Diamondback Energy Shares Edge Higher After Strong Q4 Report

Diamondback Energy Inc. (NASDAQ: FANG) shares edged higher on Monday after the company reported fourth-quarter earnings that surpassed analysts' expectations. The Midland, Texas-based oil and natural gas exploration and production company reported net income of $1.07 billion, or $3.67 per share, compared to the average estimate of $3.26 per share by nine analysts surveyed by Zacks Investment Research. Earnings, adjusted for non-recurring gains, were $3.64 per share, also surpassing the expected $3.35 per share.

Diamondback's revenue of $3.71 billion in the quarter also topped the Street forecasts of $3.53 billion. The company's strong performance was driven by higher average daily oil volumes, operational efficiency improvements, synergies from the Endeavor merger, and strong well performance.

Diamondback's average daily oil volumes rose to 475,924 barrels of oil equivalent per day in the fourth quarter, up from 273,087 a year earlier. The company's drilling, completions, and production groups have consistently pushed well costs lower, with a new Midland Basin well cost range of $555 to $605 per foot, down approximately $45 per foot (over 7%) year over year. This improvement in operational efficiency helped the company reduce capital expenditures and increase profitability.

The merger with Endeavor Energy Resources, L.P. in September 2024 allowed Diamondback to bring its industry-leading operational structure onto a world-class asset with differentiated inventory quality and duration. The integration process has delivered operational synergies, such as a new standardized facility design, improved drillout efficiencies, and procurement savings, which have contributed to the company's strong performance.

Diamondback's fourth-quarter average production of 475.9 MBO/d (883.4 MBOE/d) was above the high end of the guidance range of 470 - 475 MBO/d (840 - 850 MBOE/d). Capital expenditures were $933 million, below the low end of the guidance range of $950 million to $1.05 billion. This beat was primarily driven by Midland Basin well costs continuing to move lower, settling below the stated fourth-quarter $600 per lateral foot estimate.

Diamondback generated $2.3 billion of net cash provided by operating activities and $1.4 billion of Adjusted Free Cash Flow in the fourth quarter. Approximately 51% of Adjusted Free Cash Flow was delivered to stockholders through the company's base dividend and buyback program. Diamondback repurchased 2,326,247 shares of common stock in the fourth quarter for $402 million, excluding excise tax, at a weighted average price of $172.91 per share. The company also repurchased 1,254,600 shares of common stock to date in the first quarter of 2025 for $210 million, excluding excise tax, at a weighted average price of $167.42 per share.

Diamondback's strong Q4 performance and positive outlook for 2025 have contributed to the company's share price increase. The company's shares were up 1.62% after-hours at $157.75 on Monday. Diamondback's 2025 guidance for full-year oil production is 485 - 498 MBO/d (883 - 909 MBOE/d), which represents a significant increase from its 2024 average production of 337.0 MBO/d (598.3 MBOE/d). The company's full-year 2025 cash capital expenditures guidance is $3.8 - $4.2 billion, which is allocated towards drilling and completing wells with an average lateral length of approximately 11,500 feet. This investment in capital expenditures will support the company's production growth objectives.

In conclusion, Diamondback Energy's strong Q4 performance, driven by higher average daily oil volumes, operational efficiency improvements, synergies from the Endeavor merger, and strong well performance, has contributed to the company's share price increase. The company's positive outlook for 2025, supported by its 2025 guidance for full-year oil production and capital expenditures, suggests that Diamondback Energy is well-positioned for continued growth and success in the oil and natural gas exploration and production sector.