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The United States on Wednesday (1 May) issued hundreds of fresh sanctions targeting Russia over the war in Ukraine in action that took aim at Moscow’s circumvention of Western measures, including through China.

The US Treasury Department imposed sanctions on nearly 200 targets and the State Department designated more than 80 in one of the most wide-ranging actions against Chinese companies so far in Washington’s sanctions aimed at Russia.

The US imposed sanctions on 20 companies based in China and Hong Kong, following repeated warnings from Washington about China’s support for Russia’s military, including during recent trips by Treasury Secretary Janet Yellen and US Secretary of State Antony Blinken to the country.

China’s support for Russia is one of the many issues threatening to sour the recent improvement in relations between the world’s biggest economies.

“Treasury has consistently warned that companies will face significant consequences for providing material support for Russia’s war, and the US is imposing them today on almost 300 targets,” Yellen said in a statement.

Russia’s embassy in Washington did not immediately respond to a request for comment.

Liu Pengyu, spokesperson for China’s embassy in Washington, said the government oversees the export of dual-use articles in accordance with laws and regulations, adding that normal trade and economic interactions between China and Russia are in like with World Trade Organization rules and market principles.

“The Chinese side firmly opposes the US’s illegal unilateral sanctions,” he said.

The United States and its allies have imposed sanctions on thousands of targets since Russia invaded neighboring Ukraine. The war has seen tens of thousands killed and cities destroyed.

Washington has since sought to crack down on evasion of the Western measures, including by issuing sanctions on firms in China, Turkey and the United Arab Emirates.

Treasury’s action on Wednesday sanctioned nearly 60 targets located in Azerbaijan, Belgium, China, Russia, Turkey, the United Arab Emirates and Slovakia it accused of enabling Russia to “acquire desperately-needed technology and equipment from abroad.”

The move included measures against a China-based company Treasury said exported items for the production of drones – such as propellers, engines and sensors – to a company in Russia. Other China and Hong Kong-based technology suppliers were also targeted.

The State Department also imposed sanctions on four China-based companies it accused of supporting Russia’s defense industrial base, including by shipping critical items to entities under US sanctions in Russia, as well as companies in Turkey, Kyrgyzstan and Malaysia that it accused of shipping high priority items to Russia.

“The concern about entities in the PRC supplying Russia’s war is in focus at the highest levels of the Department and the administration. The reason is very simple: the PRC is the leading supplier of critical components for Russia’s defense industrial base, and Russia is using them to prosecute its war on Ukraine,” a senior State Department official said.

“If the PRC were to end its support for exporting these items, Russia would struggle to sustain its war effort.”

The Treasury also targeted Russia’s acquisition of explosive precursors needed by Russia to keep producing gunpowder, rocket propellants and other explosives in Wednesday’s action, including through sanctions on two China-based suppliers sending the substances to Russia.

Chemical weapons, future energy

The US also accused Russia of violating a global ban on chemical weapons.

The State Department also expanded its targeting of Russia’s future ability to ship liquefied natural gas, or LNG, one of the country’s top exports.

It designated two vessel operators involved in transporting technology including gravity based structure equipment, or concrete legs that support offshore platforms, for Russia’s Arctic LNG 2 project.

Previous US sanctions on Arctic LNG 2 last month forced Novatek, Russia’s largest LNG producer, to suspend production at the project which suffered a shortage of tankers to ship the fuel.

Also targeted were subsidiaries of Russia’s state nuclear power company Rosatom as well as 12 entities within the Sibanthracite group of companies, one of Russia’s largest producers of metallurgical coal, the State Department said.

Washington also imposed sanctions on Russian air carrier Pobeda, a subsidiary of Russian airline Aeroflot.

The US Commerce Department has previously added more than 200 Boeing and Airbus airplanes operated by Russian airlines to an export control list as part of the Biden administration’s sanctions over the Russian invasion of Ukraine.

Navalny

The State Department also targeted three people in connection to the death of late Russian opposition leader Alexei Navalny, the best known domestic critic of President Vladimir Putin, who died in February in a Russian Arctic prison.

Russian authorities say he died of natural causes. His followers believe he was killed by the authorities, which the Kremlin denies.

Wednesday’s action targeted the director of the correctional colony in Russia where Navalny was held for the majority of his imprisonment, as well as the head of the solitary confinement detachment and the head of the medical unit at the colony where he was imprisoned before his death.

The officials oversaw the cells where Navalny was kept in solitary confinement, the walking yard where he allegedly collapsed and died and Navalny’s health, including in the immediate aftermath of his collapse, the State Department said.

Source:  Euractiv.com

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Weekly data by EIA reveals crude stockpiles of 7.3 million barrels for the week to April 26, a sharp swing from a draw of 6.4 million barrels posted the previous week.
Standard Chartered: the fastest rate of stock draws in the first half of 2024 should happen in May and June.
We’re entering a key period for oil fundamentals that will determine whether the market will tighten further or disappoint.

Energy markets have kicked off the new month on the back foot, with oil prices sliding 3% in Wednesday’s intraday session following a surprise U.S. inventory build amid lingering uncertainty about future oil demand growth.

Weekly data by the Energy Information Administration (EIA) reveals crude stockpiles of 7.3 million barrels for the week to April 26, a sharp swing from a draw of 6.4 million barrels posted the previous week.

That marks the highest inventory levels since last June. Meanwhile, the Fed is expected to keep its benchmark federal-funds rate steady at around 5.3%, its highest level in more than two decades amid stubbornly high inflation.

Thankfully, the oil and gas outlook appears more bullish on a global scale. According to commodity analysts at Standard Chartered, oil supply and demand balances show a significant tightening in the current year, a sharp contrast to large surplus conditions of early 2023.

StanChart’s model shows a cumulative global stock draw of 189 million barrels (mb) in H1-2024 compared to a build of 218 mb recorded over last year’s corresponding period which overhung the market and flattened forward price curves.

According to their model, the fastest rate of stock draws in the first half of 2024 should happen in May and June, essentially meaning that we are now entering a key period for oil fundamentals that will determine whether the market will tighten further or disappoint.

StanChart says the key metric to watch is global oil demand, which they have predicted will hit an all-time high of 103.1 mb/d in May and rise further to 103.8 mb/d in June. The analysts have forecast y/y demand growth at 1.62 mb/d in May and 1.74 mb/d in June.

Interestingly, the EIA has similarly forecast June demand to clock in at 103.8 mb/d, but is cautious about May, predicting demand of 102.2 mb/d. The  H1 draw in StanChart’s model takes place in May and June, while the EIA sees nearly half of the H1 draw taking place in June alone.

All eyes will be trained on OPEC+ when it holds its next ministerial meeting on June 1 in Vienna. It’s, however, unlikely that analysts and industry experts will have garnered adequate information on actual May and June fundamentals at that point, meaning they will have to largely rely on reflected indicators, such as market spreads, prices and sentiment. StanChart’s model shows that OPEC has scope to increase output by over 1 mb/d in Q3 without increasing global inventories. However, the analysts have pointed out that the organization is unlikely to make any dramatic moves without knowing whether the expected H1 tightening was fully delivered in May and June. Given this backdrop, StanChart has predicted the supply deficit to exceed 2 mb/d in August if production stays at current levels. StanChart says oil markets are yet to price in the potential deficit.

