Diamondback Energy, Inc. Announces Third Quarter 2018 Financial and Operating Results
THIRD QUARTER HIGHLIGHTS
- Q3 2018 net income of
$157 million , or$1.59 per diluted share; adjusted net income (as defined and reconciled below) of$165 million , or$1.67 per diluted share - Q3 2018 production of 123.0 Mboe/d (72% oil), up 9% over Q2 2018 and 45% year over year
- Increasing full year 2018 production guidance range to 118.5 – 119.5 Mboe/d, up 2% from prior guidance midpoint; implies 50% annualized growth at the midpoint from full year 2017 average daily production
- Q3 2018 cash dividend of
$0.125 per share payable onNovember 26, 2018 ; implies a 0.4% annualized yield based on theNovember 5, 2018 share closing price of$115.99 - Shareholder meetings to vote on the previously announced all-stock acquisition of
Energen Corporation are scheduled forNovember 27 ; deal expected to close shortly thereafter pending shareholder approval - On
October 31, 2018 , closed previously announced acquisition of leasehold interests and related assets fromAjax Resources, LLC ("Ajax") - Also on
October 31, 2018 , closed additional tack-on acquisitions of 3,646 net leasehold acres, ~3,500 boe/d of estimated current net production and related assets inNorthwest Martin andNortheast Andrews counties fromExL Petroleum Management, LP ,ExL Petroleum Operating, Inc. ("ExL") andEnergyQuest II, LLC ("EnergyQuest") for$312.5 million , subject to adjustment; complementary assets adjacent to existing Diamondback and Ajax acreage - Rattler Midstream intends to exercise its right to acquire a 10% equity interest in the Gray Oak Pipeline, subject to certain closing conditions; Diamondback has increased its volume commitment to the Gray Oak Pipeline from 50,000 bo/d to 100,000 bo/d, taking Diamondback's total volume commitment to new long-haul pipelines to 200,000 bo/d (including previously announced volume commitment of 100,000 bo/d on the EPIC Crude Oil Pipeline project)
- Acquired ownership of overriding royalty interests across a large portion of Ajax's asset base in
Northwest Martin andNortheast Andrews counties; increases net revenue interest by 1% across field - Executed joint development agreement with Carlyle for development of the San Pedro area of
Pecos County and commenced drilling operations
“Diamondback continued to deliver on both our near-term objectives and long-term strategic initiatives through the third quarter and into the fourth quarter of 2018. First, we were able to deliver significant quarter over quarter production growth while maintaining our best in class margins and operational efficiencies. Second, we closed multiple highly complementary asset acquisitions in the
Mr. Stice continued, "Since the beginning of the year, Diamondback has been able to generate
OPERATIONAL HIGHLIGHTS
Diamondback’s Q3 2018 production was 123.0 Mboe/d (72% oil), up 45% year over year from 85.0 Mboe/d in Q3 2017, and up 9% quarter over quarter from 112.6 Mboe/d in Q2 2018.
During the third quarter of 2018, Diamondback drilled 40 gross horizontal wells and turned 43 operated horizontal wells to production. The average completed lateral length for third quarter wells was 9,638 feet. Operated completions during the third quarter consisted of 18 Wolfcamp A wells, 11 Wolfcamp B wells, 10 Lower Spraberry wells, two Middle Spraberry wells and two Second Bone Spring wells.
The Company operated 13 drilling rigs and five dedicated frac spreads during the third quarter of 2018. Following the closing of the Ajax acquisition, Diamondback assumed operations of one additional operated rig, and plans to maintain this cadence for the remainder of 2018. The Company now expects to turn between 170 and 175 gross operated horizontal wells to production for the full year 2018.
