Diamondback Energy, Inc. (FANG) Earnings & Analysis

Latest quarter

Diamondback reported third-quarter revenue of $5.4 billion, above the $4.3 billion consensus and up from $3.9 billion a year earlier. Adjusted earnings per share of $5.86 also beat the $4.92 consensus. Diluted earnings per share, a separate measure, rose to $5.69 from $3.51.

The company reported an operating margin of 46.0%, compared with 31.5% a year earlier, and free cash flow of $2.6 billion, compared with $1.9 billion. Total production averaged 1,033,967 barrels of oil equivalent per day in the quarter.

Diamondback’s filing said oil, natural gas and natural gas liquids revenue increased from the second quarter, primarily because of higher oil production and improved natural gas prices, partly offset by lower oil prices. The company said new pipeline capacity out of the Permian improved its realized gas price from the preceding quarter. Lease operating expenses rose from the second quarter, primarily because of higher production and more well workovers.

The company increased its annual base dividend to $4.72 per share and declared a $1.18 per-share base dividend payable in the fourth quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the earnings call, CEO Kaes Van’t Hof said Diamondback’s capital plan starts with selecting its best drilling projects. He said the company aims to keep reinvestment low so it can generate free cash flow and allocate it as market conditions change. Van’t Hof also pointed to commodity-price volatility as a reason for maintaining that discipline.

Responding to David’s question about costs and spending, Van’t Hof said Diamondback had begun seeing inflation in consumables. He said fourth-quarter capital spending was expected to be essentially the same as in the third quarter, and that efficiencies could help the company keep oil production flat at the higher end of its spending range. Growing next year, he said, would require spending a little more than the fourth-quarter range, with the decision still dependent on the macroeconomic backdrop.

Chief Operating Officer Danny Wesson said Diamondback would continue trying to offset variable costs through execution and procurement. He said the extent of service-sector inflation in 2027 remained uncertain. Asked about deep development, Wesson said longer horizontal well sections and shared surface infrastructure could reduce costs, while drilling teams were becoming faster. He cautioned that the company still had a limited dataset for those wells.

Chief Engineer Al Barkmann said much of the company’s 2027 obligation drilling would be near recently reported wells in the western part of the basin. Diamondback plans to develop multiple wells together in those areas, he said, to satisfy obligations without leaving later wells behind.

On gas demand, Van’t Hof said Diamondback had secured pipeline space closer to end markets and was exploring arrangements with LNG companies that have transport capacity but need supply. He said Diamondback’s shareholders had not owned the company to take on long-term commitments to get LNG facilities built. On well completions, Wesson said the company would assess the appropriate size as development progresses, depending on well spacing and returns.

Guidance

Diamondback raised its full-year 2026 oil production guidance to approximately 524,000 barrels per day from more than 522,000 previously. It also increased its total production outlook to approximately 1.015 million BOE/d from more than 1 million BOE/d.

The company raised its full-year cash capital expenditure guidance to $3.95 billion to $4.00 billion from approximately $3.9 billion.