Diamondback posts record cash flow

2023 production will increase, Stice says

Diamondback Energy racked up record cash flow and brought in 223,000 barrels of oil per day in 2022, which Chairman-CEO Travis Stice calls a strong start on the New Year.

Reporting $4.6 billion in free cash flow and over $7 billion in earnings before interest, taxes, depreciation and amortization, Stice said, “Our well performance continues to trend in the right direction as our normalized oil production in the Midland Basin improved by six percent year-over-year and nearly 20 percent when compared to 2020.

‘We continue to optimize our multi-zone co-development strategy, which we pivoted to prior to the pandemic by tweaking our frac designs, spacing assumptions and landing zones to maximize our returns. On the operations side, we’ve also built out substantial water infrastructure, which allows us to implement simul-frac completions across our position.

“This type of completion is consistently more efficient than a traditional zipper frac design because we can complete approximately 80 wells per year with just one crew. When you add in the additional efficiencies we’re seeing from our Halliburton e-fleet, our completion savings are approximately $50 a foot.”

Stice said in Diamondback’s recent fourth quarter 2022 earnings report that the company “was not without its challenges from significant inflationary pressures, particularly with casing, equipment availability and weather-related downtime.

“We made two Midland Basin acquisitions, Lario and FireBird, both of which are now closed and seamlessly integrated to add over 500 high quality opportunities and 83,000 net acres to our portfolio,” he said from Midland.

“When you account for the 11 months of Lario and a full year of FireBird production contribution, our guidance reflects 260,000 barrels of oil a day and $2.6 billion in capital expenditures while running 15 rigs and four simul-frac crews.”

Chief Financial Officer Kaes Van’t Hof said Diamondback’s biggest problem over the past six quarters has been the cost of well casings with an increase from $40 or $50 to $110 a foot

“Now we can certainly see around the corner that maybe we’re seeing some softening there,” Van’t Hoff said. “Casing is 20 percent of our Midland Basin well cost now and that’s a significant headwind, but I think the headwind is going to ease. If not, it’s a little bit out of our control.

“The things we can control are the efficiencies gained from simul-frac operations. We’ll probably have four simul-frac crews running by the second quarter of this year, saving $30 a foot versus conventional crews.

“Two of those crews will be Halliburton e-fleet Zeus crews and those use less fuel and run on cheap Waha gas, saving another $15 or $20 a foot. So we’re doing what we can to keep costs as low as possible in an inflationary environment.”