Diamondback Energy, Inc. (NASDAQ:FANG) (“Diamondback” or the
“Company”) today announced financial and operating results for the
fourth quarter ended December 31, 2016.
HIGHLIGHTS
- Q4 2016 production of 51.9 Mboe/d (73% oil), up 16% over Q3
2016 and 38% year over year
- Full year 2016 production of 43.0 Mboe/d (73% oil), up 30% year
over year
- Q4 2016 average realized prices were $46.72 per barrel of oil,
$2.53 per Mcf of natural gas and $17.70 per barrel of natural gas
liquids, resulting in a total equivalent price of $38.72/boe, up
13% from the Q3 2016 total equivalent price of $34.39/boe
- Q4 2016 cash operating costs of $8.48/boe, including LOE of
$4.89/boe and cash G&A of $0.92/boe
- Proved reserves as of December 31, 2016 of 205.5 MMboe (68%
oil), up 31% year over year; proved developed finding and
development ("PD F&D") costs of $7.26/boe
- Previously announced pending acquisition of Brigham Resources
expected to close at the end of February 2017
- Increasing pro forma full year 2017 production guidance to 69.0
to 76.0 Mboe/d, up from 64.0 to 73.0 Mboe/d
- Operating six horizontal rigs, including first operated rig in
the Southern Delaware Basin, with plans to add two additional rigs
after the closing of the pending Brigham Resources acquisition
“Diamondback achieved over 40% production growth
in the second half of 2016 by showcasing our ability to respond
quickly to a rising commodity price environment. We ended the year
operating five rigs, and as I said in November, we are just
beginning to bear the fruit of our activity ramp. We recently added
a sixth operated rig, our first in the Southern Delaware Basin, and
plan to add two more rigs to the Delaware Basin following the
closing of the pending Brigham transaction at the end of February,"
stated Travis Stice, Chief Executive Officer of Diamondback.
Mr. Stice continued, “After doubling our Tier 1
acreage in the second half of 2016, our focus now shifts to
execution. Diamondback's success has and continues to be driven by
our ability to identify accretive opportunities, integrate these
efficiently into operations and convert resource into cash flow.
Our resource expansion into the Southern Delaware Basin marks
another opportunity to expand our operational leadership in regards
to low cost operations, best in class well productivity and, above
all, creating shareholder value. Our updated 2017 guidance implies
over 65% production growth at the midpoint, while conservatively
preparing for potential service cost inflation with respect to
capital guidance. Our pro forma balanced footprint secures
Diamondback's ability to generate leading growth rates within cash
flow for years to come."
OPERATIONAL HIGHLIGHTS
Diamondback’s Q4 2016 production was 51.9 Mboe/d
(73% oil), up 38% year over year from 37.6 Mboe/d in Q4 2015, and
up 16% quarter over quarter from 44.9 Mboe/d in Q3 2016. Average
daily production for the full year 2016 was 43.0 Mboe/d (73% oil),
exceeding the high end of its guidance range of 41.0 to 42.0 Mboe/d
and up 30% year over year from 33.1 Mboe/d in 2015.
During the fourth quarter of 2016, Diamondback
averaged five operated rigs, drilled 25 gross horizontal wells and
completed 23 operated horizontal wells with an average of two
completion crews. Operated completions consisted of 14 Lower
Spraberry wells, six Wolfcamp A wells, two Middle Spraberry wells
and one Wolfcamp B well. In January 2017, Diamondback added a sixth
operated horizontal rig to begin development on the Company's
previously acquired Southern Delaware Basin acreage. The Company
anticipates closing its previously announced acquisition of
leasehold interests and related assets from Brigham Resources at
the end of February. Subsequent to the transaction close,
Diamondback plans to operate two additional rigs in the Southern
Delaware Basin.
Diamondback continues to decrease drilling
times, lower costs and achieve new Company records. During the
fourth quarter of 2016, Diamondback drilled an 8,200 foot lateral
well in Glasscock County in less than nine days from spud to total
depth, a new record for the Company. Diamondback also drilled a
13,500 foot lateral in Midland County in 20.3 days, a new record
for the Company.
