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Diamondback Energy, Inc. (FANG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong operating execution: production averaged 475.9 MBO/d (883.4 MBOE/d), above the high end of guidance, with cash CAPEX of $933M coming in below the low end of guidance, driving Adjusted Free Cash Flow of $1.4B and total return of capital of ~$694M (base dividend + buybacks) .
  • GAAP results: Revenue $3.71B and diluted EPS $3.67; YoY revenue increased vs Q4 2023 ($2.23B) while EPS declined YoY due largely to higher DD&A post Endeavor merger; QoQ revenue and EPS improved vs Q3 2024 ($2.65B, $3.19) .
  • Guidance reset shows higher oil output with lower budget: FY2025 oil production 485–498 MBO/d and CAPEX $3.8–$4.2B, ~10% better capital efficiency than original pro forma outlook (470–480 MBO/d on $4.1–$4.4B) .
  • Capital returns and balance sheet: base dividend increased 11% to $1.00/share; ~2.3M shares repurchased for $402M in Q4; consolidated net debt at YE 2024 was ~$13.0B with ~$2.6B liquidity; company reiterated plan to reduce net debt to ~$10B via FCF and non-core asset sales .
  • Strategic catalysts: closed TRP acreage acquisition (Dec-2024), announced Double Eagle acquisition (Feb-2025), and progressing power/data center strategy to monetize gas and secure low-cost electricity; leadership succession announced with President Kaes Van’t Hof to become CEO at the 2025 AGM .

What Went Well and What Went Wrong

What Went Well

  • Production beat and CAPEX underspend: Q4 oil production 475.9 MBO/d exceeded guidance (470–475 MBO/d); total cash CAPEX of $933M was below the $950–$1,050M range, reflecting lower well costs and execution efficiencies .
  • Capital efficiency and cost reductions: Midland Basin well costs guided at $555–$605 per lateral foot in FY2025 (~7% YoY improvement); management said “we are averaging $600 per lateral foot across the combined Company,” ahead of expectations .
  • Clear capital return posture: base dividend raised to $1.00/share; opportunistic buybacks (~2.3M shares, $402M in Q4) with continued repurchases in early 2025; management emphasized “at $70 oil, this business generates $20/share of free cash flow in 2025” .

What Went Wrong

  • Lower realized commodity prices: Q4 average realized prices declined QoQ and YoY, notably oil $69.48/bbl, gas $0.48/Mcf, NGLs $19.27/bbl; combined realized price fell to $42.71/BOE, pressuring margins .
  • Higher DD&A and integration expenses post-merger reduced EPS: Q4 DD&A/BOE rose to $14.22 (vs $11.02 in Q4 2023), and merger/integration expense of $30M for the quarter impacted GAAP results .
  • Estimates comparison unavailable: Wall Street consensus EPS and revenue figures from S&P Global were not retrievable due to service limits, preventing formal beat/miss assessment (consensus unavailable via S&P Global).

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Billions)$2.23 $2.65 $3.71
Diluted EPS ($)$5.34 $3.19 $3.67
Net Income Margin (%)43.1% (960/2,228) 24.9% (659/2,645) 28.9% (1,074/3,711)
Adjusted EBITDA Margin (%)71.3% (1,588/2,228) 62.6% (1,656/2,645) 67.5% (2,504/3,711)
Consensus EPS (S&P Global)UnavailableUnavailableUnavailable
Consensus Revenue (S&P Global)UnavailableUnavailableUnavailable

Note: S&P Global consensus estimates were unavailable due to service limits; formal beat/miss assessment not provided.

Key operating KPIs

KPIQ4 2023Q3 2024Q4 2024
Oil volumes (BO/d)273,087 321,054 475,924
Total volumes (BOE/d)462,565 571,098 883,424
Avg realized oil price ($/bbl)$76.42 $73.13 $69.48
Avg realized gas price ($/Mcf)$1.29 $(0.26) $0.48
Avg realized NGL price ($/bbl)$19.96 $17.70 $19.27
LOE ($/BOE)$5.97 $6.01 $5.67
GP&T ($/BOE)$1.83 $1.94 $1.17
Cash G&A ($/BOE)$0.59 $0.63 $0.69