OPERATIONS UPDATE
In
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In the
FINANCIAL HIGHLIGHTS
Diamondback's third quarter 2018 net income was
Third quarter 2018 Adjusted EBITDA (as defined and reconciled below) was
Third quarter 2018 average realized prices were
Diamondback's cash operating costs for the third quarter of 2018 were
As of September 30, 2018, Diamondback had
During the third quarter of 2018, Diamondback spent
DIVIDEND DECLARATION
Diamondback announced today that the Company's Board of Directors has declared a cash dividend for the third quarter of
FULL YEAR 2018 GUIDANCE
Giving effect to the Ajax, ExL and EnergyQuest acquisitions that closed on
Additionally, Diamondback is increasing full year 2018
2018 Guidance | ||||
Diamondback Energy, Inc. | Viper Energy Partners LP | |||
Total Net Production – MBoe/d | 118.5 – 119.5 | 16.75 - 17.25 | ||
Oil Production - % of Net Production | 72% - 74% | 69% - 73% | ||
Unit costs ($/boe) | ||||
Lease operating expenses, including workovers | $3.75 - $4.50 | |||
Gathering & Transportation | $0.25 - $0.75 | $0.20 - $0.40 | ||
G&A | ||||
Cash G&A | Under $1.00 | $0.75 - $1.25 | ||
Non-cash equity-based compensation | $0.50 - $1.00 | $0.50 - $0.75 | ||
DD&A | $11.00 - $14.00 | $8.00 - $11.00 | ||
Interest expense (net of interest income) | $1.00 - $2.00 | |||
Production and ad valorem taxes (% of revenue)(a) | 7.0% | 7.0% | ||
Corporate tax rate (% of pre-tax income) | 20% - 23% | |||
Gross horizontal D,C&E/Ft. - Midland Basin | $760 - $810 | |||
Gross horizontal D,C&E/Ft. - Delaware Basin | $1,175 - $1,225 | |||
Horizontal wells completed (net) | 170 - 175 (146 - 154) | |||
Capital Budget ($ - million) | ||||
Horizontal drilling and completion | $1,250 - $1,300 | |||
Infrastructure | $250 - $275 | |||
2018 Capital Spend | $1,500 - $1,575 |
(a) Includes production taxes of 4.6% for crude oil and 7.5% for natural gas and NGLs and ad valorem taxes.
CONFERENCE CALL
Diamondback will host a conference call and webcast for investors and analysts to discuss its results for the third quarter of 2018 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 Private Securities Litigation Reform Act of 1995. 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. 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
Diamondback Energy, Inc. | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(unaudited, in thousands, except share amounts and per share data) | |||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Oil, natural gas and natural gas liquids | $ | 527,068 | $ | 299,237 | $ | 1,508,764 | $ | 799,169 | |||||||
Lease bonus | 1,322 | 322 | 2,250 | 2,507 | |||||||||||
Midstream services | 7,280 | 1,694 | 26,658 | 4,241 | |||||||||||
Other operating income | 2,359 | — | 6,825 | — | |||||||||||
Total revenues | 538,029 | 301,253 | 1,544,497 | 805,917 | |||||||||||
Operating expenses: | |||||||||||||||
Lease operating expenses | 49,111 | 32,498 | 129,103 | 88,113 | |||||||||||
Production and ad valorem taxes | 33,536 | 18,371 | 93,042 | 49,975 | |||||||||||
Gathering and transportation | 6,976 | 3,476 | 18,074 | 9,110 | |||||||||||
Midstream services | 19,725 | 4,445 | 48,515 | 7,127 | |||||||||||
Depreciation, depletion and amortization | 146,318 | 87,579 | 391,401 | 221,681 | |||||||||||
General and administrative expenses(1) | 14,185 | 11,888 | 45,039 | 37,524 | |||||||||||
Asset retirement obligation accretion | 387 | 357 | 1,107 | 1,030 | |||||||||||
Other operating expense | 940 | — | 2,416 | — | |||||||||||
Total expenses | 271,178 | 158,614 | 728,697 | 414,560 | |||||||||||
Income from operations | 266,851 | 142,639 | 815,800 | 391,357 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense, net | (18,548 | ) | (9,192 | ) | (49,345 | ) | (29,662 | ) | |||||||
Other income, net | 1,962 | 3 | 89,170 | 9,472 | |||||||||||
Gain (loss) on derivative instruments, net | (48,373 | ) | (50,645 | ) | (139,305 | ) | 20,376 | ||||||||
Gain (loss) on revaluation of investment | (199 | ) | — | 5,165 | — | ||||||||||
Total other income (expense), net | (65,158 | ) | (59,834 | ) | (94,315 | ) | 186 | ||||||||
Income before income taxes | 201,693 | 82,805 | 721,485 | 391,543 | |||||||||||
Provision for income taxes | 42,276 | 857 | 82,750 | 4,393 | |||||||||||
Net income | 159,417 | 81,948 | 638,735 | 387,150 | |||||||||||
Net income attributable to non-controlling interest | 2,363 | 8,924 | 99,723 | 19,448 | |||||||||||