Diamondback is increasing its pro forma full
year 2017 production guidance to 69.0 to 76.0 Mboe/d, the midpoint
of which is up over 65% from 2016 average daily production. The
Company expects to complete 130 to 165 gross wells with an average
lateral length of approximately 8,500 feet.
MIDLAND BASIN WELL RESULTS
In Howard County, Diamondback continues to see
strong extended performance from its latest pad using a
high-density near-wellbore completion design. These wells targeted
the Lower Spraberry, Wolfcamp A and Wolfcamp B with an average
completed lateral length of 9,725 feet. The Reed 1A 1WA and the
Reed 1A 1WB achieved respective peak 30-day 2-stream initial
production ("IP") rates of 1,978 boe/d (89% oil) and 1,605 boe/d
(90% oil). After producing over 100,000 boe in 125 days, the Reed
1A 1LS well continues to produce over 1,100 boe/d (89% oil).
In Glasscock County, Diamondback recently
completed a two-well Wolfcamp A pad with an average lateral of
10,660 feet. The Ray 3427 A 4WA and Ray 3427 B 5WA achieved an
average 30-day IP rate of 1,378 boe/d (85% oil) per well. After
producing an average of 85 Mboe in 80 days, both wells are now
producing over 1,400 boe/d (83% oil) on pump. Additionally, the
Company recently completed its second and third Lower Spraberry
wells in Glasscock County. These wells were completed with an
average lateral of 10,423 feet and are currently in the early
stages of flowback.
In Andrews County, Diamondback recently
completed two Lower Spraberry wells with an average lateral of
10,000 feet and a high-density near-wellbore design. These wells
have achieved an average peak 15-day IP rate of 1,564 boe/d (89%
oil) per well.
FINANCIAL HIGHLIGHTS
Diamondback's fourth quarter 2016 net income was
$26 million, or $0.32 per diluted share. Adjusted net income (a
non-GAAP financial measure as defined and reconciled below) was $72
million, or $0.90 per share.
Fourth quarter 2016 Adjusted EBITDA (as defined
and reconciled below) was $138 million, up 35% from $102 million in
Q3 2016. Fourth quarter 2016 revenues were $185 million, up 30%
from $142 million in Q3 2016.
Diamondback's cash operating costs for the
fourth quarter of 2016 were $8.48 per boe, including lease
operating expenses ("LOE") of $4.89 per boe and cash general and
administrative expenses of $0.92 per boe. Total LOE expenses of
$82.4 million for the full year 2016 was essentially flat versus
2015, despite production increasing 30% over the same period.
As of December 31, 2016, Diamondback had $1,667
million in cash and an undrawn $500 million credit facility. During
the fourth quarter of 2016, Diamondback spent approximately $104
million on drilling and completion, $10 million on infrastructure
and $8 million on non-operated properties. Additionally, the
Company spent $87 million on acquisitions during the fourth quarter
of 2016, including $68 million attributable to Viper.
On October 20, 2016, Diamondback priced $500
million of 4.75% Senior Notes due 2024, with proceeds used
primarily to repurchase the Company’s prior outstanding 7.625%
Senior Notes due 2021. On December 15, 2016, the Company priced
$500 million of 5.375% Senior Notes due 2025, with proceeds to be
used, along with proceeds from Diamondback's recent common equity
offering, to fund a portion of the pending Brigham Resources
acquisition.
RESERVES
Ryder Scott Company, L.P. prepared estimates of
Diamondback’s proved reserves as of December 31, 2016. Reference
prices of $42.75 per barrel of oil, $2.49 per MMbtu of natural gas
and $19.97 per barrel of natural gas liquids were used in
accordance with applicable rules of the Securities and Exchange
Commission. Realized prices with applicable differentials were
$39.94 per barrel of oil, $1.36 per Mcf of natural gas and $12.91
per barrel of natural gas liquids.
Proved reserves at year-end 2016 of 205.5 MMboe
represent a 31% increase over year-end 2015 reserves. Proved
developed reserves increased by 29% to 119.1 MMboe (58% of total
proved reserves) as of December 31, 2016, reflecting the
continued development of the Company’s horizontal well inventory.
Crude oil represents 68% of Diamondback’s total proved
reserves.
