Diamondback Energy Q2 2022 Earnings Results and Increased Share Repurchase Authorization

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  • Diamondback Energy (FANG) recently announced its financial and operating results for the second quarter ended June 30, 2022. Here are the details.

Diamondback Energy (FANG) recently announced its financial and operating results for the second quarter ended June 30, 2022. Here are the highlights:

— Average production of 221.1 MBO/d (380.5 MBOE/d)

— Cash flow from operating activities of $1.7 billion; Operating cash flow before changes in working capital (as defined and reconciled below) of $1.8 billion

— Cash capital expenditures of $468 million

— Free Cash Flow (as defined and reconciled below) of $1.3 billion

— As previously announced, increase in the basic annual dividend by 7% to $3 per share; declared a basic cash dividend for Q2 2022 of $0.75 per share payable August 23, 2022; implies an annualized return of 2.3% based on the stock’s closing price on July 29, 2022 of $128.02

— Announcement of a variable cash dividend of $2.30 per share payable on August 23, 2022; a basic plus variable total dividend of $3.05 per share implies an annualized return of 9.5% based on the closing share price on July 29, 2022 of $128.02

— Repurchased 2,368,816 common shares in Q2 2022 for $303 million (at a weighted average price of $127.61/share); repurchased 1,761,363 common shares year-to-date in Q3 2022 for $200 million (at a weighted average price of $113.70/share)

— Total Q2 2022 principal repayment of $837 million; represents 63% of Q2 2022 Free Cash Flow from share buybacks and more variable base dividend declared

— The Board of Directors approved a $2 billion increase in share buyback program authorization to $4.0 billion from $2.0 billion previously

— As previously announced, increase the quarterly return on capital commitment to at least 75% of free cash flow starting in the third quarter of 2022; from at least 50% of free cash flow

– Redemption of approximately $337 million in aggregate principal amount across multiple tranches of the Diamondback Senior Notes at an average cost of 95.5% of par (~$322 million)

– In July 2022, redeemed $20 million in old Energen Notes due July 2022 and called $25 million in QEP Notes due October 2022 at par, removing all 2022 debt maturities

– Rattler Midstream LP takeover transaction expected to close end of August 2022

KEY QUOTES:

“Diamondback continued to build on its track record of execution in the second quarter. The company generated record free cash flow of $1.3 billion, beating the company’s record last quarter by 35%. We used the cash to reduce our net debt by 5% quarter-over-quarter, pay a total dividend of $3.05 per share and repurchase over 2.3 million shares We continue to focus on operational excellence and cost control in this inflationary operating environment, working to mitigate and offset the persistent inflationary pressures we see across our businesses.Diamondback has a strong record of cost control, and we We expect to continue to improve this balance sheet in the coming quarters.”

“Beginning this quarter, we are committed to returning at least 75% of our free cash flow to shareholders, placing Diamondback’s cash return framework at the forefront of the industry. We believe this combination of execution, cost control and cash returns presents a differentiated value proposition for our shareholders that is not reflected in the current value of equity, which is why our Board of Directors has approved a $2.0 billion increase in our stock repurchase authorization to $4 billion.

— Travis Stice, President and CEO of Diamondback

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