I support most of his decisions but this is stupid
So much of our economy is based on o&g that crashing that market in favor of consumer pricing will cause significantly more damage than gain

Thing is, if it's too cheap, US producers simply clamp down and stop producing and then the US top export nosedives, all the support industry like pipe and valve, software, polymers etc all crash. If it's too high it isn't good. But too low and the economy will crash. History has proven that. This is about as stupid as he could be. The whole drill baby drill thing will never happen with $50 oil. We will fall further in the world in oil production and more further from being self reliant.

We need oil at $75-80

I'm all for $75/bbl oil.

These things tend to sort themselves out.

MAROON said:

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I would tend to agree as my job is directly tied to O&G exploration and production.

But I also think cheap energy is a pretty big boon for the rest of the economy, and voters absolutely love cheap gas

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Anecdotal but I haven't seen gas prices really fall that much at all. I'm pure upstream so not conversant in the downstream dynamics at play, but are y'all seeing different re prices at the pump?

From what I've been told, in the last 6-8 months royalties have slid pretty significantly, and probably dropped 40% this year.
Mix of low crude prices and resultant reduced production from throttling

CPDAggie10 said:

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Diamondback just announced they are laying 3 rigs down. I'm sure we will continue to see much more of that

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it's worth everyone's time to read Stice's letter to the shareholders if they have yet to do so.

Diamondback Stockholders,
This letter is meant to be a supplement to our earnings release and is being furnished to the Securities and Exchange Commission (SEC) and released to our stockholders simultaneously with our earnings release. Please see the information regarding forward-looking statements and non-GAAP financial information included at the end of this letter.
Macro Update
The past two months have been challenging for the U.S. oil and gas industry, as the combination of global economic uncertainty (lower demand) and an increase in expected OPEC+ production (higher supply) has lowered oil prices and increased volatility.
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Over the past decade, the cost of supply for the average barrel of oil produced in the United States has increased. The shale revolution has evolved from proof of concept (outspend cash flow to prove up basins) to manufacturing mode (significant growth) and is now in a more mature stage of development (free cash flow generation and return of capital). Today, geologic headwinds outweigh the tailwinds provided by improvements in technology and operational efficiency. On an inflation-adjusted basis, there have only been two quarters since 2004 where front month oil prices have been as cheap as they are today (excluding 2020 which was impacted by the global pandemic). Therefore, we believe we are at a tipping point for U.S. oil production at current commodity prices.
As crude pricing moves lower for a period of time, as it has over the last month, we expect activity to slow and oil production to decline. We currently estimate that the U.S. frac crew count is already down ~15% this year, with the Permian Basin crew count down ~20% from its January peak, and both are expected to decline further. We also expect the U.S. oil directed rig count to be down almost 10% by the end of the second quarter and decline further in the third quarter. As a result of these activity cuts, it is likely that U.S. onshore oil production has peaked and will begin to decline this quarter.
This will have a meaningful impact on our industry and our country. Over the past 15 years, this industry has grown U.S. oil production by 8 million barrels of oil per day to over 13 million barrels per day, a staggering growth trajectory. This growth alone would make the United States the third largest oil producer in the world. Combining both oil and gas production, the United States today produces more than the second and third largest producers, Russia and Saudi Arabia, combined. This has transformed our economy and given the United States a level of energy security not thought possible at the beginning of this century.
In the process, this industry has pushed employment to over 2 million jobs1, grown GDP, improved our trade balance and reduced our dependence on foreign oil. This represents the best of American ingenuity, strengthening America's standing on the world stage while creating millions of high-paying American jobs. In addition, the tax revenue generated from our industry supports education, infrastructure and health care across the country. For example, in 2024 the Texas oil and gas industry sent over $27 billion in tax dollars to Austin. Per TXOGA, this is more than the total tax revenue of 34 states. Today's prices, volatility and macroeconomic uncertainty have put this progress in jeopardy.

