Diamondback Energy (FANG) 21 Feb 242023 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Diamondback Energy Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Lawlis, VP, Investor Relations.

Thank you, Daniel. to Fourth welcome Call. XXXX and morning, Diamondback Quarter Energy's Conference Good

on Diamondback our reference and and stockholders, Wesson, letter found will today, CEO; which COO. website. updated be During President we Danny and Kaes an Van't call and Stice, are today Travis investor Hof, presentation can Diamondback's Chairman Representing CFO; to

differ forward-looking performance materially caution SEC. factors company's results During variety Information to the relating that from certain in forward-looking of plans, could the this operations, statements conference We call, the participants those and that objectives, results the these statements of indicated are concerning actual can these future financial in with a you make be condition, found due to businesses. may filings factors. company's

non-GAAP will reconciliations found in we make The appropriate measures yesterday certain issued release to reference afternoon. can measures. GAAP addition, our be the with In earnings

to the Travis Now call I'll over turn Stice.

and appreciate night, I you, an Thank last this to the continue efficient issued to morning. you way hope communicate. I letter we find Adam, stockholders' that everyone joining

the is So lot of material obviously, letter. in that a stockholders

with would that, open please line questions? So you for the operator,

with [Operator comes question Our Neal Securities. from Instructions] Dingmann first Truist

I just this. My first is to on Endeavor, go back question to want specifically.

but I will how until it's these of while locations, how would slightly You Travis, current compares with for still this a and all just core I'm about? closes, highlighted potential X,XXX about about footprint attack XXX,XXX thing That incremental XXX,XXX smaller I'm amount wondering just to I'm material does acres immediate know you likely wondering, assets? this and you and X,XXX locations. you And provide all. or be thinking upside, wondering a

we to and we and of in to been It's say listen, us be lot them. be a there's think for mean, laid sub-XX. North aggressive have us mean XX generally, both above we Diamondback's numbers. of position, I about how even with inventory it put deals inventory of sub-XX breaks I Neal, number is I years shale. in the breakeven lately that's American put mean, able combined, I kind well think inventory a inventory of best-in-class that to Yes, those I lot I counts out as for we that And in conservative wanted there. think truly a there's counts why

we'd a of the lot I today, breakeven basin. like going zones zone sub-XX to fully a think there's throughout it ready I location some but think in that the count. There's we're on probably testing the put Upper probably call Sprayberry don't

just and that all So upside later, we below $XX, conservatism. the position X,XXX on all a saving I equal it's think it's that, right? relative developing And accrue combined going and and with upside pro created today are within some what there's the that not for is count, I mean we're know location think size to breakeven of I locations acreage forma. us that to about the basis,

oil and that things about just the and endeavor numbers denominator of is of I durable inventory and sector. the really ratio. if gas company's numerator efficiency in a conversion And to think think some the it's merger, through both add now of future, inventory. to important also of But this that two just announcement there. with control Neal, this that the we're you One are of point, kind for walked you Kaes

we a come color actually today doing that little then the and gets our we've we is be above conversion comfort, assumption we operating was scale to wells. I Diamondback bit what a the and across explaining, extends simply So our give our fence. that, to long mean that didn't And is case time made known adjacent, by a that completion physical durable just can been And think thumb inventory larger then drilling across more this looked on asset applied applied for, and to And on fence. bear greatly for base. our put our as what on I and efficiency you above

I you there, more question. to your a Thanks Neal. So for want bit give little color

I I the No, appreciate both. from conservatism. definitely appreciate

I the think second on today something There lot multi-zone has of And Kaes, development of you're current -- right, strategy. my XX on inflated. your is a Slide been question

you had 'XX 'XX, around Specifically, really of the like be had just for project I'm how larger approximately And that will hits wells. -- other you these that when do do plague sorry, projects? they XX all to to And with size that mitigate that, year? average -- just much I'm continue wondering, the operators for this or I'm same all wondering seem the frac so

have not use I We're strategy Neal, Look, Yes. counties generally, an don't for not We use to different different number. area. within unique I each exact up. asset. a to strategy mean, project is be size development is XX -- we I cookie think the different a the zones. in spacing different going mean each cutter we where develop It's --

looking of with the seeing frac what planning around might hits the over lot arise. think our in experience years, has significantly group we've learned gotten with better issues core I I a think at and

scale well, here, in of that these and X magnified be merger. the other XX quarter, around flexibility But size of on of And potential of allows Endeavor a and every coming move and X coming scale, project. us plan to the and that's lot only these with And with of X a If and we that our certainly, quarter, have X, will right? on business. size tubular the X, operational one that every of we there's there's have projects benefit benefits just risk

of our with had strategy look well to, CapEx. XX% the capital you profile see when quarter volumes budget, the kind yields And our fourth shining but that as doing just development so we're same essentially in was Neal, And performance. we're because less that talking the efficiency you at through XXXX maintaining we the Kaes

very, I the important. shaping very capital look that universe, of in industry as the So I that to up is terms think like efficiency. this budget going And efficiency execution we for our be year across and capital way is