Free cash flow and liquidity highlights

  • Operating cash flow before working capital: $2.26B in Q4; Free Cash Flow $1.33B; Adjusted FCF $1.36B .
  • YE 2024 consolidated total debt $13.2B; cash $161M; net debt $13.0B; total liquidity ~$2.6B .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Oil production (MBO/d)FY2025470–480 (Feb 2024 pro forma) 485–498 Raised (higher output)
Net production (MBOE/d)FY2025800–825 (Feb 2024 pro forma) 883–909 Raised
Total CAPEX ($B)FY2025$4.1–$4.4 (Feb 2024 pro forma) $3.8–$4.2 Lowered
Oil production (MBO/d)Q1 2025N/A470–475 (860–875 MBOE/d) New
LOE ($/BOE)FY2025N/A$5.90–$6.30 New
Cash G&A ($/BOE)FY2025N/A$0.60–$0.75 New
DD&A ($/BOE)FY2025N/A$14.00–$15.00 New
Interest expense ($/BOE)FY2025N/A$0.25–$0.50 New
GP&T ($/BOE)FY2025N/A$1.20–$1.40 New
Prod & ad valorem taxes (% rev)FY2025N/A~7% New
Corporate tax rateFY2025N/A23% New
Cash tax rateFY2025N/A17%–20% New
Base dividend (per share)Q4 2024$0.90 (Q3 2024) $1.00 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Capital efficiencyQ2/Q3 emphasized lowering well costs, fewer rigs/fracs while maintaining footage; drilling 24→26 wells/rig, ~100 wells/crew; Midland well costs trending lower FY2025 efficiency improved ~10% vs original pro forma; sustained $600/ft and aiming $555–$605/ft; CAPEX underspend in Q4 Improving
Share buybacksFlex returns; lean into buybacks during weakness; Q3 raised authorization to $6B; participated in Endeavor secondary “Stock is cheap”; continued buybacks in Jan–Feb; focus on per-share metrics; large owner supportive Increasing emphasis
M&A postureQ3: focused on integrating Endeavor; TRP trade to high-grade inventory Double Eagle acquisition announced; management: “last meaningful asset in core Midland,” pause likely after digesting Consolidation, then digest
DUC drawdownQ2/Q3 plans to draw down DUCs; ability to flex rigs/completions Significant DUC drawdown planned; ~$200M CAPEX savings; will flex drilling if ahead of plan Active utilization
Power/data center strategyQ3 introduced surface/gas-to-power concept; discussions with hyperscalers; equity participation potential Advancing behind-the-meter gas power with hyperscaler partner; aim to monetize gas and secure low-cost power Developing
Midstream and asset salesQ3: monetize equity investments selectively; Deep Blue growth; Delaware non-op sale possible Committing ≥$1.5B non-core asset sales; potential Endeavor water to Deep Blue; push net debt to ~$10B Acceleration
Macro postureQ3 cautious on 2025 oversupply; prioritizing FCF over growth Reiterate cautious macro; 2% oil growth base case; flexibility to spend less if needed Cautious

Management Commentary

  • “This quarter, we announced an 11% increase to the base dividend… Today, we are confident we can protect the increased dividend and our base level of activity below $40 a barrel at our current cost structure.” – Letter to Stockholders .
  • “We are averaging $600 per lateral foot across the combined Company - above expectations and ahead of schedule.” – Letter to Stockholders .
  • “Not saying we’re never going to do another deal again, but certainly you need to digest here… At $70 oil, this business generates $20 a share of free cash flow in 2025.” – Kaes Van’t Hof, Q4 call .
  • “We tried to articulate… this was really the last opportunity in the core of the Midland Basin.” – Travis Stice, Q4 call .
  • “We have flexibility… SimulFRAC fleets are completing about 100 wells per fleet per year, up from 80 a year ago.” – Kaes Van’t Hof, Q4 call .

Q&A Highlights

  • Capital efficiency and DUCs: Management targets ~$200M 2025 savings from DUC drawdown; will adjust drilling pace based on CAPEX execution and market conditions .
  • Buybacks vs variable dividend: Emphasis on buybacks at current valuation; plan remains “at least 50%” of FCF returned, with flexibility to lean in during volatility .
  • Non-core asset monetizations: Focus on equity investments and water infrastructure; avoid selling operated Permian acreage; pathway to ~$1.5B proceeds .
  • Power initiative: Pursuing behind-the-meter gas power with hyperscaler use; Diamondback aims to provide gas and receive power/equity benefits to lower LOE and monetize gas .
  • Integration learnings: Clear fluids and SimulFRAC standardized; studying completion designs and production synergies to reduce costs and improve uptime .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS, revenue, and EBITDA were unavailable due to service limits; therefore, no beat/miss determination versus Street consensus is provided (consensus unavailable via S&P Global).
  • Internally, Diamondback highlighted a FCF sensitivity improvement: free cash flow per share equivalence now at ~$67/bbl vs ~$76/bbl last year, reflecting lower costs and accretive M&A .

Key Takeaways for Investors

  • Q4 execution outperformed on volumes and CAPEX, with robust FCF and disciplined returns; dividend increase and continued buybacks are supportive of per-share value .
  • 2025 setup prioritizes capital efficiency over volume: higher oil output with lower budget, providing levers to defend FCF if macro softens .
  • Inventory and cost structure improved through Endeavor integration and TRP trade; Double Eagle adds ~400 core locations with adjacency synergies (longer laterals, shared infrastructure) .
  • Balance sheet strategy is clear: ≥$1.5B non-core monetizations and ~50% of FCF to delevering, targeting ~$10B net debt while maintaining flexibility to repurchase shares .
  • Emerging power/data center strategy could structurally reduce LOE and monetize in-basin gas; watch for JV announcements as a medium-term catalyst .
  • Near-term trading: upside catalysts include buyback cadence, asset sale progress, and synergy delivery; risks include commodity price volatility and NGL/gas realizations weighing on blended prices .
  • Medium-term thesis: best-in-class Permian capital efficiency, longer-duration inventory, and disciplined capital returns underpin durable FCF growth through cycles .