UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 6, 2019
___________
(Exact Name of Registrant as Specified in Charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
(Address of principal executive offices) | (Zip code) | |||
(432 ) 221-7400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 6, 2019, Diamondback Energy, Inc. issued a press release announcing financial and operating results for the second quarter ended June 30, 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DIAMONDBACK ENERGY, INC. | ||||
Date: | August 6, 2019 | |||
By: | /s/ Teresa L. Dick | |||
Name: | Teresa L. Dick | |||
Title: | Executive Vice President and Chief Accounting Officer | |||
Exhibit 99.1
DIAMONDBACK ENERGY, INC. ANNOUNCES SECOND QUARTER 2019 FINANCIAL AND OPERATING RESULTS
Midland, TX (August 6, 2019) - Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the second quarter ended June 30, 2019.
HIGHLIGHTS
• | Q2 2019 net income of $349 million, or $2.11 per diluted share; adjusted net income (as defined and reconciled below) of $280 million, or $1.70 per diluted share |
• | Q2 2019 Consolidated Adjusted EBITDA (as defined and reconciled below) of $789 million; adjusted EBITDA net of non-controlling interest of $772 million |
• | Q2 2019 production of 280.4 Mboe/d (68% oil), up 7% over Q1 2019 and 149% over Q2 2018 |
• | Updated 2019 production guidance of 277.0 - 284.0 Mboe/d, narrowed from prior guidance of 272.0 - 287.0 Mboe/d; implies 26% annualized production growth at the midpoint from 2018 combined volumes |
• | Second quarter capital expenditures of $721 million; turned 69 wells to production |
• | Updated 2019 CAPEX guidance of $2.725 - $2.950 billion, narrowed from $2.7 - $3.0 billion previously; expect to complete between 300 and 320 operated horizontal wells, up from 290 to 320 wells previously |
• | Declared Q2 2019 cash dividend of $0.1875 per share payable on August 26, 2019; implies a 0.8% annualized yield based on the August 2, 2019 share closing price of $97.49 |
• | Repurchased 1,016,000 shares in Q2 2019 for ~$104 million; represents 5.2% of Board approved program for up to $2.0 billion of stock repurchases through December 31, 2020 |
• | Received $720 million in net cash proceeds upon the closing of subsidiary Rattler Midstream LP's (NASDAQ: RTLR) ("Rattler") initial public offering of 43.7 million units in May 2019 |
• | Closed divestiture of conventional Permian assets acquired from Energen on July 1, 2019; closed another previously announced divestiture of non-core Southern Midland Basin assets in Q2 2019 |
• | As previously announced, divesting 5,090 net royalty acres in the Permian Basin through a drop down transaction ("Drop Down") to subsidiary Viper Energy Partners LP (NASDAQ: VNOM) ("Viper"), for 18.3 million Class B units of Viper, an equal number of common units in Viper's operating subsidiary and $150 million in cash; the Drop Down, with an aggregate value of $700 million, is expected to close in Q4 2019, subject to continued diligence and closing conditions |
• | Company expects unhedged oil price realizations of 95% or greater of WTI for the second half of 2019, based on existing firm transportation agreements and current commodity prices |
"In the second quarter of 2019, Diamondback continued to execute on its disciplined 2019 capital plan, delivering record EBITDA per share from 7% sequential production growth. Our per lateral foot well costs, which include every dollar spent bringing our operated wells to production, and the six months of production costs thereafter, are down 7% year over year from Q2 2018 in the Midland Basin and 16% in the Delaware Basin. As such, we are narrowing the midpoint of our 2019 capital budget and increasing the midpoint of our operated completions, which implies over $110 per completed lateral foot of improved capital efficiency versus our initial budget presented in December. Based on existing contracts in place and current commodity prices, we expect to realize 95% or greater of WTI for the second half of 2019, putting our widest oil basis differential quarters behind us. By early next year, we expect to realize oil prices at parity with or greater
than WTI, which we believe, combined with our track record of cost leadership, will fuel free cash flow per share growth well in excess of our future production growth," stated Travis Stice, Chief Executive Officer of Diamondback.
