Diamondback Energy Misses Q1 Forecasts As Oil Prices Slide

Diamondback Energy (NASDAQ: FANG) booked lower-than-expected revenues and earnings for the first quarter on the back of lower commodity prices.

The U.S. shale producer reported adjusted net income of $751 million, or $4.10 per diluted share, for the first quarter, below the Zacks consensus estimate of $4.36 per share earnings.  

For the first quarter of last year, Diamondback booked an adjusted net income of $929 million, or $5.20 per diluted share.

Revenues for Q1 2023 slid to $1.9 billion, from $2.4 billion for the same period a year ago, and missed the Zacks consensus estimate by 1.31%.

For the quarter just ended, lower realized prices weighed on revenues and earnings.

First quarter 2023 average unhedged realized prices were $73.11 per barrel of oil, $1.46 per Mcf of natural gas, and $23.16 per barrel of natural gas liquids (NGLs), resulting in a total equivalent unhedged realized price of $49.72 per barrel of oil equivalent. This was down by 29% compared to a year ago.

Diamondback, however, expressed optimism that cost inflation in the shale patch, or at least in its operations, has started to ease.

"We believe well costs peaked over the last two quarters and have line of sight to meaningful decreases in the upcoming quarters," the company said in a letter to stockholders on Monday.

"Both raw materials (including steel, diesel, sand) and service costs are now decreasing."

The company's operated rig count for the year peaked at 16-17 rigs, and Diamondback expects it to average 14-15 rigs in the second half of 2023. The firm confirmed its $2.5 billion-$2.7 billion annual capex budget, with capex burden decreasing in the second half of the year.

Return of capital is also a major pillar for Diamondback and other major shale producers. Diamondback generated $646 million of free cash flow (FCF) in the first quarter and will return - as pledged - at least 75% to stockholders, or $485 million of FCF for the quarter, including quarterly base dividends, variable dividends, and $332 million worth of stock repurchases.

By Tsvetana Paraskova for Oilprice.com

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