Gas Markets Turn Bullish

A late cold snap has paused the European gas injection season, with EU gas inventories have risen over the past seven weekdays while the inventory build above the five-year average has now contracted for 13 consecutive days. According to the latest Gas Infrastructure Europe (GIE) data, Europe’s natural gas Inventories stood at 71.60 billion cubic meters (bcm) on April 28, good for a y/y increase of 3.09 bcm and 18.15 bcm above the five-year average. However, the cold snap has not materially affected the long-term bearish view that spare storage capacity is likely to become constrained in late summer, although it pushed back the timing of the tightness by about three weeks.

Natural gas markets have also been reacting to possible fresh sanctions on Russian gas. TotalEnergies (NYSE:TTE) CEO Patrick Pouyanne has predicted that natural gas and LNG prices will spike after the EU sanctions Russian gas from the Yamal LNG project.

“If the EU sanctions Yamal LNG, the price of LNG will go up quickly and globally our portfolio will benefit. It’s a positive if there were sanctions, not a negative, because the cash from Yamal is quite limited. European leaders understand that their security of supply today relies on LNG and they don’t want to see price rises again… what I understand is that they might have some ideas, but from 2027 on, not before,”  Pouyanne told Reuters.

Source: Oilprice.com

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ENB Pub Note: This is a disaster waiting in the wings. The “Climate Corps” would be looking to shut down any business that is not “controled” by AI or the government. Make no mistake, this is a power grab.

 

With the national debt racing toward a record $35 trillion, President Joe Biden released his budget proposal Monday, including an eye-popping $8 billion for a “Climate Corps” program.

Enthusiastically supported by Green New Deal architects New York Democrat Representative Alexandra Ocasio-Cortez and Massachusetts Democrat Senator Ed Markey, Biden’s Climate Corps would hire 50,000 government workers annually by 2031 with the explicit yet vague mission of “tackling climate change.” Any guesses which political party these workers will be supporting?

The budget proposal made good on Biden’s pledge during the State of the Union to triple the number of workers from the original 20,000 he proposed last fall.

One can only surmise the Climate Corps would focus on carrying out Biden’s 2020 campaign vow to “end fossil fuel.” Since taking office, his administration has done their best to make good on this promise.

They have targeted the oil and gas industry at every opportunity, from executive orders curtailing leasing on federal land to the so-called “Inflation Reduction Act” that contained more than $369 billion dollars of green giveaways.

The Climate Corps has been likened to President Franklin Roosevelt’s Depression Era jobs program, but there has never been legislation nor appropriation of such an expansive government program without congressional approval.

For context, the National Aeronautics and Space Administration (NASA) has a workforce of less than 20,000, as does the Environmental Protection Agency (EPA). Both of those agencies have a clear mission and are funded through and accountable to Congress.

Much like the Biden administration’s “special presidential envoy for climate,” the Climate Corps skirts constitutional congressional oversight. There are no details on leadership, staff, selection criteria, or even budget. When so-called Climate Czar John Kerry brazenly refused to comply with oversight requests, my organization filed a lawsuit. If past is prologue, the Climate Corps is likely to employ a similar tactic.

But it shouldn’t come to this. Congress can and should use the power of the purse to stop this boondoggle from moving forward. According to Article I, Section 9, Clause 7 of the U.S. Constitution, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”

Conservatives have learned the hard way about the difficulties in repealing government entitlement programs once enacted. Look no further than Obamacare, which Republicans tried and failed to unwind, despite controlling all three branches of government in 2017. As President Ronald Reagan once observed, “a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”

With his poll numbers among young voters lagging over his handling of Israel’s war against Hamas terrorists, Biden badly needs a bone to throw the youth. His administration has already pledged to sign a bipartisan bill cracking down on TikTok, which will add even more fuel to the fire.

Biden is fond of saying, “Don’t tell me what you value. Show me your budget—and I’ll tell you what you value.” Applying that logic to the latest budget, one finds $8 billion for climate workers and $4.7 billion for the emergency situation at the border. It tells us everything we need to know about his misplaced priorities.

Even if the overall budget is dead on arrival, Congress can use its constitutionally allotted powers to kill the Biden Climate Corps before it launches, and let’s hope they seize the moment. Republicans have complained mightily about the weaponization of government and the targeting of political opponents. Thousands of young people door-to-door canvasing for climate change will be both.

We should not spend tax dollars so Gen Zers can knock on the doors of those deemed in need of climate change education, nor should it be gathering signatures of those who support their agenda.

A program the size of the Climate Corps, without congressional approval, must be stopped as blatantly unconstitutional. Failure to do so undermines the rule of law and threatens an industry so vital to our economy and national security.

Source: Msn.com

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Florida lawmakers have approved new legislation that would strike mention of “climate change” from many state laws, focusing them instead on energy security.

The final version of the bill, which was awaiting Gov. Ron DeSantis’ signature as of April 30, strengthens mutual-aid guidelines for power providers, helps harden electric and gas networks against cyberattacks and directs the state to investigate whether nuclear power is a viable path forward for Florida.

But it removes all explicit mentions of climate change, including by shortening a passage that would have obliged the state to “recognize and address the potential of global climate change wherever possible.” Instead, the bill directs the state only to “promote the cost-effective development and use of a diverse supply of domestic energy resources.”

The bill also eliminates a wide collection of guidelines for government to increase energy efficiency and reduce fossil fuel emissions. The new bill prohibits new wind energy construction within one mile of Florida’s coastlines, and language prioritizing fuel-efficient government vehicles or energy-efficient meeting spaces was removed.

The legislation reverses the last vestiges of a policy first put in place by then-Republican Gov. Charlie Crist in 2008, which passed unanimously in the Florida legislature. It was meant to account for the effects of climate change and how it could or should affect Florida’s energy policy.

Florida Republican Rep. Bobby Payne, who sponsored the new legislation, said a focus on climate change would have added difficulty to the task of meeting Florida’s energy needs.

“We’re protecting consumers, we’re protecting consumer pricing, we’re protecting them with great reliability and we’re protecting to make sure we don’t have a lack of energy security in our state. That’s where we’re moving as far as our policies.”

Crist, now a Democrat, told The Associated Press “It’s disappointing to see a continuing lurch in the wrong direction, particularly when Florida, with our coastline, is probably the most vulnerable to rising sea levels.”

“I mean if we don’t address it, who’s going to?” Crist said. “It breaks my heart.”

Gov. DeSantis has until May 15 to sign the bill.

Source: Scrippsnews.com

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What Powell Said about rate hikes, no rate cuts, rate cuts, and the QT slowdown while getting rid of MBS entirely.

By Wolf Richter for WOLF STREET.

“Hike” and “rate hike” were mentioned 8 times by reporters and by Powell during the FOMC’s post-meeting press conference today. Those terms weren’t mentioned at all in the press conferences during Rate-Cut Mania, which were all about “rate cuts,” how many and when.