2025 Guidance Update
We believe this is the first true test of the capital returns model we implemented post-COVID that has improved returns and stockholder trust. At Diamondback, we believe we can create long-term value for our stockholders during this volatility by making the right capital allocation decisions - which we believe we are doing through our announcements today. We have spent the last five years positioning the Company to excel in periods of both strength and weakness, and are confident we will build off a strong first quarter to continue delivering differentiated results for our stockholders.
Last quarter, I stressed that we have consistently chosen capital efficiency and Free Cash Flow generation over volume growth for our capital plan. As the macro environment has deteriorated, we are staying true to this thesis and lowering our activity to cut CAPEX, drill and complete fewer wells and maximize Free Cash Flow generation during this period of macro instability. Put simply, we would prefer to use the incremental dollar generated to repurchase shares and pay down debt over drilling and completing wells at these prices today.
Therefore, we are lowering our full year 2025 capital budget to $3.4 - $3.8 billion, down from $3.8 - $4.2 billion previously. This is a reduction of approximately $400 million at the midpoint (10%). We now expect to drill between 385 and 435 gross wells and complete approximately 475 to 550 wells. We are dropping three rigs and one full time completion crew in the second quarter and we expect to be at these levels through the majority of the third quarter. To use a driving analogy, we are taking our foot off the accelerator as we approach a red light. If the light turns green before we get to the stoplight, we will hit the gas again, but we are also prepared to brake if needed.
Should oil prices remain weak or further deteriorate, we will maintain this level of activity, with potential to reduce further if needed. Should the market stabilize and we see consistent oil prices above $65, we have the ability to ramp activity back to previous levels and potentially grow production volumes. Traditionally, we would use this lower service cost environment to build more DUCs ("Drilled but Uncompleted Wells"), but the cost of our largest drilling input cost, casing, has increased over 10% in the last quarter due to steel tariffs.
Due to year to date volume outperformance, we expect that the offsetting oil production effect of this activity change to be minimal. Our updated annual oil production range is now 480 to 495 MBO/d, down just 1% from the midpoint of prior guidance.
As a reminder, we measure our capital efficiency using oil barrels produced divided by total capital spent. Our updated guidance implies full year 2025 oil production per million dollars of cash capital expenditures ("MBO per $MM of CAPEX") of 49.4, ~10% better than the Company's original full year 2025 guidance.
First Quarter 2025 Review
For the first quarter, Diamondback produced 475.9 MBO/d, above the high end of the oil guidance range of 470 - 475 MBO/d. Capital expenditures were $942 million, below the midpoint of our guidance range of $900 million to $1.0 billion.
We generated $2.4 billion of net cash provided by operating activities and $1.6 billion of Adjusted Free Cash Flow of which approximately $864 million, or ~55%, was delivered to stockholders through our base dividend and buyback program. We once again leaned into buybacks in the first quarter as we felt our share price was materially below the intrinsic value of our business and repurchased approximately 3.7 million shares for ~$575 million, or $157.15 per share. We have continued to actively repurchase shares in the second quarter amidst the increased volatility since April 1st. Through last Friday, we have repurchased 1,965,180 shares for ~$255 million in the second quarter at a weighted average price of $129.71.
Operations Update
Despite the macroeconomic headwinds, the base business continues to execute flawlessly. Our drilling and completions teams remain focused on improving operational performance and driving efficiency gains. During the quarter, our drilling team set multiple records for the Company. We averaged 8.8 days from spud to target depth ("TD"), the fastest average performance in Diamondback history. Since 2018, we have drilled 23 wells from spud to TD in under 5 days and 10 of these wells were drilled in the first quarter. Additionally, we averaged nearly 2,500 lateral feet drilled per day, the best quarterly performance since 2021.
On the completions side, we continue to utilize SimulFrac fleets for nearly all of our completions and are now running four electric Halliburton Zeus fleets. In the first quarter, we averaged approximately 3,500 lateral feet completed per day.
As I mentioned earlier, our cost of casing has already increased by over 10% due to tariffs, the most material cost headwind we are currently fighting. This increases our total well costs by about $6 a foot (~1%), or almost $40 million annually at our current development pace. We expect a combination of service cost reductions and efficiency gains to more than offset this increase as industry activity slows in the coming quarters. As a result, we have lowered our average Midland Basin well cost estimate for 2025 by ~2%.
Double Eagle Acquisition
On April 1st we closed the previously announced Double Eagle acquisition. As I wrote last quarter, we believe this transaction further positions Diamondback to have the best long-term capital efficiency in the Permian Basin through a combination of inventory quality, duration and execution cost structure. We view the Double Eagle asset as the last high-quality, largely undeveloped position in the Midland Basin and have incorporated their 400 core locations into our near-term drilling plan. The operations team has seamlessly integrated this new position into our portfolio and performance on the asset is exceeding initial expectations. Additionally, our partnership to accelerate development on our Southern Midland Basin acreage is underway, which we expect to have significant Free Cash Flow benefits to Diamondback in 2026 and beyond.
