Diamondback Energy Inc
Q3 2024 Earnings
Market Reaction
S&P 500 over the same 30 days: +5.39%.
Did FANG Beat Earnings? Q3 2024 Results
Diamondback Energy posted a mixed third quarter for 2024, clearing the bar on revenue while falling short on earnings as merger costs clouded the bottom line. The Permian Basin independent reported adjusted EPS of $3.38, missing the $3.99 consensus estimate by 15.29%, even as revenue of $2.65 billion beat expectations by 8.33% and climbed 13.0% from a year ago. The primary culprit behind the earnings shortfall was the $258 million in merger and integration expenses tied to the September 10 closing of the Endeavor Energy Resources acquisition, which also lifted depreciation charges to $14.12 per BOE from $10.61 a year ago. Production surged to 571.1 MBOE/d, aided by 21 days of legacy Endeavor volumes, though sharply lower oil realizations of $73.13 per barrel, down from $81.57 a year ago, capped the upside. The company is already pursuing new revenue angles from its expanded Permian footprint, including attracting data centers as natural gas customers. Looking ahead, Diamondback guided Q4 oil production at 470 to 475 MBO/d and set a 2025 capital budget of $4.10 to $4.40 billion, while targeting near-term debt reduction below $10 billion.
- Endeavor merger closed September 10, adding 21 days of legacy Endeavor production to Q3
- Q3 oil production of 321.1 MBO/d exceeded high end of guidance range (319-321 MBO/d)
- Drilling and completion costs averaging $600 per lateral foot, below $625 target promised at deal announcement
- SimulFrac completions completing nearly 4,000 lateral feet per day per crew, 30% above original plan
- Total cash operating costs decreased slightly QoQ to $11.49/BOE
- Lower realized commodity prices: oil at $73.13/Bbl vs $81.57 YoY, natural gas at $(0.26)/Mcf vs $1.62 YoY
“At time of deal announcement, we promised to drill and complete wells for $625 per lateral foot in 2025 on Endeavor's acreage. I can say that today, in real time and two months post-announcement, we are averaging $600 per lateral foot across the combined Company - above expectations and ahead of schedule.”
Diamondback Energy CEO, on the earnings call
Forward Guidance & Outlook
For Q4 2024, Diamondback expects oil production of 470–475 MBO/d (840–850 MBOE/d) and capital expenditures of $950–$1,050 million. Full year 2024 guidance calls for net production of 587–590 MBOE/d, oil production of 335–337 MBO/d, and total capital expenditures of $2,875–$3,000 million. The 2025 base case plan targets oil production of 470–480 MBO/d (800–825 MBOE/d) with approximately $4.1–$4.4 billion in capital, plus an incremental ~5 MBO/d from the Viper Tumbleweed acquisition. Management expects to achieve the rig count reduction from 22–24 rigs to approximately 18 through continued efficiency gains. The company will reduce activity if oil prices weaken, prioritizing Free Cash Flow and capital efficiency over volumes. Near-term debt reduction target is to bring consolidated net debt below $10 billion, with a long-term leverage goal of ~0.5x at mid-cycle pricing ($6–$8 billion net debt). The TRP asset trade, expected to close by year-end 2024, is expected to be accretive to 2025 Cash Flow and Free Cash Flow per share.
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