Our comes with David from next question Cowen. Deckelbaum TD

could to interested obviously, of an with said about plenty I if curious, you interest investments. know How weren't is that something deal, you investments outlook. I sense. versus see we harvested, to kind of about you going these -- be harvesting? we of Is minority just do the the we in relative all announced the market Travis, some think you of think Endeavors? should provide around that harvesting which more you But pipeline anything, long-term investing that those being think closes, for various expect -- investment when was the cycle probability deal you where to Endeavor 'XX, I'm just sell makes that until pipeline of that that just seeing prudent Or the kind or ripe might right for right if is I now have now? risk

David, able Yes, to harvested today. be some are I mean

equity selling the pipeline OMA oil sold I a I won't the mean call noncore, method the We probably Oak We but gathering further sold investments job the JV. months. good pretty done down XX of noncore, over last some interest Gray Some in interest. line. these we've them are our

used or we But some the that when through basis will can -- can't be of there's an some assets certainly that that it's our think it's on at likely the sale, sale, we will that tag or sale on we're of have I of others with quickly those merger. a pursue logical assets asset happen. a reduce control probably bigger would control the of to I but Endeavor debt our that side ledger that stand-alone along and we

think the So table. certainly that's I on

stock when we've last think sell I forced the not think to I want point deal, debt. mix done the pay is of structured don't presented a right, we that important, on with to mix having of down be assets the week. we Travis' seller assets And we significant cash to

be post monetization sellers for point minority debt we're any Yes. thoughtful in relation be emphasize our move at David, going interests, to close We're that of strategy to of assets. to very these as reduction. we forced in I that particularly forward going looking can't not enough,

be the right do and thoughtful we'll thing. very So

capital that. a And Wolfcamp in the the when lay you not, Basin then of on there's little plan some there? increasing and other the 'XX little zones. going the maybe bit you Is to and just margin out Or you but are just sort if Appreciate and year could any that this of more a the wanting there's then weeds there bit development your coincidentally developing things presumably this you're on of Midland this or geography one, more -- maybe year, some that saw of more more 'XX beyond? provide. allocate coincident confidence to years in are color where And that

Yes. think in bit I good Wolfcamp seen from really the bit, results drill we've I mean from and others D. our both drill

in I think in more stack put situation, it not makes every it into more maybe sense today but the and to situations.

the the other Sprayberry in plan. D Wolfcamp So we the And bucket, plan. more in then have Upper on more

bit and X, like that development pay targets. now it to a more Midland talked plan pro stacked Wolfcamp a X Sprayberry But think They've able duration with per that developing beneficial talk last lot endeavor. D Basin generally, X, we the stand-alone our similar about we're that extends have, years and a both nature adding zones foot, just that add the that about Upper D if basis shows core only ago think little of on I us, than to and and I the So and week. becoming didn't we see these we're the Wolfcamp inventory development forma productivity been we the zones

Mehta comes question next with from Neil Sachs. Goldman Our

you downside. protecting on as and couple in Endeavor guess talk assets, And you of questions. I forma hedging historically, about I I have Yes. your maximize also pro perspective while the the just then a would pricing-related trying upside to roll extreme once love exposure first, stand-alone

curious in for think about you that you as Just means XXXX? hedging what

our Neil, cash reduces closing, the need we the so signing ledger can Yes, I between purchase and price. the to cash through I we the mean, of that protect generate of think period free side portion

close been price. we'll kind past, hedged bought done hedged X/X, first probably little and in make there can $XX purchase to that. We've kind range. stepped don't between on that cash closer than kind WTI to, have $XX be of cash is more we've that think that, X/X now we we historically our sure to a of that portion in the the the know, the I We sign range of it up so of side and I reduce

buy to the in that base of out and tried sheet well that dividend. and with I balance XX%, free hedges think blow the that always downside XX% kind the scenario. of breakeven protects longer term, flow, at our dividend the it and to extreme doesn't have balance all strength is kind protected We've depends on cash we of sheet

