If you were waiting for more confirmation that the recent rise in crude oil prices is encouraging producers to get back to drilling, independent oil and gas producer Diamondback Energy Inc. (NASDAQ: FANG) just made your day. The company said Monday morning that it has increased its production outlook for 2016 and offered preliminary guidance for its fiscal year 2017 production.

Diamondback also provided an operations update for the third quarter. Daily production rose 22% sequentially to 44,923 barrels of oil equivalent per day, of which 73% is oil. In the second quarter, production totaled 36,841 barrels of oil equivalent per day. The average realized price per barrel was $42.11, up from $41.88 in the second quarter and well above the $35.68 average the company reported in August.

In July the company paid $560 million to acquire leaseholds and other assets in the southern Delaware (Permian) Basin. Included in the acquisition were 19,180 surface acres and net proved developed reserves of approximately 2.2 million barrels of oil equivalent. Diamondback noted that the acquired assets include 290 net identified potential horizontal drilling locations that support average laterals of about 9,500 feet.

And Diamondback appears to be wasting little time getting started on drilling at those locations. CEO Travis Stice said:

Diamondback’s continued strong well performance and increased completion cadence during the third quarter reflects our ability to turn our growth engine back on into a rising commodity price after reducing completion activity in early 2016. We are now operating four rigs with a fifth rig to be added in the coming weeks and a sixth rig to be added early next year. … Our existing asset base allows us to drive production growth within cash flow into 2017 and beyond at the current forward strip prices. The ability to drive multi-year organic growth, within cash flow on our existing asset base represents the standard we have always sought to achieve. We believe we are ideally positioned to pursue additional transactions provided they drive exceptional shareholder value while maintaining our disciplined approach to acquisitions. As has been rumored, we were engaged in discussions involving an acquisition but are not actively pursuing further negotiations at this time.

The Wall Street Journal last week reported that Diamondback is near a deal to acquire Silver Hill Energy Partners in a transaction that would value the privately held company at $2.5 billion. Private equity firms Kayne Anderson Capital Advisors and Ridgemont Equity Partners are among Silver Hill’s ownership group, and the company controls more than 42,000 net acres in the Delaware Basin.

Diamondback has raised its production guidance for the 2016 fiscal year from a previously announced range of 38,000 to 40,000 barrels a day to a new range of 41,000 to 42,000 barrels a day.  Preliminary full year 2017 production guidance is 52,000 to 58,000 barrels of oil equivalent per day, the midpoint of which is up over 30% from the midpoint of updated 2016 production guidance.

The company also said it intends to complete 65 to 70 gross horizontal wells in 2016 and 90 to 120 gross horizontal wells in 2017. Capex for 2016 is unchanged at $350 million to $425 million, rising to $500 million to $560 million in 2017, if crude prices remain above $45 a barrel.

In Monday’s premarket session, the stock traded up about 4% to $98.50, in a 52-week range of $55.48 to $99.69. The consensus 12-month price target on the stock is $107.07.

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