Diamondback Energy, Inc. Announces Second Quarter 2014 Financial And Operating Results

MIDLAND, Texas, Aug. 5, 2014 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (Nasdaq:FANG) ("Diamondback" or the "Company") today announced financial and operating results for the second quarter ended June 30, 2014.

HIGHLIGHTS
  • As previously reported in the Company's interim operational update, Q2 2014 production increased 32% to 17.8 Mboe/d from Q1 2014 and 171% from Q2 2013.
  • Diamondback completed its second and third northern Martin County Wolfcamp B wells. The Mabee Breedlove 2302H and Mabee Breedlove 2202H wells in Martin County were drilled with an average lateral length of 7,331 feet. The average peak 30 day flowing 2-stream initial production ("IP") rate to date for these wells was 684 boe/d (83% oil) with an average peak 24 hour flowing 2-stream IP rate of 927 boe/d (83% oil). Peak rates are typically not reached until the well is placed on artificial lift.
  • The UL Digger 502H, Diamondback's second horizontal Clearfork shale well in Andrews County, had a 7,203 foot lateral completed with 31 stages, achieving a peak 24 hour 2-stream IP rate of 706 boe/d (94% oil) on electric submersible pump (ESP). The peak 30 day average 2-stream rate to date is 473 boe/d (91% oil) on ESP. This well tested the lower Clearfork shale, and appears even stronger than the initial successful horizontal test, which was drilled in the upper Clearfork shale. The company believes this confirms the economic viability of the play on Diamondback's nearly 8,000 contiguous net acres in central Andrews County.
  • The Crystal A Unit 1H, 2H and 3H Wolfcamp B wells were drilled in a total of 38 days on Diamondback's first three well pad in Upton County with an average lateral length of 4,852 feet. The Company estimates drilling and completion savings of $1.25 million to $1.5 million for the three well pad.
  • The Jacee C Unit 3H is the fastest 10,000 foot lateral drilled by Diamondback to date: 14 days to a total measured depth of 19,353 feet in Upton County.
  • During the second quarter of 2014, net income was $27.8 million, or $0.54 per diluted share. Net income for the second quarter includes a loss on commodity derivatives of $11.1 million and a loss on sale of assets of $1.4 million ($8 million net of tax), or $0.16 per diluted share. Without the impact of these items, net income for the second quarter of 2014 would have been $35.8 million, or $0.70 per diluted share.
  • EBITDA (as defined below) for the second quarter of 2014 was $103.1 million.

"I am very pleased with our success to date. We continue to execute, drilling a 10,000 foot lateral in 14 days, confirmed a new horizontal Lower Spraberry development zone in Upton County, and have had exciting results in the Clearfork shale in Andrews County," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice added, "We now have our fifth consecutive quarter of double digit production growth and expect to add our sixth and seventh horizontal rigs in the first quarter of 2015. I am proud of the effort Diamondback has made thus far and we have several significant tests upcoming later this year, including our first horizontal Cline well, our first horizontal Lower Spraberry wells in Martin and Andrews counties, first horizontal well (Wolfcamp B) on our recently acquired acreage in southwest Martin County, and our first operated stacked Wolfcamp B and Lower Spraberry well in Midland County."

FINANCIAL HIGHLIGHTS

Second quarter 2014 income before income taxes was $43.0 million. During that same period, the Company's net income after taxes was $27.8 million as compared to $23.6 million in the first quarter of 2014.

Second quarter 2014 EBITDA was $103.1 million and second quarter 2014 revenues were $127.0 million, compared to first quarter 2014 EBITDA of $81.3 million and first quarter 2014 revenues of $98.0 million. Discretionary cash flow was $85.1 million, $1.66 per diluted share, in the second quarter of 2014.

As of June 30, 2014, Diamondback had $37.0 million of cash on hand and had drawn $46.0 million on its secured revolving credit facility, which had a borrowing base of $350.0 million. The company subsequently reduced the outstanding balance to zero with a portion of the proceeds from the Viper Energy Partners equity offering in July.

Second quarter 2014 general and administrative expenses were $2.42/boe, which include non-cash stock based compensation, net of capitalized amounts of $1.1 million. Excluding stock based compensation from that metric would have resulted in general and administrative expenses of $1.73/boe.

During the second quarter of 2014, capital spent for drilling, completion and infrastructure was approximately $124.1 million.

FULL YEAR 2014 GUIDANCE

Below is our full year 2014 guidance, which was previously updated in our July 21, 2014 news release providing interim operational update.
 
