Bob Campbell, Odessa American, Texas. Observing its 10th anniversary as a publicly traded company, Diamondback Energy had a successful third quarter and it looks forward to capitalizing on its purchase of the Fort Worth-based FireBird Energy Co.
That’s according to Chairman-CEO Travis Stice and President-CFO Kaes Van’t Hof, who say inflation remains a challenge.
“Our commitment to being the lowest-cost operator in the Permian Basin has been and will continue to position us for success,” Stice said in his company’s recent third-quarter earnings call. “In the quarter, we produced over 224,000 barrels of oil per day and generated $1.7 billion in operating cash flow, leading to free cash flow of $1.2 billion.”
Stice said Diamondback has been thereby able to return at least 75 percent of its free cash flow to shareholders.
“In October, we announced the pending acquisition of the assets of FireBird Energy, a company with a large, contiguous position in the Midland Basin,” he said in reference to the sedimentary basin from which oil and natural gas are pumped primarily in Martin, Midland, Upton, Howard, Glasscock, and Reagan counties.
“FireBird has the right balance of cash flow and inventory and the acquisition is immediately accretive on all relevant per-share financial metrics while providing a long runway of high-quality drilling opportunities.
“With over 350 locations, we expect to have well over a decade of run room.”
In conjunction with the acquisition, Stice reported, Diamondback will sell $500 million of its non-core assets by the end of next year with the net proceeds being used to pay down debt.
“We have closed on a $155-million sale of non-core assets in the Delaware Basin, jump-starting our program and ensuring continuous improvement to our investment-grade balance sheet,” he said.” We’ll continue to pursue strategic divestitures including the sale of certain assets within our Rattler Midstream portfolio, generating unrealized value for our shareholders.
“We have some of the best inventory in the United States with our low-cost operational machine in place and we have the unique ability to generate significant repeatable returns through the drill bit for decades to come.”
Stice said from Midland that Diamondback is working with its service providers to ensure very efficient, cost-effective personnel and equipment for 2023 including two e-fleet simul-frac crews from Halliburton, the first of which “is already in the field and performing well.
“It’s not easy to operate in this environment, but our size, scale and quality of inventory uniquely position us to deliver differentiated results and create meaningful value for our shareholders,” he said. “We’ve just celebrated 10 years as a public company, growing from a $500-million market cap to almost $30 billion today.”
The Delaware Basin lies under far West Texas and south Southeastern New Mexico.
Van’t Hof said the low costs of his company’s wells are a decided advantage. “I think we’re going to keep co-developing,” Van’t Hof said.
“In some ways, we’ll end up doing larger pads, given the sale of the Robertson Ranch area that is kicking off in a real way right now. Well costs are certainly the biggest advantage we have as a company and that’s a cultural thing from top to bottom.
“We’re very focused on keeping costs down in this inflationary environment.”