So see dividend, which believe expect debt. us company protect move an I that our the don't and balance base non just to sheet to it's prudent we to because hedging we like

Okay. it been pressure. under a gas. the your is know That's a as associated helpful. Permian, year-over-year. up to surprised then of just gas the supply is economics. much But lot on part gas as of I in natural have follow-up smaller And as we've And XPs been see it's prices

supply how your towards associated see or this discipline markets So move of gas the it. can with Permian, perspective rebalances a oil structural challenge on calibrate do in you more the we as gas as particular, continued market in just

of discipline, always oil curves exceed the Permian the in Basin regardless gas generally, think I expectations.

seeing universally level more a expectations, growth think almost that the expect conservative in always is almost side on gas annual you're I which why basis. than basin all we beats and pretty we're on

still that's So the to gas could in going oil great price the We wells. Neil. -- and returns at don't on make I think run X we continue, Permian

as personally, as to as to -- as But protect us, try basis get hedging gas For gas bigger we well our generally, protecting through to through price markets our by exposure. some have there's well oil, of on eventually And be a Permian, our commitments zones. to I going produced the you in gas left gassier to lot to and even think you're associated if disciplined move the gas Permian. to pipeline stay

Our Jayaram comes JPMorgan Arun next with Securities. from question

would walk that the to Kaes, reaching do billion kind debt to net Travis, through the to like timing? timing target? sales, $XX could that get -- terms if of And I'd in you target maybe of you past influence the how asset know us of

the free to to $XX will cash Yes, just flow. billion Arun, combine we a half the the kind out, of the laid $XX think by billion generate cash high 'XX. more X business number, with of reduce And in at this XXXX year generate you billion net that to portion puts of I will purchase businesses $X.X we're to with the the That price. see billion level, that in used of kind course out $XX full $X looking kind of world, billion you middle $X could a XXXX And close. about free of at in throughout numbers of debt generally, of we number laid cash close, late continuing if be

based Now asset an think price. think we there's I don't that the commodity under-promised, accelerate and that And can a price company, try do I we sales of to because be lot to want entire excludes things bet outside any or acceleration. put on overdelivered to we that commodity

sell months next down and beat the available target. So in here to we're that at of looking couple what's

it. a just Got maybe And follow-up.

something plan wait through timing kind Or asset Basin, transaction? close maybe Delaware until If the would you would the of you do on you talk do contemplate reaching in doing sales. the when to us

highly we're going not Yes. certainty to I do and process. I focused think mean, deal derails that closed, getting on that deal the and anything we're

a great we've So is necessary cash and capital lease for free we flow the and us, rate, purposes. great wells think Basin and drill holding cash our low there commitments for Delaware decline flow to need reduced I very

do it's value the not asset anything for a long time just have to near think but being to I in the it's So term. -- certainly it's good good looking run, and option over the

Our next with from Derrick Stifel. question comes Whitfield

are to I wanted wanted leadership by the environment as the really peers start to treating capital guys for demonstrated on were by committing committing as discipline -- start of balanced you it today. you've many naturally your

Thank you, Derrick.

and collapse that to on preexisting spec Is some the rates, environment. activity lower revisit With is the the gas there directed of opportunity an last I In year. now on higher the focus service prices service question, my first light service wanted the experienced utilization to in underway of equipment? industry

good Derrick, question. Yes.

we'll their don't we softening remain we're do service set have we're market, place. that -- the expect this basins muted If in our to where lines market price of commitments we'll we we but year. kind in on of activity certainly think the see service the service levels, of takers, I some prices not the on end don't continue market finding push the existing gas in for all our price

Are And as of with follow-up, touch to your are I since guys Terrific. in the view? my wanted that on was the since investors Endeavor you any aspects meeting announced. have transaction been deal there underappreciated out

the our the synergies. came that existing of assets. billion of structure the question synergies the to Endeavor cost of up by first Most was worth think I applied $X those underpinned on

and was with the we cost then assumptions of entry so a we shareholders. And of same usually are questions the those questions. cost the the the that the more gained lot strategic currently are comfort kind once today, to doing we assumptions But explained embedded we're that went

probably were first then efficiencies some Kaes that of retirement So were the and the cost questions X I just that the probably most went strategies with. we were debt dealt secondarily, the through topical think

comes Our with next Fargo. from Roger Wells question Read

on footprint these what applied seeing your footprint here let's be that and an of idea benches. year-end? efficient I as as before whether it's productivity could to other or maybe talked Give back, up well some that that in within of, an of as it, might you're of they'll earlier just of question will and these expanded productive wanted you and efficiency other a come or science some work call open be just benches about thinking the those as benches us some efforts