Drop Down Acquisition
Last Thursday, Viper shareholders voted to approve the Drop Down and we closed the transaction shortly thereafter. As a reminder, Diamondback sold Endeavor's mineral and override assets to our subsidiary Viper Energy, Inc. in a transaction valued at approximately $4.45 billion at the time of announcement. Diamondback received $1 billion in cash and 69.6 million units of Viper's operating subsidiary. The cash proceeds were used to pay down near-term debt and the units received pushed Diamondback's ownership in Viper to 52% on a fully diluted basis. As we have stated previously, we view Viper as a one-of-a-kind mineral company, with an exciting trajectory that includes unique insight into the Diamondback drill-bit. We continue to believe in the long-term distribution growth potential at Viper, and our pro forma position is worth approximately $6.5 billion assuming Friday's stock price.
Balance Sheet
Pro forma for the close of the Double Eagle transaction, we had approximately $15.7 billion of gross debt and $15.1 billion of net debt on a consolidated basis as of March 31st, with ~$2.5 billion of liquidity at Diamondback.
We used the $1 billion in cash proceeds received as part of the consideration for the Drop Down to pay down our $900 million Term Loan due September of this year. We expect to further reduce our absolute debt levels through organic Free Cash Flow generation, non-core asset sales and strategic open market bond repurchases. As a reminder, we have committed to at least $1.5 billion of asset sales, which we expect will include sales of certain equity method investments, Endeavor's water infrastructure and non-operated assets.
On February 28th, MPLX announced it had signed a definitive agreement with affiliates of WhiteWater and Diamondback to purchase the remaining 55% interest in BANGL, LLC for $715 million. This equates to approximately $130 million for our 10% interest, with additional potential proceeds from an earn out mechanism tied to specific financial performance metrics. We expect this sale to close this summer.
Additionally, we have repurchased ~$220 million of principal of our long-dated bonds for approximately $167 million (including accrued interest), or 75.3% of par value so far in the second quarter. This approach to debt repurchases mirrors our approach on the equity side, opportunistic repurchases at a value discount.
Balance sheet strength is a core tenet of Diamondback's strategy. We continue to have a near-term goal of reducing consolidated net debt to $10 billion and are targeting long-term consolidated net debt of $6 to $8 billion. We do not see debt reduction and share repurchases as mutually exclusive and believe we can execute both. We will allocate a higher percentage of capital to repurchases should commodity price volatility persist or increase. By lowering activity and cutting CAPEX, we also have the ability to pay down debt simultaneously.
Closing
Later this month at Diamondback's 2025 Annual Meeting, I will move into my role as Executive Chairman. I will still be an employee of the Company and will continue to provide advice and guidance to our management team, which will be led by Kaes Van't Hof as CEO. Kaes is a generational talent who I have been fortunate enough to have worked with closely for the past decade. The company is in great hands, and the future could not be brighter for Diamondback.
It doesn't seem that long ago when I was working on a laptop in the kitchen of a small metal field office trying to figure out how to get the company off the ground. It took quite a few twists and turns, but we were able to IPO in October 2012 at a $500 million valuation producing just 3,000 BOE/d. There were some really tough days early on, but as they say - you can't climb a smooth mountain. We were able to survive those first couple of years, move to a period of success and, after multiple large transactions, become significant. Today, we are the largest Permian pure play and the second largest oil producer in the Permian Basin, a size and scale we never dreamed of when we started the Company.
I am so proud of our employees who made this growth possible. Their passion, resilience, and commitment to excellence have shaped our identity and have allowed us to become what we are today. We have the best organization in the industry with a culture where good is never good enough. It is amazing to watch this drive in action and see it translate to the results we deliver quarter in and quarter out.
Thank you to all our employees, past and present, who have put their support in me and Diamondback, trusting us to help you reach your career goals and aspirations. Each of you has been an inspiration to me and it has been such a privilege leading you the past fifteen years.
We are fortunate to have an exceptional Board of Directors, a group who not only helped shape our long-term strategy but also stood firmly behind management through both our greatest successes and our most challenging moments. Their guidance has been instrumental in the Company's growth and evolution.
I am especially grateful to Steve West, our Chairman during our formative first decade. His strategic vision, his steady leadership and, above all, his enduring friendship have left a lasting imprint on both the Company and me personally. Words fall short in expressing the depth of my appreciation for all he has contributed.
Thank you to our stockholders for believing in us when very few did and supporting us all these years. I am so proud of the Company we have built and the track record of success we have created. We are blessed to live in a country and operate in a state where entrepreneurial spirit is encouraged and nurtured, a place where companies like Diamondback can become the next great American success story.
Sincerely,
Travis D. Stice
Chairman of the Board and Chief Executive Officer