Powell was obviously unenthusiastic about rate hikes, and thought it “unlikely that the next policy rate move will be a hike” – “our policy focus is really how long to keep policy restrictive,” he said. But rate hikes weren’t even on the table before, so that alone was a big shift, from a bunch of rate cuts to having to deal with the possibility of a rate hike. One step at a time.

What would it take for the Fed to hike rates?

“We need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation down to 2%,” he said. “We look at the totality of the data to answer that question. That would include inflation.  Inflation expectations and all the other data, too.”

The Fed could hike rates “if we were to come to that conclusion that policy wasn’t tight enough to achieve that, so it would be the totality of all the things we’re looking at; it could be [inflation] expectations, it could be a combination of things. If we reach that conclusion – and we don’t see evidence supporting that conclusion – that’s what it would take for us to take that step,” he said.

“So, if we were to conclude that policy is not sufficiently restrictive to bring inflation sustainably to under 2%, then that would be what it would take for us to want to increase rates,” he said.

Is there a timeframe of persistent inflation that would trigger a rate hike? “These are going to be judgment calls. Clearly restrictive monetary policy needs more time to do its job. That’s pretty clear based on what we’re seeing. How long that will take and how patient we should be depends on the totality of the data and how the outlook evolves,” he said.

Was there a discussion at the meeting about a rate hike? “The policy focus has been on what to do about holding the current level of restriction. That’s where the policy discussion was in the meeting,” he said.

Oh deary, where did my rate cuts go?

“So, let me address cuts,” Powell said. “Obviously, our decisions we make on our policy rate will depend on the incoming data, how the outlook is evolving, and the balance of risks, as always. We’ll look at the totality of the data. We think that policy is well positioned to address different paths that the economy might take.”

“We don’t think it would be appropriate to dial back our restrictive policy stance until we’ve gained greater confidence that inflation is moving down sustainably to 2%,” he said.

“If we had a path where inflation proves more persistent than expected, and where the labor market remains strong, but inflation is moving sideways, we’re not gaining greater confidence. That would be a case in which it could be appropriate to hold off on rate cuts.”

“There are other paths that the economy could take which would cause us to want to consider rate cuts.” One path “would be that we do gain greater confidence if inflation is moving sustainably down to 2%,” he said. “Another path could be an unexpected weakening in the labor market, for example.”

“For us to begin to reduce policy restriction, we want to be confident that inflation is moving sustainably down to 2%. For sure, one of the things we would be looking at is the performance of inflation. We would be looking at inflation expectations. We would be looking at the whole story. Clearly, incoming inflation data would be at the very heart of that decision.”

Wait-and-see is now entrenched?

“My colleagues and I today have said that we didn’t see progress [on inflation] in the first quarter. And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. I don’t know how long it will take. I can just say that when we get that confidence, then rate cuts will be in scope. And I don’t know exactly when that will be,” he said.

“What do we now see in the first quarter? Strong economic activity. We see a strong labor market. We see inflation. We see three [bad] inflation readings. I think you’re at a point there where you should take some signal. We don’t like to react to one or two months of data. But this is a full quarter.  We are taking signal. And the signal we’re taking is it’s likely to take longer for us to gain confidence that we’re on a sustainable path to 2% inflation. That’s the signal we’re taking,” he said.

“My expectation is that we will, over the course of this year, see inflation move back down. That’s my forecast. But my confidence in that is lower than it was because of the data we’ve seen,” he said.

“We actually have the luxury of having strong growth and a strong labor market, very low unemployment, high job creation, and all of that. And we can be patient. We will be careful and cautious, as we approach the decision to cut rates,” he said.

What’s the chance of no rate cuts?

“I don’t have a probability estimate for you. But all I can say is that we didn’t think it would be appropriate to cut until we were more confident that inflation was moving sustainably at 2%. Our confidence in that didn’t increase in the first quarter.  And, in fact, what really happened was we came to the view that it will take longer to get that confidence.”

“But there are paths to not cutting. And there are paths to cutting. It’s really going to depend on the data.

QT slowdown to avoid accidents that could stop it prematurely.

“The decision to slow the pace of runoff does not mean that our balance sheet will ultimately shrink by less than it would otherwise, but rather allows us to approach its ultimate level more gradually,” Powell said.

“In particular, slowing the pace of runoff will help ensure a smooth transition, reducing the possibility that money markets experience stress, and thereby facilitating the ongoing decline in our securities holdings that are consistent with reaching the appropriate level of ample reserves,” he said. The Fed has already shed over $1.5 trillion in assets since it started QT in July 2022.

Why even slow QT? “It’s really to ensure that the process of shrinking the balance sheet down to where we want to get it is a smooth one and doesn’t wind up with financial market turmoil, the way it did the last time we did this,” Powell said in reference to the repo market blowout in the second half of 2019, which caused the Fed to step back in with large-scale repo operations that quickly undid a big part of QT-1. And that’s to be avoided this time.

The FOMC’s statement and Implementation Notes today already outlined the basics of the QT slowdown:

Starts in June
Cap for Treasury runoff reduced to $25 billion from $60 billion
Cap for MBS runoff stayed at $35 billion
If MBS run off faster than $35 billion a month, then the excess will be replaced with Treasury securities, and not MBS.

Getting rid of MBS entirely. What Powell added in the press conference was the Fed’s intention “to hold primarily Treasury securities in the longer run,” meaning they want to get rid of MBS entirely. Powell cited this intention as the reason for not reducing the runoff rate of MBS, and for not replacing any excess MBS runoff over the $35 billion cap with MBS, but with Treasury securities.

This unchanged cap also means that QT will speed up when the housing market unfreezes and sales volume goes back to more normal levels, which would trigger a much faster rate of mortgage payoffs, which would trigger a much faster pace of passthrough principal payments to holders of MBS, such as the Fed. And passthrough principal payments being the primary way in which MBS come off the balance sheet, it would speed up QT, and could push QT to a maximum pace of $60 billion a month.

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Daily Standup Top Stories

TotalEnergies considers moving stock listing to New York over favorable oil and gas views in U.S.

Highlights of the Podcast

00:00 – Intro

01:36 – TotalEnergies considers moving stock listing to New York over favorable oil and gas views in U.S.