Net proved reserve additions of 64.3 MMboe
resulted in a reserve replacement ratio of 409% (defined as the sum
of extensions, discoveries, revisions and purchases, divided by
annual production). The organic reserve replacement ratio was 380%
(defined as the sum of extensions, discoveries and revisions,
divided by annual production).
Purchases of reserves came primarily from the
acquisition of working interest acreage in Reeves and Ward
counties, which contributed 56% of the total purchased reserves.
Mineral interest purchases by Viper contributed 37% of the total
and the remaining purchases were bolt on acquisitions of working
interest acreage. Extensions totaling 79.8 MMboe of reserves
occurred from continued development of the Company's properties in
the northwest Midland Basin and the initial development of
Diamondback's properties in Howard and Glasscock counties.
Development occurred in the Middle Spraberry, Lower Spraberry,
Wolfcamp A and Wolfcamp B horizons. Proved developed producing
extensions accounted for approximately 50% of the extension
reserves and were the result of 59 wells in which the Company also
owns a working interest. It also includes
Diamondback's mineral interests in 33 wells, 30 of which
Diamondback has a working interest. Approximately 50% of the
extension reserves are from 51 proved undeveloped locations in
which the Company has a working interest. Reserves also include
Diamondback's mineral interests in 32 locations, 30 of which the
Company also owns a working interest. Total downward revisions of
20.1 MMboe include 11.2 MMboe of pricing related revisions.
|
|
|
Oil (Bbls) |
|
|
Liquids (Bbls) |
|
|
Gas (Mcf) |
|
|
BOE |
|
Proved Reserves As of
December 31, 2015 |
|
|
105,978,711 |
|
|
26,004,144 |
|
|
149,502,744 |
|
|
156,899,979 |
|
Extensions and discoveries |
|
|
55,069,092 |
|
|
13,962,103 |
|
|
64,758,390 |
|
|
79,824,260 |
|
Revisions
of previous estimates |
|
|
(12,482,657 |
) |
|
(1,887,643 |
) |
|
(34,518,746 |
) |
|
(20,123,424 |
) |
Purchase
of reserves in place |
|
|
2,170,774 |
|
|
1,454,836 |
|
|
5,582,053 |
|
|
4,555,952 |
|
Production |
|
|
(11,561,920 |
) |
|
(2,399,440 |
) |
|
(10,428,441 |
) |
|
(15,699,434 |
) |
Proved Reserves As of
December 31, 2016 |
|
|
139,174,000 |
|
|
37,134,000 |
|
|
174,896,000 |
|
|
205,457,333 |
|
Diamondback’s exploration and development costs
in 2016 were $376.7 million. Proved developed F&D costs were
$7.26/boe. PD F&D costs are defined as exploration and
development costs divided by the sum of reserves associated with
transfers from proved undeveloped reserves at year end 2015
including any associated revisions in 2016 and extensions and
discoveries placed on production during 2016. Drill bit
F&D costs were $6.31/boe including the effects of all revisions
including pricing revisions. Drill bit F&D costs are defined as
the exploration and development costs divided by the sum of
extensions, discoveries and revisions.
(in
thousands) |
|
|
Year Ended December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2014 |
Acquisition costs |
|
|
|
|
|
|
|
|
|
Proved
properties |
|
|
$ |
72,044 |
|
|
$ |
64,340 |
|
|
$ |
302,234 |
Unproved
properties |
|
|
752,117 |
|
|
448,638 |
|
|
601,188 |
Development costs |
|
|
47,575 |
|
|
42,749 |
|
|
86,097 |
Exploration costs |
|
|
329,122 |
|
|
319,102 |
|
|
475,756 |
Capitalized asset
retirement costs |
|
|
4,030 |
|
|
3,458 |
|
|
4,962 |
Total |
|
|
$ |
1,204,888 |
|
|
$ |
878,287 |
|
|
$ |
1,470,237 |
FULL YEAR 2017 GUIDANCE
Below is Diamondback's full year 2017 guidance, which has been
updated to reflect higher production, an increased completion
cadence and detailed expense guidance. To account for the increased
activity and the closing of the pending Brigham Resources
acquisition, the Company has increased its 2017 capital expenditure
guidance for drilling, completion and infrastructure to $800.0
million to $1.0 billion, including $75 million of one time capital
expenditures for oil and natural gas gathering systems in the
Southern Delaware Basin.
