Diamondback Energy – 2024 results
Posted: Tue Feb 25, 2025 7:12 am
Summary
Diamondback reported good 2024 results. Q4 production was well above expectation. As a consequence, 2024 profit exceeded expectations. Reserves increased due to the Endeavor acquisition. The RRR was bit low. Production should continue to grow. Long-term debt is too high and Diamondback is implementing assets disposals. Profitability is good and PE is medium. Shareholder returns are at a decent level.
Reserves
• 2024 proven reserves (3,557 M BoE) were up 1,379 M BoE versus 2023 (2,178 M BoE). The reserves increase was due to the Endeavor acquisition (1,569 M BoE), partially compensated by 121 M BoE of assets sales.
• 2024 Reserves Replacement Ratio (RRR) of 0.68 was disappointing, not replacing volumes produced by new reserves.
• RRR over the period 2019-2024 (2.06) is very sound and well above industry average (1.09).
• Proven reserves are equivalent to a good 11.0 years of 2025 production (industry average 9.5-10.0 years).
• The reserves and RRR combined allow a further growth of production with 3.5-4.5% per year.
Production
• Q4 production (883.4 K BoE/d) was above guidance (830-850 K BoE/d) and also well above my anticipated 850 K BoE/d.
• 2025 production outlook is 893-909 K BoE/d. The outlook is inclusive 37 K BoE/d from the Double Eagle acquisition with 27 K BoE/d (start in Q2). The indicated Q1 production is 860-875 K BoE/ and Q2-Q4 production is 891-920 K BoE/d.
• The guidance above does not mention the $ 4.45 B dropdown of assets to Viper (announced in January 2025). My guess is that these assets have approx. 30 K BoE/d of associated production.
• Including both the Double Eagle acquisition and the Viper dropdown, I expect for 2025 production to be 880-885 K BoE/d.
• After 2025 production can grow to 1,000-1,050 K BoE/d by 2029.
• Fluids are liquid dominated and are 54% oil, 22% NGL and 24% gas.
Balance sheet
• Long-term debt late 2024 was $ 12.1 B, well up from the $ 6.8 B at the end of 2023. The increase was due to the Endeavor acquisition.
• 2024 debt/EBITDA ratio, with only one quarter of Endeavor included in 2024 was a high 1.53.
• In 2025, with Endeavor included for the full year, the ratio can fall to 0.88, lower if 2025 assets disposal is considered.
• The debt will increase with $ 1.0 B due to the already announced $ 4.45 B ($3.0 B cash) Double Eagle acquisition. The debt will reduce due to the $ 1.0 B cash from the assets drop down to Viper.
• Diamondback has indicated it wants to dispose of another $ 1.5 B of non-core assets and wants to reduce the debt to $ 10 B.
• The equity ratio (=equity/balance sheet total) at the end of 2024 was a good 59.2%.
• The balance sheet allows shareholder returns.
Profitability
• Diamondback is a profitable company.
• 2024 eps was $ 16.57, well above my expectation of $ 15.97.
• Realized gas prices recovered from a negative -$ 0.48/MM Btu (Q3) to a positive +$ 0.28/MM Btu (Q4).
• Q4 was the first quarter with Endeavor included. Some Q4 cost (depreciation/amortization and administration) were higher than I had anticipated.
• For 2025, with WTI- $ 70-75/bbl, I expect an eps of $ 15.10-17.10 (PE is a medium 9.1-10.3).
• After 2025 with a growing production the eps can increase to $ 19.10-21.50 (PE=7.2-8.1).
Shareholder returns
• Diamondback targets to return 50% of the FCF to shareholders.
• Diamondback paid in Q4 a $ 1.00 regular dividend, but no special dividend like it did in Q1-Q3.
• In the latest return of capital framework special dividends are no longer mentioned.
• Diamondback in Q4 bought back 2.3 M shares for $ 402 M.
• For 2025 I expect shareholder returns of 5.5-6.5%.
• After 2025 returns can increase to 8.0-9.5%.
Conclusions
Diamondback reported good 2024 results. Q4 production was well above expectation. As a consequence, 2024 profit exceeded expectation. Reserves increased due to the Endeavor acquisition. The RRR was bit low. Production should continue to grow. Long-term debt is too high and Diamondback is implementing assets disposals. Profitability is good and the PE is medium.
Shareholder returns are at a decent level.