Mr. Stice continued, “Following the successful initial public offering of Rattler Midstream in late May, Diamondback immediately commenced the next phase in our previously announced return of capital program. Through the end of the second quarter, Diamondback repurchased approximately $104 million of stock while reducing its consolidated net debt by $400 million relative to the prior quarter. On July 1, 2019, we closed the previously announced divestiture of conventional Permian assets acquired in the Energen acquisition, and expect to close the recently announced Drop Down sale of mineral assets to Viper in the fourth quarter of 2019. We intend to use proceeds from both transactions, along with increasing free cash flow from operations, for debt reduction and continuing our stock repurchase program, as we also work to strengthen our balance sheet and deliver industry leading per share metrics and growth. Diamondback has now completed every major strategic objective and exceeded our stated synergies presented one year ago when we announced the Energen acquisition. Our capital efficiency continues to improve with our post-close well costs now significantly below Diamondback standalone well costs in the second quarter of 2018, all while doubling the size of our team over the last year."
OPERATIONS UPDATE
Diamondback’s Q2 2019 production averaged 280.4 Mboe/d (68% oil), up 149% year over year from 112.6 Mboe/d in Q2 2018, and up 7% quarter over quarter from 262.6 Mboe/d in Q1 2019.
During the second quarter of 2019, Diamondback drilled 89 gross horizontal wells and turned 69 operated horizontal wells to production. The average lateral length for the wells completed during the second quarter was 9,833 feet. Operated completions during the second quarter consisted of 45 Wolfcamp A wells, 10 Lower Spraberry wells, six Wolfcamp B wells, three Middle Spraberry wells, two Jo Mill wells, two Second Bone Springs wells and one Third Bone Springs well.
In the first half of 2019, the Company drilled 172 gross horizontal wells and turned 151 operated horizontal wells to production. The average lateral length for wells completed during the first six months of 2019 was 9,733 feet, and consisted of 84 Wolfcamp A wells, 33 Lower Spraberry wells, 18 Wolfcamp B wells, five Middle Spraberry wells, five Second Bone Springs wells, four Third Bone Springs wells and two Jo Mill wells.
FINANCIAL HIGHLIGHTS
Diamondback's second quarter 2019 net income was $349 million, or $2.11 per diluted share. Adjusted net income (a non-GAAP financial measure as defined and reconciled below) was $280 million, or $1.70 per diluted share, up 22% from $1.39 in Q1 2019 and up 7% from $1.59 in Q2 2018
Second quarter 2019 Adjusted EBITDA (as defined and reconciled below) was $772 million, up 19% from $651 million in Q1 2019 and up 109% from $370 million in Q2 2018.
Second quarter 2019 average realized prices were $54.41 per barrel of oil, $(0.41) per Mcf of natural gas and $13.60 per barrel of natural gas liquids, resulting in a total equivalent unhedged price of $39.19/boe. As previously indicated, Diamondback expects realized prices to improve through the remainder of 2019 and
2020 as fixed differential contracts roll off and convert to our commitments on the EPIC and Gray Oak pipelines or move to the current Midland market price. Based on current market differentials and estimated in-basin gathering costs, Diamondback expects to realize 95% or greater of WTI for the second half of 2019 and 100% or greater of WTI in 2020, all including the effect of current basis hedges, firm transportation agreements and in-basin gathering costs.
Diamondback's cash operating costs for the second quarter of 2019 were $8.67 per boe, including LOE of $4.98 per boe, cash G&A expenses of $0.51 per boe and taxes and transportation of $3.18 per boe.
As of June 30, 2019, Diamondback had $310 million in standalone cash and approximately $1.6 billion of outstanding borrowings under its revolving credit facility. In connection with its Spring 2019 redetermination, which closed in June, the borrowing base under Diamondback's credit facility increased to $3.4 billion from $2.65 billion, with the Company's aggregate elected commitment amount unchanged at $2.5 billion. This borrowing base excludes the value of reserves held by Energen, whose final borrowing base prior to closing the merger with Diamondback was $2.15 billion. As part of this redetermination, the Company added "fall away" provisions, which would make the Company's revolving credit facility unsecured in the event the Company receives an investment grade rating from either S&P or Moody's, along with its current investment grade rating at Fitch.