04:05 – When Worlds Collide – U.S. Gulf Coast Refiners Face Challenges To Accessing Heavier Crude Oil

10:27 – Markets Update

12:18 – Large Crude Inventory Build Rocks Oil Prices

13:22 – Chesapeake Energy Corporation Q1 Earnings Report

16:02 – Diamond Energy, Q1 2024 Highlights

18:00 – Outro

 

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:15] What’s going on, everybody? Welcome into the Thursday, May 2nd, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, TotalEnergies considers moving stock. Listening to New York over favorable oil and gas views from the Twilight Zone. Absolutely unbelievable story. We will then kick over and cover when worlds collide. U.S. Gulf Coast refiners face challenges to assessing heavier crude oil. That’ll wrap up our news segment. We will then pop over and cover all things finance first. Talk about what Jerome Powell specifically mentioned in relates to where interest rates are going, which played a huge role on the absolute pounding that crude oil prices got today. We also saw a large EIA crude oil inventory build, which did not help prices either. Mainly the reason we were down so much today. And we will then kick over and quickly cover some specific earnings. We saw Chesapeake and Diamondback come in today, and I think there’s some interesting, notes on both of them relative. So we will cover all that and a bag of chips guys. As always check us out. World’s greatest website www.energynewsbeat.com I am Michael Tanner in for Stuart Turley who is on assignment. I’ll be holding it down today so low. He’ll be back in the chair with me on, Monday after the weekly recap. [00:01:35][80.8]

Michael Tanner: [00:01:36] So let’s go ahead and kick this off TotalEnergie’s moving stock listing to New York over favorable oil and gas views in the US. Absolutely right. Somebody is moving to New York City to get better oil and gas law as well. Well, I’ll read straight from the article here. This is Bloomberg. TotalEnergies is increasingly making noise about moving its stock listing to New York, adding much more chatter around European giants potentially being attracted to the U.S investors greater enthusiasm from oil and gas companies. Holy smoke would not have said that two years ago. Next paragraph. The French giant is considering switching, in part because ESG and this is a quote, in part because ESG policies in Europe have more weight, according to Chief Executive officer, Patrick Yang. He told the, the French Senate, you don’t mean you’re done a French Senate. This unbelievable, on climate change goals. Quote, we’re losing European shareholders while U.S. investors are still buying the stock. He did say that the company will, quote, seriously study such a step and prevent its findings to the board in September. That was, based on his conference call last week with analysts. I mean, this is causing a lot of shakeup right now. We already know that Glencore is trying to do a coal merger or, acquisition of a coal, spinoff, and that is being looked at very badly upon the London Stock Exchange. They’re considering moving all of their operations over to the United States. It’s pretty unbelievable. Here’s Eric Meyer, head of RBC Capital Markets in France. We love these guys. Europe’s, virtuous attitude when it comes to ESG norms. Free traders say, or say on pay may have been naive at times in front of trading partners, but economic interests above all, it’s a good point of if and again, for as much as we complain about what’s going on here in the United States, you also have to look at it’s a lot tougher to do business over there in, in, in Europe, we know that shell is also possibly considering doing this. And especially as we’ve seen, prices continue to rise relative to where they are now or relative to where they have been. Excuse me. I think, you know, more and more people are going to see this, but we could see TotalEnergies, move out of France and come over here to the US. Would be would be really interesting. They’re saying all options are on the table, you know, that. You know, to give you guys a quick idea, the total energy is valued at about eight times earnings, whereas Exxon is about 12 times earnings. So there is a little bit of a valuation difference there. Does it have to do with where they’re listed. Who knows. All right. [00:04:05][149.1]

Michael Tanner: [00:04:05] Let’s move to the next one here. When worlds collide U.S. Gulf Coast refiners faces challenges to assessing heavier crude. This is a little bit of in the weeds, but since I’ve got the solo show today, I’ve got the keys to the Kingdom. I wanted to bring this up. We’ve talked a lot on the show about refining margins, and I talk about that relative to when the EIA releases all their I, I, I, I like to look at the supply. We bring it up every once in a while in terms of what’s going in and out of the refineries from a utilization standpoint. But there also is something to refining these refineries, being able to handle a certain type of crude, specifically heavier crude. Obviously, you can have an idea. West Texas Intermediate, which is the standard oil price oil composition that people base everything off of. We’ve heard of that. You can imagine that is almost green looking. It’s a vial. It’s very easily pouring in. It’s definitely a little bit see through if you only have a little bit of to. That’s that light, sweet, crude. What comes up from Mexico, what comes up from Venezuela. What comes from Russia is really a heavy crude, which is almost could be considered more of a paste. Now heavier crude has a lot of impurities in it which cause it to. Trade at a, discount relative to the light sweet crew. But what it also requires is different retrofitting on the refineries. And because of some of the stuff that’s happened in Mexico, specifically over their future forecasted supply of oil, it’s it’s kind of thrown some of these refineries into into whack here. So I’m going to go ahead and read a few, a couple paragraphs out of here. The prospect of decreased crude oil supplies from Mexico, the top international supplier, to the US Gulf Coast, is creating uncertainty among heavy crude focused refineries, Mexico’s state owned country, Pemex or Petro. Pemex instructed its trainee use unit to cancel 436,000 barrels a day of crude exports for April and decided, and to supposedly focus on producing domestic oil at its new or processing the domestic oil at its new 340,000 barrels per day. Does Baucus refinery and or existing plants, while this refinery startup is not nearly as imminent as Pemex says, the cancellation of Mexican crude imports could be problematic for U.S. refiners with plants built to run heavy crude a necessary ingredient reading to optimize operations and yield. Adding to this complexity of the situation is the upcoming start of the Trans Mountain pipeline expansion and recent reinstatement of U.S. sanctions on Venezuelan crude. And this is from, you know, they go on to examine sort of the potential fallout from this decision from Pemex in terms of where those heavy crudes were going. Specifically, the heavy crude is going to be less and less available. So they the really great overview. I’d recommend going to energy Newsbeat and reading this. Andy, if you can go ahead here and pull up. Figure one the typical qualities of Pemex crude oil. You’re going to see the different grades there Olmec es mas, Maya and Altair. You’ll notice that Maya is their, flagship grade. Basically, it’s the majority of their, exports are specifically coming in that Maya flagship blend. The interesting part is that that Maya crude blend does definitely have a little bit of a smaller gravity. You see, the API gravity of the Altamira is a little bit lower sitting at 15.5, whereas the Maya is about 2021 to 20. With this restriction in Mexico now sending their a lot of their domestic heavy crude to within with all of this crude from Mexico now and Pemex staying within Mexico, it goes to wonder where are these U.S. Gulf Coast refineries going to find their heavy crude? We also know Venezuela is this. The sanctions are ramping back up. People of you know, we we drew a little bit of oil. There was a few loads coming out of Venezuela, but now the prospects per se of a lot more oil coming out of Venezuela is not going to happen. So a lot of what these Gulf Coast refineries are dealing with right now, what this analysis shows is it tries to plant out where exactly are these going to come from. And the big the big, big answer, specifically in this article, as I mentioned, was that Trans Mountain pipeline, which flows from Edmonton all the way down to British Columbia and the Puget Sound system, where there are a bunch of refineries. Canada also has a decent amount of heavy crude. So if we have to now shift ourselves and buying it from Canada, those differentials are a little bit different. You pay a little bit more of a premium for the Canadian heavy crude than you would the Mexican heavy crude. So all of a sudden now the spreads on what a refinery can make or not, it could go down. And specifically if you’re talking about, you know, the margin that makes up the refining basis, it could get very interesting here. I love this breakdown. You know, via RB, RB and energy. We do a lot of that stuff. You know, it’s a $25 billion investment that Trans Mountain pipeline. So whether or not that’s going to be able to completely take over or not it’s going to be interesting. You know, the this article goes on to say the extent to which an individual refinery can lighten up its crude slate by very, varies by, say, switching to lighter crudes would increase cost given that light crude is more expensive than heavy goods. However, the light heavy crude differential continues to narrow and may narrow further on the US. On the U.S Gulf Coast, as measured by West Texas Intermediate, spread to Houston. You know, these these narrower differentials are expected to incentivize some Gulf Coast refiners to shift towards lighter crude slates. Further, we expect the minimal impact of crude runs, an increase in Latin America imports. or they they see minimal impact to overall crude runs in some increases to Latin American imports, to the United States Gulf, excluding Venezuela. So it looks like they’re thinking a lot of this is going to come from, from, Latin America, Canada and be able to fill the gap. But very interesting what Mexico, has decided to do. And it kind of gives you a little bit of behind the scenes on a lot of what these, refineries are dealing with on the back end. [00:09:49][343.9]