Lots of interesting (potential) contradictions in Stice's letters.

Touts capital discpline around not over producing in low price environments in order to maximize shareholder returns - laments the fact they have to curtail three rigs because "OPEC."

Implies desire for protectionsm - "we are at a tipping point of U.S. oil production" then chastises tariffs for increasing their input costs.

Interestingly, they remind us that capital efficiency is measured in crude barrels - would be interesting if it were BOE. That would probably paint a much healthier outlook for the Permian.

Operationally, they've never drilled faster - maybe they didn't need those three rigs after all.

I don't necessarily disagree with Stice on any of it...but there's a lot of fence sitting in there.

Sims said:

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Lots of interesting (potential) contradictions in Stice's letters.

Touts capital discpline around not over producing in low price environments in order to maximize shareholder returns - laments the fact they have to curtail three rigs because "OPEC."

Implies desire for protectionsm - "we are at a tipping point of U.S. oil production" then chastises tariffs for increasing their input costs.

Interestingly, they remind us that capital efficiency is measured in crude barrels - would be interesting if it were BOE. That would probably paint a much healthier outlook for the Permian.

Operationally, they've never drilled faster - maybe they didn't need those three rigs after all.

I don't necessarily disagree with Stice on any of it...but there's a lot of fence sitting in there.

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very true. he's not going to paint all doom and gloom. but it is a pretty sobering outgoing message.

He's not wrong on the vast majority of this.

I will say it again.
Look at history. When oil prices are super low, our economy struggles mightily. This is sheer stupidity. We don't need $120 oil but for strength our economy needs $70-80 oil

ag94whoop said:

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I will say it again.
Look at history. When oil prices are super low, our economy struggles mightily. This is sheer stupidity. We don't need $120 oil but for strength our economy needs $70-80 oil

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Previous examples certainly agree with you in isolation but if you observe the trend over time, barrels of crude per oz of gold is moving up and to the right on a noticeable trend. The spikes usually indicated (or result from) recession but the spikes tend to have to be higher in order for the recession indicator to hold.

I guess what I'm saying is oil is getting cheaper over time regardless of the economic conditions and is a function of technology and availability. While it may be true that at one point we needed $80 oil, adjusted to consider the gold/oil trend - we may only need $55- $65 oil moving forward. Not claiming that to be true, just an inferred data point.

Just reading that as an industry, hedging had dropped to like 20% for 2025 production for oil. If that is the case then look out for some players to go bankrupt this year if they didn't set their hedges up.

Now I'm assuming any with bank debt will be required to have minimum hedges set by the bank. But we are in for a tough 2025 and 2026 it seems.

I think the discussion about the economy in relation to crude prices is an interesting one. Not even necessarily with respect to it being a leading or trailing indicator but with respect to everything's relationship to crude itself.

If you don't follow his group/service - I think everyone in the oil business would be wise to give a listen to Doomberg. Get passed the green chicken avatar, the data they present and the (as well as they can) unbiased analysis of energy markets has been really helpful to me.