During the second quarter of 2019, Diamondback spent $579 million on drilling and completion, $42 million on non-operated properties, $47 million on infrastructure and $53 million on midstream, for total capital expenditures of $721 million. In the first half of 2019, the Company spent $1,100 million on drilling and completion, $55 million on non-operated properties, $83 million on infrastructure and $111 million on midstream, for total capital expenditures of $1,349 million.
CAPITAL RETURN PROGRAM
Diamondback announced today that the Company's Board of Directors declared a cash dividend for the second quarter of 18.75 cents per common share payable on August 26, 2019, to stockholders of record at the close of business on August 16, 2019.
In May 2019, Diamondback's Board of Directors authorized the Company to acquire up to $2.0 billion of common stock through December 31, 2020. During the second quarter of 2019, Diamondback repurchased 1,016,000 shares of common stock for approximately $104 million.
The repurchase program is authorized to extend through December 31, 2020, and the Company intends to purchase stock under the repurchase program opportunistically with funds from cash generated from operations and liquidity events such as the sale of assets. This repurchase program may be suspended from time to time, modified, extended or discontinued by the Board of Directors at any time. Purchases under the repurchase program may be made from time to time in open market or privately negotiated 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, contractual obligations and other factors. Any stock purchased as part of this program will be retired and made available for future issuances by the Company.
FULL YEAR 2019 GUIDANCE
Diamondback is narrowing its full year 2019 guidance for average daily production to between 277.0 to 284.0 Mboe/d, up slightly at the midpoint from prior guidance of 272.0 to 287.0 Mboe/d. As a result of continued cost reductions and capital efficiency improvements, the Company expects full year 2019 CAPEX between $2.725 - $2.950 billion, down slightly at the midpoint from $2.7 - $3.0 billion previously, and is lowering Midland Basin well costs to between $730 - $760 per foot, down from $740 - $780 per foot previously. Diamondback now expects to complete 300 - 320 gross operated horizontal wells in 2019, up 2% from the midpoint of prior guidance of 290 - 320 wells. Finally, the Company is lowering guidance for cash G&A expense to under $0.75/boe, down from under $1.00/boe previously.
2019 Guidance | ||
Diamondback Energy, Inc. | Viper Energy Partners LP | |
Total Net Production – MBoe/d | 277.0 - 284.0 | 21.5 - 22.0 |
Oil Production - % of Net Production | 68% - 70% | 67% - 71% |
Unit costs ($/boe) | ||
Lease operating expenses, including workovers | $4.25 - $4.75 | |
Gathering & Transportation | $0.40 - $0.70 | |
G&A | ||
Cash G&A | Under $0.75 | Under $1.00 |
Non-cash equity-based compensation | $0.75 - $1.50 | $0.40 - $0.65 |
D,D&A | $13.00 - $15.00 | $9.00 - $10.50 |
Interest expense (net of interest income) | $1.00 - $1.50 | |
Midstream service expense (net of revenue; $MM) | $0 - $10 | |
Production and ad valorem taxes (% of revenue)(a) | 7.0% | 7.0% |
Corporate tax rate (% of pre-tax income) | 23% | |
Gross horizontal D,C&E/Ft. - Midland Basin | $730 - $760 | |
Gross horizontal D,C&E/Ft. - Delaware Basin | $1,075 - $1,150 | |
Horizontal wells completed (net) | 300 - 320 (265 - 285) | |
Average lateral length (Ft.) | 9,500 | |
Capital Budget ($ - million) | ||
Horizontal drilling and completion | $2,325 - $2,525 | |
Midstream (ex. long-haul pipeline investments) | $225 - $250 | |
Infrastructure | $175 | |
2019 Capital Spend | $2,725 - $2,950 | |
(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 second quarter of 2019 on Wednesday, August 7, 2019 at 9:00 a.m. CT. Participants should call (877) 440-7573 (United States/Canada) or (253) 237-1144 (International) and use the confirmation code 2319546. A telephonic replay will be available from 12:00 p.m. CT on Wednesday, August 7, 2019 through Wednesday, August 14, 2019 at 12:00 p.m. CT. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 2319546. A live broadcast of the earnings conference call will also be available via the internet at www.diamondbackenergy.com under the “Investor Relations” section of the site. A replay will also be available on the website following the call.