Michael Tanner: [00:09:49] So we’ll go ahead and jump over to the finance segment, guys. But before we do that, as always, the news and analysis you just heard is brought to you by, the world’s greatest website, www.energynewsbeat.com. The best place for all your energy and oil and gas news. Appreciates you in the team. Doing a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas. Is, as you can hit the description below for all the timestamps links to the articles. Appreciate all the, feedback and support. You can also check us out. Dashboard.energynewsbeat.com as always energynewsbeat.com world’s greatest website. [00:10:26][37.2]

Michael Tanner: [00:10:27] Let’s flip over to finance here for the markets. Markets were up in the morning. Jerome Powell decided to come out and give a little bit of a crazy not a crazy speech but a little bit of a dampening speech on the market. And markets absolutely tumbled, finished actually down on the day after being up almost 85 points on the S&P 500. We’ve now fallen about 75 points. Market closed about 5018. That’s about three quarters of a percentage point down. Nasdaq was down about 0.7 percentage points. Ten year yields two year yields fall 1.45 percentage points. Ten year yields fall only one percentage point dollar index down about, 3/10 of a percentage point. Bitcoin down 5%. Below 60,000 at 57,000. And then we get to crude oil who dropped about $3.33 today to 7917 as we currently sit here in stand, which is lower than we’ve seen it. And, you know, I think there’s there’s two reasons why the overall markets have done pretty poorly today. Obviously FOMC you know they they meet today the you know they they they held its benchmark interest rates at its current level. You know we kind of all thought that you know we know they have priced in a few rate cuts. But based on some of the info that’s come out the FOMC decided to keep interest rates. Where they are in that 5.25 guidance range. You know it. Jerome Powell always decides to speak afterwards. And and basically he’s quote was they’re prepared to maintain the current target range the federal funds as long as appropriate. they also said they would slow the pace of reducing its balance sheet starting in June. That decision ensures money markets don’t experience an episode of volatility and stress, as seen in September 2019, so interest rates from the federal funds stay the same. Which means, you know, overall, markets are going to take a little bit of a hit relative to the fact that we were hoping for some rate cuts coming in. And you can see the broader markets did like that. [00:12:18][110.7]

Michael Tanner: [00:12:18] You know, another reason oil prices were down, as I mentioned, 79 and 16 was the fact that we did have crude oil inventories come out today. EIA estimated a 7.3 million barrel build for the street for, the crude oil inventory reserves. That compares to a 6.4 million barrel draw. Last week we saw gasoline, inventories rise by 300,000 barrels, in which we saw a draw of 600,000 barrels. Yesterday, gasoline production was about 9.4 million barrels daily, which compared to, one, well, 9.1 million barrels during the previous week. Distillates we saw draw the inventory about 700,000 barrels, on those distillates, adding about 4.5 million barrels per day. So, I mean, you know, there was I think it was swinging on crude oil inventories. And if stew was on here, he’d say, hey, maybe we need to check the numbers a little bit. I won’t necessarily go that far, but I do think, you know, these wild swings we’re experiencing on the on the crude oil inventories front is indicative of that. The the market may not be as solid as we think it. And and as we kind of swing back and forth, it it continues to hurt to earnings. [00:13:22][63.7]

Michael Tanner: [00:13:22] I want to cover, Chesapeake and Diamondback. We’ll start with Chesapeake. You know, this is going to be a bloodbath per usual or not per usual, but clearly, because the fact that we’re releasing earnings here and in Q1, you know, we’ve got a couple different things here. Net cash provided by operating activities for Chesapeake came in at a cool $552 million. They delivered about 112 million of adjusted free cash flow, you know, due to quarterly combined base and variable debit of about $0.71 per common share holder. reaffirmed its core, borrowing credit base, to about 2.5 billion, to about 2.5 billion. And that variable breaks down into a variable dividend of $0.14 and a base dividend of about $0.57. You know, here’s here’s the other interesting part. As I mentioned, net income was only 26 million or adjusted net income, about 80 million. Obviously the street didn’t like this. You know, you you, you you miss on earnings. You know, they’re down about 20% or you know the a slight miss on earnings. You know $0.56 a share. Street was averaging about was hoping for about $0.70 a share. So not quite unfortunately what the street was wanting. Their stock today was trading down. Let me pull it up here. Stock down was 3.5 percentage points. on the fact that natural gas prices actually rose today a little bit. Not rose, but they, they out lost natural gas. Natural gas dropped 2.8 percentage points. Chesapeake now down 3.8 percentage points. So a four percentage points increase on the downside mainly because I mean the market I think is is adjusting the fact that if prices don’t turn around, it’s going to be tough, tough for Chesapeake in these companies, to keep making money. You know, they, they, they’re they, they talk about how they’re building their productive capacity with over 46 ducks and their and keep deferring what they would call turret titles or turning lines, which means, hey, who knows what’s going to happen? We’re just going to wait. See how we’re going to play and we’re going to turn these guys on, but we can turn them on. So, you know, not good on Chesapeake side. I do want to point out that, I mean, they’re still spending money, folks. It’s 354 million of CapEx being spent in Q1. What they’re spending CapEx on, I have no idea. I don’t know what you’d be spending CapEx on in this environment. But, hey, sometimes you got to do what you got to do. They are drilling, you know, you know, there’s no Eagle Ford. They’re just drilling Haynesville in Marcellus. Relative to, what they what they’re saying. So truly 300 of of CapEx, there’s non drilling, you know, field and corporate CapEx that could definitely be associated with it. But there’s still find a ways to spend money. Folks. I think the street is going to somehow figure out and it’s going to come to them at some point okay guys. What’s what’s what’s going on here? What what’s going on? Why are we spending $3 million of gas prices below $2? But that’s just me. [00:16:02][159.8]

