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Diamondback Energy, Inc. (FANG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered broad-based beats versus consensus: Adjusted EPS was $3.08 vs $2.95 estimate (+4.6%), revenue was $3.74B vs $3.53B estimate (+6.0%), and EBITDA was $2.66B vs $2.49B estimate (+6.7%). Values retrieved from S&P Global.*
  • Oil production averaged 503.8 MBO/d (942.9 MBOE/d), at the top of range following the Sitio/Viper close, with free cash flow of $1.76B and total return of capital of $892M (50% of Adj. FCF), including 4.286M shares repurchased for ~$603M and a $1.00 base dividend .
  • Guidance was raised: FY25 oil 495–498 MBO/d (prior 485–492), BOE 910–920 MBOE/d (prior 890–910), and Q4 oil 505–515 MBO/d; capital narrowed to $3.45–$3.55B with mix shifts (higher D&C and workovers; lower infrastructure) .
  • Strategic portfolio actions closed post-quarter: sale of Environmental Disposal Systems to Deep Blue ($694M upfront; up to $200M earnouts) and EPIC Crude interest ($504M upfront; up to $96M contingent), improving liquidity and flexibility .
  • Management remains in “yellow light” mode—prioritizing per-share FCF growth, buybacks, and balance-sheet resilience amid a murky supply debate—while executing efficiency gains (continuous pumping, faster drilling) despite steel tariff headwinds .

What Went Well and What Went Wrong

What Went Well

  • Production and cash outcomes strong: Oil 503.8 MBO/d (943 MBOE/d), operating cash flow before WC $2.53B, and Adjusted FCF $1.79B; total ROC $892M with buybacks at $140.70/share .
  • Efficiency/operations: Continuous pumping now delivering >1 mile of lateral per day, record spud-to-TD cycle times (11% wells under 5 days), and LOE+GPT cash costs down to $10.05/BOE; management: “continuous pumping…should see some savings flow through” .
  • Portfolio optimization: Closed EDS sale to Deep Blue (retained 30% stake) and EPIC Crude divestiture; management highlighted non-core monetizations at attractive multiples and debt reduction actions .
    • “We sold $1.0 billion of primarily non‑E&P producing assets at higher multiples than we trade” .

What Went Wrong

  • Pricing and costs: Realized gas price $0.75/Mcf and combined price $39.73/BOE; LOE ticked up to $5.65/BOE QoQ; steel tariffs raised casing costs even as efficiencies offset part of the impact .
  • Net leverage up sequentially: Consolidated net debt rose to ~$15.9B, reflecting Viper notes for Sitio redemption; CFO expects net debt to decline materially in Q4 via FCF and asset proceeds .
  • Macro uncertainty: Company remains in “yellow” stoplight—no acceleration due to contested oversupply outlook; reiterated willingness to defend capital if oil “prints months” in the 50s .

Financial Results

Reported Results by Quarter (GAAP and Company Non-GAAP)

MetricQ1 2025Q2 2025Q3 2025
Oil, gas & NGL sales ($B)$3.657 $3.316 $3.447
Total Revenues ($B)$4.048 $3.678 $3.924
Net Income ($B)$1.405 $0.699 $1.018
Diluted EPS (GAAP) ($)$4.83 $2.38 $3.51
Adjusted EPS ($)$4.54 $2.67 $3.08
Adjusted EBITDA ($B)$2.801 $2.311 $2.408
Free Cash Flow ($B)$1.545 $1.242 $1.760
Adjusted Free Cash Flow ($B)$1.583 $1.334 $1.792
Cash CAPEX ($B)$0.942 $0.864 $0.774

Consensus vs. Actual (S&P Global)

MetricQ3 2024Q2 2025Q3 2025
Primary EPS Consensus Mean (Est)3.9242.7252.945
Primary EPS (Actual)3.3802.6703.080
Revenue Consensus Mean ($B, Est)2.4113.3343.530
Revenue (Actual, $B)2.6363.4953.743
EBITDA Consensus Mean ($B, Est)1.7342.3232.491
EBITDA (Actual, $B)1.8092.2422.657
Values retrieved from S&P Global.*

KPIs and Costs (Quarterly)

KPIQ1 2025Q2 2025Q3 2025
Oil production (MBO/d)475.9 495.7 503.8
Total production (MBOE/d)850.7 919.9 942.9
Realized oil ($/Bbl)70.95 63.23 64.60
Realized gas ($/Mcf)2.11 0.88 0.75
LOE ($/BOE)5.33 5.26 5.65
GPT ($/BOE)1.45 1.73 1.41
Cash OpEx ($/BOE)10.48 10.10 10.05

