Diamondback Energy, Inc. (NASDAQ:FANG) Q4 2024 Earnings Call Transcript

Diamondback Energy, Inc. (NASDAQ:FANG) Q4 2024 Earnings Call Transcript February 25, 2025

Diamondback Energy, Inc. beats earnings expectations. Reported EPS is $3.64, expectations were $3.57.

Operator: Welcome to Diamondback Energy’s fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone.

Adam Lawlis: Thank you, Swadda. Good morning, and welcome to Diamondback Energy’s fourth quarter 2024 conference call. During our call today, we will reference an updated investor presentation letter to stockholders, which can be found on Diamondback’s website. Representing Diamondback today are Travis Stice, Chairman and CEO, Kaes Van’t Hof, President, Danny Wesson, COO, and Jerry Thompson. During this conference call, the participants may make certain forward-looking statements relating to the company’s financial condition, results of operations, plans, objectives, future performance, and businesses. Be cautioned that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors.

Information concerning these factors can be found in the company’s filings with the SEC. In addition, we will make reference to certain non-GAAP measures. Reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon.

Travis Stice: Thank you, Adam, and welcome, everyone, and appreciate you joining this morning. I hope you find the shareholder letter a meaningful way to communicate. And also, as Adam pointed out, we’ve got an updated investor deck out there that we can reference during our questions this morning. Operator, if you’ll please open the line for questions.

Q&A Session

Operator: Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one one. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Neal Dingmann with Truist Securities. Your line is open.

Neal Dingmann: Morning. And, Travis, congratulations on it to you, but the case of Jerry, but especially, like, fantastic career. Look forward to seeing you soon. My first question, maybe just around that, again, another great quarter. My first question is really around the free cash flow since that you all show on slide thirteen. Specifically, you know, when looking at that, I’m just wondering, you put a comment that I’d noticed on the bottom of the slide. Suggesting now around sixty-seven dollars a barrel produced the same free cash flow of seventy-six last year. I’m just wondering, is this continued achieved through the larger scale? Is this a lot of the completion drive? I’m just wondering maybe if you could talk and discuss the drivers behind all this.

Travis Stice: Yeah. Neal, you know, that’s not a new number that we’re gonna start to look at here. I kind of equate that number to the same thing as a dividend breakeven. It’s basically, you know, what oil price gets you the same free cash flow per share as the prior year and if that number is going down, you know, capital efficiency is improving or you’ve done an accretive deal. And, you know, when we announced the Endeavor deal, you know, a little over a year ago, you know, we said we’d have ten percent plus free cash flow per share accretion. And, you know, here you are a year later, showing that free cash flow per share is going down by nine dollars a barrel to equal the same number as last year. So you know, it’s gonna be tough to keep moving that number down nine dollars a barrel every year. But, you know, I think through a lower share count, lower cost structure, and quality inventory, you know, that’s certainly gonna be the goal.

Neal Dingmann: No. Great, great direction. The thing, it just keeps dropping. And then my second question, maybe on your D and C plans, which one, can you talk about maybe I don’t know. K. Do you look at it completions per several frack crew or, you know, maybe talk. I’m just noticing the amount of completed wells and, you know, you all talk about sort of four to five of these simul fracs. And then secondly, noticed you’ll continue to complete several more wells than you drill like you did last year, maybe just discuss that.

Travis Stice: Yeah. So on the DUC drawdown, you know, we’re drilling less wells and we’re completing, you know, a combination of things. We were ahead of plan last year, so we drilled more wells, and we expected. And then we also acquired a lot of ducks with the Endeavor deal. And a smaller amount with the TRP deal that closed earlier this year. So you know, there’s a pretty significant dock drawdown planned in the CapEx budget. I would just say if we’re ahead of schedule, and, you know, CapEx is looking good for the year, we’ll probably, you know, reduce that drawdown and drill a few more wells. Particularly right now given that, you know, putting pipe in the ground on the drilling side is almost as cheap as it’s been in the last, you know, five or six years.

So I think we have flexibility in the plan, but you know, really seeing the efficiencies come through here, right, with, you know, drilling over four hundred wells with fifteen or sixteen rigs this year versus last year, going into the year, we thought we’re gonna drill two eighty wells down and back stand along with fifteen or sixteen rigs. And then on the frac side, you know, basically, the solid frac fleets are getting about a hundred walls per fleet per year. That’s kinda up from eighty a year ago, you know, just continued efficiencies in the field and that’s partly due to the higher comp rate that we’ve implemented from some learnings from Endeavor and you know, I think we’re still looking at ways to push that even higher. We tried some things that might get us closer to a hundred ten, hundred twenty wells per year.

