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Diamondback Energy, Inc. (FANG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered production near the top of guidance with average oil at 495.7 MBO/d and total 919.9 MBOE/d, generating $3.678B total revenues, $2.38 GAAP diluted EPS and $2.67 adjusted EPS .
  • Return of capital remained robust: $691M in Q2 via $1.00 base dividend and ~3.0M shares repurchased; buyback authorization raised by $2.0B to $8.0B, with ~$3.5B remaining .
  • Guidance tightened/lowered: 2025 net BOE raised to 890–910 MBOE/d, oil narrowed to 485–492 MBO/d; cash capex cut to $3.4–$3.6B; LOE lowered, DD&A, GPT, and interest expense raised; Q3 oil guided to 485–495 MBO/d .
  • Versus S&P Global consensus, Q2 revenue was a beat, while adjusted EPS and EBITDA were slight misses; drivers included lower realized commodity prices, higher DD&A and derivative losses offset by volume strength and improved NGL yields (see Estimates Context; values from S&P Global*) .

What Went Well and What Went Wrong

What Went Well

  • Operational outperformance and efficiency records: “completions crews averaged over 3,900 completed lateral feet per day, a Company quarterly record,” while drilling set company/Texas records (31,035 ft TD, 10,000’ lateral in 4 days) .
  • Improved gas capture and NGL yields: management highlighted adding ~33,000 bbl/d of NGLs quarter-over-quarter in Martin County as plants operated more efficiently under Energy Transfer .
  • Cost discipline: cash operating costs down to $10.10/BOE, LOE at $5.26/BOE; 2025 LOE guidance reduced to $5.30–$5.70/BOE .

What Went Wrong

  • Realized pricing headwinds: oil $63.23/bbl, gas $0.88/Mcf, NGLs $18.13/bbl; combined $39.61/BOE—down versus Q1/Q4, pressuring revenue per BOE .
  • Elevated DD&A: $1.266B in Q2 vs $1.097B in Q1, compressing GAAP earnings and margins .
  • Derivative and interest rate swap losses: net non‑cash derivative loss $160M and net cash settlements loss $37M, including $52M realized loss on early termination of $450M of interest rate swaps (excluded from return of capital calc) .

Financial Results

Reported Metrics vs Prior Periods (GAAP and Non-GAAP)

MetricQ4 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$3,711 $4,048 $3,678
Oil, Gas & NGL Sales ($USD Millions)$3,471 $3,657 $3,316
GAAP Diluted EPS ($)$3.67 $4.83 $2.38
Adjusted EPS ($)$3.64 $4.54 $2.67
Adjusted EBITDA Attributable to Diamondback ($USD Millions)$2,504 $2,801 $2,311
Daily Oil Volumes (BO/d)475,924 475,944 495,692
Daily Combined Volumes (BOE/d)883,424 850,656 919,879

Margins (S&P Global)

MetricQ1 2025Q2 2025
EBITDA Margin (%)78.34%*64.15%*
Net Income Margin (%)36.40%*20.00%*

Values retrieved from S&P Global.*

KPIs (Realizations and Cash Costs)

KPIQ4 2024Q1 2025Q2 2025
Oil Realized Price ($/bbl)$69.48 $70.95 $63.23
Gas Realized Price ($/Mcf)$0.48 $2.11 $0.88
NGL Realized Price ($/bbl)$19.27 $23.94 $18.13
Combined Realized Price ($/BOE)$42.71 $47.77 $39.61
LOE ($/BOE)$5.67 $5.33 $5.26
GPT ($/BOE)$1.17 $1.45 $1.73
Cash G&A ($/BOE)$0.69 $0.72 $0.55

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Production (MBOE/d)FY 2025857–900 890–910 Raised
Oil Production (MBO/d)FY 2025480–495 485–492 Narrowed up
LOE incl. workovers ($/BOE)FY 2025$5.65–$6.05 $5.30–$5.70 Lowered
DD&A ($/BOE)FY 2025$14.00–$15.00 $14.50–$15.50 Raised
Interest exp. net ($/BOE)FY 2025$0.40–$0.65 $0.60–$0.80 Raised
GPT ($/BOE)FY 2025$1.40–$1.60 $1.60–$1.75 Raised
Cash tax rate (% pre-tax)FY 202519–22% 15–18% Lowered
Operated D&C ($MM)FY 2025$2,780–$3,090 $2,850–$2,950 Slightly raised
Workovers/non-op/science ($MM)FY 2025$280–$320 $250–$300 Lowered
Infra/env/midstream ($MM)FY 2025$340–$390 $300–$350 Lowered
Total Cash Capex ($MM)FY 2025$3,400–$3,800 $3,400–$3,600 Lowered midpoint
Gross Wells Drilled (net)FY 2025385–435 (349–395) 425–450 (395–418) Increased
Gross Wells Completed (net)FY 2025475–550 (444–514) 490–515 (458–482) Narrowed
Q3 Oil (MBO/d), Total (MBOE/d)Q3 2025N/A485–495, 890–920 New
Q3 Capex ($MM)Q3 2025N/A$750–$850 New
Base Dividend ($/share)Q2 2025$1.00 (Q1 precedent) $1.00 declared Maintained
Share Repurchase AuthorizationCurrent$6.0B prior$8.0B total; ~$3.5B available Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Macro “stoplight” & activity disciplineFY25 plan implied Q2–Q4 run-rate oil 490–505 MBO/d ; Q1 cut activity to prioritize FCF “2025 is a year of debt reduction and share count reduction… maintaining flexibility” Cautious/defensive
Efficiency (drilling/completions)Strong program scale; ops updates ongoing Record drilling and completions cycle times; >3,900 lateral ft/day Improving
Gas capture/NGL yieldsNot emphasized previously+33 kbbl/d NGLs QoQ; flaring down; improved capture in Martin County Improving
DUC strategy/flexibilityActivity reductions to boost FCF Maintain higher DUC balance (250–300 target range) for optionality Building optionality
Tariffs/steel costsNot discussedCasing costs expected to rise ~25% in 2025 due to tariffs Headwind increasing
Power/electricity costN/AEvaluating in-basin power generation; focus on lowering LOE power inflation Exploring solutions
TaxesQ2 cash taxes guide $340–$400MM (Q1 release) 2025 cash tax 15–18%; ~$200MM one-time benefits; Q3 cash taxes $50–$110MM Favorable tailwind
Hedging postureFY25 hedge book detailed in Q4 release Gradually adding 2026 puts; cost sensitivity, balance sheet reducing hedge need Patient build