D, I of for results at time fence some like -- Roger, I of of a zones also assets, think spend Yes, the our looking seen but on the mean Wolfcamp a lot we've across spent lot Diamondback doesn't time got ourselves. line. testing lot we the a

that lot as We analysis, spend through get line D process County what Wolfcamp has fence people other the competitive, you Glasscock into Midland and line are or And a either area. we've across Martin competitor looking just particularly seen that been of the kind also Southern of County. in also and doing, general time very M&A

that's more So -- attention. getting that's

Sprayberry, a best wells Energen and wells our say of It's the old the I that some an actually offer portfolio. and Upper of Sprayberry lot year completed, well, work 'XX, would the XXXX was we've we've last probably ourselves. done zone one in drilled the particular, in Sprayberry recently is that of revisited in on it one in Upper or we

Sprayberry to or ready capital we strategy in now. position, the acreage more attention to particularly not fact and the fashion, I'm getting to Upper say form co-development and across certainly other this some each means with entire zones get that year that talk exists but and So these our the got it

the Northern for added we've a our haven't seen kind so I speak degradation themselves And you results Martin plan, in development because the Sprayberry and think County Upper of into productivity.

this key impacting that's your is think resource a productivity, that's I to the if expand resource shareholders. can you expansion win without for exploration, story our

Roger, a the as mentioned. In they Kaes add get become. high comment level my I'll more experience, inwardly a just bigger, what focused companies from just

on less pay of hallmark started, us. and first when goes ours really -- around doing attention on One, And out Diamondback what are to a very own focus beginning. results hallmark their what it's we others around necessity it's of them. they since So been but of more you the to been a on

what at culture post close, others much And rigorously culturally right stay we intact. intellectual now, And our across a you examine promise not into larger that will only results, our I internal but are on spend move capital also own fence as ingrained position to it's above so looking doing.

doing, what are better and and We than are others to adopt accordingly. continue look will we potentially find

Our question comes Co. next Lambujon Jeoffrey from & TPH with

my you My forward looking question in first into question efficiency is to XXXX. change are -- the step capital first on

the If comment you as as maybe on of from non-D&C on well be into in terms could know you're costs, mentioned, you'll there? already you items of legacy think the cost and side, you and I can Travis. talk you or more focusing there line in for about portfolio larger this year about for next? pieces reduction the well the shift pathway terms buckets both Endeavor we that moving which But the

Jeff, that the fence D&C big put buckets that probably Yes, as to Endeavor integrate across of that there's E probably with side just the side, we a two we place plan of it's larger think on the to of costs numbers. their as don't well half as plan business. team reduces development simul-frac really of the on chain This start our benefits these the completion to see down in generally, the there cost only I we've us think we'll look simul-frac side. to being the of which I side is the costs the modeled capital a getting the fleet, supply completion on much

there's something from And point. some place to then and we've X these learned was QEP side, on been saves years the fluids, oil-based proponent mud we not at It . put drill drilling X or the in That So team of and there using ago. some money. wells. probably upside time clear big a

Endeavor are done what dollars. to learn this And save from I'm that modeled learned just and we better, in business. And what QEP something doing think forma with date. can tent significant think I is mergers And under team about I Energen get we've we've that's two to that make do decision a both that's large and they're right? the the not so pro to excited that

put we're really, we're there's think But larger there. I what to looking some all doing today So doing in is a asset base. on place upside

when door improvements, income we've a on good of the opposed really understand to cultural we Jeff, ago And when checking in about making since we're working they of side we first what's job understood. a understanding the elements just on egos it's collectively do, cultural at making our and the a And second and of what seeking together, do our I on -- as being both is Diamondback. asset to and culture done spoke our really One combine the mentioned, another why companies really put two side. as finding some they it Kaes history, just excited and assets out and of element

just for will you just then weight And in to about once math commentary if net continues to could all balance philosophy But my how follow-up, closes, evolve wonder how the the to space. get class Perfect. speak terms debt $XX billion levels at the the to the the level. the timing of thinking deal pro back around we term I appreciate we're kind of forma path new push to longer on sheet

different got Yes. we're hey, fits the a now and us do. investors That's resonated is last profile. And you're I to a lot think and long-term question of with class need leverage what with kind year listen, trying we from saying, weight to a your on probably road reassess in you that