Michael Tanner: [00:16:02] Look at Diamondback real quick. I mean, they’re only down, you know, just just to give you guys a quick thing. They were only down 2.5 percentage points. Oil’s down 3.5 percentage points. So there actually saw a little bit less of a drop relative to what oil prices did. Mainly because of their, impending merger with Endeavor Resources. They’re still hoping that gets approved here. Quarter four of 2024. But to give you guys an idea. Net cash provided by operating activities 1.3 billion operating cash flow before working capital changes. You know, that’s a mouthful, right? There was 1.4 billion. CapEx was still 609 million free cash flow, 791 million base dividend of about $0.90 per share and a variable dividend of about one point, one dollars and $0.07. Which means it’s about a basically a $2 per share, or excuse about $2 per share. And that implies, a 3.8 annualized return or a 3.8 annualized yield, based on that closing price of about $205. So. Absolutely. Good stuff for Diamondback. I mean, they continue to to keep on keepin on. They went ahead and drilled, 79 wells, 69 in the Midland Basin, ten in the, ten in the Delaware Basin, and completed 101 wells. I they’re a pretty big rig program. I don’t know exactly how many. But we we do know that they’re they completed 30 lower Sprayberry Wells, 919 Wolfe camp, a 16 Joe Mill, Wells, 15 Wolfe Camp, B-12, middle Sprayberry six Wolf camp, d Wells and three Upper Sprayberry well. So they continue to, to chunk along. They they also did release some of their guidance. You can go check out I mean, we we we we we are big fans of Diamondback here on the show. They, you know, we always say good management, good numbers. The team over there, continues to make smart acquisitions. I think this merger with endeavor is only going to make them stronger. And I think that’s partly what you’re seeing in this, in this in this earnings call in terms of, you know, where they came in relative to how far their stock fell relative to where oil prices fall. [00:17:59][116.9]

Michael Tanner: [00:18:00] So, great day all around, guys. It’s the end of the week though. So I’m going to go ahead and let you guys get out of here. Appreciate for checking us out. World’s greatest website energynewsbeat.com. You’ll see a long form interview with With stew tomorrow and conversations with Stu Energy. You will see our weekly recap on Saturday, and we will be back in the chair Monday for everyone. We will see you. Have a great weekend. We’ll see you Monday. [00:18:00][0.0][1062.1]

– Get in Contact With The Show –

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Energy News Beat

New language: “In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”

By Wolf Richter for WOLF STREET.

The FOMC statement released today after its two-day meeting acknowledged for the first time that inflation resurfaced as an issue after a series of worrisome inflation reports so far this year have already killed Rate-Cut Mania. It added new language to that effect: “In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”

FOMC members voted unanimously today to maintain the Fed’s five policy rates, with the top of its policy rates at 5.50%, as had been broadly telegraphed all year with speeches, interviews, and panel discussions by Fed governors.  The last rate hike occurred at its meeting in July 2023:

Federal funds rate target range between 5.25% and 5.5%.
Interest it pays the banks on reserves: 5.4%.
Interest it pays on overnight Reverse Repos (ON RRPs): 5.3%.
Interest it charges on overnight Repos: 5.5%.
Primary credit rate: 5.5% (banks’ costs to borrow at the “Discount Window”).

Push-back on Rate-Cut Mania: Back at the January meeting, the Fed had added new language to its statement to push back against Rate-Cut Mania. At today’s meeting, it repeated that language for the third time:

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

QT slow-down starts in June: The Fed has been discussing for months in vague bits and pieces its future plans to slow down QT, on the theory, as Powell had put it at the last press conference, that “by going slower, you can get farther,” to avoid the kind of blowup they got in the repo market in 2019 which the Fed linked to QT-1. The Fed has already shed over $1.5 trillion in assets since it started QT in July 2022.

Today it said that QT will continue at its current pace through May but will slow beginning in June:

The cap for the Treasury roll-off will be reduced from $60 billion to $25 billion
The cap for the MBS roll-off will remain unchanged at $35 billion.
If MBS roll-off excess of the $35 billion cap, the overage will be replaced with Treasury securities, and not MBS.

And it repeated: “The Committee is strongly committed to returning inflation to its 2 percent objective.”

It replaced the old language on the labor market:

“The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance.”

With:

“The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.”

Powell will likely use the press conference to provide more details as to when the slowdown might start and what it might look like.

It was a no-dot-plot meeting. Today’s meeting was one of the four meetings a year when the Fed does not release a “Summary of Economic Projections” (SEP), which includes the infamous “dot plot” which shows how each FOMC member sees the development of future policy rates. SEP releases occur quarterly at meetings that are near the end of the quarter. The next SEP will be released after the June 11-12 meeting.

Powell at the press conference on rate hikes, no rate cuts, rate cuts, and the QT slowdown while getting rid of MBS entirely: Oh Deary, Where Did my Rate Cuts Go? Fed’s Wait-and-See Now Entrenched? And Suddenly Lots of Talk about “Rate Hikes”

Here is the whole statement:

Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage‑backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.

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The post Fed Holds Rates at 5.50% Top of Range, QT Slowdown Starts in June, Acknowledged Inflation is a Problem Again appeared first on Energy News Beat.

 

Energy News Beat

MIDLAND, Texas, April 30, 2024 (GLOBE NEWSWIRE) — Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the first quarter ended March 31, 2024.

FIRST QUARTER 2024 HIGHLIGHTS

Average production of 273.3 MBO/d (461.1 MBOE/d)
Net cash provided by operating activities of $1.3 billion; Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $1.4 billion
Cash capital expenditures of $609 million
Free Cash Flow (as defined and reconciled below) of $791 million
Declared Q1 2024 base cash dividend of $0.90 per share and a variable cash dividend of $1.07 per share, in each case payable on May 22, 2024; implies an 3.8% annualized yield based on April 29, 2024 closing share price of $205.86
Repurchased 279,266 shares of common stock in Q1 2024 for $42 million, excluding excise tax (at a weighted average price of $149.50/share)
Total Q1 2024 return of capital of $396 million; represents ~50% of Q1 2024 Free Cash Flow (as defined and reconciled below) from stock repurchases and the declared Q1 2024 base-plus-variable dividend
Announced merger with Endeavor Energy Resources, L.P. on February 12, 2024. Diamondback stockholders approved the merger on April 26, 2024. The deal remains subject to regulatory approval and is expected to close in the fourth quarter of 2024.

OPERATIONS UPDATE

The tables below provide a summary of operating activity for the first quarter of 2024.

Total Activity (Gross Operated):

Number of Wells Drilled

Number of Wells Completed

Midland Basin
69

101

Delaware Basin
10

Total
79

101

Total Activity (Net Operated):

Number of Wells Drilled

Number of Wells Completed

Midland Basin
67

89

Delaware Basin
9

Total
76

89

During the first quarter of 2024, Diamondback drilled 69 gross wells in the Midland Basin and ten gross wells in the Delaware Basin. The Company turned 101 operated wells to production, all in the Midland Basin, with an average lateral length of 11,463 feet. Operated completions during the first quarter consisted of 30 Lower Spraberry wells, 19 Wolfcamp A wells, 16 Jo Mill wells, 15 Wolfcamp B wells, 12 Middle Spraberry wells, six Wolfcamp D wells and three Upper Spraberry wells.

FINANCIAL UPDATE

Diamondback’s first quarter 2024 net income was $768 million, or $4.28 per diluted share. Adjusted net income (as defined and reconciled below) was $809 million, or $4.50 per diluted share.