Net income attributable to Diamondback Energy, Inc. | $ | 157,054 | $ | 73,024 | $ | 539,012 | $ | 367,702 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 1.59 | $ | 0.74 | $ | 5.47 | $ | 3.81 | |||||||
Diluted | $ | 1.59 | $ | 0.74 | $ | 5.45 | $ | 3.80 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 98,638 | 98,144 | 98,603 | 96,491 | |||||||||||
Diluted | 98,818 | 98,369 | 98,820 | 96,752 | |||||||||||
Dividends declared per share | 0.125 | — | 0.375 | — |
(1) Includes non-cash expense of
Diamondback Energy, Inc. | |||||||||||
Selected Operating Data | |||||||||||
(unaudited) | |||||||||||
Three Months Ended September 30, 2018 |
Three Months Ended June 30, 2018 |
Three Months Ended September 30, 2017 |
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Production Data: | |||||||||||
Oil (MBbl) | 8,120 | 7,478 | 5,678 | ||||||||
Natural gas (MMcf) | 7,804 | 7,367 | 5,935 | ||||||||
Natural gas liquids (MBbls) | 1,893 | 1,540 | 1,155 | ||||||||
Oil Equivalents (MBOE)(1)(2) | 11,314 | 10,246 | 7,823 | ||||||||
Average daily production (BOE/d)(2) | 122,975 | 112,592 | 85,029 | ||||||||
% Oil | 72 | % | 73 | % | 73 | % | |||||
Average sales prices: | |||||||||||
Oil, realized ($/Bbl) | $ | 55.99 | $ | 61.57 | $ | 45.62 | |||||
Natural gas realized ($/Mcf) | 1.90 | 1.54 | 2.51 | ||||||||
Natural gas liquids ($/Bbl) | 30.44 | 28.02 | 21.87 | ||||||||
Average price realized ($/BOE) | 46.59 | 50.26 | 38.25 | ||||||||
Oil, hedged ($/Bbl)(3) | 51.23 | 55.53 | 46.90 | ||||||||
Natural gas, hedged ($ per MMbtu)(3) | 1.93 | 1.75 | 2.64 | ||||||||
Average price, hedged ($/BOE)(3) | 43.19 | 45.87 | 39.28 | ||||||||
Average Costs per BOE: | |||||||||||
Lease operating expense | $ | 4.34 | $ | 4.16 | $ | 4.15 | |||||
Production and ad valorem taxes | 2.96 | 3.14 | 2.35 | ||||||||
Gathering and transportation expense | 0.62 | 0.66 | 0.44 | ||||||||
General and administrative - cash component | 0.78 | 0.87 | 0.73 | ||||||||
Total operating expense - cash | $ | 8.70 | $ | 8.83 | $ | 7.67 | |||||
General and administrative - non-cash component | $ | 0.47 | $ | 0.55 | $ | 0.79 | |||||
Depreciation, depletion and amortization | 12.93 | 12.68 | 11.20 | ||||||||
Interest expense, net | 1.64 | 1.67 | 1.18 |
(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 includes 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 plus non-cash (gain) loss on derivative instruments, net, net interest expense, depreciation, depletion and amortization, non-cash equity-based compensation expense, capitalized equity-based compensation expense, asset retirement obligation accretion expense, gain on revaluation of investment and income tax (benefit) provision. 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 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 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 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 (loss).
Diamondback Energy, Inc. | |||||||||||
Reconciliation of Adjusted EBITDA to Net Income | |||||||||||
(unaudited, in thousands) | |||||||||||
Three Months Ended September 30, 2018 |
Three Months Ended June 30, 2018 |
Three Months Ended September 30, 2017 |
|||||||||
Net income | $ | 159,417 | $ | 301,164 | $ | 81,948 | |||||
Non-cash loss on derivative instruments, net | 9,913 | 13,667 | 58,645 | ||||||||
Interest expense, net | 18,548 | 17,096 | 9,192 | ||||||||
Depreciation, depletion and amortization | 146,318 | 129,867 | 87,579 | ||||||||
Non-cash equity-based compensation expense | 7,688 | 7,999 | 8,354 | ||||||||
Capitalized equity-based compensation expense | (2,338 | ) | (2,349 | ) | (2,167 | ) | |||||
Asset retirement obligation accretion expense | 387 | 365 | 357 | ||||||||
Loss (gain) on revaluation of investment | 199 | (4,465 | ) | — | |||||||
Income tax (benefit) provision | 42,276 | (6,607 | ) | 857 | |||||||
Consolidated Adjusted EBITDA | $ | 382,408 | $ | 456,737 | $ | 244,765 | |||||
Adjustment for non-controlling interest | (10,832 | ) | (86,568 | ) | (12,306 | ) | |||||
Adjusted EBITDA attributable to Diamondback Energy, Inc. | $ | 371,576 | $ | 370,169 | $ | 232,459 | |||||
Adjusted EBITDA per common share: | |||||||||||
Basic | $ | 3.77 | $ | 3.75 | $ | 2.37 | |||||
Diluted | $ | 3.76 | $ | 3.75 | $ | 2.36 | |||||
Weighted average common shares outstanding: | |||||||||||
Basic | 98,638 | 98,614 | 98,144 | ||||||||
Diluted | 98,818 | 98,797 | 98,369 |
Adjusted net income is a performance measure used by management to evaluate performance, prior to non-cash loss on derivative instruments, gain on revaluation of investment, loss on sale of assets, other income and related income tax adjustments.