|
2017 Guidance |
|
|
Diamondback Energy, Inc. |
Viper Energy Partners LP |
|
|
|
Total Net Production –
MBoe/d |
69.0 –
76.0 |
8.0 –
8.5 |
|
|
|
Unit costs ($/boe) |
|
|
Lease operating
expenses, including workovers |
$4.75
- $5.75 |
n/a |
Gathering &
Transportation |
$0.50
- $1.00 |
$0.25
- $0.50 |
G&A |
|
|
Cash
G&A |
$1.00
- $2.00 |
$0.50
- $1.50 |
Non-cash
equity-based compensation |
$1.50
- $2.50 |
$2.00
- $3.00 |
DD&A |
$9.00
- $11.00 |
$8.00
- $10.00 |
Interest expense (net
of interest income) |
$2.50
- $3.50 |
|
|
|
|
Production and ad
valorem taxes (% of revenue)(a) |
7.0% |
7.0% |
|
|
|
($ - million) |
|
|
Gross horizontal well
costs - Midland Basin(b) |
$5.0 -
$5.5 |
n/a |
Gross horizontal well
costs - Delaware Basin(b) |
$6.0 -
$8.0 |
n/a |
Horizontal wells
completed (net) |
130 -
165 (110 - 140) |
n/a |
|
|
|
Capital Budget ($ -
million) |
|
|
Horizontal drilling and
completion |
$650 -
$825 |
n/a |
Infrastructure |
$150 -
$175 |
n/a |
2017 Capital Spend |
$800 - $1,000 |
n/a |
|
|
|
(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 financial and
operating results for the fourth quarter and full year of 2016 on
Wednesday, February 15, 2017 at 8:30 a.m. CT. Participants should
call (877) 440-7573 (United States/Canada) or (253) 237-1144
(International) and use the confirmation code 66899658. A
telephonic replay will be available from 11:30 a.m. CT on
Wednesday, February 15, 2017 through Wednesday, February 22, 2017
at 11:30 a.m. CT. To access the replay, call (855) 859-2056
(United States/Canada) or (404) 537-3406 (International) and
enter confirmation code 66899658. 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. A replay will also be available on the website
following the call.
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, Bone Spring 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 are forward-looking statements, including
specifically the statements regarding the pending acquisition
discussed above. 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 share amounts
and per share data) |
|
|
|
|
|
|
|
|
|
Three Months EndedDecember 31, |
|
Twelve Months EndedDecember 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
|
|
|
|
|
|
Oil,
natural gas liquids and natural gas |
$ |
185,012 |
|
|
$ |
114,323 |
|
|
$ |
527,107 |
|
|
$ |
446,733 |
|
Operating
Expenses |
|
|
|
|
|
|
|
Lease
operating expenses |
23,348 |
|
|
17,508 |
|
|
82,428 |
|
|
82,625 |
|
Production and ad valorem taxes |
9,212 |
|
|
7,954 |
|
|
34,456 |
|
|
32,990 |
|
Gathering
and transportation |
3,542 |
|
|
1,748 |
|
|
11,606 |
|
|
6,091 |
|
Depreciation, depletion and amortization |
51,329 |
|
|
48,549 |
|
|
178,015 |
|
|
217,697 |
|
Impairment of oil and natural gas properties |
— |
|
|
217,610 |
|
|
245,536 |
|
|
814,798 |
|
General
and administrative expenses |
10,208 |
|
|
8,522 |
|
|
42,619 |
|
|
31,968 |
|
Asset
retirement obligation accretion expense |
294 |
|
|
245 |
|
|
1,064 |
|
|
833 |
|
Total
expenses |
97,933 |
|
|
302,136 |
|
|
595,724 |
|
|
1,187,002 |
|
Income
(loss) from operations |
87,079 |
|
|
(187,813 |
) |
|
(68,617 |
) |
|
(740,269 |
) |
Interest
income (expense) |
(10,418 |
) |
|
(10,106 |
) |
|
(40,684 |
) |
|
(41,510 |
) |
Other
income |
1,417 |
|
|
(520 |
) |
|
3,064 |
|
|
728 |
|
Gain (loss) on