It’s not on the plan today, but that’s some upside that we could accrue to our shareholders.

Neal Dingmann: Perfect. Thanks. Look forward to seeing y’all.

Travis Stice: Thanks, Neil.

Operator: Please stand by for our next question. Our next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.

Neil Mehta: Yeah. Good morning, and congratulations, Travis, and congratulations Casey. I think one of the takeaways seems, from the deck is and post the Double Eagle acquisition is that there might be a pause as it relates to M&A given the feels like you’ve consolidated a lot of the quality positions in the Permian. So K. Just love your perspective on that. And then if that’s the case, how do you think about leaning into the share repurchase program at these valuation levels?

Travis Stice: Good morning, Neil. Thank you for your comments as well too. Yeah. We tried to articulate during the announcement of the Double Eagle trade that this was really the last, you know, opportunity in the core of the Middle East and, you know, if it in fact is the last opportunity, then there’s really not much left on a go-forward basis. So that’s our strategy is to we took advantage of probably what was the, you know, the among the last meaningful assets in the middle of basin. Yeah. Neil, you know, not saying we’re never do another deal again, but certainly need to digest here, you know, the quality of the inventory that we have. Puts us in a really good position to move more towards, you know, the other side of the capital allocation discussion, which is the share repurchases.

And reducing the enterprise value. And, you know, I think at these levels, it’s very obvious that share repurchases is a great use of capital. At seventy dollars oil, this business generates twenty dollars a share of free cash flow in twenty twenty-five. Current prices that’s, you know, essentially a twelve and a half, thirteen percent yield. So for us, that’s cheap. And, you know, our goal is to continue to make our stock look cheap by improving, you know, per share metrics and I think that’s what we’ve laid out here with the twenty twenty-five plan.

Neil Mehta: Yeah. And, Casey, on that buyback program, have a very concentrated shareholder coming out of the Endeavor transaction. So how do you think about maintaining the dry powder for potential sell downs there? And how should the market be thinking about, you know, your largest shareholder in general?

Travis Stice: Yeah. I mean, I think the market should realize that we have a long-term patient shareholder and the Stephens family that, you know, has known this basin for forty-five years and is very, very comfortable with the decision they made in, you know, merging with Diamondback. You know, this isn’t a private equity investment that, you know, has to monetize for fun life. There’s a lot of patience from their side and, you know, we had conversations with them just like all of our other shareholders and, you know, they like our other shareholders. You can see on page one of our roster, encouraging us to lean into our buyback right now because stock’s cheap and, you know, the best use of capital is to buy back our shares.

So, you know, lastly, I’d probably say that, you know, I think the market’s got a little ahead of this, you know, lock-up expirations over the coming, you know, months. And in my mind, there’s a lot of other ways to reduce ownership that aren’t, you know, well-telegraphed marketed deals and that stuff that we’re thinking about. I think we have the balance sheet capacity and the free cash flow generation most importantly to, you know, get creative on that front while still buying back shares in the open market.

Neil Mehta: Thanks, Casey. Thanks for

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of John Freeman with Raymond James. Your line is open.

John Freeman: Yeah. Good morning. And, you have remarkable career, Travis, and congratulations, Casey, Jerry, on the well-deserved promotion. I just wanna start on looking at the midstream budget, the roughly four hundred and fifteen million on the midstream infrastructure budget, is there anything that’s sort of at a one-time in nature related to either kind of Double Eagle or Endeavor transactions where you kinda either to put in some infrastructure, facility upgrades, anything like that that we should be aware of?

Travis Stice: Yeah, John. You know, I think, you know, one thing we highlighted is that there is sixty million dollars of midstream CapEx in there, traditional midstream CapEx with the Endeavor water business, EDS. You know, if that business were to monetize, you know, likely into our Deep Blue JV, you know, that would reduce our CapEx burden depending on the timing of that deal. You know? And I think second to that, you know, we have some kind of accelerated environmental CapEx this year and probably a little bit next, but, you know, that’s to the tune of sixty million dollars or seventy million dollars of one-time this year. So couple things going away in the future. I’d say in general, we’d like to get that midstream sorry, that infrastructure and other budget down to kind of five percent to seven percent of total capital from where it is today.

