Letter to Stockholders Issued by Diamondback Energy, Inc

Core Viewpoint - The company is navigating a challenging macroeconomic environment with a focus on maintaining operational flexibility and financial discipline while preparing for potential future growth in oil production [4][6][7]. Macro Update - The macroeconomic uncertainty discussed in previous communications persists, with U.S. shale oil production likely having peaked and activity levels in the Lower 48 states remaining depressed [4]. - The U.S. oil-directed rig count has decreased by approximately 60 rigs this year, with a notable decline in active completion crews in the Permian Basin [4]. 2025 Guidance Update - The company has reduced its full-year 2025 capital budget by 10% to a range of $3.4 - $3.8 billion due to macroeconomic concerns, with an additional reduction of $100 million to a new range of $3.4 - $3.6 billion [7][8]. - The company plans to operate 13 to 14 rigs and five completion crews for the remainder of the year, expecting to drill approximately 30 more gross wells while completing 10 fewer wells than previously anticipated [8]. Operational Performance - In the second quarter, oil production averaged 496 MBO/d, near the top end of the guidance range, with capital expenditures of $864 million [11]. - The company achieved record-low drilling and completion cycle times, drilling the longest well in its history at a total depth of 31,035 feet [12]. Financial Performance - The company generated $1.7 billion in net cash from operating activities in the second quarter, resulting in $1.2 billion of Free Cash Flow [15]. - Approximately $691 million was returned to stockholders in the second quarter through dividends and stock repurchases, equating to about 52% of Adjusted Free Cash Flow [15]. Share Repurchase Program - The company has repurchased approximately 3.0 million shares for about $398 million in the second quarter, with a total of 6.6 million shares repurchased for $973 million in the first half of 2025 [15][16]. - An incremental $2.0 billion increase to the share repurchase authorization program has been approved, raising the total buyback approval to $8.0 billion [16]. Balance Sheet - Consolidated net debt rose by roughly $2.8 billion following the Double Eagle acquisition, with approximately $15.3 billion of consolidated gross debt reported [17]. - The company plans to continue reducing net debt through Free Cash Flow generation and proceeds from non-core asset sales [17]. Non-Core Asset Sales - The company realized net proceeds of approximately $130 million from the sale of a 10% interest in the BANGL pipeline and is progressing towards a $1.5 billion target for non-core asset sales [19][20].