  2014 Guidance
  Diamondback excluding Viper Viper Energy Partners Diamondback Energy Inc
       
Total Net Production – MBoe/d 14.5 – 16.0 2.5 – 3.0 17.0 – 19.0
       
Unit costs ($/boe)      
Lease operating expenses $7.00 - $8.00 $0.00 $6.00 - $7.00
G&A $2.50 - $3.50 $0.00 $2.00 - $3.00
DD&A $22.00 - $24.00 $26.00 - $28.00 $23.00 - $25.00
       
Production and Ad Valorem Taxes (% of Revenue) (a) 7.0% 7.5% 7.1%
       
$ - million      
Gross Horizontal Well Costs (b) $6.9 - $7.4 n/a $6.9 - $7.4
Horizontal Wells Drilled (net) 65-75 (52 – 60) n/a 65-75 (52 – 60)
Gross Vertical Well Costs $2.0 - $2.2 n/a $2.0 - $2.2
Gross Vertical Wells Drilled (net) 20-25 (16 – 20) n/a 20-25 (16 – 20)
Capital Expenditures $425 - $475 n/a $425 - $475
Interest Expense (net of interest income) n/a n/a $36.0 - $38.0
       
a - Includes production taxes of 4.6% for crude oil and 7.5% for natural gas and NGLs and ad valorem taxes.
b -Assumes a 7,500' average lateral length.

CONFERENCE CALL

Diamondback will host a conference call and webcast for investors and analysts to discuss its results for the quarter on Wednesday, August 6, 2014 at 9:00 a.m. CT. Participants should call (877) 440-7573 (United States/Canada) or (253) 237-1144 (International) and utilize the confirmation code 81183824. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 81183824. The recording will be available from 12:00 p.m. CT on Wednesday, August 6, 2014 through Monday, August 11, 2014 at 10:59 p.m. CT. A live broadcast of the earnings conference call will also be available via the internet at www.diamondbackenergy.com under the "Investor Relations" section of the site. The webcast will be archived on the site.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas Company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. Diamondback's activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than historical facts, that address activities that Diamondback assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future including those relating to Viper, are forward-looking statements. The forward-looking statements are based on management's current beliefs, based on currently available information, as to the outcome and timing of future events. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Diamondback. Information concerning these risks and other factors can be found in Diamondback's filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the Securities and Exchange Commission's web site at http://www.sec.gov. Diamondback undertakes no obligation to update or revise any forward-looking statement.
Diamondback Energy, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2014 2013 2014 2013
Revenues:        
Oil and natural gas revenues  $ 127,004  $ 45,394  $ 225,008  $ 74,303
Operating Expenses:        
Lease operating expense 10,496 5,495 18,411 10,403
Production and ad valorem taxes 8,554 2,788 14,396 4,742
Gathering and transportation expense 703 247 1,285 380
Depreciation, depletion and amortization 40,021 14,815 70,994 25,553
General and administrative 3,934 2,621 8,491 5,092
Asset retirement obligation accretion expense 104 45 176 88
Total expenses 63,812 26,011 113,753 46,258
Income from operations 63,192 19,383 111,255 28,045
Other income 30 388 60 777
Interest expense (7,739) (535) (14,244) (1,020)
Other expense (1,408)  -- (1,408)  --
Non-cash gain (loss) on derivative instruments (7,468) 3,893 (10,810) 5,428
Loss on derivative instruments, net (3,620) (856) (4,676) (2,399)
Total other income (expense) (20,205) 2,890 (31,078) 2,786
Income before income taxes 42,987 22,273 80,177 30,831
Income tax provision 15,163 7,802 28,764 10,964
Net income  27,824  14,471  51,413  19,867
Less: Net income attributable to noncontrolling interest  71  --  71  --
Net income attributable to Diamondback Energy, Inc.  $ 27,753  $ 14,471  $ 51,342  $ 19,867
         
Basic earnings per common share  $ 0.55  $ 0.37  $ 1.03  $ 0.52
         
Diluted earnings per common share(1)  $ 0.54  $ 0.36  $ 1.02  $ 0.52
         
Weighted average number of basic shares outstanding  50,777  39,402  49,622  38,237
         
Weighted average number of diluted shares outstanding  51,142  39,719  50,047  38,477
         
¹The Company's diluted earnings per common share is calculated in accordance with ASC 260, with an adjustment included for the awards issued by a consolidated subsidiary.
 
