Endeavor Acquisition Synergies
Q: How will the Endeavor merger improve inventory and capital efficiency?
A: Management expects the Endeavor merger to enhance their inventory with about 12 years of sub-$40 breakeven inventory, positioning them as best-in-class in North American shale. " They plan to apply Diamondback's drilling and completion strategies, such as simul-frac development and clear fluids drilling, to the Endeavor assets, reducing well costs by $1.5 to $2 million per well. " This is projected to yield $550 million in cost synergies and improve capital efficiency in 2025. "

Debt Reduction Plan
Q: What is the plan to reduce net debt to $10 billion?
A: The company aims to reduce net debt to $10 billion by mid-2025 through free cash flow generation and potential asset sales. " " They anticipate generating about $5 billion in free cash flow in 2024, with half used to reduce the cash portion of the Endeavor purchase price, bringing net debt down to around $12 billion at close. " Ongoing free cash flow and selective asset sales will further reduce debt. " "

Capital Expenditure Outlook
Q: How will capital spending change post-merger with Endeavor?
A: Capital expenditures are expected to decrease by about $700 million from 2024 to 2025. " This reduction comes from applying Diamondback's lower cost structure to Endeavor's operations, needing fewer wells due to shallower decline rates, and completing one-time environmental CapEx projects. " Combined with cost synergies, this enhances capital efficiency in 2025. "

Service Cost Environment
Q: Is there an opportunity to reduce service costs given lower activity in gas basins?
A: Management expects softening in the service market due to reduced gas-directed activity. " While they don't set prices, they will seek market rates for services without existing commitments, potentially lowering costs on higher-spec equipment. "

Hedging Strategy
Q: How will the hedging strategy evolve with the Endeavor merger?
A: The company plans to hedge about two-thirds to three-quarters of production between signing and closing to protect cash flows for reducing the purchase price. " Long-term, they will continue hedging at 50% to 55% to protect the balance sheet and base dividend in a $55 to $60 WTI price environment. "

Gas Market Outlook
Q: What is the outlook for the Permian gas market amid increased associated gas supply?
A: Management expects associated gas production in the Permian to continue exceeding expectations, even with oil discipline. " They believe gas prices could go to zero without impacting well economics, as wells remain profitable on oil alone. "

Revisiting Asset Sales
Q: Will the company consider selling minority interests in pipeline investments?
A: They are evaluating monetization of some minority pipeline interests to accelerate debt reduction. " Some assets could be sold now, while others may be part of larger transactions. " They emphasize not being forced sellers and will act thoughtfully post-closing. "

Development in Wolfcamp D and Upper Sprayberry
Q: Are you allocating more capital to Wolfcamp D and Upper Sprayberry zones?
A: Yes, due to encouraging results, they are increasing development in the Wolfcamp D and Upper Sprayberry zones. " " Adding these zones extends inventory duration without impacting productivity. "

Capital Discipline and Efficiencies
Q: How are you maintaining capital discipline in the current environment?
A: By focusing on multi-zone development, optimizing project sizes, and mitigating frac hits, they maintain efficiencies. " They continue to improve conversion efficiency and develop durable inventory. "

Long-Term Balance Sheet Philosophy
Q: What is the long-term leverage target post-merger?
A: They aim for net debt in the range of $6 to $8 billion, approximately half a turn at strip prices. " This approach allows flexibility for capital allocation in down cycles and supports shareholder returns. "