The operator welcomes participants to the Diamondback Energy Third Quarter 2023 Earnings Conference Call and introduces the speakers. The speakers caution that actual results may differ from forward-looking statements and mention the availability of a shareholder letter and non-GAAP measures. The call is then opened up for questions.

Neal Dingmann, from Truist Securities, asked Travis D. Stice about the company's capital allocation and production growth plans. Stice mentioned that the current market conditions are uncertain and the company's focus is on efficient capital allocation to return value to shareholders. He also discussed the company's development strategy and highlighted the efficient execution and differentiated development. Stice mentioned that most of the remaining Midland inventory is suitable for an average of 24 wells per project and the largest cost efficiencies are coming from this strategy.

The company has evolved since 2015, with an average of 24 wells per project in the Midland Basin. However, this number can vary depending on the shale deposits. The cost savings have been driven by lower casing costs and large scale development, with the most significant savings coming from simultaneous fracturing. Going forward, the company expects a steady state run rate for costs.

Travis Stice, CEO of Diamondback Energy, discusses the company's two e-fleets that run on lean gas and save the company $200,000 to $250,000 per well. He also mentions the company's consistent plan and results in well productivity per foot, and how they want to avoid changing plans based on oil prices. In regards to return of capital, Stice emphasizes the importance of a sustainable and growing base dividend, followed by share repurchases and honoring their commitment to return 75% of free cash flow to shareholders through variable dividends. He stresses the need for discipline in share repurchases to avoid chasing stock prices at the top of the cycle.

The company holds themselves accountable to rigorous analytics for all of their capital allocation decisions, using a NAV value at mid-cycle oil prices to determine whether to buy more, increase, or pivot to a share repurchase or variable dividend. The Deep Blue JV was a significant deal for the company, as it allowed them to monetize their midstream infrastructure and benefit from the expertise of Deep Blue and Five Point in the sector. The company retained a 30% equity interest in the business.

Travis Stice, CEO of the company, is confident that the recent sale of a business unit will result in growth and good returns for shareholders. The company expects some impacts on costs, with an increase in LOE and a decrease in midstream CapEx. However, the sale was made at a higher multiple than the company's current trading value, and they are excited to see how the new owners will create value for the remaining 30% retained by the company. In response to a question about their strategy as an "acquirer and exploiter," Stice states that they will always do what is best for shareholders and remain focused on delivering their business plan. They have a history of success with this strategy and will continue to pursue opportunities in the market.

The company has a high quality inventory and is being selective in adding new opportunities. They are pleased with their current inventory and are executing it well. The DUC backlog is expected to reach 150 by the end of the year and the company is expecting low-single-digit organic oil growth next year, with the Viper acquisition providing a jump start in Q4. The growth is expected to continue in the following years due to the quality of their assets.

The speaker discusses the company's DUC backlog and the flexibility it provides for future operations. They also mention their goal to consistently run for the SimulFRAC crews and their belief that they have enough inventory depth for long-term success in the Midland. They do not believe that more large-scale M&A is necessary, but it has been a part of their business strategy in the past.

The speaker discusses the company's strong position in North American shale and the Midland Basin, with a deep and enviable inventory. They attribute their success to their low cost structure and execution prowess, and believe they have a strong inventory for the next five to ten years. They acknowledge that at some point, they may have to move down the quality of their inventory.

The company has been able to maintain a low cost structure for drilling wells, which has been a key factor in their success for the past 10 years. This sets them up well for a world where assets are becoming more scarce. The company also believes in being conservative with their capital, including when it comes to buying back stock, in order to continue building equity value.

The company has implemented a flexible return of capital program in order to accrete value for shareholders. They have also seen improvements in their operational track record, with faster drilling times and successful tests of new zones in the Midland Basin.

The Wolfcamp D in the Midland Basin is becoming a primary development zone and there is also excitement about deeper zones in the basin. The stacked bay and amount of oil in place in the Midland Basin provide opportunities for future value for shareholders. Diamondback has a culture and focus on efficiency and cost that has allowed them to consistently outperform competitors in execution. This has been a key factor in their success over the past 10 years.

During a conference call, Roger Read thanks the speakers for their insights and asks a question about maintenance capital for 2024. Kaes Van't Hof responds that maintenance CapEx would be $100-200 million cheaper and 20-30 less wells would be needed to maintain production. Travis D. Stice points to slide seven, which shows maintenance CapEx and breakeven prices, highlighting their cost and execution strategies that protect their business even at low commodity prices. Derrick Whitfield thanks them for the information and asks for further clarification.