And, you know, the teams, we put it in share Travis’s letter. The teams have already worked on it, you know, best in class combined. Facility design that we expect will save us, you know, a million and a half or, you know, ten percent or so per facility. And, you know, that’ll add up over the years as we develop the asset base.

John Freeman: That’s great. And then just a follow-up on Neil’s earlier question on the docs. Can you just remind us just rough numbers where y’all sort of stood on DUCs, you know, kind of pro forma for the Double Eagle transaction.

Travis Stice: Yeah. We were carrying around, you know, just a little over two hundred ducks total, two hundred two hundred fifty ducks total. Pro forma, the Double Eagle transaction, and Double Eagle’s coming over with about fifty, you know, with that, you know, what you would add to that number that we call, you know, work in place wells that, you know, we don’t we don’t expect that we’ll be dug, so they’ll be they’ll be brought online kinda, you know, sometime between now and close.

John Freeman: That’s great. Thanks, guys. Appreciate it.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of David Deckelbaum with TD. Line is open.

David Deckelbaum: Thanks for taking my questions, guys, and just to echo everyone’s congrats. I was hoping just to step back a second just to revisit. I mean, obviously, in case you made some comments about the attractiveness valuation shares right now, you know, in the context of Steven’s family as well. You guys have this one and a half billion commitment on asset sales and I think you’ve bridged that with free cash down to, you know, almost ten billion. Of net debt by the end of the year. I guess, how do you think about the flexibility of getting above that fifty percent return of capital this year, you know, when you appreciate where your shares are now relative to how you see valuation or, you know, should we be looking for that net debt, you know, trigger before kind of getting away from the fifty percent at least fifty percent commitment.

Travis Stice: Yeah. I mean, David, I think, you know, I think that at least fifty percent commitment is going to remain regardless of the situation. Now the execution of that whether it’s above fifty percent or not, I think will depend on, you know, the market conditions. And, you know, I think we in Q4 for instance, we leaned in a little bit. I think free cash flow beat even our internal expectations with we were fully prepared to go over fifty percent free cash return in Q4 given the volatility we saw in December. You know, I probably lean against going to seventy-five or a hundred in these market conditions. I don’t think we’re there. I think we gotta get these non-core asset sales done and dead down, but we have a lot of levers to pull and I think we saw more volatility, you know, than we’re seeing right now. We’d be we’d be leaning it.

David Deckelbaum: I appreciate that. And just to, you know, to follow-up on the infrastructure spend, obviously, a trajectory coming down with some of the synergies of facility design. You talked about the potential with, you know, the sale to Deep Blue. But just also wanted to bring up, like, the slide around surface acreage and power generation. How do you feel, you know, or how do you think about sort of financing your own internal power needs? You know, how sort of, you know, imminent are these needs in terms of spends to expand what you would you would need just to service your own wells? And when when do you think we would expect to hear, you know, some announcements around some of those solutions, whether it includes, you know, third party commercial opportunities or just incremental spend to build out for your own operations.

Travis Stice: Yeah. I think internally, we’ve spent probably on average seventy to a hundred million dollars a year on power for the last five or six years. So think there’s seventy or seventy-five million in the budget this year for our power needs that’s, you know, just holes and wires in the field. You know, I try to separate that from our, you know, Power JV we’re looking at and, you know, I think there’s been a lot of a lot of discussions around power in the basin. We obviously were short power in the base. I think what we’re trying to together with, you know, a large IPP is can we build a large behind the meter gas plant gas power plant in the basin using Diamondback gas but also having Diamondback receive, you know, some of that power back with, you know, hyperscale or data center operator taking on the lion’s share of that of that power.

So, you know, that’s in the works. We’re still, you know, confidentially discussing it with the hyperscalers, getting feedback and I think what what separates Diamondback from others in this space is, you know, our flexibility and how nimble we are and how quickly we can move to get get something done, you know, let alone how much gas we have that needs a better market. So, you know, two separate things, but, you know, we’ll continue to build out power in the field because it, you know, increases uptime as well as reduces LOE.

David Deckelbaum: Appreciate the color, guys.

Travis Stice: Thank you.

Operator: Please standby for our next question. Our next question comes from the line of Arun Jayaram with JPMorgan Securities. Your line is open.

