Diamondback Energy Inc (FANG) Q1 2026 Earnings Call Transcript
Neutral Oil & Gas E&P 49.68B USA
Next Earnings
2026-05-04
Diamondback Energy, Inc., an independent oil and natural gas company, acquires, develops, explores, and exploits unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. It focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin; and the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin in West Texas and New Mexico. Diamondback Energy, Inc. was founded in 2007 and is headquartered in Midland, Texas.
Diamondback targets cost-down Barnett development with development-mode efficiency, surfactant pilots, and disciplined inventory growth, while guiding 2026 CAPEX lower-end with potential future reductions if Barnett and surfactants progress and gas realizations improve.
⭐ Key Highlights
Barnett expansion with cost-down plan
Diamondback disclosed a strategic Barnett acquisition of acreage with plan to develop 900 gross locations, targeting cost reductions to about $800 per foot and extended laterals to drive competitive returns.
Cost optimization and development mode
Company outlined a shift to development-mode techniques (multi-pad development, simul-frac) to reduce drilling costs and improve returns, with a focus on 15,000-foot laterals where feasible.
Surfactants pilot showing early promise
60 surfactant tests across wells showed meaningful production uplift at low incremental cost, with early results guiding potential future integration into development plans.
Inventory replenishment and capital discipline
Diamondback emphasized ongoing inventory replenishment, longer average lateral lengths, and a philosophy of adding inventory without external capital, supporting a long-duration resource base.
Guidance and 2026 plan details
2026 capital plan remains conservative with CAPEX at the lower end of quarterly guidance; potential for reductions if Barnett/Sufactant initiatives progress and oil/gas realizations improve.
Oil/gas mix and marketing strategy
With Barnett expected to lean toward gas and liquids, Diamondback is prioritizing gas marketing improvements and potential in-basin egress to enhance cash flow and NAV.
Hyperscaler/data center opportunity progress
Progress on in-basin data-center projects and power purchase agreements to uplift natural gas pricing, with fuller details to be shared when binding.
✔Positive Signals
- Barnett resource expansion with cost-down plan targeting $800/ft and 15,000-ft laterals
- Development-mode efficiency improvements (multi-pad, simul-frac) to lower costs
- Surfactants pilot showing production uplift and potential future integration
- Inventory replenishment focus enabling sustained cash flow and long-term resource base
- Gas marketing strategy and potential in-basin egress to boost realizations
✖Negative Signals
- Guidance remains at the lower end of CAPEX with potential for cuts contingent on Barnett/surfactants progress
- Execution risk in scaling Barnett development and achieving cost targets across the basin
- Reserve revisions driven by price; impairment charges largely tied to prior deals
- Higher LOE and GP&T in 2026 due to non-hedged power costs and water-handling changes
- Hyperscaler/data center opportunities are still not binding and depend on future contracts
📊Financial Results
- Q4 EBITDA beat aided by lower OpEx; 2026 LOE and GP&T guidance reflect higher power costs and continued workovers
- D&C costs in Midland trending down toward sub-$550/ft in legacy zones; Barnett costs targeted at ~$800/ft with cost-cutting measures
- Reserve revisions driven primarily by price effects; management emphasizes PDP focus and ramping up Barnett without material changes to core reserve quality
🔮Future Guidance
- 2026 CAPEX guided toward the lower end of quarterly ranges; potential reductions if Barnett surfactants and cost reductions materialize
- Barnett activity expected to ramp: roughly 30 wells drilled and ~10 completed in 2026, with a larger program in 2027 (~100 gross wells)
- Continued emphasis on inventory replenishment and extending lateral lengths; ongoing evaluation of DUC backlog with flexibility to adjust
💡Interesting Insights
- Diamondback intends to provably share facilities and optimize capex by leveraging existing Midland infrastructure for Barnett development where feasible
Detailed Analysis
AI-generated summary of Diamondback Energy Inc earnings call transcript.
Diamondback announced a strategic Barnett expansion, emphasizing cost reductions and development-mode execution to unlock material oil and gas production from the backyard asset. The company highlighted a 900 gross-location plan with initial capex discipline, moving toward longer laterals (15,000 ft) and multi-pad, simul-frac techniques to lower drilling costs. Surfactants testing showed early but meaningful production uplift, guiding potential future incorporation into the development plan. Inventory replenishment remains a core priority, with a focus on extending lateral lengths and maintaining cash flow while returning cash to shareholders. The Barnett plan is expected to ramp through 2026-27, with a heavier gas/liquids mix improving corporate returns and NAV. While the company maintains a cautious stance on capex guidance, improvements in Barnett cost structure and gas marketing could support a more favorable contribution to results. Progress on hyperscaler/data center opportunities is ongoing, with binding details pending. Overall sentiment is cautiously constructive, balanced by macro uncertainty and a prudent approach to capital deployment.
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