Diamondback Energy, Inc.
Selected Operating Data
(unaudited, in thousands, except per BOE data)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2014 2013 2014 2013
Production Data:        
Oil (MBbl)  1,211  447  2,171  748
Natural gas (MMcf)  990  409  1,698  760
Natural gas liquids (MBbls)  247  84  389  156
Oil Equivalents (1)(2) (MBOE)  1,623  600  2,843  1,031
Average daily production(2) (BOE/d)  17,836  6,590  15,706  5,694
% Oil 75% 75% 76% 73%
         
Average sales prices:        
Oil, realized ($/Bbl)  $ 95.19  $ 91.76  $ 94.46  $ 88.59
Natural gas realized ($/Mcf)  4.38  4.08  4.51  3.71
Natural gas liquids ($/Bbl)  29.92  31.91  31.62  33.38
Average price realized ($/BOE)  78.25  75.70  79.15  72.10
Oil, hedged(3) ($/Bbl)  92.20  89.84  92.30  85.38
Average price, hedged(3) ($/BOE)  76.02  74.27  77.50  69.77
         
Average costs per BOE:        
Lease operating expenses  $ 6.47  $ 9.16  $ 6.48  $ 10.09
Production and ad valorem taxes  5.27  4.65  5.06  4.60
Gathering and transportation expense  0.43  0.41  0.45  0.37
Interest expense  4.77  0.89  5.01  0.99
General and administrative(4)  2.42  4.37  2.99  4.94
Depreciation, depletion, and amortization  24.66  24.71  24.97  24.80
Total  $ 44.02  $ 44.19  $ 44.96  $ 45.79
(1) Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl.
(2) The volumes presented are based on actual results and are not calculated using the rounded numbers in the table above.
(3) Hedged prices reflect the after effect of our commodity derivative transactions on our average sales prices. Our calculation of such after effects include realized gains and losses on cash settlements for commodity derivatives, which we do not designate for hedge accounting.
 
(4) General and administrative includes non-cash stock based compensation, net of capitalized amounts, of $1,128 and $477 for the three months ended June 30, 2014 and 2013, respectively. Excluding stock based compensation from the above metric would have resulted in general and administrative cost per BOE of $1.73 and $3.58 for the three months ended June 30, 2014 and 2013, respectively. General and administrative includes non-cash stock based compensation, net of capitalized amounts, of $3,318 and $936 for the six months ended June 30, 2014 and 2013, respectively. Excluding stock based compensation from the above metric would have resulted in general and administrative cost per BOE of $1.82 and $4.03 for the six months ended June 30, 2014 and 2013, respectively.

Non-GAAP Financial Measures

Adjusted net income is a non-GAAP financial measure equal to net income attributable to Diamondback Energy, Inc. plus (gain) loss on derivative instruments, net, (gain) loss on sale of assets, net and related income tax adjustments. EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines EBITDA as net income plus non-cash (gain) loss on derivative instruments, net, loss on derivative instruments, net, interest expense, depreciation, depletion and amortization, non-cash stock-based compensation expense, capitalized stock-based compensation expense, asset retirement obligation accretion expense and deferred income tax provision. EBITDA is not a measure of net income (loss) as determined by United States' generally accepted accounting principles, or GAAP. Management believes EBITDA is useful because it allows it to more effectively evaluate the Company's operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net income (loss) in arriving at EBITDA because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP or as an indicator of the Company's operating performance or liquidity. Certain items excluded from EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of EBITDA. The Company's computations of EBITDA and adjusted net income may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts. 

The following tables present a reconciliation of the non-GAAP financial measure of EBITDA to the GAAP financial measure of net income.

Diamondback Energy, Inc.
Reconciliation of EBITDA to Net Income
(unaudited, in thousands)
         
  Three Months Ended June 30, Six Months Ended June 30,
  2014 2013 2014 2013
Net income  $ 27,824  $ 14,471  $ 51,413  $ 19,867
Non-cash (gain) loss on derivative instruments, net 7,468 (3,893) 10,810 (5,428)
Loss on derivative instruments, net 3,620 856 4,676 2,399
Interest expense 7,739 535 14,244 1,020
Depreciation, depletion and amortization 40,021 14,815 70,994 25,553
Non-cash stock-based compensation expense 2,777 700 6,033 1,356
Capitalized stock-based compensation expense (1,649) (223) (2,715) (420)
Asset retirement obligation accretion expense 104 45 176 88
Deferred income tax provision 15,163  7,802 28,764  10,964
EBITDA  $ 103,067  $ 35,108  $ 184,395  $ 55,399
         
Diamondback Energy, Inc.
Adjusted Net Income
(unaudited, in thousands, except per share data)
         
Adjusted net income is a performance measure used by management to evaluate performance, prior to (gain) loss on derivatives, net and (gain) loss on sale of assets, net.
         
