Just having announced its $26 billion merger with Endeavor Energy Resources, Diamondback Energy reports first quarter net income of $768 million with first quarter net cash provided by operating activities of $1.3 billion.
Diamondback Chairman-CEO Travis Stice said from Midland that the merger was OK’d by shareholders April 26 and that subject to regulatory approval it will close in the fourth quarter.
During the quarter ended March 31, Stice said, his company drilled 69 gross wells in the Midland Basin and ten gross wells in the Delaware Basin and turned 101 operated wells to production in the Midland Basin with an average lateral length of 11,463 feet.
Operated completions during the first quarter totaled 30 Lower Spraberry wells, 19 Wolfcamp A wells, 16 Jo Mill wells, 15 Wolfcamp B wells, 12 Middle Spraberry wells, six Wolfcamp D wells and three Upper Spraberry wells.
First quarter 2024 net cash provided by operating activities was $1.3 billion.
Stice particularly emphasized natural gas, for which the price has been depressed for the past year, standing at a little over $2 per thousand cubic feet Thursday when producers consider $3 the minimum at which they can make a fair profit.
“From a macro perspective I think we’ve been pretty clear that we’re going to continue to need pipes being built about every 12 to 18 months out of the Permian Basin to accommodate the associated gas that goes along with the 6 million barrels a day that we produce out here,” he said. “Natural gas is right now being almost treated like a waste product.”
Referring to a major pipeline under construction to the Gulf Coast, Stice said, “When the Matterhorn comes on this fall we’ll see some of that reverse.”
Diamondback President-Chief Financial Officer Kaes Van’t Hof said Diamondback has made a long-term commitment to helping build more gas pipelines.
“We’ve done that in the last couple of years with commitments on Whistler and Matterhorn,” Van’t Hof said. “As Travis said, we just need to do more and with our size and scale and balance sheet we should be taking a leadership position on these new pipes.
“We’ve talked to a lot of people who are working on them and it seems that there are projects in the works that will help de-bottleneck past the end of this year. But as we control or have the ability to control more gas flows on our side, as contracts roll off we’re going to keep pushing on more pipes and more markets out of this basin.”
Van’t Hof said deflationary pressures in the Permian Basin are being driven by declines in the rig count and completion crew count.
“Those will be tailwinds for us as we look through the rest of this year,” he said. “But without regard to those deflationary impacts we continue to push the envelope on our drilling and completions operations where we’re getting almost 13,000 feet for the quarter this year. And we continue to get these wells drilled faster.
“Then our completion crews continue to push the envelope on the number of lateral feet that are completed in a 24-hour period. We’re working on the numerator and denominator of capital efficiency and we really like the way the rest of the year sets up for us.”
Van’t Hof said Diamondback is supplying Houston feed refineries with a lot of oil and is concentrating on risk aversion.
“We’ve grown up as a company in terms of marketing,” he said. “Very clearly, mistakes were made five, six, seven years ago. The Permian got tight and we’re not looking to make those mistakes again.
“So with our size and scale we’re going to contribute to oil pipes and new gas pipes. We’ve made some investments in gathers and processors and many midstream investments throughout the years here that one, made our shareholders money on the investment side but two, protected us on the commercial side.
“I expect that trend to continue as we get bigger.”