Management Commentary

  • “We are narrowing our annual oil production guidance to 485–492 MBO/d… and increasing our annual BOE guidance by 2% to 890–910 MBOE/d” .
  • “Our completions crews averaged over 3,900 completed lateral feet per day, a Company quarterly record” .
  • “We expect casing costs to increase almost 25% through the course of 2025, raising the breakeven cost of nearly every well drilled in the United States this year” .
  • “2025 for us is a year of debt reduction and share count reduction, waiting for that spring to coil” .
  • “We’ve added 33,000 barrels a day of NGLs to our production in Q2 over Q1… very positive for long term cash flow” .
  • “We should naturally be the consolidator of choice… until someone else can prove they can do it better than us” .

Q&A Highlights

  • Consolidation/M&A posture: Diamondback sees itself as “the consolidator of choice,” with selectivity given scarcity of sub‑$40/bbl breakeven inventory; Viper continues roll-up strategy .
  • Non-core asset monetization: Targeting $1.5B in sales; EPIC pipeline stake (27.5%) and Endeavor water assets expected to be part of transactions; binding documents in progress .
  • DUC flexibility and activity: Comfort with 250–300 DUCs; ability to accelerate or slow quickly depending on macro; maintaining best‑in‑class execution .
  • Taxes: 2025 cash tax rate 15–18% (down from 19–22%); ~$200MM of one-time benefits; 2026 expected 18–20% .
  • Hedging: 2026 oil puts building slowly due to cost; hedge need declining as balance sheet and breakeven improve .
  • Power strategy: Pursuing behind-the-meter solutions to reduce LOE power costs; patient approach; benefits tied to gas egress and power inflation mitigation .

Estimates Context

  • Q2 2025 vs S&P Global consensus: Revenue beat, adjusted EPS and EBITDA slight misses. See table below (S&P Global definitions may differ from GAAP totals; comparisons use S&P Global actuals and consensus*). Lower realized prices and higher DD&A/derivative losses were headwinds, partially offset by stronger volumes and NGL yields .
MetricConsensusActualSurprise
Revenue ($USD Millions)3,334.4*3,495.0*+160.6 (+4.8%)*
Primary EPS (Adjusted EPS, $)2.72*2.67*-0.05 (-2.0%)*
EBITDA ($USD Millions)2,322.6*2,242.0*-80.6 (-3.5%)*

Values retrieved from S&P Global.*

Implications: Street models likely raise revenue/volume and NGL yield assumptions for H2 given operational execution, while trimming EPS/EBITDA near-term for higher DD&A, GPT/interest expense and derivative effects; tax rate reductions (15–18%) should partially support H2 EPS .

Key Takeaways for Investors

  • Production execution remains a core strength; efficiency gains and improved gas capture/NGL yields underpin H2 revenue resilience despite price headwinds .
  • Capital discipline tightened further: FY25 capex midpoint lowered, LOE guidance reduced; GPT/interest expense higher—watch mix-shift impact on unit economics .
  • Return of capital is durable: $1.00 base dividend and expanded $8B buyback authorization; opportunistic debt repurchases at discounts to par signal value-aware capital allocation .
  • Macro stance is cautious (“yellow light”); higher DUCs preserve optionality to accelerate if the curve tightens; expect stable oil volumes near 490–500 MBO/d into Q3 .
  • Near-term catalysts: Non-core asset sale updates (EPIC, water), Viper Sitio closing, Q3 cash tax tailwind ($50–$110MM), continued buyback activity .
  • Watch tariff-driven casing inflation (~25%) and contract shifts (take in kind) increasing GPT; both can weigh on margins even as LOE improves .
  • Trading setup: Strong operational prints and buyback firepower vs. pricing/DD&A/derivative headwinds; a curve steepening or OPEC supply discipline would be catalysts for re‑rating; absent that, expect estimates to bias modestly lower on EPS/EBITDA but supported by tax and volume .