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 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 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, including proposed sales of assets. 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 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. Diamondback undertakes no obligation to update or revise any forward-looking statement.
Diamondback Energy, Inc. | ||||||
Consolidated Balance Sheets | ||||||
(unaudited, in millions, except share amounts) | ||||||
June 30, | December 31, | |||||
2019 | 2018 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 326 | $ | 215 | ||
Accounts receivable: | ||||||
Joint interest and other, net | 168 | 96 | ||||
Oil and natural gas sales | 349 | 296 | ||||
Inventories | 44 | 37 | ||||
Derivative instruments | 29 | 231 | ||||
Prepaid expenses and other | 56 | 50 | ||||
Total current assets | 972 | 925 | ||||
Property and equipment: | ||||||
Oil and natural gas properties, full cost method of accounting ($9,585 million and $9,670 million excluded from amortization at June 30, 2019 and December 31, 2018, respectively) | 24,076 | 22,299 | ||||
Midstream assets | 828 | 700 | ||||
Other property, equipment and land | 150 | 147 | ||||
Accumulated depletion, depreciation, amortization and impairment | (3,451 | ) | (2,774 | ) | ||
Net property and equipment | 21,603 | 20,372 | ||||
Funds held in escrow | 13 | — | ||||
Equity method investments | 187 | 1 | ||||
Derivative instruments | 23 | — | ||||
Deferred tax asset | 150 | 97 | ||||
Investment in real estate, net | 112 | 116 | ||||
Other assets | 111 | 85 | ||||
Total assets | $ | 23,171 | $ | 21,596 | ||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities: | ||||||
Accounts payable-trade | $ | 204 | $ | 128 | ||
Accrued capital expenditures | 573 | 495 | ||||
Other accrued liabilities | 239 | 253 | ||||
Revenues and royalties payable | 139 | 143 | ||||
Derivative instruments | 25 | — | ||||
Total current liabilities | 1,180 | 1,019 | ||||
Long-term debt | 4,472 | 4,464 | ||||
Derivative instruments | 8 | 15 | ||||
Asset retirement obligations | 142 | 136 | ||||
Deferred income taxes | 1,909 | 1,785 | ||||
Other long-term liabilities | 10 | 10 | ||||
Total liabilities | 7,721 | 7,429 | ||||
Commitments and contingencies | ||||||
Stockholders’ equity: | ||||||
Common stock, $0.01 par value, 200,000,000 shares authorized, 163,949,167 issued and outstanding at June 30, 2019; 200,000,000 shares authorized, 164,273,447 issued and outstanding at December 31, 2018 | 2 | 2 | ||||
Additional paid-in capital | 12,933 | 12,936 | ||||
Retained earnings | 1,069 | 762 | ||||
Total Diamondback Energy, Inc. stockholders’ equity | 14,004 | 13,700 | ||||
Non-controlling interest | 1,446 | 467 | ||||
Total equity | 15,450 | 14,167 | ||||
Total liabilities and equity | $ | 23,171 | $ | 21,596 | ||
Diamondback Energy, Inc. | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(unaudited, $ in millions except per share data, shares in thousands) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Oil, natural gas and natural gas liquids | $ | 1,000 | $ | 516 | $ | 1,842 | $ | 982 | |||||||
Lease bonus | 2 | 1 | 3 | 1 | |||||||||||
Midstream services | 16 | 8 | 35 | 19 | |||||||||||
Other operating income | 3 | 2 | 5 | 4 | |||||||||||
Total revenues | 1,021 | 527 | 1,885 | 1,006 | |||||||||||
Operating expenses: | |||||||||||||||
Lease operating expenses | 127 | 43 | 236 | 80 | |||||||||||
Production and ad valorem taxes | 64 | 33 | 119 | 60 | |||||||||||
Gathering and transportation | 17 | 7 | 29 | 11 | |||||||||||
Midstream services | 17 | 18 | 34 | 29 | |||||||||||
