Diamondback - outlook Q2 results

[Petroleum economist]

Diamondback is one of Dan’s best choices for the sweet 16. Diamondback is a large-cap operating light tight oil in the Permian in Texas and will merge with Endeavor in late 2024, increasing its market value by 70% to $ 38.1 B.

Diamondback will release its second quarter 2024 financial results on Monday August 5, 2024 after the market closes. Q2 should have been a good quarter.

Production
• Diamondback provided a Q2 outlook of 459-466 K BoE/d, flat versus Q1 (461.1 K BoE/d).
• Diamondback tends to be conservative in their outlooks and production normally is at the higher end of the guidance or even above it.
• I expect a Q2 production of 464 K BoE/d.
• Diamondback should provide a Q3 production outlook of 462-468 K BoE/d.
• The 2024 outlook (459-466 K BoE/d) should not change.

Net profit
• Diamondback revenues come mainly from oil (88%) and NGL (9%) and only 3% from gas.
• Diamondback realized oil price, due to the light nature of the oil, trades at a discount of $ 2.00-2.50/bbl versus WTI.
• In Q2 the unhedged realized oil price should have been $ 80.30-80.80/bbl.
• It will be interesting to see if Diamondback has managed to lower its interest payments ($ 46 M in Q1), especially after the sale of the 11.5 M Viper shares in March ($ 402 M) and the $ 375 M it received from its MTG midstream sale in late May.
• I expect a Q2 net profit (excl. unrealized hedging results) of $ 932 M (eps= $ 5.23).
F• or 2024 I expect with WTI at $ 81.50/bbl a net profit of $ 2,440 M (eps=$ 20.42, PE=9.9)

Balance sheet
• The Q1 balance sheet was very solid (solvency=67.0%).
• I do not expect any major changes. The solvency may have crept up a bit further.

Shareholder returns
• Diamondback in Q1 paid a fixed dividend of $ 0.90 and a special dividend of $ 1.07.
• I expect the variable dividend in Q2 to increase to $ 1.50.
• Diamondback bought back 792 K shares in Q1 for $ 42 M.
• I hope that the share buybacks will have increased to $ 100 M, but it very well may be possible that Diamondback will hold back as it needs cash for the Endeavour acquisition at the end of 2024.

Conclusion
Diamondback should report solid Q2 results with no shocks. From a risk point of view Diamond is the only company which is green in all my risk categories.

[dan_s]

Diamondback is loved by the Wall Street Gang because it over delivers and it holds some of the best Running Room in the Permian Basin.