Doomberg

Anyone else having issues accessing Enverus/Energylink today?

Just me?

MAROON said:

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Just reading that as an industry, hedging had dropped to like 20% for 2025 production for oil. If that is the case then look out for some players to go bankrupt this year if they didn't set their hedges up.

Now I'm assuming any with bank debt will be required to have minimum hedges set by the bank. But we are in for a tough 2025 and 2026 it seems.

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Where did you read that, wondering if its just speculation. As stated, most hedging done is required.

https://oilprice.com/Energy/Crude-Oil/American-Oil-Is-Underhedged-and-Heavily-Exposed.html

https://info.evaluateenergy.com/most-north-american-oil-production-left-unhedged-in-early-2025/

Those guys are cherry-picking one stat and making a prediction. They are ignoring why these companies are less hedged - they have significantly less leverage, more liquidity, and FCF, things that were not the case in prior downturns. Leverage and hedging are correlated. They aren't hedged because they aren't levered.

Gig-Em2003 said:

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Those guys are cherry-picking one stat and making a prediction. They are ignoring why these companies are less hedged - they have significantly less leverage, more liquidity, and FCF, things that were not the case in prior downturns. Leverage and hedging are correlated. They aren't hedged because they aren't levered.

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That's true, but I still think these companies should hedge more often. Hedge when you are euphoric about oil prices, lift your hedges if we get into the sub $40s. Stay unhedged or buy puts depending on vol in between.

Gordo14 said:

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Gig-Em2003 said:

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Those guys are cherry-picking one stat and making a prediction. They are ignoring why these companies are less hedged - they have significantly less leverage, more liquidity, and FCF, things that were not the case in prior downturns. Leverage and hedging are correlated. They aren't hedged because they aren't levered.

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That's true, but I still think these companies should hedge more often. Hedge when you are euphoric about oil prices, lift your hedges if we get into the sub $40s. Stay unhedged or buy puts depending on vol in between.

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Oh man, I hear "we should just buy puts" almost daily.

The backwardation of the last few years has made hedging unattractive to oil producers. The front months may look nice, but the tail of the 2-year has looked like Saudi flooding the market for a long time.

Yeah, we were planning for $65 way before tariffs were enacted. The OPEC dump was slightly surprising, but not terribly.

Putting some feelers out there for a new part time job for my wife. Preferably in Midland, but could be remote as she basically works remote now.

Looking for assistant controller/operational accountant type role. Background is 10 years with a publicly traded drilling OFS company doing operational accounting, inventory audits, asset management and ERP systems.

We are needing something which allows school drop off/pick up at 8:30 AM and 3 PM. Ideally this role helps her build relationships and community.

Hopefully some on this board have a lead for this type of experience.

Thanks!

https://www.houstonchronicle.com/news/houston-texas/trending/article/chevron-layoffs-west-texas-permian-basin-20350882.php

Quote:

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Houston-based Chevron will layoff nearly 800 200 workers at its Permian Basin facilities in West Texas.
The layoffs, expected to begin July 15, will affect workers at three Chevron facilities in Midland County, according to the Texas Workforce Commission.

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That appears to be about 20% of their Midland office plus some field personnel. T&Ps to the CVX folks here

Just waiting now for COP's layoffs in the fall to see what effect they may have in Midland

txaggie_08 said:

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https://www.houstonchronicle.com/news/houston-texas/trending/article/chevron-layoffs-west-texas-permian-basin-20350882.php

Quote:

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Houston-based Chevron will layoff nearly 800 workers at its Permian Basin facilities in West Texas.
The layoffs, expected to begin July 15, will affect workers at three Chevron facilities in Midland County, according to the Texas Workforce Commission.

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That appears to be their entire Midland office plus some field personnel. T&Ps to the CVX folks here, and the Midland economy.

Just waiting now for COP's layoffs in the fall.

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Effects of $60 oil I guess.

Please forward all Christmas cards to:

Chevron Business Support Center S.R.L.
Cecilia Grierson 355 C1107BHA
Buenos Aires, Argentina

FWIW, I heard it was a misfiling and is 200 people.

Still sucks, though.