Depreciation, depletion and amortization | 359 | 130 | 681 | 245 | |||||||||||
General and administrative expenses | 22 | 15 | 49 | 31 | |||||||||||
Asset retirement obligation accretion | 3 | — | 5 | 1 | |||||||||||
Other operating expense | 1 | — | 2 | 1 | |||||||||||
Total expenses | 610 | 246 | 1,155 | 458 | |||||||||||
Income from operations | 411 | 281 | 730 | 548 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense, net | (49 | ) | (16 | ) | (95 | ) | (30 | ) | |||||||
Other income, net | 2 | 84 | 3 | 87 | |||||||||||
Gain (loss) on derivative instruments, net | 94 | (59 | ) | (174 | ) | (91 | ) | ||||||||
Gain on revaluation of investment | — | 4 | 4 | 5 | |||||||||||
Total other income (expense), net | 47 | 13 | (262 | ) | (29 | ) | |||||||||
Income before income taxes | 458 | 294 | 468 | 519 | |||||||||||
Provision for (benefit from) income taxes | 102 | (7 | ) | 69 | 40 | ||||||||||
Net income | 356 | 301 | 399 | 479 | |||||||||||
Net income attributable to non-controlling interest | 7 | 82 | 40 | 97 | |||||||||||
Net income attributable to Diamondback Energy, Inc. | $ | 349 | $ | 219 | $ | 359 | $ | 382 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 2.12 | $ | 2.22 | $ | 2.18 | $ | 3.87 | |||||||
Diluted | $ | 2.11 | $ | 2.22 | $ | 2.17 | $ | 3.87 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 164,839 | 98,614 | 164,846 | 98,584 | |||||||||||
Diluted | 165,019 | 98,797 | 165,253 | 98,820 | |||||||||||
Dividends declared per share | 0.1875 | 0.125 | 0.375 | 0.250 | |||||||||||
Diamondback Energy, Inc. | ||||||
Consolidated Statements of Cash Flows | ||||||
(unaudited, in millions) | ||||||
Six Months Ended June 30, | ||||||
2019 | 2018 | |||||
Cash flows from operating activities: | ||||||
Net income | $ | 399 | $ | 479 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Provision for deferred income taxes | 69 | 40 | ||||
Asset retirement obligation accretion | 5 | 1 | ||||
Depreciation, depletion and amortization | 681 | 245 | ||||
Amortization of debt issuance costs | 3 | 1 | ||||
Change in fair value of derivative instruments | 196 | 14 | ||||
Gain on revaluation of investment | (4 | ) | (5 | ) | ||
Equity-based compensation expense | 23 | 13 | ||||
Loss on sale of assets, net | — | 3 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (94 | ) | (1 | ) | ||
Inventories | (8 | ) | (18 | ) | ||
Prepaid expenses and other | (28 | ) | (3 | ) | ||
Accounts payable and accrued liabilities | (166 | ) | (1 | ) | ||
Accrued interest | (30 | ) | (12 | ) | ||
Income tax payable | 1 | — | ||||
Revenues and royalties payable | (4 | ) | 8 | |||
Net cash provided by operating activities | 1,043 | 764 | ||||
Cash flows from investing activities: | ||||||
Drilling, completions and non-operated additions to oil and natural gas properties | (1,155 | ) | (614 | ) | ||
Infrastructure additions to oil and natural gas properties | (83 | ) | (36 | ) | ||
Additions to midstream assets | (111 | ) | (95 | ) | ||
Purchase of other property, equipment and land | (7 | ) | (4 | ) | ||
Acquisition of leasehold interests | (127 | ) | (101 | ) | ||
Acquisition of mineral interests | (125 | ) | (253 | ) | ||
Proceeds from sale of assets | 36 | 4 | ||||
Investment in real estate | (1 | ) | (110 | ) | ||
Funds held in escrow | (13 | ) | 11 | |||
Equity investments | (186 | ) | — | |||
Net cash used in investing activities | (1,772 | ) | (1,198 | ) | ||
Cash flows from financing activities: | ||||||
Proceeds from borrowings under credit facility | 925 | 569 | ||||
Repayment under credit facility | (973 | ) | (388 | ) | ||
Proceeds from senior notes | — | 312 | ||||