I think billion debt eventually of a to the balance to real to get keep $X $X net cash on sheet. number, billion kind want we

I down mind, merger. do how capital And of buyback that be been and leaves a that to think removed this lean in probably with on go into in in or the procyclical a the allocation at all cycle side not every deal lean terms cash allocating deal the and do size. into my we capital in deals us to the -- going has down acquisition look to or the is Diamondback use in flexibility or concern repurchase an cycle be

But great. to to place at turn billion in $X be. think billion to pretty a term, long gets that that would it if half would strip is $X X, a running I a generally good be So be number. good

from comes Cheng Paul with question next Our Scotiabank. Instructions] [Operator

lower XXXX XXXX you say, be profile was when 'XX, to about, XXXX deal, [indiscernible] week, grow fast? Can ], related because the be comparing that last how you pro to how antipathy And break CapEx is Number truly announced to the because and down forma going the lower. million the ], [ you think asset Kaes, will [ you much is It testing? and also you're that is as will not gave production. on $XXX the much

Yes. Paul. Sure,

little gap combined out cut of running say the CapEx our get we kind with would the the bridge -- but and million. I combined most how between D&C. which Endeavor I Endeavor You down bit, the separately the a is XXXX question it question. is of your guide in The think us business 'XX, I $XXX was and cost structure on

$X.X so $X And cheaper, that's you basically wells $XXX million about XXX to million at gets to million.

combined going not midyear, hit down the need started wells rate so growing year think to I many is was business number. that decline will slowing but production last that Endeavor shallowing, as help. the their to

continues will to And the probably I in we're best shallow help. North Our going allocate decline capital that to combined which rate resource will think to America, help.

then environmental kind think $X.X that so pop. as $X at million, $XXX less we're million probably nature -- dollars gets year, reduced $XX XX I another in about kind million. that to this on our well. on you of will and million be of is That's generally, CapEx and wells probably some needing side onetime And of about And spending

move around, and we're very XXXX, thinking So you 'XX. can together, all very, that's assuming that business well and capital-efficient existing a how costs, that but put about that's in

question next from comes ROTH Leo MKM. Our with Mariani

entity able had as these of you here. see some tax two combining of be benefit combination you Wanted Do any companies, you guys result a combined defer to preliminary to cash might just any the at the the tax FANG look about that? if where payments Endeavor for ask

we're the transaction pretty some the work. cash obviously of I to the with mean, cash well. mean mean our will combination do taxpayer full there as I benefit I we're But interest associated close a expense. portion and be continuing essentially, they're

don't be to bit I taxes to shield think going but Leo, going side. on a little too to is there, piece So of certainly, the do much our there's cash

got Obviously, the jumping big the the then you M&A. in over to -- rewarded helpful. here. shareholders the and That's the prize Okay. clearly guys market And back has Permian Diamondback just

kind at do stuff out As of of kind the of do it that maybe to more together? you look kind to that's to would years landscape, left think is interest be everything anything little kind there chunky you or there's just of FANG tie remaining of over the

soon the I Listen, on fully Leo, assess does Yes. getting come. possible landscape on and that as deal focused happens. whenever here. as am We're when mean, look the will that can that time we're closed confident different we this I the sidelines landscape

Our Bank Doug next question comes Leggate with of America. from

My any Or anyway? impact ahead integration that question does plan? go have is, that does on

have to you Doug, speak up.

Doug Abbott was John Leggate, This is on I for apologies, on mute.

And more one the difference Just the you million. about in on to That's on then in Paul's XXXX question XXXX. question talk just $XXX back going between one CapEx million and about $XXX synergies.

sort we're into trying is of sort So when there top think of XXXX, we of on reconcile the X that as numbers? $XXX to sort you addition of million, about that think an just

Yes.

X longer-term of I see rate, less is but more kind But as activity think which as million $XXX we million. versus the the million is the in has of run a 'XX difference 'XX, $XXX numbers and helping, between between really the the business $XXX combined John. activity

this I would no time. showing to to for Travis questions back further now I'm Stice, like turn at closing it CEO, remarks.

you, everyone reach if then. just this you listening asking I us, to any have Thank them day. and address morning And a follow-up, we'll Thank good there's and all you, out in really questions. and Great. appreciate and

you Thank conference for call. participating. This today's concludes

now may disconnect. You