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Diamondback's (FANG) Q3 Earnings Miss on Weak Gas Prices

Zacks Equity Research

Diamondback Energy, Inc. FANG reported disappointing third-quarter 2019 results. Weaker-than-expected natural gas price realizations caused this underperformance. Precisely, natural gas prices came in at 69 cents per thousand cubic feet (Mcf), missing the Zacks Consensus Estimate of $1.05 and the year-ago figure of $1.90 as well. Moreover, the company’s adjusted net income per share of $1.47 lagged the Zacks Consensus Estimate of $1.71 and also decreased 12% from the year-ago figure of $1.67.

Further, this Permian pure play’s total revenues of $975 million fell short of the Zacks Consensus Estimate of $1,051 million but soared nearly 82% from the year-earlier figure of $538 million, primarily due to increased contribution from the midstream services.

Notably, two Permian biggies, namely Apache Corporation APA and Concho Resources CXO, reported earnings miss in their latest quarterly releases. While both companies bore the brunt of lower year-over-year oil and gas prices, Apache was able to partially offset pricing woes through production gains. Another Permian player Pioneer Natural Resources PXD unveiled quarterly results yesterday, missing on earnings due to modest fuel prices in spite of robust output.

Production & Realized Prices

The 2018 buyouts of Energen Corporation and Ajax Resources helped Diamondback transform into one of the leading Permian Basin oil producers. Production of oil and natural gas averaged 287.1 thousand barrels of oil equivalent per day (MBOE/d) comprising 65% oil. The figure skyrocketed 133% from the year-ago quarter and also marginally surpassed the Zacks Consensus Estimate of 286.4 MBOE/d. While oil production surged 110.2% year over year, natural gas volumes more than tripled.

The average realized crude oil price in the third quarter was $51.71 per barrel, reflecting a 7.6% decrease from the year-ago realization of $56. Overall, the company fetched $36.20 per barrel compared with $46.59 a year ago.

Expenses & Financials

Third-quarter cash operating cost was $8.70 per barrel of oil equivalent (BOE), in line with the prior-year figure. Diamondback’s cash G&A expense was 59 cents, down from 78 cents in the third quarter of 2018. However, lease operating expense of $4.85 was up 11.8% year over year. Meanwhile, production taxes fell nearly 8% from the prior-year quarter to $2.31 per BOE.

Capital expenditure in the quarter totalled $825 million. The company shelled out $701 million on drilling and completion and spent another $28 million on non-operated properties. Plus, infrastructure and midstream budget amounted to $96 million.

As of Sep 30, 2019, this Permian-focused operator had $100-million in cash and cash equivalents, and long-term debt of $4.7 billion. The debt-to-capital ratio of the Zacks Rank #3 (Hold) company was 23.51%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Diamondback Energy, Inc. Price, Consensus and EPS Surprise


The company now expects 2019 output in the range of 281-282 MBOE/d compared with the prior guidance of 277-284 MBOE/d. Further, full-year capex is revised to $2.72-$2.95 billion from the prior expectation of $2.85-$2.90 billion.

Diamondback projects 2020 average daily production of 310.0-325.0 MBOE/d. Its average daily oil production is estimated between 205.0 and 215.0 MBO/d with expected capital spend of $2.8-$3.0 billion.

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Click to get this free report Concho Resources Inc. (CXO) : Free Stock Analysis Report Apache Corporation (APA) : Free Stock Analysis Report Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report To read this article on click here. Zacks Investment Research