Proceeds from joint venture | 43 | — | ||||
Debt issuance costs | (8 | ) | (5 | ) | ||
Public offering costs | (41 | ) | (2 | ) | ||
Proceeds from public offerings | 1,106 | — | ||||
Proceeds from exercise of stock options | 6 | — | ||||
Repurchased shares for tax withholdings | (13 | ) | — | |||
Diamondback Energy, Inc. | ||||||
Consolidated Statements of Cash Flows | ||||||
(unaudited, in millions) | ||||||
Repurchased as part of share buyback | (104 | ) | — | |||
Dividends to stockholders | (51 | ) | (12 | ) | ||
Distributions to non-controlling interest | (50 | ) | (38 | ) | ||
Net cash provided by financing activities | 840 | 436 | ||||
Net increase in cash and cash equivalents | 111 | 2 | ||||
Cash and cash equivalents at beginning of period | 215 | 112 | ||||
Cash and cash equivalents at end of period | $ | 326 | $ | 114 | ||
Supplemental disclosure of cash flow information: | ||||||
Interest paid, net of capitalized interest | $ | 76 | $ | 44 | ||
Supplemental disclosure of non-cash transactions: | ||||||
Change in accrued capital expenditures | $ | 78 | $ | 149 | ||
Capitalized stock-based compensation | $ | 10 | $ | 5 | ||
Asset retirement obligations acquired | $ | 3 | $ | — | ||
Diamondback Energy, Inc. | |||||||||||
Selected Operating Data | |||||||||||
(unaudited) | |||||||||||
Three Months Ended June 30, 2019 | Three Months Ended March 31, 2019 | Three Months Ended June 30, 2018 | |||||||||
Production Data: | |||||||||||
Oil (MBbl) | 17,402 | 16,115 | 7,478 | ||||||||
Natural gas (MMcf) | 21,439 | 21,684 | 7,367 | ||||||||
Natural gas liquids (MBbls) | 4,538 | 3,908 | 1,540 | ||||||||
Oil Equivalents (MBOE)(1)(2) | 25,513 | 23,637 | 10,246 | ||||||||
Average daily production (BOE/d)(2) | 280,365 | 262,633 | 112,592 | ||||||||
% Oil | 68 | % | 68 | % | 73 | % | |||||
Average sales prices: | |||||||||||
Oil, realized ($/Bbl) | $ | 54.41 | $ | 46.12 | $ | 61.56 | |||||
Natural gas realized ($/Mcf) | $ | (0.41 | ) | $ | 1.32 | $ | 1.54 | ||||
Natural gas liquids ($/Bbl) | $ | 13.60 | $ | 18.00 | $ | 27.99 | |||||
Average price realized ($/BOE) | $ | 39.19 | $ | 35.63 | $ | 50.24 | |||||
Oil, hedged ($/Bbl)(3) | $ | 53.95 | $ | 46.92 | $ | 55.53 | |||||
Natural gas, hedged ($ per MMbtu)(3) | $ | 0.04 | $ | 1.49 | $ | 1.56 | |||||
Natural gas liquids, hedged ($ per Bbl)(1) | $ | 14.41 | $ | 18.19 | $ | 27.99 | |||||
Average price, hedged ($/BOE)(3) | $ | 39.39 | $ | 36.38 | $ | 45.86 | |||||
Average Costs per BOE: | |||||||||||
Lease operating expense | $ | 4.98 | $ | 4.61 | $ | 4.16 | |||||
Production and ad valorem taxes | 2.51 | 2.33 | 3.14 | ||||||||
Gathering and transportation expense | 0.67 | 0.51 | 0.66 | ||||||||
General and administrative - cash component | 0.51 | 0.55 | 0.87 | ||||||||
Total operating expense - cash | $ | 8.67 | $ | 8.00 | $ | 8.83 | |||||
General and administrative - non-cash component | $ | 0.35 | $ | 0.59 | $ | 0.55 | |||||
Depreciation, depletion and amortization | $ | 14.07 | $ | 13.62 | $ | 12.68 | |||||
Interest expense, net | $ | 1.92 | $ | 1.95 | $ | 1.67 | |||||
(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, interest expense, net, depreciation, depletion and amortization, non-cash equity-based compensation expense, capitalized equity-based compensation expense, asset retirement obligation accretion expense, gain (loss) 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 Diamondback Energy, Inc. plus non-cash gain on derivative instruments, gain on revaluation of investment and related income tax adjustments. The Company’s computations of Adjusted EBITDA and 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.
