Financial Data and Key Metrics Changes - The company reported a reinvestment rate of 36% at mid-60s oil prices, which is a significant improvement compared to historical performance [9] - Free cash flow per share increased by 15% despite a 14% decline in oil prices [39] - The company plans to maintain a production level of approximately 505,000 barrels per day in Q1 2026, down from 510,000 barrels per day in Q4 2025 [17][18] Business Line Data and Key Metrics Changes - The company has shifted focus to co-developing all zones in the Midland Basin, resulting in higher overall returns per section [12] - The average well performance has remained consistent, with expectations for 2026 to align with 2024 and 2025 performance [22] Market Data and Key Metrics Changes - The company expects to reduce its exposure to the Waha gas market from over 70% to just over 40% by the end of 2026 [34] - The company is actively working on diversifying its gas sales to new pipelines and power projects to improve gas realizations [87] Company Strategy and Development Direction - The company emphasizes generating free cash flow per share over simply growing cash flow, maintaining a disciplined approach to capital allocation [9] - The company is focused on optimizing its development style to enhance returns per section and reduce costs [12][52] - The company is exploring opportunities in power generation and natural gas utilization, indicating a strategic pivot towards energy solutions [33] Management's Comments on Operating Environment and Future Outlook - The management described the current macro environment as a "yellow light," indicating caution but also confidence in the company's ability to navigate challenges [38] - The management expressed optimism about the company's long-term position, stating that Diamondback is well-prepared for both adverse and favorable market conditions [111] Other Important Information - The company has successfully sold $1 billion in non-core assets, which has strengthened its balance sheet [42] - The company is implementing continuous pumping techniques to improve drilling efficiency, which is expected to enhance production rates [30] Q&A Session Summary Question: How does the company view its activity in the Permian compared to other operators? - The company maintains a disciplined approach and focuses on generating free cash flow, despite observing other operators accelerating their activities [8] Question: What is the expected CapEx for Q4 and its implications for 2026? - The company indicated a CapEx of $925 million for Q4, which is seen as a baseline for maintaining production levels [17] Question: Can the company elaborate on efficiency gains in drilling? - The company reported improvements in drilling consistency, with a significant increase in wells completed in under five days [28] Question: What is the company's strategy regarding gas sales and pipeline utilization? - The company is working to reduce its reliance on the Waha market and is exploring new pipeline opportunities to enhance gas sales [34][87] Question: How does the company plan to manage its core inventory and development cadence? - The company has approximately 5,500 core locations and is focused on optimizing development to maximize returns [92]

Financial Data and Key Metrics Changes - The company reported over $3 billion in retained earnings for the first time this quarter, a significant improvement from an accumulated deficit just three and a half years ago [12] - The leverage ratio stands at 0.4, indicating a strong balance sheet [12] - The company paid down $670 million of its revolving debt over the past year and currently has about $2 billion in liquidity [13] Business Line Data and Key Metrics Changes - The capital program includes 12 additional wells with a rate of return exceeding 50%, particularly in the Antelope Ridge area [9] - Well costs have been reduced from an initial guidance of $880 per completed lateral foot to a revised range of $835 to $855, resulting in capital savings of approximately $50 to $60 million [10][12] - The company expects to turn on roughly 1.2 million net lateral feet this year, with a positive outlook for 2026 [10][11] Market Data and Key Metrics Changes - The company is positioned to achieve a 2% to 5% organic growth rate in 2026, supported by accelerated operations and strong project economics [11] - The midstream business processed a record 533 million cubic feet per day of natural gas last quarter, indicating robust performance [40] Company Strategy and Development Direction - The company plans to continue raising dividends, having increased it by 20% this quarter, marking the fourth increase in seven years [13][22] - There is a focus on maintaining optionality in capital spending decisions, allowing flexibility based on market conditions [24] - The management emphasizes the importance of operational efficiency and cost reductions in decision-making processes [36][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate lower oil prices, citing strong operational efficiencies and a solid balance sheet [75] - The company is optimistic about future opportunities, with a strong inventory of projects and a favorable outlook for 2026 [76] Other Important Information - The company highlighted the importance of its midstream operations, which provide fee-based revenue and enhance overall stability [40][44] - The management team has a high level of employee participation in stock purchases, indicating confidence in the company's future [73] Q&A Session Summary Question: On operational efficiency and capital spending decisions - Management discussed the balance between capital spending and production growth, emphasizing that decisions are based on multiple factors, not solely oil prices [18][20] Question: On efficiency gains and future projections - Management indicated that there is still room for efficiency improvements, particularly in completion operations, and expects to enhance these gains in 2026 [28] Question: On oil market conditions and spending decisions - Management acknowledged the potential for an oversupplied oil market in 2026 and stated that they would adjust spending based on market conditions [32][34] Question: On natural gas pricing and pipeline capacity - Management discussed the expected relief in Waha pricing due to new pipeline capacity coming online in 2026, which should improve market conditions [58][61] Question: On well productivity expectations - Management expects well productivity to remain strong in 2026, with longer laterals and improved capital efficiencies anticipated [66] Question: On midstream activity and EBITDA outlook - Management noted that growth in Matador's operations would positively impact San Mateo's volumes and EBITDA, with significant capital expenditures planned for midstream projects [70]