The following table presents a reconciliation of adjusted net income to net income:
Diamondback Energy, Inc. | |||||||
Adjusted Net Income | |||||||
(unaudited, in thousands, except share amounts and per share data) | |||||||
Three Months Ended September 30, 2018 |
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Pre-Tax Amounts | Amounts Per Share | ||||||
Net income attributable to Diamondback Energy, Inc. | $ | 157,054 | $ | 1.59 | |||
Non-cash loss on derivative instruments | 9,913 | 0.10 | |||||
Gain on revaluation of investments | 199 | — | |||||
Adjusted income excluding non-cash loss on derivative instruments, gain on revaluation of investment and other income | 167,166 | 1.69 | |||||
Income tax adjustment for above items | (2,190 | ) | (0.02 | ) | |||
Adjusted net income | $ | 164,976 | $ | 1.67 |
Derivatives
As of the filing date, the Company had the following outstanding derivative contracts. 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 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.
Crude Oil (Bbls/day, $/Bbl) | |||||||||||||||||||
Q4 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | |||||||||||||||
Swaps - West Texas Intermediate (Cushing) | 26,000 | 7,000 | 4,000 | 4,000 | 3,000 | ||||||||||||||
$ | 51.27 | $ | 55.29 | $ | 51.86 | $ | 51.59 | $ | 49.82 | ||||||||||
Swaps - West Texas Intermediate (Magellan East Houston) | 7,000 | 7,000 | 4,000 | 2,000 | 1,000 | ||||||||||||||
$ | 71.06 | $ | 69.65 | $ | 74.64 | $ | 75.65 | $ | 75.74 | ||||||||||
Swaps - Crude Brent Oil | 10,000 | 5,000 | 2,000 | 2,000 | 2,000 | ||||||||||||||
$ | 62.51 | $ | 72.82 | $ | 75.43 | $ | 74.95 | $ | 74.45 | ||||||||||
Basis Swaps | 15,000 | 3,000 | — | — | — | ||||||||||||||
$ | (0.88 | ) | $ | (9.42 | ) | $ | — | $ | — | $ | — | ||||||||
Three-Way Collar Short Put - West Texas Intermediate (Cushing) | — | 10,000 | 10,000 | — | — | ||||||||||||||
$ | — | $ | 45.00 | $ | 45.00 | $ | — | $ | — | ||||||||||
Three-Way Collar Floor - West Texas Intermediate (Cushing) | — | 10,000 | 10,000 | — | — | ||||||||||||||
$ | — | $ | 55.00 | $ | 55.00 | $ | — | $ | — | ||||||||||
Three-Way Collar Ceiling - West Texas Intermediate (Cushing) | — | 10,000 | 10,000 | — | — | ||||||||||||||
$ | — | $ | 70.76 | $ | 69.71 | $ | — | — | |||||||||||
Three-Way Collar Short Put - West Texas Intermediate (Magellan East Houston) | 7,000 | 7,000 | 4,000 | — | — | ||||||||||||||
$ | 56.43 | $ | 56.43 | $ | 57.50 | $ | — | $ | — | ||||||||||
Three-Way Collar Floor - West Texas Intermediate (Magellan East Houston) | 7,000 | 7,000 | 4,000 | — | — | ||||||||||||||
$ | 66.43 | $ | 66.43 | $ | 67.50 | $ | — | $ | — | ||||||||||
Three-Way Collar Ceiling - West Texas Intermediate (Magellan East Houston) | 7,000 | 7,000 | 4,000 | — | — | ||||||||||||||
$ | 78.82 | $ | 77.56 | $ | 77.68 | $ | — | $ | — | ||||||||||
Three-Way Collar Short Put - Crude Brent Oil | — | 8,000 | 8,000 | 4,000 | 2,000 | ||||||||||||||
$ | — | $ | 55.00 | $ | 55.00 | $ | 55.00 | $ | 55.00 | ||||||||||
Three-Way Collar Floor - Crude Brent Oil | — | 8,000 | 8,000 | 4,000 | 2,000 | ||||||||||||||
$ | — | $ | 65.00 | $ | 65.00 | $ | 65.00 | $ | 65.00 | ||||||||||
Three-Way Collar Ceiling - Crude Brent Oil | — | 8,000 | 8,000 | 4,000 | 2,000 | ||||||||||||||
$ | — | $ | 81.25 | $ | 81.25 | $ | 84.58 | $ | 87.90 |
Natural Gas (Mmbtu/day, $/Mmbtu) | |||
Q4 2018 | |||
Swaps | 20,000 | ||
$ | 3.07 |
Investor Contact:
+1 432.221.7467
alawlis@diamondbackenergy.com
Source: Diamondback Energy, Inc.