Arun Jayaram: Good morning. My first question, Travis and Casey, I was wondering if you could talk about the asset sale divestiture program we anticipate to execute on in terms of the Double Eagle transaction, are these gonna represent primarily midstream assets, but give us a sense of what your what your plans are in terms of monetizations.

Travis Stice: Yeah. I mean, you know, I think what what we’ve been doing the market is that we think we can get these non-core asset sales done without selling operated acreage and I think the lion share of the value will come from a couple of our equity method investments that we list in our in our deck. That kind of been been built out in our near monetization. And, you know, on top of that, our midstream business that we acquired from Endeavor, the EDS water business likely, you know, has some synergies to merge into our Deep Blue JV, which is doing very, very well in and winning a lot of third party business in the basin. You know, I think most of that that gets you most of the way there. You know, we we’ve started to uncover a lot of assets from Endeavor that we acquired.

That are all over the country. But the biggest one is probably a sizable position in the Delaware Basin, and that’s likely your last kind of monetization candidate to get to that one point five billion.

Arun Jayaram: Great. And maybe the follow-up. You know, your overall, you know, top down capital efficiency, screens quite well relative to our model industry’s expectation. In terms of the, you know, the CapEx, for unit of oil output. That metric you mentioned in the shareholder letter, one kind of question is that the CapEx number is accompanied by more, you know, kind of gross tilts and Dentsfield a few questions around what are some of the implications for well productivity as we think about the twenty-five program versus last year?

Travis Stice: Yeah. I mean, I think overall, well, productivity is gonna be as good as any year. This year. We’ve had it for pretty a couple pretty banner years. Last few years. You know, I think a till number while, you know, a lot of other peers don’t don’t even give that number. We put it out there for transparency purposes, but there’s a lot of things that can move around in a till number. Right? If one twenty well pad is completed on, you know, December thirtieth of last year, you know, the account for last year or this year. So, you know, there’s some noise in that in that number. I think a true run rate we kinda got into the street to five hundred wells a year. Ish before double eagle. Double Eagle has about thirty wells a year of development.

So I think somewhere in that, you know, five twenty-five to five forty wells per year, assuming capital efficiency is kind of an apples to apples number. And, you know, I think I think the other question on capital efficiency, we have posted this dollars of CapEx per BO produced and I think that’s a number that we wanna hold ourselves to in the future. It’s gonna be tough to replicate the efficiency of twenty twenty-five given the drop drawdown, but that’s the mission to the team. I think there’s a lot of ancillary CapEx that’s gonna come down to replace that and capital efficiency is going to remain strong as particularly on a relative basis to where the market is today.

Arun Jayaram: Great. Thanks a lot.

Operator: Thank you. Please standby for our next question. Our next question comes from the line of Derrick Whitfield with Texas Capital. Your line is open.

Derrick Whitfield: Good morning, all, and echo everyone’s congrats as well.

Travis Stice: Thank you, Derrick.

Derrick Whitfield: With regard to the Double Eagle transaction, how should we think about the capital and production impacts from your agreement with Double Eagle to accelerate non-core Southern Midland Basin development and when would that start to or could that start to meaningfully impact your financials?

Travis Stice: Yeah. Derrick, on the capital side, there’s zero capital. You know, we’re getting, you know, a Terry. So, you know, no impact to us. You know, further rationale for that for that part of the deal is, you know, we we were gonna have to move a few rigs down south to, you know, secure some leasehold that had, you know, lower working interest and needed some horizontal wells to maintain the leasehold and, you know, we have we obviously have a good relationship with the Double Eagle guys, and, you know, they needed a place for their couple rigs to go, and so they’re gonna accelerate some development down there. I think the color we’ve given the market is that it’s about one hundred million dollars of free cash flow on a consolidated basis and in twenty twenty-six, and I’d probably say that fifty percent of that is for Viper.

You know, we’ll talk about it on the Viper call, but the Reagan County piece was the second largest from an acreage perspective piece of the drop down, and so this is kind of an unmodeled upside for the drop down that that in turn benefits time back through Viper’s outperformance.

Derrick Whitfield: That’s great. And then regarding your commentary on unmodeled synergies, where do you see the greatest remaining opportunities now that your organizations are fully integrated?