derivative instruments, net |
(16,680 |
) |
|
5,117 |
|
|
(25,345 |
) |
|
31,951 |
|
Loss on extinguishment
of debt |
(33,134 |
) |
|
— |
|
|
(33,134 |
) |
|
— |
|
Total other income
(expense), net |
(58,815 |
) |
|
(5,509 |
) |
|
(96,099 |
) |
|
(8,831 |
) |
Income (loss)
before income taxes |
28,264 |
|
|
(193,322 |
) |
|
(164,716 |
) |
|
(749,100 |
) |
Provision for (benefit
from) income taxes |
(176 |
) |
|
(6,487 |
) |
|
192 |
|
|
(201,310 |
) |
Net income
(loss) |
28,440 |
|
|
(186,835 |
) |
|
(164,908 |
) |
|
(547,790 |
) |
Net income attributable
to non-controlling interest |
2,842 |
|
|
574 |
|
|
126 |
|
|
2,838 |
|
Net income
(loss) attributable to Diamondback Energy, Inc. |
$ |
25,598 |
|
|
$ |
(187,409 |
) |
|
$ |
(165,034 |
) |
|
$ |
(550,628 |
) |
|
|
|
|
|
|
|
|
Earnings per
common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.32 |
|
|
$ |
(2.80 |
) |
|
$ |
(2.20 |
) |
|
$ |
(8.74 |
) |
Diluted |
$ |
0.32 |
|
|
$ |
(2.80 |
) |
|
$ |
(2.20 |
) |
|
$ |
(8.74 |
) |
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
80,315 |
|
|
66,850 |
|
|
75,077 |
|
|
63,019 |
|
Diluted |
80,510 |
|
|
66,850 |
|
|
75,077 |
|
|
63,019 |
|
Diamondback Energy, Inc. |
Selected Operating Data |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
Production Data: |
|
|
|
|
|
|
|
|
|
Oil
(MBbl) |
|
3,507 |
|
|
2,641 |
|
|
11,562 |
|
|
9,081 |
|
|
Natural
gas (MMcf) |
|
3,172 |
|
|
2,407 |
|
|
10,728 |
|
|
7,931 |
|
|
Natural
gas liquids (MBbls) |
|
742 |
|
|
418 |
|
|
2,399 |
|
|
1,678 |
|
|
Oil
Equivalents (MBOE)(1)(2) |
|
4,778 |
|
|
3,460 |
|
|
15,749 |
|
|
12,081 |
|
|
Average
daily production (BOE/d)(2) |
|
51,934 |
|
|
37,614 |
|
|
43,031 |
|
|
33,098 |
|
|
%
Oil |
|
73 |
% |
|
76 |
% |
|
73 |
% |
|
75 |
% |
|
|
|
|
|
|
|
|
|
|
|
Average sales
prices: |
|
|
|
|
|
|
|
|
|
Oil,
realized ($/Bbl) |
|
$ |
46.72 |
|
|
$ |
39.32 |
|
|
$ |
40.70 |
|
|
$ |
44.68 |
|
|
Natural
gas realized ($/Mcf) |
|
2.53 |
|
|
2.14 |
|
|
2.10 |
|
|
2.47 |
|
|
Natural
gas liquids ($/Bbl) |
|
17.70 |
|
|
12.68 |
|
|
14.20 |
|
|
12.77 |
|
|
Average
price realized ($/BOE) |
|
38.72 |
|
|
33.04 |
|
|
33.47 |
|
|
36.98 |
|
|
Oil,
hedged ($/Bbl)(3) |
|
45.86 |
|
|
54.66 |
|
|
40.80 |
|
|
60.63 |
|
|
Average
price, hedged ($/BOE)(3) |
|
38.09 |
|
|
44.74 |
|
|
33.54 |
|
|
48.97 |
|
|
|
|
|
|
|
|
|
|
|
|
Average Costs
per BOE: |
|
|
|
|
|
|
|
|
|
Lease
operating expense |
|
$ |
4.89 |
|
|
$ |
5.06 |
|
|
$ |
5.23 |
|
|
$ |
6.84 |
|
|
Production and ad valorem taxes |
|
1.93 |
|
|
2.30 |
|
|
2.19 |
|
|
2.73 |
|
|
Gathering
and transportation expense |
|
0.74 |
|
|
0.51 |
|
|
0.74 |
|
|
0.50 |
|
|
General
and administrative - cash component |
|
0.92 |
|
|
1.06 |
|
|
1.03 |
|
|
1.11 |
|
|
Total
operating expense - cash |
|
$ |
8.48 |
|
|
$ |
8.93 |
|
|
$ |
9.19 |
|
|
$ |
11.18 |
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative - non-cash component |
|
$ |
1.22 |
|
|
$ |
1.40 |
|
|
$ |
1.68 |
|
|
$ |
1.54 |
|
|
Depreciation, depletion, and amortization |
|
10.74 |
|
|
14.03 |
|
|
11.30 |
|
|
18.02 |
|
|
Interest
expense |
|
2.18 |
|
|
2.92 |
|
|
2.58 |
|
|
3.44 |
|
|
|
|
|
|
|
|
|
|
|
(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 effect of our commodity derivative transactions on our
average sales prices. Our calculation ofsuch effects includes
