Jeoffrey Lambujon

Jeoffrey Lambujon inquired about the implications of the Barnett disclosure on the corporate oil mix over time, considering ongoing Midland Basin core operations. He also asked for an update on hyperscaler and data center opportunities, including the progress of discussions and the general outlook.

Answer

CEO Kaes Van't Hof explained that while the Barnett is getting airtime, the core inventory remains impressive with increased lateral lengths and productivity. He noted that the Barnett becoming a larger capital piece would likely reduce the overall oil mix, emphasizing the importance of gas marketing. CFO Jere Thompson expressed excitement about data center opportunities, highlighting Diamondback's full suite of offerings and the potential for material uplift to natural gas pricing. Kaes Van't Hof added that announcements would only be made when fully binding.

Jeoffrey Lambujon asked about the implications of Barnett disclosure on Diamondback Energy's corporate oil mix over time and requested an update on hyperscaler and data center opportunities.

Answer

CEO Kaes Van't Hof noted the Barnett's small budget share but significant investor interest, indicating trust in core inventory performance. He expects the corporate oil mix to decrease as Barnett capital allocation grows, emphasizing gas marketing for better realizations post-2026. CFO Jere Thompson expressed excitement about data center opportunities, focusing on power purchase agreements to uplift natural gas pricing. Kaes Van't Hof confirmed announcements would be made only when fully binding.

Jeoffrey Lambujon asked about the confidence level in the updated Willow project cost range, seeking clarity on what aspects are now locked in and the flexibility for future changes, or if the current range captures the most likely scenarios.

Answer

Kirk Johnson, Executive Vice President of Global Operations and Technical Functions, explained that the updated estimate reflects actual inflation of 4.5-5% observed post-FID, higher than the initial 2% expectation. He stated that 90% of facility contracts are now secured, tied to market indices, and the company has conservatively budgeted for continued 4-5% inflation for the next three years. He expressed high confidence in the updated capital guide due to strong project execution and no schedule slips or scope discovery issues.

Jeoffrey Lambujon asked for clarification on the confidence level in the updated Willow project capital range, specifically what is locked in and if the wider range captures the most likely scenarios or allows for flexibility.

Answer

Kirk Johnson (EVP of Global Operations and Technical Functions) explained that the updated range reflects a reconciliation of actual inflation (4.5%-5% average) seen over the past couple of years, which was higher than the 2% originally assumed at FID. He noted current inflation rates are abating (3%-3.5%) but they've conservatively budgeted for 4%-5% compounding inflation for the next three years, given contracts tied to market indices. Johnson expressed high confidence in the guide due to strong project execution, no schedule slips, and the cost pressure being primarily market-wide inflation rather than scope discovery.

Jeoffrey Lambujon asked for an outlook on operating expenses for the North Sea assets as production declines over the coming years.

Answer

CFO Stephen Riney stated that detailed guidance would be provided in the February call. He emphasized that the North Sea is now being managed for free cash flow, meaning new capital investment is uneconomic. The company is intensely focused on reducing operating costs, without compromising safety or environmental standards, to maximize cash generation from the asset's remaining life.