Travis Stice: You know, I think we’ve really, you know, talked a lot about synergies or around the drill bit and completions. And the capital synergies. I think there’s some longer dated synergies in the, you know, in the field, in the production world as we get teams integrated. And continue to share, you know, learnings and best practices from the operating teams in the field and, you know, on the production and PDP side. You know, where can we see improvements, you know, shared resources, those things take a little longer than, you know, just converting a drill and rig or completion crew over to a program. So, you know, we’re still in the middle of all that and, you know, the integration of the field organization really is gonna, you know, be hot and heavy this year, and we’re excited to, you know, it’ll be it’ll be smaller things that are hard to measure, but, you know, be a lot of a lot of a lot of things that will, you know, accrue hopefully to our LOE and OpEx budgets, you know, in future years.

Derrick Whitfield: Thanks. That’s great.

Operator: Thank you. Please standby for our next question. Our next question comes from the line of Kevin McCurdy with Pickering Energy Partners. Your line is open.

Kevin McCurdy: Hey. Good morning. You have a breakdown of the twenty twenty-five CapEx plan for the legacy assets versus the CapEx for Double Eagle. I was just trying to get a feel for how much lower the new legacy guide is compared to the prior commentary.

Travis Stice: Yeah. Kevin, you know, we we gave out double eagle hundred million dollars of CapEx for Q2 to Q4. For twenty-seven thousand barrels a day of oil, you know, their assets a little earlier, so it’s kind of a forty something like that. Thousand BOEs a day. So if you look at our three eight to four two, you take two hundred off that on each side. You’re at three six to four. It kinda ties three six three point six to four billion for the full year. It kinda ties to where we guided Q1 of twenty twenty-five is nine hundred million to a billion. For, you know, four seventy oil to four seventy-five oil. You know, we’re talking about ironically looks a lot like Q4 of twenty twenty-four. So we’re kind of moving towards, you know, given the volatility we’ve seen over the last quarter last year and certainly some, you know, more headlines and volatility this year to kick things off, we we figured cutting capital and growing less or, you know, growing zero prior to the double legal deal made made a lot of sense.

And so Q1 is pretty good luck at what we were planning to do prior to DE and, you know, we we certainly had to change our plans pretty quickly as that deal moved quickly. But I think in general, you’re seeing a more capital efficient plan than expectation.

Kevin McCurdy: I appreciate that detail. And as a follow-up, is there any CapEx associated with the assets that you might sell this year both on the JV and the non-op?

Travis Stice: I think the only the only thing, you know, we we highlighted this midstream CapEx number. Which is sixty million dollars or so, there’s certainly some CapEx associated with the non-op in the Delaware, but it’s not it’s not a meaningful overall number.

Kevin McCurdy: Appreciate it. Thank you.

Operator: Thank you. Please standby for our next question. Our next question comes from the line of Paul Cheng with Scotiabank. Your line is open.

Paul Cheng: Thank you. Good morning. And first, congratulations to Travis and, Case and Jerry. Maybe that’s a case. Can can you tell us that with the drawdown in stock, how much you estimate is the saving in CapEx? On those hundred and twenty hundred and thirty bucks.

Travis Stice: Yeah, Paul. You know, basically on a on a on a gross basis, drilling right now is about two hundred twenty dollars a foot. So on a net basis, your average working interest about two hundred dollars a foot. So you’re basically at, you know, two point two to two point four million a well. So I’d say overall, it’s probably about a two hundred million dollar savings this year. And I think as I mentioned earlier in the call, the goal of the team is going to be how can we offset that in twenty twenty-six, but, you know, reduce CapEx elsewhere?

Paul Cheng: Okay. And the just curious that the cadence of the program, I mean, if we put w double eagle aside, should we assume that it’s roughly about per rate each quarter the same number of wells that coming on Trims. Because when we’re looking at the number of wells that you expect to bring, one would have think. Given your strong productivity that, production will be somewhat higher than what you guide. So just curious that is there anything we should be aware in terms of the timing of the wells or anything?

Travis Stice: No. I think we, you know, we kind of said that, you know, twenty wells were brought into this year from last year. Who really knows what’s gonna happen at the end of this year? But I think this kind of low five hundreds before Double Eagle well, it’s per year run rate is a pretty good number, you know, with with thirty added wells from from Double Eagle, but you know, with the program of five hundred wells a year, you know, wells moving forward or backward across the calendar line is not something we, you know, actively think about.