realized gains and losses on cash settlements for commodity
derivatives, which we do not designatefor hedge accounting. |
NON-GAAP FINANCIAL MEASURES
Adjusted 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 Adjusted EBITDA as
net income (loss) plus non-cash loss on derivative instruments,
interest expense, depreciation, depletion and amortization,
impairment of oil and gas properties, non-cash equity-based
compensation expense, capitalized equity-based compensation
expense, asset retirement obligation accretion expense, loss on
extinguishment of debt and income tax (benefit) provision. Adjusted
EBITDA is not a measure of net income (loss) as determined by
United States’ generally accepted accounting principles ("GAAP").
Management believes Adjusted 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 adds the items listed above to net income (loss) in
arriving at Adjusted 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.
Adjusted 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 Adjusted 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 Adjusted EBITDA. Adjusted net
income is a non-GAAP financial measure equal to net income (loss)
attributable to Diamondback Energy, Inc. plus non-cash (gain) loss
on derivative instruments, net, (gain) loss on the sale of assets,
net, impairment of oil and gas properties, loss on extinguishment
of debt and related income tax adjustments. The Company’s
computations of Adjusted 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 Adjusted EBITDA to the GAAP
financial measure of net income.
Diamondback Energy, Inc. |
Reconciliation of Adjusted EBITDA to Net
Income |
(unaudited, in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedDecember 31, |
|
Twelve Months EndedDecember 31, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net income (loss) |
|
|
$ |
28,440 |
|
|
$ |
(186,835 |
) |
|
$ |
(164,908 |
) |
|
$ |
(547,790 |
) |
Non-cash loss on
derivative instruments |
|
|
13,664 |
|
|
35,386 |
|
|
26,522 |
|
|
112,918 |
|
Interest expense |
|
|
10,418 |
|
|
10,106 |
|
|
40,684 |
|
|
41,510 |
|
Depreciation, depletion
and amortization |
|
|
51,329 |
|
|
48,549 |
|
|
178,015 |
|
|
217,697 |
|
Impairment of oil and
natural gas properties |
|
|
— |
|
|
217,610 |
|
|
245,536 |
|
|
814,798 |
|
Non-cash equity-based
compensation expense |
|
|
7,364 |
|
|
5,788 |
|
|
33,532 |
|
|
24,572 |
|
Capitalized
equity-based compensation expense |
|
|
(1,554 |
) |
|
(918 |
) |
|
(7,079 |
) |
|
(6,043 |
) |
Asset retirement
obligation accretion expense |
|
|
294 |
|
|
245 |
|
|
1,064 |
|
|
833 |
|
Loss on extinguishment
of debt |
|
|
33,134 |
|
|
— |
|
|
33,134 |
|
|
— |
|
Income tax (benefit)
provision |
|
|
(176 |
) |
|
(6,487 |
) |
|
192 |
|
|
(201,310 |
) |
Consolidated Adjusted
EBITDA |
|
|
$ |
142,913 |
|
|
$ |
123,444 |
|
|
$ |
386,692 |
|
|
$ |
457,185 |
|
EBITDA attributable to
noncontrolling interest |
|
|
(4,605 |
) |
|
(2,154 |
) |
|
843 |
|
|
(7,940 |
) |
Adjusted EBITDA
attributable to Diamondback Energy, Inc. |
|
|
$ |
138,308 |
|
|
$ |
121,290 |
|
|
$ |
387,535 |
|
|
$ |
449,245 |
|
Adjusted net income is a performance measure
used by management to evaluate performance, prior to non-cash
losses on derivative instruments, (gain) on sale of assets, net,
impairment of oil and gas properties and related income tax
adjustments.
