Diamondback Energy Q3 Results

[dan_s]

Production exceeded my forecast and they raise guidance again.

THIRD QUARTER HIGHLIGHTS

Q3 2018 net income of $157 million, or $1.59 per diluted share; adjusted net income (as defined and reconciled below) of $165 million, or $1.67 per diluted share

Q3 2018 production of 123.0 Mboe/d (72% oil), up 9% over Q2 2018 and 45% year over year

Increasing full year 2018 production guidance range to 118.5 – 119.5 Mboe/d, up 2% from prior guidance midpoint; implies 50% annualized growth at the midpoint from full year 2017 average daily production

Q3 2018 cash dividend of $0.125 per share payable on November 26, 2018; implies a 0.4% annualized yield based on the November 5, 2018 share closing price of $115.99

Shareholder meetings to vote on the previously announced all-stock acquisition of Energen Corporation are scheduled for November 27; deal expected to close shortly thereafter pending shareholder approval

On October 31, 2018, closed previously announced acquisition of leasehold interests and related assets from Ajax Resources, LLC ("Ajax")

Also on October 31, 2018, closed additional tack-on acquisitions of 3,646 net leasehold acres, ~3,500 boe/d of estimated current net production and related assets in Northwest Martin and Northeast Andrews counties from ExL Petroleum Management, LP, ExL Petroleum Operating, Inc. ("ExL") and EnergyQuest II, LLC ("EnergyQuest") for $312.5 million, subject to adjustment; complementary assets adjacent to existing Diamondback and Ajax acreage

Rattler Midstream intends to exercise its right to acquire a 10% equity interest in the Gray Oak Pipeline, subject to certain closing conditions; Diamondback has increased its volume commitment to the Gray Oak Pipeline from 50,000 bo/d to 100,000 bo/d, taking Diamondback's total volume commitment to new long-haul pipelines to 200,000 bo/d (including previously announced volume commitment of 100,000 bo/d on the EPIC Crude Oil Pipeline project)
Acquired ownership of overriding royalty interests across a large portion of Ajax's asset base in Northwest Martin and Northeast Andrews counties; increases net revenue interest by 1% across field

Executed joint development agreement with Carlyle for development of the San Pedro area of Pecos County and commenced drilling operations

“Diamondback continued to deliver on both our near-term objectives and long-term strategic initiatives through the third quarter and into the fourth quarter of 2018. First, we were able to deliver significant quarter over quarter production growth while maintaining our best in class margins and operational efficiencies. Second, we closed multiple highly complementary asset acquisitions in the Northern Midland Basin and have since taken over operations. Finally, we continued executing on our midstream and long-haul takeaway strategy through our commitment to, and ownership interest in, the Gray Oak Pipeline project. With our commitment to Gray Oak and EPIC, Diamondback has secured waterborne pricing and "wellhead to water" solutions for all of the current and expected production from our existing asset base, while also building value for our midstream business through strategic joint ventures," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, "Since the beginning of the year, Diamondback has been able to generate $12 million in free cash flow while growing production 45% over the last 12 months. Our existing 14 operated rigs, along with the 10 rigs currently operated by Energen, will provide the baseline for our 2019 operating plan assuming the approval of the merger by the shareholders of both companies on November 27 and the closing of the merger shortly thereafter. With respect to capital, we are raising our infrastructure budget for 2018 due to the continued growth of our midstream operations and the added infrastructure costs related to the signing of our joint development agreement with Carlyle, along with staying ahead of our accelerated rig count. As we look ahead into 2019, we look forward to delivering on the synergies presented from our merger with Energen while growing production at industry-leading rates, maintaining our best in class operating metrics, generating free cash flow and increasing our return of capital program."