First quarter 2024 net cash provided by operating activities was $1.3 billion.

During the first quarter of 2024, Diamondback spent $580 million on operated and non-operated drilling and completions, $25 million on infrastructure and environmental and $4 million on midstream, for total cash capital expenditures of $609 million.

First quarter 2024 Consolidated Adjusted EBITDA (as defined and reconciled below) was $1.6 billion. Adjusted EBITDA net of non-controlling interest (as defined and reconciled below) was $1.6 billion.

Diamondback’s first quarter 2024 Free Cash Flow (as defined and reconciled below) was $791 million.

First quarter 2024 average unhedged realized prices were $75.06 per barrel of oil, $0.99 per Mcf of natural gas and $21.26 per barrel of natural gas liquids (“NGLs”), resulting in a total equivalent unhedged realized price of $50.07 per BOE.

Diamondback’s cash operating costs for the first quarter of 2024 were $11.52 per BOE, including lease operating expenses (“LOE”) of $6.08 per BOE, cash general and administrative (“G&A”) expenses of $0.76 per BOE, production and ad valorem taxes of $2.84 per BOE and gathering, processing and transportation expenses of $1.84 per BOE.

As of March 31, 2024, Diamondback had $876 million in standalone cash and no borrowings under its revolving credit facility, with approximately $1.6 billion available for future borrowings under the facility and approximately $2.5 billion of total liquidity. As of March 31, 2024, the Company had consolidated total debt of $6.8 billion and consolidated net debt (as defined and reconciled below) of $5.9 billion, down from consolidated total debt of $6.8 billion and net debt of $6.2 billion as of December 31, 2023.

DIVIDEND DECLARATIONS

Diamondback announced today that the Company’s Board of Directors declared a base cash dividend of $0.90 per common share for the first quarter of 2024 payable on May 22, 2024 to stockholders of record at the close of business on May 15, 2024.

The Company’s Board of Directors also declared a variable cash dividend of $1.07 per common share for the first quarter of 2024 payable on May 22, 2024 to stockholders of record at the close of business on May 15, 2024.

Future base and variable dividends remain subject to review and approval at the discretion of the Company’s Board of Directors.

COMMON STOCK REPURCHASE PROGRAM

During the first quarter of 2024, Diamondback repurchased 279,266 shares of common stock at an average share price of $149.50 for a total cost of approximately $42 million, excluding excise tax. To date, Diamondback has repurchased 19,337,765 shares of common stock at an average share price of $124.52 for a total cost of approximately $2.4 billion and has approximately $1.6 billion remaining on its current share buyback authorization. Diamondback intends to continue to purchase common stock under the common stock repurchase program opportunistically with cash on hand, free cash flow from operations and proceeds from potential liquidity events such as the sale of assets. This repurchase program has no time limit and may be suspended from time to time, modified, extended or discontinued by the Board at any time. Purchases under the repurchase program may be made from time to time in privately negotiated transactions, or in open market transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and will be subject to market conditions, applicable legal requirements and other factors. Any common stock purchased as part of this program will be retired.

FULL YEAR 2024 GUIDANCE

Below is Diamondback’s guidance for the full year 2024, which includes second quarter production, cash tax and capital guidance.

2024 Guidance
2024 Guidance

Diamondback Energy, Inc.
Viper Energy, Inc.

Net production – MBOE/d
458 – 466
46.00 – 48.00

Oil production – MBO/d
270 – 275
25.75 – 26.75

Q2 2024 oil production – MBO/d (total – MBOE/d)
271 – 275 (459 – 466)
26.00 – 26.50 (46.50 – 47.25)

Unit costs ($/BOE)

Lease operating expenses, including workovers
$6.00 – $6.50

G&A

Cash G&A
$0.55 – $0.65
$1.00 – $1.20

Non-cash equity-based compensation
$0.40 – $0.50
$0.10 – $0.15

DD&A
$10.50 – $11.50
$11.00 – $11.50

Interest expense (net of interest income)
$1.65 – $1.85
$4.25 – $4.50

Gathering, processing and transportation
$1.80 – $2.00

Production and ad valorem taxes (% of revenue)
~7%
~7%

Corporate tax rate (% of pre-tax income)
23%
20% – 22%

Cash tax rate (% of pre-tax income)
15% – 18%

Q2 2024 Cash taxes ($ – million)
$180 – $220
$13 – $18

Capital Budget ($ – million)

2024 Drilling, completion, capital workovers, and non-operated properties
$2,100 – $2,330

2024 Infrastructure and midstream
$200 – $220

2024 Total capital expenditures
$2,300 – $2,550

Q2 2024 Capital expenditures
$580 – $620

Gross horizontal wells drilled (net)
265 – 285 (244 – 263)

Gross horizontal wells completed (net)
300 – 320 (273 – 291)

Average completed lateral length (Ft.)
~11,500′

FY 2024 Midland Basin well costs per lateral foot
$600 – $650

FY 2024 Delaware Basin well costs per lateral foot
$875 – $925

Midland Basin completed net lateral feet (%)
~90%

Delaware Basin completed net lateral feet (%)
~10%

CONFERENCE CALL

Diamondback will host a conference call and webcast for investors and analysts to discuss its results for the first quarter of 2024 on Wednesday, May 1, 2024 at 8:00 a.m. CT. Access to the webcast, and replay which will be available following the call, may be found here. The live webcast of the earnings conference call will also be available via Diamondback’s website at www.diamondbackenergy.com under the “Investor Relations” section of the site.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties, and assumptions. All statements, other than statements of historical fact, including statements regarding Diamondback’s: future performance; business strategy; future operations (including drilling plans and capital plans); estimates and projections of revenues, losses, costs, expenses, returns, cash flow, and financial position; reserve estimates and its ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures); and plans and objectives of management (including plans for future cash flow from operations and for executing environmental strategies) are forward-looking statements. When used in this news release, the words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “model,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions (including the negative of such terms) as they relate to Diamondback are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Although Diamondback believes that the expectations and assumptions reflected in its forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond Diamondback’s control. Accordingly, forward-looking statements are not guarantees of future performance and Diamondback’s actual outcomes could differ materially from what Diamondback has expressed in its forward-looking statements.