In my oil and gas company ranking Diamondback ranks just above average, at 35th out of 84.
Diamondback reported good 2024 results. Q4 production was well above expectation. As a consequence, 2024 profit exceeded expectations. Reserves increased due to the Endeavor acquisition. The RRR was bit low. Production should continue to grow. Long-term debt is too high and Diamondback is implementing assets disposals. Profitability is good and PE is medium. Shareholder returns are at a decent level.
Reserves
• 2024 proven reserves (3,557 M BoE) were up 1,379 M BoE versus 2023 (2,178 M BoE). The reserves increase was due to the Endeavor acquisition (1,569 M BoE), partially compensated by 121 M BoE of assets sales.
• 2024 Reserves Replacement Ratio (RRR) of 0.68 was disappointing, not replacing volumes produced by new reserves.
• RRR over the period 2019-2024 (2.06) is very sound and well above industry average (1.09).
• Proven reserves are equivalent to a good 11.0 years of 2025 production (industry average 9.5-10.0 years).
• The reserves and RRR combined allow a further growth of production with 3.5-4.5% per year.
Production
• Q4 production (883.4 K BoE/d) was above guidance (830-850 K BoE/d) and also well above my anticipated 850 K BoE/d.
• 2025 production outlook is 893-909 K BoE/d. The outlook is inclusive 37 K BoE/d from the Double Eagle acquisition with 27 K BoE/d (start in Q2). The indicated Q1 production is 860-875 K BoE/ and Q2-Q4 production is 891-920 K BoE/d.
• The guidance above does not mention the $ 4.45 B dropdown of assets to Viper (announced in January 2025). My guess is that these assets have approx. 30 K BoE/d of associated production.
• Including both the Double Eagle acquisition and the Viper dropdown, I expect for 2025 production to be 880-885 K BoE/d.
• After 2025 production can grow to 1,000-1,050 K BoE/d by 2029.
• Fluids are liquid dominated and are 54% oil, 22% NGL and 24% gas.
Balance sheet
• Long-term debt late 2024 was $ 12.1 B, well up from the $ 6.8 B at the end of 2023. The increase was due to the Endeavor acquisition.
• 2024 debt/EBITDA ratio, with only one quarter of Endeavor included in 2024 was a high 1.53.
• In 2025, with Endeavor included for the full year, the ratio can fall to 0.88, lower if 2025 assets disposal is considered.
• The debt will increase with $ 1.0 B due to the already announced $ 4.45 B ($3.0 B cash) Double Eagle acquisition. The debt will reduce due to the $ 1.0 B cash from the assets drop down to Viper.
• Diamondback has indicated it wants to dispose of another $ 1.5 B of non-core assets and wants to reduce the debt to $ 10 B.
• The equity ratio (=equity/balance sheet total) at the end of 2024 was a good 59.2%.
• The balance sheet allows shareholder returns.
Profitability
• Diamondback is a profitable company.
• 2024 eps was $ 16.57, well above my expectation of $ 15.97.
• Realized gas prices recovered from a negative -$ 0.48/MM Btu (Q3) to a positive +$ 0.28/MM Btu (Q4).
• Q4 was the first quarter with Endeavor included. Some Q4 cost (depreciation/amortization and administration) were higher than I had anticipated.
• For 2025, with WTI- $ 70-75/bbl, I expect an eps of $ 15.10-17.10 (PE is a medium 9.1-10.3).
• After 2025 with a growing production the eps can increase to $ 19.10-21.50 (PE=7.2-8.1).
Shareholder returns
• Diamondback targets to return 50% of the FCF to shareholders.
• Diamondback paid in Q4 a $ 1.00 regular dividend, but no special dividend like it did in Q1-Q3.
• In the latest return of capital framework special dividends are no longer mentioned.
• Diamondback in Q4 bought back 2.3 M shares for $ 402 M.
• For 2025 I expect shareholder returns of 5.5-6.5%.
• After 2025 returns can increase to 8.0-9.5%.
Conclusions
Diamondback reported good 2024 results. Q4 production was well above expectation. As a consequence, 2024 profit exceeded expectation. Reserves increased due to the Endeavor acquisition. The RRR was bit low. Production should continue to grow. Long-term debt is too high and Diamondback is implementing assets disposals. Profitability is good and the PE is medium.
Shareholder returns are at a decent level.
In my oil and gas company ranking Diamondback ranks just above average, at 35th out of 84.