Markets

Diamondback Energy Cuts 2020 Output View, Provides Q2 Update

Diamondback Energy, Inc. FANG recently announced its downward revision of 2020 operational production in the wake of a weak oil pricing scenario. It also provided an update on its second-quarter production.

The natural gas price is persistently trending in the bear territory along with crude prices that are plunging since the coronavirus outbreak, which further adversely impacted global energy demand. As a result, the outlook for all industries in the energy sector seems gloomy. Thus, energy players are restricting their operational activities by streamlining capital budgets.

Evidently, Diamondback Energy aims to prune current-year net production to 290,000-305,000 barrels of oil equivalent per day (Boe/d), indicating a fall from the prior guidance of 295,000-310,000 Boe/d. This downtrend is induced by higher-than-expected volume contraction in the second quarter and fluctuating oil prices.

Further, this Midland, TX-headquartered company plans to complete 153-180 net wells and drill 205-215 gross wells in 2020. Finally, the entity estimates to close the year with 110-140 drilled but uncompleted wells.

Management believes that the company can sustain fourth-quarter 2020 oil production through 2021 with a capital budget estimated to be 25-35% below 2020 capex, which is projected in the $1.8-1.9 billion band.

Meanwhile, the company’s second-quarter 2020 production of oil and natural gas averaged at 294,100 Boe/d with oil output of 176,300 barrels per day. The average realized unhedged crude oil price in the second quarter was $21.99 per barrel while that of natural gas liquids was $7.17 and the same for natural gas was 63 cents per thousand cubic feet. Overall, the company fetched $15.39 per barrel of oil equivalent.

We note that this presently Zacks Rank #3 (Hold) Diamondback Energy’s affiliate organization, Viper Energy Partners VNOM, also recently issued an update on its second-quarter production. The company’s second-quarter 2020 production of oil and natural gas averaged at 24,508 Boe/d with oil output of 14,453 barrels per day. The average realized unhedged crude oil price in the second quarter was $21 per barrel while that of natural gas liquids was $7.69 and the same for natural gas was 46 cents per thousand cubic feet. Overall, the company fetched $14.55 per barrel of oil equivalent. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earlier in March, Diamondback Energy also announced plans to slash its 2020 capex guidance by $1.2 billion (or in excess of 40%) from its prior projection of $2.58-$3 billion. This strategic action comes at a time when the ongoing turmoil in the hydrocarbon market dwindled oil prices.

Several other companies with significant exploration and production activities are making similar tactical moves to navigate through this tough phase while sustaining a solid financial footing and a strong operational efficiency at the same time. Energy players like Pioneer Natural Resources Company PXD and Apache Corporation APA are curtailing expenditures for the current year and are also fortifying their capital positions when oil prices appear unprofitable for most producers.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Click to get this free report

Apache Corporation (APA): Free Stock Analysis Report

Pioneer Natural Resources Company (PXD): Free Stock Analysis Report

Diamondback Energy, Inc. (FANG): Free Stock Analysis Report

Viper Energy Partners LP (VNOM): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More