Paul Cheng: Mhmm. I see. Alright. Will do. Thank you.

Travis Stice: Thanks, Paul. Thanks, Paul.

Operator: Please stand by for our next question. Our next question comes from the line of Leo Mariani with Roth. Your line is open.

Leo Mariani: Guys. I was hoping to dig a little bit more into the Double Eagle, you know, deal here in the synergies. You guys obviously spoke about a little bit on the call and kind of alluded to some of this in the press release, but, you know, clearly, FANG is a low-cost operator in terms of being able to drill complete wells nicely under six hundred dollars per foot. In the Midland, you kinda have a number for those guys in terms of what, you know, their kinda run rate was try to get a sense of the well cost savings over time here and also gonna probably assume that maybe your LOE is also a bit lower than there. So I was hoping maybe you could kinda quantify kind of the D and C and LOE numbers there to give us a sense of maybe some potential savings over time?

Travis Stice: Yeah. You know, you know, for a group known for their land prowess, those guys are actually pretty good operators over there at Double Eagle. They’re doing a pretty good job. You know, they were probably in the, you know, six twenty-five, six fifty range. But, you know, on a private deal, we’re gonna model it with our cost structure and, you know, we put that new kinda well cost out last year when, yeah. So when we when we, announce the trade, so that’s that’s probably the biggest, you know, number we put out. I think second to that because of the adjacencies, you know, we’re not gonna have to build as much infrastructure to service those assets. And yeah, I mean, I think I think from a timing perspective, you know, those guys that have been running five or six rigs and they ran all in the southern portion of their asset.

And we’re about to move four or five rigs up to the north and, you know, choose through that inventory very, very quickly, and so we decided to move on the deal because, you know, so often in this business, you’ve seen companies buy deals that have high decline curves and have to chase that decline curve with too much too much capital and too many rigs and the outcome of that is, you know, inventory duration being shortened rather than lengthened. So we timed it well where, you know, we didn’t acquire too much production instead acquired a lot of upside that, you know, fits in well with our plan over the next over the next ten years.

Leo Mariani: Okay. That’s helpful. I just wanna take a minute. On the capital side here. So certainly noticed that your capitalized interest has kind of been going up the last few quarters. I’m sure a lot of that’s related to the Endeavor deal, but just wanted to kinda check-in on that. Is the capitalized interest included when you when you lay out the budget, you know, for for twenty twenty-five here on the capital side?

Travis Stice: Yeah. No. So capitalized interest seems to be the hot topic. I don’t know if we gone down to capitalize interest is something that’s interesting in this business, but, you know, at the end of the day, we don’t make the accounting rules. When you do a deal with a lot of undeveloped acreage, if you raise debt dollars to pay for it, those go in the capitalized section. For us, that runs through addition to oil and gas properties. Which is not our CapEx budget. We’re gonna put our CapEx budget as, you know, what it takes to run the business. But, you know, our shareholder commitments and return commitments and all the math we do on our side, does include that, but from a free cash flow definition perspective, we exclude it. And I think over the coming couple of years as we pay down a significant amount of that debt, you know, that issue will be put to rest.

Leo Mariani: Thank you. Thank you.

Operator: As a reminder, ladies and gentlemen, that star one one to ask the question. Our next question comes from the line of Doug Leggate with Wolfe Research. Line is open.

Carlos: Hey, gentlemen. Good morning. This is actually Carlos in for Doug. And he most definitely expresses congratulations to you. Travis, Gary, and Case. Look, guys. What we’re trying to figure out is you talk about a decade of inventory. At the current pace and that’s for Subaru presumably associated to your highest return screen. What would that look like if we applied the current strip to screen returns? Would that number change? And how much so? Thanks.

Travis Stice: Yeah. You know, I think, you know, the gold standard in the industry right now is sub forty breakeven and that’s what we’ve been focused on and saying, you know, the decade reference. You know, obviously, inventory expands significantly as commodity prices go up. I think for us, you know, that number is put in our in our deck on slide twelve. We show kind of the fifty dollar breakeven now. That’s ten percent rate of return at fifty dollars a barrel. Right? We’re not gonna be wanting to drill that many wells in that situation. Instead, we’d like to have the balance sheet strength to be buying back shares in that situation. But I think from an overall strategy perspective, you know, the inventory is there. It’s just about, you know, at what time do you have to prosecute that inventory and we’ve tried to position ourselves to be the last person to have to drill the lower returning inventory but also have the lowest cost structure to be able to do it.