The speaker discusses the company's non-core asset sales and the potential for future monetization. He also mentions the recent acquisitions of FireBird and Lario and how their low cost structure was a key factor in winning those deals. The company's ability to underwrite with the lowest cost has been a long-standing strategy.

The speaker discusses the two recent deals made by the company, one being an execution deal and the other a technical deal. They believe they can execute on the Lario deal more efficiently due to their cost structure. They also mention plans for next year's program in the Midland Basin, including focusing on less active zones and potentially testing new areas.

In 2024, the company plans to focus on longer cycle projects with an average lateral length of 11,000 feet and heavy development in Martin County. They also plan to test more wells and increase development in the Northern Midland Basin. The company has exceeded their target for non-core asset sales and is considering potential opportunities for longer dated inventory in the Delaware Basin, which will make up a small percentage of total capital.

The speaker discusses how their company has been successful in using a co-development approach to increase production and cash flow. They mention that inventory is in high demand and they are not willing to sell it at a low price. The speaker also mentions that they are constantly monitoring emerging technologies to improve recovery, but they have not seen anything that can increase recovery factors by 20% at this time. They acknowledge that there are smart individuals in the industry and they are all focused on improving recovery.

The speaker asks a question about the company's approach to acquisitions and divestitures. He notes that the company has mentioned there are few positions they envy, but also points out that there may be fewer potential buyers for some large private positions. He asks how the company views the current lineup of buyers and sellers in the market.

Kaes Van't Hof and Travis D. Stice discuss industry consolidation and the potential for large private or unicorn companies to be acquired. They mention that while there may be fewer buyers, they are well-funded and competitive. They also state that Diamondback's cost structure and underwriting philosophy make them an attractive option for potential acquisitions. They do not spend time thinking about what sellers may be considering, but instead focus on creating value for their shareholders.

The speaker believes that Diamondback has one of the best positions and cost structures in North America, which will benefit shareholders in the long term. They then discuss the efficiency gains in the drilling process and how they have moved away from focusing on the rig to crew ratio. Instead, they focus on keeping the drilling program ahead of the SimulFRAC fleet and ensuring the fleet moves efficiently.

The company sees their drilling and completion programs as separate but dependent on each other. They have been successful in finding efficiency gains and will continue to improve their development strategy. They plan to run 14 or 15 rigs next year and do not anticipate drawing down their excess DUCs, as they feel this inventory level is balanced.

In paragraph 22, Kaes Van't Hof and Scott Gruber discuss the stability of costs in the oil and gas industry, with Van't Hof stating that there is a constant RFP season and real-time cost analysis. They also mention the budget for 2024, which is projected to be around $2.5 billion, with no significant changes in activity. The question of inflation or deflation is also brought up, with Van't Hof stating that costs are currently stabilizing.

Travis D. Stice, CEO of Diamondback Energy, says that the company is conservative in estimating well costs. He is confident that the current range is a good estimate for next year. In terms of M&A, the company plans to continue being a consolidator. Stice also addressed the possibility of selling the company, saying they will always do what is best for shareholders but their focus is on delivering their business plan. During the Q&A session, a question was asked about the company's progress in electrification to reduce costs.

The speaker addresses two questions, the first regarding Diamondback's change of view on infrastructure control and the second on electrification in the Permian. The speaker explains that the company has already invested in and built their water infrastructure, making it a well-functioning system that can be turned over to Deep Blue, their largest customer and equity holder. On the topic of electrification, the speaker believes it will lead to lower costs and environmental benefits, but also mentions the need for the state and utilities to improve power distribution in the Permian.

Kaes Van't Hof, the COO of Diamondback Energy, discusses the company's progress in electrifying its operations. Currently, 90-95% of production operations are electrified, with a focus on converting compression and completion fleets to electric power. The company is also working on electrifying its drilling rigs. Van't Hof anticipates that in the next four to five years, the majority of the company's operations will be electrified. CEO Travis Stice thanks investors for their questions and encourages them to read the company's shareholder letter for more information.

The speaker acknowledges the upcoming Veterans Day and thanks all veterans for their service, including those from Diamondback and anyone else who has served. They also mention planned breakfast or lunch ceremonies for Diamondback employees and conclude the conference.

This summary was generated with AI and may contain some inaccuracies.