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY Oil Production (MBO/d)FY 2025485–492 495–498 Raised
FY Total Production (MBOE/d)FY 2025890–910 910–920 Raised
Q4 Oil (MBO/d) / BOE (MBOE/d)Q4 2025—505–515 (927–963) New
Total Cash CAPEX ($B)FY 20253.40–3.60 3.45–3.55 Narrowed (midpoint unchanged)
Q4 Cash CAPEX ($B)Q4 2025—0.875–0.975 New
LOE ($/BOE)FY 20255.30–5.70 5.40–5.70 Slightly higher low end
GPT ($/BOE)FY 20251.60–1.75 1.45–1.60 Lowered
Cash G&A ($/BOE)FY 20250.60–0.75 0.60–0.75 Maintained
Corporate tax rate (%)FY 202523% 23% Maintained
Cash tax rate (%)FY 202515–18% 15–18% Maintained
Operated D&C ($B)FY 20252.85–2.95 2.925–2.95 Raised low end
Workovers/non-op/science ($B)FY 20250.25–0.30 0.30–0.35 Raised
Infrastructure/env/midstream ($B)FY 20250.30–0.35 0.225–0.25 Lowered
Gross wells drilled (net)FY 2025425–450 (395–418) 445–465 (412–430) Raised
Gross wells completed (net)FY 2025490–515 (458–482) 510–520 (471–481) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Macro “stoplight” disciplineYellow; willing to go red sub-$50; defend FCF/share count Still yellow; murky supply debate; defend capital until price signal Cautious, unchanged
Efficiency (drilling & completions)Record spud-to-TD; pursuing 4–5 day wells; >4,000 ft/day completions Continuous pumping; >1 mile/day; 11% wells <5 days; consistency rising Improving
Steel tariffs/costsCasing up ~12–15%; expecting service price relief Tariffs persist; offset by efficiency; LOE modestly up QoQ Mixed
Gas egress & Waha exposureBuilding FT; long-term pivot away from Waha CPV Ward County deal; Waha exposure to ~40% by YE26; adding pipelines (Blackcomb/Matterhorn) Reducing Waha
Power generation/data centersExploring in-basin power; behind-the-meter value Long-term gas-to-power strategy; ERCOT-indexed supply; power cost mitigation Advancing
DUC backlog & flexibilityMaintain 250–300 DUCs; optionality to accelerate/decelerate Still well-positioned; continuous pumping reduces crew need Stable optionality
Delaware Basin focusLimited capital; Midland Basin dominant Delaware gets less attention in ’26; focus on Midland zones De-emphasized
Viper/SitioViper consolidation; data advantage Sitio closed; private well-level data on ~50% of Permian aids FANG Strategic asset

Management Commentary

  • “We remain in the ‘yellow’ zone today…there is no need for incremental oil barrels until there is a proper price signal” (CEO Kaes Van’t Hof) .
  • “Continuous pumping…getting 20% more lateral footage completed in a day on a pad…we should see some savings flow through” (COO Danny Wesson) .
  • “By year-end 2026, we expect Waha exposure to be down to just over 40% of gas sales…we continue to work on other power projects” (CFO Jere Thompson) .
  • “We sold $1.0 billion of primarily non‑E&P producing assets at higher multiples than we trade…accrues straight to the balance sheet” (CEO) .
  • “Never underestimate the American engineer…we will continue to evolve, invent and discover” (CEO) .

Q&A Highlights

  • Maintenance capital and 2026 baseline: ~$925M per quarter is a reasonable bogey to hold ~505 MBO/d in a maintenance scenario; optionality via DUC backlog and efficiency .
  • Efficiency rollout: Two fleets on continuous pumping now, targeting conversion of all fleets next quarter; expect to run four full-time fleets .
  • Gas strategy: ERCOT-indexed CPV supply agreement; pipeline diversity (Matterhorn, Blackcomb, ET/WTG) to reduce Waha exposure and improve realizations .
  • Macro stance: Stayed “yellow”; prepared to defend if low-50s oil persists; buybacks remain priority alongside debt reduction .
  • Delaware vs Midland and zones: Further tilt to Midland; testing Barnett/Woodford; co-developing additional zones without degrading productivity .

Estimates Context

  • Q3 2025 results beat Street expectations across EPS, revenue, and EBITDA: Adjusted EPS $3.08 vs $2.95; revenue $3.74B vs $3.53B; EBITDA $2.66B vs $2.49B. Values retrieved from S&P Global.*
  • Prior quarter (Q2 2025) showed a small EPS miss ($2.67 vs $2.72) but revenue beat; narrative now improving with raised FY guidance and Q4 spend to maintain oil volumes .
  • Post-quarter non-core proceeds and debt actions plus improved gas egress likely drive estimate revisions higher for FCF and 2026 unit costs.

Key Takeaways for Investors

  • Diamondback executed a clean beat quarter with raised FY production guidance, strong FCF, and stepped-up buybacks—actionable for near-term positive estimate revisions and sentiment.
  • Continuous pumping and drilling consistency are driving structural cost advantages that offset tariff headwinds, supporting maintenance-level oil at attractive capital efficiency .
  • Gas strategy (ERCOT-linked deal, pipeline diversity) should improve realizations and reduce Waha risk by 2026—supportive to margin and cash flows .
  • Portfolio optimization (Deep Blue, EPIC Crude) and debt reduction increase flexibility; CFO guides net debt to decline in Q4, reducing risk into 2026 .
  • Management remains disciplined (“yellow light”)—prioritizing per-share FCF growth; expect buybacks (~1%+ float/quarter) to continue unless macro shifts .
  • Watch Q4 capex step-up ($875–$975M) as baseline for 2026 maintenance spend and for efficiency carry-through; track LOE and GPT trajectories .
  • Catalysts: estimate upgrades on production/FCF, clarity on power/data-center initiatives, and further non-core monetizations.

Footnotes

  • S&P Global consensus and actual values used in “Consensus vs. Actual” and beats/misses.