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Diamondback (FANG) Beats on Q3 Earnings, Hikes Dividend

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Diamondback Energy, Inc. (FANG - Free Report) reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and also the year-ago quarter’s earnings of 62 cents. The company’s bottom line was aided by better-than-expected production. Overall volumes were 404.3 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 394.9 MBOE/d.

The company’s quarterly revenues of $1.91 billion outperformed the Zacks Consensus Estimate of $1.52 billion and also increased from the year-earlier figure of $720 million.

Production & Realized Prices

The 2018 buyouts of Energen Corporation and Ajax Resources helped Diamondback transform into one of the leading Permian Basin oil producers. Production of oil and natural gas averaged 404.3 MBOE/d comprising 59.3% oil. The figure increased 40.7% from the year-ago quarter’s 287.3 MBOE/d and also surpassed the Zacks Consensus Estimate of 394.9 MBOE/d. While oil output was up 41% year over year, natural gas volumes rose 40.2% year over year.

The average realized crude oil price in the third quarter was $68.27 per barrel, reflecting a 76.2% rise from the year-ago realization of $38.75. Overall, the company fetched $51 per barrel compared with $26.75 a year ago.

Diamondback Energy, Inc. Price, Consensus and EPS Surprise

Diamondback Energy, Inc. Price, Consensus and EPS Surprise

Diamondback Energy, Inc. price-consensus-eps-surprise-chart | Diamondback Energy, Inc. Quote

Expenses & Financials

Third-quarter cash operating costs were $9.97 per barrel of oil equivalent (BOE), up 31% from the prior-year figure of $7.61. Diamondback’s lease operating expense (LOE) of $4.19 was up 8.5% year over year. Production taxes rose 60.1% from the prior-year quarter’s level to $3.33 per BOE. Gathering and transportation expenses were $1.8 per BOE, higher than $1.25 in the third quarter of 2020.

Capital expenditure in the quarter totaled $391 million. The company shelled out $345 million on drilling and completion, and spent another $19 million on non-operated properties. Plus, infrastructure and midstream budget amounted to $21 million and $6 million, respectively.

As of Sep 30, 2020, this Permian-focused operator had $457 million of cash and cash equivalents, and a long-term debt of $6.9 billion with total debt-to-total capital of 35.8%.

Diamondback’s board of directors declared a quarterly dividend of 50 cents per share for the third quarter. This signifies an 11.1% hike in its quarterly payout from the previous level of 45 cents. The amount will be paid out on Nov 18, 2021 to its shareholders of record as of Nov 11.

It also generated a free cash flow of $740 million in the third quarter.

Diamondback completed the divestment of its 95,000 net acres in the Williston Basin to Oasis Petroleum Inc. after fulfilling all the customary conditions. Proceeds from the sale will be utilized in debt repayment.

The company plans to distribute 50% of its free cash flow to investors. Beginning the ongoing quarter of this year, this Permian producer’s business will return free cash flow through its basic dividend and additional shareholder return methods. In order to support this return promise, the independent energy firm’s board approved a new share repurchase program worth $2 billion, which was implemented with immediate effect.

Outlook

Diamondback raised its 2021 average daily production guidance to 370-372 MBOE/d from the prior-guided range of 363-370 MBOE/d. Full-year capital spend estimate is cut to $1.49-$1.53 billion, down 4% at the midpoint from the prior-guided range of $1.525-$1.625 billion.

This Midland, TX-headquartered company predicts fourth-quarter daily production in the 368-375 MBOE/d range with an estimated capex between $435 million and $475 million. Permian Basin production for the December quarter is anticipated in the 363-370 MBOE/d band.

Zacks Rank & Other Key Picks

Diamondback currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the energy space include Cheniere Energy (LNG - Free Report) and Continental Resources, Inc. , each presently flaunting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.


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