Diamondback Energy(US:FANG)2025-08-06 20:07PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Diamondback Energy, Inc Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Q2 and H1 2025, including balance sheets, income statements, cash flows, and explanatory notes Condensed Consolidated Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Account | June 30, 2025 (In millions) | December 31, 2024 (In millions) | | :--- | :--- | :--- | | Total Current Assets | $2,066 | $2,110 | | Property and equipment, net | $69,229 | $64,472 | | Total Assets | $71,941 | $67,292 | | Total Current Liabilities | $3,759 | $4,811 | | Long-term debt | $15,119 | $12,075 | | Total Liabilities | $29,122 | $27,430 | | Total Equity | $42,819 | $39,862 | | Total Liabilities and Stockholders' Equity | $71,941 | $67,292 | - Total assets increased to $71.9 billion as of June 30, 2025, from $67.3 billion at year-end 2024, primarily driven by an increase in net property and equipment. Total liabilities also grew, largely due to a rise in long-term debt from $12.1 billion to $15.1 billion17 Condensed Consolidated Statements of Operations Details the company's financial performance, including revenues, operating income, and net income for the three and six months ended June 30, 2025 and 2024 | Metric | Three Months Ended June 30, 2025 (In millions) | Three Months Ended June 30, 2024 (In millions) | | :--- | :--- | :--- | | Total Revenues | $3,678 | $2,483 | | Income from operations | $1,139 | $1,156 | | Net income attributable to Diamondback | $699 | $837 | | Diluted EPS | $2.38 | $4.66 | | Metric | Six Months Ended June 30, 2025 (In millions) | Six Months Ended June 30, 2024 (In millions) | | :--- | :--- | :--- | | Total Revenues | $7,726 | $4,710 | | Income from operations | $2,812 | $2,274 | | Net income attributable to Diamondback | $2,104 | $1,605 | | Diluted EPS | $7.20 | $8.93 | - For Q2 2025, total revenues increased to $3.68 billion from $2.48 billion in Q2 2024, but net income decreased to $699 million from $837 million, primarily due to a $197 million net loss on derivative instruments and higher operating costs. For the six-month period, revenues and net income both increased significantly year-over-year20 Condensed Consolidated Statements of Cash Flows Outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 (In millions) | Six Months Ended June 30, 2024 (In millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,032 | $2,863 | | Net cash used in investing activities | $(5,632) | $(1,200) | | Net cash provided by financing activities | $1,657 | $4,663 | | Net increase in cash | $57 | $6,326 | - Cash from operations increased to $4.0 billion in the first six months of 2025, up from $2.9 billion in the prior year period. Cash used in investing activities surged to $5.6 billion, driven by $3.9 billion in property acquisitions. Financing activities provided $1.7 billion, a decrease from $4.7 billion in the prior year, reflecting different financing needs and activities29 Notes to the Condensed Consolidated Financial Statements Provides detailed explanations and additional information regarding significant accounting policies, transactions, and financial events impacting the statements - Acquisitions and Divestitures (Note 4): - 2025 Drop Down: On May 1, 2025, the company divested Endeavor Subsidiaries to its subsidiary Viper for $1.0 billion in cash and 69.63 million Viper LLC units52 - Double Eagle Acquisition: On April 1, 2025, the company acquired Double Eagle for $3.0 billion in cash and ~6.84 million shares of common stock54 - Pending Sitio Acquisition: Viper entered an agreement to acquire Sitio Royalties Corp. in an all-equity transaction valued at approximately $4.1 billion, expected to close in Q3 202555 - Endeavor Acquisition (Note 5): The acquisition of Endeavor was completed on September 10, 2024, for total consideration of $27.42 billion, consisting of $7.31 billion in cash and $20.11 billion in stock7880. For the six months ended June 30, 2025, the Endeavor assets contributed $2.5 billion in revenue and $758 million in net income84 - Debt (Note 9): In Q2 2025, the company repurchased ~$252 million of its senior notes in open market transactions for ~$196 million, resulting in a gain on debt extinguishment of ~$55 million107. In March 2025, the company issued $1.2 billion of 5.550% Senior Notes due 2035 to fund the Double Eagle Acquisition111 - Stockholders' Equity (Note 10): The company repurchased $973 million of its common stock in the first six months of 2025115. As of June 30, 2025, approximately $1.7 billion remained available under the repurchase program121. Dividends paid in the first half of 2025 totaled $584 million, or $2.00 per share121 - Subsequent Events (Note 17): - On July 31, 2025, the board declared a Q2 base dividend of $1.00 per