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 millions) | |||||||||||
Three Months Ended June 30, 2019 | Three Months Ended March 31, 2019 | Three Months Ended June 30, 2018 | |||||||||
Net income | $ | 356 | $ | 43 | $ | 301 | |||||
Non-cash loss (gain) on derivative instruments, net | (89 | ) | 285 | 14 | |||||||
Interest expense, net | 49 | 46 | 16 | ||||||||
Depreciation, depletion and amortization | 359 | 322 | 130 | ||||||||
Non-cash equity-based compensation expense | 13 | 20 | 8 | ||||||||
Capitalized equity-based compensation expense | (4 | ) | (6 | ) | (2 | ) | |||||
Asset retirement obligation accretion expense | 3 | 2 | — | ||||||||
Gain (loss) on revaluation of investment | — | (4 | ) | (4 | ) | ||||||
Income tax (benefit) provision | 102 | (33 | ) | (7 | ) | ||||||
Consolidated Adjusted EBITDA | $ | 789 | $ | 675 | $ | 456 | |||||
Adjustment for non-controlling interest | (17 | ) | (24 | ) | (86 | ) | |||||
Adjusted EBITDA attributable to Diamondback Energy, Inc. | $ | 772 | $ | 651 | $ | 370 | |||||
Adjusted EBITDA per common share: | |||||||||||
Basic | $ | 4.68 | $ | 3.95 | $ | 3.75 | |||||
Diluted | $ | 4.68 | $ | 3.94 | $ | 3.75 | |||||
Weighted average common shares outstanding: | |||||||||||
Basic | 164,839 | 164,852 | 98,614 | ||||||||
Diluted | 165,019 | 165,061 | 98,797 | ||||||||
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, 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 June 30, 2019 | |||||||
Pre-Tax Amounts | Amounts Per Share | ||||||
Net income attributable to Diamondback Energy, Inc. | $ | 349 | $ | 2.11 | |||
Non-cash gain on derivative instruments | (89 | ) | (0.53 | ) | |||
Adjusted income excluding above items | 260 | 1.58 | |||||
Income tax adjustment for above items | 20 | 0.12 | |||||
Adjusted net income | $ | 280 | $ | 1.70 | |||
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) | |||||||||||||||||||||||
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | ||||||||||||||||||
Swaps - WTI (Cushing) | 30,457 | 29,457 | 8,000 | 8,000 | 8,000 | 8,000 | |||||||||||||||||
$ | 61.09 | $ | 61.21 | $ | 59.09 | $ | 59.09 | $ | 59.09 | $ | 59.09 | ||||||||||||
Swaps - WTI (Magellan East Houston) | 8,000 | 8,000 | 6,000 | 6,000 | 6,000 | 6,000 | |||||||||||||||||
$ | 66.76 | $ | 65.01 | $ | 62.80 | $ | 62.80 | $ | 62.80 | $ | 62.80 | ||||||||||||
Swaps - Crude Brent Oil | 7,000 | 7,000 | 4,000 | 4,000 | 4,000 | 4,000 | |||||||||||||||||
$ | 67.86 | $ | 67.71 | $ | 64.50 | $ | 64.50 | $ | 64.50 | $ | 64.50 | ||||||||||||
Basis Swaps | 45,000 | 45,000 | 41,538 | 41,538 | 41,087 | 41,087 | |||||||||||||||||
$ | (5.52 | ) | $ | (5.52 | ) | $ | (1.21 | ) | $ | (1.21 | ) | $ | (1.21 | ) | $ | (1.21 | ) | ||||||
Three-Way Collar - WTI (Cushing) | 15,652 | 15,652 | 11,000 | 11,000 | 11,000 | 11,000 | |||||||||||||||||