Carlos: Gotcha. That’s very helpful. And not to beat the dead horse here, but in terms of your dock and the capital associated with that, how much of that capital benefit or at what rate do you expect that capital to come back throughout twenty twenty-six? What’s the cadence associated with the capital benefit we’re rolling back to normal levels.

Travis Stice: It’s, you know, it’s pretty level loaded. You know, we have a very good, you know, forward visibility into what we’re completing and what we’re drilling. You know, I think I think we also went into this year, you know, running eighteen or nineteen rigs and realized that, you know, we were going to have a pretty sizable buck balance we could draw down. So, you know, we’re gonna be down at kind of fifteen rates here in the next couple weeks, and we’ll probably keep that pace for most of the year. I think as mentioned earlier, if things are going well on the year and we’re towards the lower half of guidance, we’ll probably, you know, drill thirty to fifty more wells and, you know, keep, you know, a relatively high dock balance.

You know, we really like that. It gives us operational flexibility, particularly with, you know, the size of these pads and the size of the development. So it’s good to have somewhere to go when things go south and that duct balance allows us to do that.

Carlos: Awesome. Thank you guys, and congrats again.

Travis Stice: Thanks.

Operator: Please stand back for our next question. Our next question comes from the line of Kalei Akamine with Bank of America. Line is open.

Kalei Akamine: Hey. Good morning, guys. On slide twenty-eight, you’re breaking out surface acres in the Permian for the first time. Kinda suggest that you’re getting close to securing maybe the Permian’s first data center deal. How should we think about how the financial benefits are gonna flow back? I’m thinking in terms of land sale revenues, will there be maybe a fixed price for gas? Could you even be paid in kind or through discounted power prices?

Travis Stice: Yeah. Good questions. You know, I think the land payment in my mind is important of all the payments given the size of the land needed, you know, it’s not a huge piece of property. But it’s about a thousand acres, and you can buy a lot of surface out here. In the Permian cheap. And fortunately, we have a lot of it. But I think the benefits to us would be, you know, participation from an equity perspective in the plant, you know, and on the power side. But also and also for the, you know, contributing all the gas needed for the plant. And, you know, the debate is on between us and our partners on how we wanna structure that. You know, you could look at things on a fixed price basis, you could look at a collar. You could look at an index.

So I think what we’re trying to do is kinda be more flexible than most here. Because in our situation, we’re looking to take back a good amount of power ourselves, which I think will, you know, maintain our, you know, best in class LOE structure, particularly as power gets more scarce in the basin. So a lot of moving parts, but we’re very actively working on it today. And I think it could be exciting for the Permian and exciting for Diamondback shareholders.

Kalei Akamine: I appreciate that color. For my next question, I’m thinking about the Endeavor share overhang. Kinda go back to Neil’s question. Post drop down, you guys are a lot longer than I’m stuck. Do you think there’s any opportunities to maybe creatively swap bed and chairs? For the seller shares in Vang?

Travis Stice: Yeah. Probably that’s something I can comment on? But, you know, I think Diamondback from Diamondback’s perspective is happy with our ownership in BEM. I think, you know, the stock’s had a good run. I think the world’s kinda waking up to the value of minerals, you know, and Diamondback has a now, you know, seven and a half, eight billion dollar stake in Inbound that I think is, you know, truly unique. But we structured that deal because we with as much equity as we did because we, you know, look at debt on a net debt on a consolidated basis and in our mind, it didn’t make sense to lever up Viper in exchange for after-tax debt dollars as a parent. So we do a highly accretive trade, but, you know, I think from the diversified side, gets us back over fifty percent ownership of Viper and leaves Viper under Lever to continue to consolidate its market because, you know, I think that mineral consolidation will, you know, pretty significant over the coming years relative to upstream.

Kalei Akamine: Thanks, Gaze. Travis, Gaze. Congrats to you guys both.

Travis Stice: Thank you.

Operator: Ladies and gentlemen, I’m showing no further questions in the queue. I would now like to turn the call back over to CEO, Travis Stice, for closing remarks.

Travis Stice: Thanks everyone for listening in this morning. Appreciate the attention. You’ve got any follow-up questions please reach out to the numbers provided. Thanks again. Y’all have a great day.

Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.