Diamondback Energy, Inc. (FANG - Free Report) delivered strong first-quarter 2020 earnings. Better-than-expected production led to this outperformance. Precisely, overall volume came in at 321.1 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 306.7 MBOE/d.
The company’s adjusted net income per share of $1.45 outpaced the Zacks Consensus Estimate of $1.32 and also increased 4.3% from the year-ago figure of $1.39.
However, this Permian pure play’s total revenues of $899 million missed the Zacks Consensus Estimate of $966 million due to weaker-than-expected average oil price realization. Precisely, the average realized crude oil price in the first quarter was $45.10 per barrel, lagging the Zacks Consensus Estimate of $47.57. However, the top line improved 4% from the year-earlier figure of $864 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 321.1 MBOE/d comprising 63% oil. The figure jumped 22.2% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of 306.7 MBOE/d. While oil output was up 13.7% year over year, natural gas volumes surged 48.1% year over year.
The average realized crude oil price in the first quarter was $45.10 per barrel, reflecting a 2.2% drop from the year-ago realization of $46.12. Overall, the company fetched $30.23 per barrel compared with $35.63 a year ago.
Expenses & Financials
First-quarter cash operating cost was $8.52 per barrel of oil equivalent (BOE), up 6.5% from the prior-year figure of $8 per BOE. Diamondback’s gathering and transportation expense was $1.23, higher than 51 cents in the first quarter of 2019. Moreover, depreciation, depletion and amortization expense of $13.93 was slightly up year over year. Meanwhile, production taxes rose nearly 4.3% from the prior-year quarter to $2.43 per BOE.
Capital expenditure in the quarter totalled $790 million. The company shelled out $672 million on drilling and completion and spent another $18 million on non-operated properties. Plus, infrastructure and midstream budgets amounted to $56 million and $44 million, respectively.
As of Mar 31, 2020, this Permian-focused operator had $149-million in cash and cash equivalents, and long-term debt of $5.6 billion. The debt-to-capitalization of the company was 30.7%.
Diamondback’s board of directors declared a quarterly dividend of 37.5 cents per share for the first quarter. The amount will be paid out on May 21, 2020 to its shareholders of record as of May 14. This indicates annual dividend yield of the company to be 3.7%.
Diamondback projects 2020 average daily production to be 295-310 MBOE/d. Its average daily oil production is estimated between 183 MBO/d and 193 MBO/d with expected capital spend of $1,500-$1,900 million.
In response to the coronavirus-induced weak oil scenario, the company plans to curb 10-15% of its oil production estimated for May 2020 in areas where it can control production costs effectively.
It further anticipates completing not more than 10% of its full-year projection of completed gross well count in the second quarter.
Diamondback is currently running a 14-rig program. The company's rig count is expected to decline to eight by the end of June, further the slipping to seven while entering the fourth quarter. Thereafter, Diamondback may ramp down activity levels should the situation demand.
Meanwhile, Diamondback lowered its operating expenses by increasing water infrastructure productivity and cutting down on trucking costs.
Zacks Rank & Key Picks
Diamondback has a Zacks Rank #5 (Strong Sell).
Some better-ranked players in the energy space are CNX Resources Corporation. (CNX - Free Report) , Cheniere Energy, Inc. (LNG - Free Report) and KLR Energy Acquisition Corp. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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