Short Put Price ($/Bbl) | $ | 35.94 | $ | 35.94 | $ | 45.00 | $ | 45.00 | $ | 45.00 | $ | 45.00 | |||||||||||
Long Put Price ($/Bbl) | $ | 45.94 | $ | 45.94 | $ | 55.00 | $ | 55.00 | $ | 55.00 | $ | 55.00 | |||||||||||
Ceiling Price ($/Bbl) | $ | 61.65 | $ | 61.65 | $ | 66.63 | $ | 66.63 | $ | 66.63 | $ | 66.63 | |||||||||||
Three-Way Collar - WTI (Magellan East Houston) | 5,000 | 5,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||||||
Short Put Price ($/Bbl) | $ | 50.00 | $ | 50.00 | $ | 50.00 | $ | 50.00 | $ | 50.00 | $ | 50.00 | |||||||||||
Long Put Price ($/Bbl) | $ | 60.00 | $ | 60.00 | $ | 60.00 | $ | 60.00 | $ | 60.00 | $ | 60.00 | |||||||||||
Ceiling Price ($/Bbl) | $ | 66.10 | $ | 66.10 | $ | 68.61 | $ | 68.61 | $ | 68.61 | $ | 68.61 | |||||||||||
Three-Way Collar - Crude Brent Oil | 8,000 | 6,000 | 18,000 | 18,000 | 18,000 | 18,000 | |||||||||||||||||
Short Put Price ($/Bbl) | $ | 52.50 | $ | 51.67 | $ | 50.56 | $ | 50.56 | $ | 50.56 | $ | 50.56 | |||||||||||
Long Put Price ($/Bbl) | $ | 62.50 | $ | 61.67 | $ | 60.56 | $ | 60.56 | $ | 60.56 | $ | 60.56 | |||||||||||
Ceiling Price ($/Bbl) | $ | 78.88 | $ | 78.47 | $ | 74.08 | $ | 74.08 | $ | 74.08 | $ | 74.08 | |||||||||||
Put Spreads - WTI (Cushing) | — | — | 4,700 | 4,700 | 4,700 | 4,700 | |||||||||||||||||
Short Put Price ($/Bbl) | $ | — | $ | — | $ | 45.00 | $ | 45.00 | $ | 45.00 | $ | 45.00 | |||||||||||
Long Put Price ($/Bbl) | $ | — | $ | — | $ | 55.00 | $ | 55.00 | $ | 55.00 | $ | 55.00 | |||||||||||
Crude Oil (Bbls/day, $/Bbl) | |||||||||||||||||||||||
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | ||||||||||||||||||
Put Spreads - Crude Brent Oil | — | — | 3,350 | 3,350 | 3,350 | 3,350 | |||||||||||||||||
Short Put Price ($/Bbl) | $ | — | $ | — | $ | 50.00 | $ | 50.00 | $ | 50.00 | $ | 50.00 | |||||||||||
Long Put Price ($/Bbl) | $ | — | $ | — | $ | 60.00 | $ | 60.00 | $ | 60.00 | $ | 60.00 | |||||||||||
Natural Gas (Mmbtu/day, $/Mmbtu) | |||||||||||||||||||||||
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | ||||||||||||||||||
Natural Gas Swaps - Henry Hub | 70,000 | 70,000 | — | — | — | — | |||||||||||||||||
$ | 3.06 | $ | 3.06 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Natural Gas Swaps - Waha Hub | — | — | 80,000 | 80,000 | 80,000 | 80,000 | |||||||||||||||||
$ | — | $ | — | $ | 1.68 | $ | 1.68 | $ | 1.68 | $ | 1.68 | ||||||||||||
Natural Gas Basis Swaps - Waha Hub | 70,000 | 70,000 | — | — | — | — | |||||||||||||||||
$ | (1.56 | ) | $ | (1.56 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||
Natural Gas Liquids (Bbls/day, $/Bbl) | |||||||
Q3 2019 | Q4 2019 | ||||||
Natural Gas Liquid Swaps - Mont Belvieu | 7,500 | 7,500 | |||||
$ | 27.30 | $ | 27.30 | ||||
Investor Contact:
Adam Lawlis
+1 432.221.7467
alawlis@diamondbackenergy.com