The following table presents a reconciliation of adjusted net
income to net income:
Diamondback Energy, Inc. |
Adjusted Net Income |
(unaudited, in thousands, except share amounts
and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedDecember 31, |
|
Twelve Months EndedDecember 31, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net income (loss)
attributable to Diamondback Energy, Inc. |
|
|
$ |
25,598 |
|
|
$ |
(187,409 |
) |
|
$ |
(165,034 |
) |
|
$ |
(550,628 |
) |
Plus: |
|
|
|
|
|
|
|
|
|
Non-cash
loss on derivative instruments |
|
|
13,664 |
|
|
35,386 |
|
|
26,522 |
|
|
112,918 |
|
(Gain)
loss on sale of assets, net |
|
|
(24 |
) |
|
759 |
|
|
(61 |
) |
|
668 |
|
Impairment of oil and gas properties* |
|
|
— |
|
|
217,213 |
|
|
246,087 |
|
|
814,400 |
|
Loss on
extinguishment of debt |
|
|
33,134 |
|
|
— |
|
|
33,134 |
|
|
— |
|
Income
tax adjustment for above items** |
|
|
— |
|
|
(27,758 |
) |
|
— |
|
|
(263,878 |
) |
Adjusted net income
attributable to Diamondback Energy, Inc. |
|
|
$ |
72,372 |
|
|
$ |
38,191 |
|
|
$ |
140,648 |
|
|
$ |
113,480 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per
common share: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
0.90 |
|
|
$ |
0.57 |
|
|
$ |
1.87 |
|
|
$ |
1.80 |
|
Diluted |
|
|
$ |
0.90 |
|
|
$ |
0.57 |
|
|
$ |
1.87 |
|
|
$ |
1.80 |
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
80,315 |
|
|
66,850 |
|
|
75,077 |
|
|
63,019 |
|
Diluted |
|
|
80,510 |
|
|
66,850 |
|
|
75,077 |
|
|
63,019 |
|
*Impairment has been adjusted for Viper's
noncontrolling interest.**The tax impact is computed utilizing the
Company's effective federal and state income tax rates. The income
tax rate for the three months ended December 31, 2016 was
approximately 0% while it was approximately 35% for the three
months ended December 31, 2015.
PV-10
PV-10 is the Company’s estimate of the present
value of the future net revenues from proved oil and gas reserves
after deducting estimated production and ad valorem taxes, future
capital costs and operating expenses, but before deducting any
estimates of future income taxes. The estimated future net
revenues are discounted at an annual rate of 10% to determine their
“present value.” The Company believes PV-10 to be an
important measure for evaluating the relative significance of its
oil and gas properties and that the presentation of the non-GAAP
financial measure of PV-10 provides useful information to investors
because it is widely used by professional analysts and investors in
evaluating oil and gas companies. Because there are many
unique factors that can impact an individual company when
estimating the amount of future income taxes to be paid, the
Company believes the use of a pre-tax measure is valuable for
evaluating the Company. The Company believes that PV-10 is a
financial measure routinely used and calculated similarly by other
companies in the oil and gas industry.
The following table reconciles PV-10 to the
Company’s standardized measure of discounted future net cash flows,
the most directly comparable measure calculated and presented in
accordance with GAAP. PV-10 should not be considered as an
alternative to the standardized measure as computed under GAAP.