The following table presents a reconciliation of adjusted net income to net income:
         
  Three Months Ended June 30, Six Months Ended June 30,
  2014 2013 2014 2013
Net income attributable to Diamondback Energy, Inc.  $ 27,753  $ 14,471  $ 51,342  $ 19,867
Plus:        
(Gain) loss on derivative instruments, net  11,088  (3,037)  15,486  (3,029)
(Gain) loss on sale of assets, net  1,408  (21)  1,397  (30)
Income tax adjustment for above items  (4,408)  1,071  (6,057)  1,088
Adjusted net income  $ 35,841  $ 12,484  $ 62,168  $ 17,896
         
Adjusted net income per common share:        
Basic  $ 0.71  $ 0.32  $ 1.25  $ 0.47
Diluted(1)  $ 0.70  $ 0.31  $ 1.24  $ 0.47
Weighted average common shares outstanding:        
Basic  50,777  39,402  49,622  38,237
Diluted  51,142  39,719  50,047  38,477
         
¹The Company's diluted earnings per common share is calculated in accordance with ASC 260, with an adjustment included for the awards issued by a consolidated subsidiary.

Diamonback Energy, Inc. Reconciliation of Discretionary Cash Flow to Net Cash Flow from Operating Activities (unaudited, in thousands)

"Discretionary cash flow" is used by the investment community as a financial indicator of an oil and natural gas company's ability to generate cash to internally fund exploration and development activities and to service debt. Discretionary cash flow is also useful because it is widely used by professional research analysts in valuing, comparing, rating, and providing investment recommendations of companies in the oil and gas exploration and production industry. In turn, many investors use this published research in making investment decisions. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income, as defined by GAAP. Discretionary cash flow equals cash flows from operations before changes in operating assets and liabilities. Diamondback's definition of discretionary cash flow may not be comparable to other similarly titled measures of other companies because all companies may not calculate discretionary cash flow in the same manner. The following table presents reconciliation of discretionary cash flow to net cash provided by operating activities.
  Three Months Ended June 30, Six Months Ended June 30,
  2014 2013 2014 2013
Net income  $ 27,824  $ 14,471  $ 51,413  $ 19,867
         
Depreciation, depletion and amortization 40,021 14,815 70,994 25,553
Deferred income tax provision 15,163 7,802 28,764 10,964
Accretion expense 104 45 176 88
Non-cash stock based compensation 1,128 477 3,318 936
Non-cash (gain) loss on derivative instruments, net 7,468 (3,893) 10,810 (5,428)
Non-cash interest expense (4,782) (26) 946 318
Other non-cash operating items (1,844) (174) (1,397) (30)
Discretionary cash flow 85,082 33,517 165,024 52,268
         
Changes in working capital accounts 1,877 (378) (6,597) (2,470)
         
Net cash provided by operating activities  $ 86,959  $ 33,139  $ 158,427  $ 49,798
         
         
Discretionary cash flow per share:        
Basic  $ 1.68  $ 0.85  $ 3.33  $ 1.37
Diluted  $ 1.66  $ 0.84  $ 3.30  $ 1.36
Weighted average common shares outstanding:        
Basic  50,777  39,402  49,622  38,237
Diluted  51,142  39,719  50,047  38,477
 
Diamondback Energy, Inc.
Derivatives Information
(unaudited)
     
The table below provides data regarding the details of Diamondback's current price swap contracts through 2015.
     
  Average Bbls Average
Oil Swaps Per Day Price per Bbl
2014    
Third Quarter-LLS  7,000  $ 98.64
Fourth Quarter-LLS  7,000  $ 98.64
2014 Average  7,000  $ 98.64
2015    
First Quarter-LLS  3,344  $ 99.68
Second Quarter-LLS  330  $ 100.00
2015 Average  907  $ 99.71
CONTACT: Investor Contact:         Adam Lawlis         +1 432.221.7467         alawlis@diamondbackenergy.com

Diamondback Energy, Inc. logo

More from Press Releases

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

Meet the Real Money Pros: Market Strategies for 2012

Meet the Real Money Pros: Market Strategies for 2012