share166 - On July 31, 2025, the stock repurchase authorization was increased by $2.0 billion to a total of $8.0 billion167 - On July 23, 2025, subsidiary Viper completed a $1.6 billion notes offering and used proceeds to redeem or discharge $780 million of existing notes168 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition, operating results, key transactions, and future outlook for Q2 and H1 2025 - Q2 2025 Operating Highlights: - Average production was 919.9 MBOE/d182 - Drilled 122 gross horizontal wells and turned 116 to production182 - Cash operating costs were $10.10 per BOE182 - Repurchased $398 million of common stock182 | Metric | 2025 Guidance | | :--- | :--- | | Net production (MBOE/d) | 890 - 910 (revised up) | | Oil production (MBO/d) | 485 - 492 (narrowed range) | | Lease operating expenses ($/BOE) | $5.30 - $5.70 (revised down) | | Depreciation, depletion, amortization ($/BOE) | $14.50 - $15.50 (revised up) | | Cash tax rate (% of pre-tax income) | 15% - 18% (revised down) | - The company revised its 2025 development plan to hold oil production flat for the remainder of the year, reduce capital expenditures, and use free cash flow to pay down debt and repurchase stock, citing commodity market volatility200 - For Q2 2025 vs Q1 2025, oil, natural gas, and NGL revenues decreased by $0.3 billion to $3.3 billion207. This was due to a $601 million reduction from lower average commodity prices, partially offset by a $260 million increase from a 9% growth in production volumes, largely driven by the Double Eagle Acquisition208 - The company's revised 2025 capital budget is approximately $3.40 billion to $3.60 billion, a reduction from prior guidance199. The plan is to run 13 to 14 rigs and five completion crews for the remainder of 2025264 Item 3. Quantitative and Qualitative Disclosures About Market Risk Details exposure to commodity price, counterparty credit, and interest rate risks, and the use of derivatives for mitigation - The company's primary market risk is commodity price volatility. To mitigate this, it uses derivative instruments such as swaps, collars, and puts281282 - As of June 30, 2025, the company had a net asset derivative position of $49 million283. A hypothetical 10% increase in forward commodity prices would increase this net asset position by $10 million, while a 10% decrease would reduce it by $9 million284 - The company is exposed to interest rate risk on its variable-rate debt, including its revolving credit facilities and the 2025 Term Loan Agreement287. It also uses interest rate swaps to manage fair value changes on its fixed-rate debt, with $450 million in notional amount outstanding as of June 30, 2025292 Item 4. Controls and Procedures Management's evaluation of disclosure controls and procedures, confirming effectiveness as of June 30, 2025, with an exclusion for Endeavor entities - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025294 - Management's assessment of internal control over financial reporting did not include the internal controls of the entities acquired in the Endeavor Acquisition on September 10, 2024, as the company is still in the process of integrating them295 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other miscellaneous information for the reporting period Item 1. Legal Proceedings Discloses routine legal proceedings, including specific lawsuits related to coastal erosion, with management asserting no material adverse effect - The company is a defendant in five lawsuits filed by coastal Louisiana parishes and the State of Louisiana related to coastal erosion, but believes the claims lack merit and intends to vigorously defend against them165299 Item 1A. Risk Factors States no material changes to previously disclosed risk factors from the 2024 Annual Report on Form 10-K and Q1 2025 Form 10-Q - There have been no material changes in the company's risk factors from those described in its 2024 Annual Report on Form 10-K and Q1 2025 Form 10-Q301 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the company's equity repurchase activities during Q2 2025 and confirms no unregistered sales of equity securities | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | April 2025 | 1,892 | $129.50 | | May 2025 | 515 | $135.25 | | June 2025 | 586 | $143.13 | | Total Q2 2025 | 2,993 | $133.16 | - On July 31, 2025, the board of directors increased the common stock repurchase authorization by $2.0 billion, bringing the total to $8.0 billion305. As of August 1, 2025, approximately $3.5 billion remained available for future repurchases305 Item 5. Other Information Confirms no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q2 2025 Item 6. Exhibits Provides an index of exhibits filed or incorporated by reference into the Form 10-Q, including key agreements and certifications