Diamondback Energy finished the first half of 2024 with a flourish, increasing its efficiency by having estimated in January that it could get 24 wells per rig and by the end of June upping that to 26 for the rest of the year.
“The first half of the year was typified by us doing more with less,” said Chairman-CEO Travis D. Stice in his Midland-based company’s second quarter earnings conference call. “You see a similar efficiency gain on the completions where we previously signaled 80 completions per year per crew and now we’re up to over 100 completions per simul-frac crew.”
As Diamondback incorporates after closing the new assets from its merger with Endeavor Energy, Stice said, “I fully anticipate that our operations organization combined with Endeavor’s operations organization will be able to continue these results.”
The significance of that, he said, is being able to apply Diamondback’s current drilling and completions cost on a larger asset.
“I’m pleased to say today that we’re significantly below where we were in February,” Stice said. “So that accrues the benefit to our shareholders and supercharges the delivery of the synergies we were talking about.
“I’m very confident that we’ll be able to continue this leading-edge capital efficiency on a larger asset base.”
President-Chief Financial Officer Kaes Van’t Hof said Diamondback was very conscious of the cash-stock mix that was put into place for the $26-billion Endeavor merger.
“We didn’t put so much cash into the deal that we had to be a seller of assets,” Van’t Hof said. “But what you’ve seen us do is sell multiple things now over the last couple of quarters that start that up.
“We sold a little bit of our Viper Energy Partners ownership to take some risk off the table and get some cash in the door and we sold our interest in WTG West Texas Gas to Energy Transfer. That will also get some cash in the door.
“Then with things like our little non-op sale that we did last quarter, all that almost adds up to $1 billion, which on top of free cash flow generation between Jan. 1 and today will reduce the cash outflow burden for the Endeavor deal.”
Van’t Hof said Diamondback “is going to be very stingy on keeping our operated properties in the Permian because they’re worth their weight in gold.”
He said the company needs to start making more money on its natural gas in the Basin.
“If you look back to the history of Diamondback we’ve grown through acquisition,” Van’t Hof said. “A lot of the deals we’ve done came with marketing contracts where we didn’t control the molecule much further than the wellhead.”
Referring to gas pipelines running to the Gulf Coast, he said, “We started with our commitment to Whistler and have grown that.
“That combined with Matterhorn will have a little bit of gas on both of those. Then you saw our press release last week that we’re going to be a participant in the next pipeline from those guys, the Blackcomb Pipeline.
“That fits the strategy of let’s take control of our molecules and see what we can do with them and I don’t think that stops at pipeline commitments. We’re looking at power needs in the Basin.
“Things like our Verde gas to gasoline plant and trying to find ways to create a local market here in the Permian because it’s a shame that we continue to sell gas near zero or below zero.
“It’s on us to continue to improve that portfolio and I think with size and scale and time we’ll be able to do that.”
