ) | |||||
| Adjusted net income attributable to | $ | 1,595 | $ | 22,395 | ||||
| Adjusted net income per common share: | ||||||||
| Basic | $ | 0.02 | $ | 0.38 | ||||
| Diluted | $ | 0.02 | $ | 0.38 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 71,026 | 58,386 | ||||||
| Diluted | 71,026 | 58,626 | ||||||
*The tax impact is computed utilizing the Company's effective federal and state income tax rates. The income tax rate for the three months ended
| Derivatives Information | ||||
| (unaudited) | ||||
| Average Bbls | Average | |||
| Oil Swaps | Per Day | Price per Bbl | ||
| 2016 | ||||
| Second Quarter - WTI | 2,000 | 42.68 | ||
| Third Quarter - WTI | 3,000 | 43.52 | ||
| Fourth Quarter - WTI | 3,000 | 43.52 | ||
| 2017 | ||||
| First Quarter - WTI | 3,000 | 45.86 | ||
| Second Quarter - WTI | 3,000 | 45.86 | ||
| Third Quarter - WTI | 3,000 | 45.86 | ||
| Fourth Quarter - WTI | 3,000 | 45.86 | ||
Investor Contact:Adam Lawlis +1 432.221.7467 alawlis@diamondbackenergy.com
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