The operator welcomes participants to the Diamondback Energy Fourth Quarter 2023 Earnings Conference Call and introduces the speakers. The speakers caution that actual results may differ from forward-looking statements and mention the use of non-GAAP measures. CEO Travis Stice thanks everyone for joining and refers to the stockholders letter for more information. The operator opens the line for questions, and the first question is from Neal Dingmann with Truist Securities.

During a conference call, Neal Dingmann asks about the potential for incremental locations and upside with the smaller core footprint of Endeavor, which has 344,000 acres and 2,300 locations compared to Diamondback's 494,000 acres and 3,800 locations. Travis Stice responds by saying that they wanted to be conservative in their inventory counts and that the combined 6,000 locations have a breakeven below 40, with some even below 30. He also mentions that the upside will accrue to them due to the size of the pro forma acreage position. Kaes Van't Hof adds that two important factors for a company's future in the oil and gas sector are the size of their acreage position and potential upside.

The speaker discusses the durability and conversion efficiency of their inventory, which has been extended through the Endeavor merger. They applied Diamondback's current strategies to adjacent areas without inflating the numbers. The average project size for 2023 is estimated to be around 24 wells, and the company uses a unique development strategy for each area to mitigate frac hits.

The speaker discusses the benefits of size and scale in their company's operations and how it allows for flexibility and risk management. They also mention the potential for increased efficiency with the merger and mention their strategy for maintaining capital efficiency. The speaker also addresses a question about selling assets and states that they will not do so until the deal with Endeavor is closed.

The company has been successful in selling non-core investments over the past year, and some assets may be sold in the future to reduce debt. However, the company is not in a rush to sell assets and will be thoughtful in their approach to debt reduction after the merger.

The speaker is discussing the company's 2024 plan and how it includes more development in the Wolfcamp D and Upper Spraberry zones. This is due to positive results from their own drilling and others' in the area. The addition of these zones will extend the company's inventory duration and is a testament to the success of the Midland Basin and stack bay. The speaker also mentions that the company's approach to hedging involves maximizing upside exposure while protecting against extreme downside.

Travis Stice, CEO of an oil and gas company, discusses hedging strategies for the year 2024. He mentions the need to protect their side of the ledger and generate free cash to reduce the cash portion of the purchase price. They plan to be more hedged during the period between signing and closing, and will likely continue to hedge at around $50-$55 WTI to protect their balance sheet and dividends. Stice also addresses the challenges in the natural gas market, particularly in the Permian Basin, where associated gas supply has increased. He believes the gas market will always exceed expectations in the Permian, regardless of oil discipline.

The company expects to reach its $10 billion net debt target by the middle of 2025, with the majority of the reduction coming from free cash flow generated by the business. The timing of reaching this target may be influenced by asset sales and the expected close of a deal in late 2024.

The speaker commends the company for its leadership in maintaining capital discipline, while many of its peers are not. The speaker also asks a question about the service environment.

Travis Stice discusses the potential for revisiting service prices in light of the current decline in gas directed activity and lower utilization rates. He also mentions the softening of the service market and the company's approach as price takers. Derrick Whitfield asks about potential underappreciated aspects of the Endeavor transaction, and Stice highlights the $3 billion in synergies and debt retirement strategies as the most discussed topics with shareholders. Roger Read from Wells Fargo asks a question, but it is not specified in this paragraph.

Kaes Van't Hof discusses the potential productivity and efficiency of other benches, such as the Wolfcamp D and Upper Spraberry, in Diamondback's footprint. They have seen competitive results in the Wolfcamp D in the Midland Glasscock County line and Southern Martin County, and have also had success in the Upper Spraberry with one of their best wells. They are now focusing on co-development strategies and adding the Upper Spraberry into their development plan in Northern Martin County. This has not resulted in a decrease in productivity.

Jeoffrey Lambujon asks about Diamondback's plans for capital efficiency in 2025. Travis Stice explains that the company is already efficient in terms of well cost, but they will focus on reducing costs and improving productivity in the Endeavor side of the business. This includes both well cost reduction and addressing non-DMC line items.

Kaes Van't Hof and Travis Stice discuss the potential benefits of integrating Diamondback's DMC side with Endeavor's completion and drilling operations. They anticipate cost savings through the use of SimulFRAC and clear fluids, and are also excited to learn from Endeavor's techniques and potentially improve upon them. They emphasize the importance of understanding each other's processes and working together to make improvements.

The speaker is asking about the company's long-term balance sheet philosophy and how it will evolve after the merger. The company plans to eventually have a net debt level of $6-8 billion and maintain cash on the balance sheet for flexibility in capital allocation. The speaker also asks about the pro forma CapEx for 2024 and 2025.

In 2005, the pro forma for 2004 showed a decrease of $700 million. Kaes Van't Hof explains that the decrease is due to a combination of factors, including running the cost structure of Endeavor DMC, a shallowing decline rate, allocating capital to the best combined resource, and reduced environmental CapEx. This will result in a very capital efficient business in 2025. Leo Mariani asks about the Endeavor FANG combination.

During a recent earnings call, analysts asked about the potential tax benefits of the merger between two oil companies, Diamondback and FANG. Kaes Van't Hof, a representative from Diamondback, stated that there may be some benefit in terms of cash tax payments, but that they are still working on the details. When asked about future M&A plans, Van't Hof stated that they are currently focused on closing the deal and will assess the landscape afterwards. Another analyst asked about the difference in CapEx between 2024 and 2025, to which the Diamondback team responded that there is a difference of $725 million, but they are confident that the $550 million in synergies from the merger will help offset this difference.

During the conference call, Kaes Van't Hof and John Abbott discussed the difference between the projected revenue of $725 million in 2024 and $550 million in 2025. Van't Hof explained that the difference is due to less activity in 2025 and that they see $550 million as a longer-term run rate. The call ended with CEO Travis Stice thanking participants and offering to address any follow-up questions.

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