(in
thousands) |
|
|
December 31, 2016 |
PV-10 |
|
|
$ |
1,741,868 |
|
Less income taxes: |
|
|
|
Undiscounted future
income taxes |
|
|
(75,595 |
) |
10% discount
factor |
|
|
(45,140 |
) |
Future discounted
income taxes |
|
|
(30,455 |
) |
|
|
|
|
Standardized measure of
discounted future net cash flows |
|
|
$ |
1,711,413 |
|
Derivatives
As of the filing date, the Company had the
following outstanding derivative contracts. The Company’s
derivative contracts are based upon reported settlement prices on
commodity exchanges, with crude oil derivative settlements based on
New York Mercantile Exchange West Texas Intermediate pricing and
with natural gas derivative settlements based on the New York
Mercantile Exchange Henry Hub pricing. When aggregating multiple
contracts, the weighted average contract price is disclosed.
|
|
|
2017 |
|
|
2018 |
|
|
|
Volume(Bbls/MMBtu) |
|
|
Fixed Price Swap(per Bbl/MMBtu) |
|
|
Volume(Bbls/MMBtu) |
|
|
Fixed Price Swap(per Bbl/MMBtu) |
First
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Swaps |
|
|
720,000 |
|
|
$ |
51.15 |
|
|
|
270,000 |
|
|
$ |
55.82 |
|
Oil Basis
Swaps |
|
|
2,160,000 |
|
|
$ |
(0.72 |
) |
|
|
1,350,000 |
|
|
$ |
(0.88 |
) |
Natural
Gas Swaps |
|
|
1,800,000 |
|
|
$ |
3.30 |
|
|
|
1,350,000 |
|
|
$ |
3.60 |
|
Second
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Swaps |
|
|
728,000 |
|
|
$ |
51.96 |
|
|
|
|
|
|
|
Oil Basis
Swaps |
|
|
2,184,000 |
|
|
$ |
(0.72 |
) |
|
|
1,365,000 |
|
|
$ |
(0.88 |
) |
Natural
Gas Swaps |
|
|
1,820,000 |
|
|
$ |
3.14 |
|
|
|
|
|
|
|
Third
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Swaps |
|
|
1,012,000 |
|
|
$ |
53.09 |
|
|
|
|
|
|
|
Oil Basis
Swaps |
|
|
2,208,000 |
|
|
$ |
(0.72 |
) |
|
|
1,380,000 |
|
|
$ |
(0.88 |
) |
Natural
Gas Swaps |
|
|
1,840,000 |
|
|
$ |
3.14 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Swaps |
|
|
1,012,000 |
|
|
$ |
53.04 |
|
|
|
|
|
|
|
Oil Basis
Swaps |
|
|
2,208,000 |
|
|
$ |
(0.72 |
) |
|
|
1,380,000 |
|
|
$ |
(0.88 |
) |
Natural
Gas Swaps |
|
|
1,840,000 |
|
|
$ |
3.19 |
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
Floor |
|
Ceiling |
|
|
|
Volume(Bbls) |
|
Fixed Price(per Bbl) |
|
Volume(Bbls) |
|
Fixed Price(per Bbl) |
First
Quarter |
|
|
|
|
|
|
|
|
|
Costless
Collars |
|
|
1,260,000 |
|
$ |
45.64 |
|
|
630,000 |
|
$ |
55.01 |
|
Second
Quarter |
|
|
|
|
|
|
|
|
|
Costless
Collars |
|
|
1,274,000 |
|
$ |
45.64 |
|
|
637,000 |
|
$ |
55 |
|
Third
Quarter |
|
|
|
|
|
|
|
|
|
Costless
Collars |
|
|
1,472,000 |
|
$ |
47.13 |
|
|
8,000 |
|
$ |
56.89 |
|
Fourth
Quarter |
|
|
|
|
|
|
|
|
|
Costless
Collars |
|
|
1,472,000 |
|
$ |
47.13 |
|
|
736,000 |
|
$ |
56.1 |
|
|
|
|
|
2018 |
|
|
|
Floor |
|
Ceiling |
|
|
|
Volume(Bbls) |
|
Fixed Price(per Bbl) |
|
Volume(Bbls) |
|
Fixed Price(per Bbl) |
First
Quarter |
|
|
|
|
|
|
|
|
|
Costless
Collars |
|
|
540,000 |
|
$ |
47 |
|
|
270,000 |
|
$ |
56.34 |
|
Investor Contact:
Adam Lawlis
+1 432.221.7467
alawlis@diamondbackenergy.com
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