Factors that could cause the outcomes to differ materially include (but are not limited to) the following: the completion of the proposed transaction on anticipated terms and timing or at all, including obtaining regulatory approval and satisfying other conditions to the completion of the transaction; uncertainties as to whether the proposed Endeavor transaction, if consummated, will achieve its anticipated benefits and projected synergies within the expected time period or at all; Diamondback’s ability to integrate Endeavor’s operations in a successful manner and in the expected time period; the occurrence of any event, change, or other circumstance that could give rise to the termination of the proposed transaction; risks that the anticipated tax treatment of the proposed transaction is not obtained; unforeseen or unknown liabilities; unexpected future capital expenditures; litigation relating to the proposed transaction; the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the effect of the pendency, or completion of the proposed transaction on the parties’ business relationships and business generally; risks that the proposed transaction disrupts current plans and operations of Diamondback or Endeavor and their respective management teams and potential difficulties in retaining employees as a result of the proposed transaction; the risks related to Diamondback’s financing of the proposed transaction; potential negative effects of the pendency or completion of the proposed transaction on the market price of Diamondback’s common stock and/or operating results; rating agency actions and Diamondback’s ability to access short- and long-term debt markets on a timely and affordable basis; changes in supply and demand levels for oil, natural gas, and natural gas liquids, and the resulting impact on the price for those commodities; the impact of public health crises, including epidemic or pandemic diseases and any related company or government policies or actions; actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments, including any impact of the ongoing war in Ukraine and the Israel-Hamas war on the global energy markets and geopolitical stability; instability in the financial markets; concerns over a potential economic slowdown or recession; inflationary pressures; rising interest rates and their impact on the cost of capital; regional supply and demand factors, including delays, curtailment delays or interruptions of production, or governmental orders, rules or regulations that impose production limits; federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations; physical and transition risks relating to climate change; those risks described in Item 1A of Diamondback’s Annual Report on Form 10-K, filed with the SEC on February 22, 2024, and those risks disclosed in its subsequent filings on Forms 10-Q and 8-K, which can be obtained free of charge on the SEC’s website at http://www.sec.gov and Diamondback’s website at www.diamondbackenergy.com/investors/; and those risks more fully described in the definitive proxy statement on Schedule 14A filed with the SEC in connection with the proposed transaction.

In light of these factors, the events anticipated by Diamondback’s forward-looking statements may not occur at the time anticipated or at all. Moreover, Diamondback operates in a very competitive and rapidly changing environment and new risks emerge from time to time. Diamondback cannot predict all risks, nor can it assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements it may make. Accordingly, you should not place undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this letter or, if earlier, as of the date they were made. Diamondback does not intend to, and disclaims any obligation to, update or revise any forward-looking statements unless required by applicable law.

Diamondback Energy, Inc.

Condensed Consolidated Balance Sheets

(unaudited, in millions, except share amounts)

March 31,

December 31,

2024

2023

Assets

Current assets:

Cash and cash equivalents
$
896

$
582

Restricted cash

3

3

Accounts receivable:

Joint interest and other, net

208

192

Oil and natural gas sales, net ($132 million and $109 million related to Viper)

734

654

Income tax receivable

1

Inventories

57

63

Derivative instruments

7

17

Prepaid expenses and other current assets

43

109

Total current assets

1,948

1,621

Property and equipment:

Oil and natural gas properties, full cost method of accounting ($8,455 million and $8,659 million excluded from amortization at March 31, 2024 and December 31, 2023, respectively) ($4,649 million and $4,629 million and $1,719 million and $1,769 million excluded from amortization related to Viper)

43,240

42,430

Other property, equipment and land

675

673

Accumulated depletion, depreciation, amortization and impairment ($913 million and $866 million related to Viper)

(16,891
)

(16,429
)

Property and equipment, net

27,024

26,674

Equity method investments

529

529

Derivative instruments

7

1

Deferred income taxes, net

61

45

Investment in real estate, net

83

84

Other assets

38

47

Total assets
$
29,690

$
29,001

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable – trade
$
243

$
261

Accrued capital expenditures

570

493

Other accrued liabilities

337

475

Revenues and royalties payable

732

764

Derivative instruments

102

86

Income taxes payable

134

29

Total current liabilities

2,118

2,108

Long-term debt ($1,094 million and $1,083 million related to Viper)

6,629

6,641

Derivative instruments

144

122

Asset retirement obligations

266

239

Deferred income taxes

2,502

2,449

Other long-term liabilities

12

12

Total liabilities

11,671

11,571

Stockholders’ equity:

Common stock, $0.01 par value; 400,000,000 shares authorized; 178,339,978 and 178,723,871 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

2

2

Additional paid-in capital

14,251

14,142

Retained earnings (accumulated deficit)

2,705

2,489

Accumulated other comprehensive income (loss)

(8
)

(8
)

Total Diamondback Energy, Inc. stockholders’ equity

16,950

16,625

Non-controlling interest

1,069

805

Total equity

18,019

17,430

Total liabilities and stockholders’ equity
$
29,690

$
29,001

Diamondback Energy, Inc.

Condensed Consolidated Statements of Operations

(unaudited, $ in millions except per share data, shares in thousands)

Three Months Ended March 31,

2024

2023

Revenues:

Oil, natural gas and natural gas liquid sales
$
2,101

$
1,902

Sales of purchased oil

116

Other operating income

10

23

Total revenues

2,227

1,925

Costs and expenses:

Lease operating expenses

255

192

Production and ad valorem taxes

119

155

Gathering, processing and transportation

77

68

Purchased oil expense

117

Depreciation, depletion, amortization and accretion

469

403

General and administrative expenses

46

40

Merger and integration expense

12

8

Other operating expenses

14

34

Total costs and expenses

1,109

900

Income (loss) from operations

1,118

1,025

Other income (expense):

Interest expense, net

(46
)

(46
)

Other income (expense), net

4

53

Gain (loss) on derivative instruments, net

(48
)

(93
)

Gain (loss) on extinguishment of debt

2

Income (loss) from equity investments, net

2

14

Total other income (expense), net

(86
)

(72
)

Income (loss) before income taxes

1,032

953

Provision for (benefit from) income taxes

223

207

Net income (loss)

809

746

Net income (loss) attributable to non-controlling interest

41

34

Net income (loss) attributable to Diamondback Energy, Inc.
$
768

$
712

Earnings (loss) per common share:

Basic
$
4.28

$
3.88

Diluted
$
4.28

$
3.88

Weighted average common shares outstanding:

Basic

178,477

181,988

Diluted

178,477

181,988

Diamondback Energy, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in millions)

Three Months Ended March 31,

2024

2023

Cash flows from operating activities:

Net income (loss)
$
809

$
746

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Provision for (benefit from) deferred income taxes

52

97

Depreciation, depletion, amortization and accretion

469

403

(Gain) loss on extinguishment of debt

(2
)

(Gain) loss on derivative instruments, net

48

93

Cash received (paid) on settlement of derivative instruments

(4
)

1

(Income) loss from equity investment, net

(2
)

(14
)

Equity-based compensation expense

14

11

Other

16

(34
)

Changes in operating assets and liabilities:

Accounts receivable

(95
)

(36
)

Income tax receivable

12

95

Prepaid expenses and other current assets

89

Accounts payable and accrued liabilities

(110
)

(26
)

Income taxes payable

70

17

Revenues and royalties payable

(35
)

60

Other

3

12

Net cash provided by (used in) operating activities

1,334

1,425

Cash flows from investing activities:

Drilling, completions and infrastructure additions to oil and natural gas properties

(605
)

(622
)

Additions to midstream assets

(4
)

(35
)

Property acquisitions

(153
)

(880
)

Proceeds from sale of assets

12

264

Other

(1
)

(6
)

Net cash provided by (used in) investing activities

(751
)

(1,279
)

Cash flows from financing activities:

Proceeds from borrowings under credit facilities

90

1,696

Repayments under credit facilities

(80
)

(989
)

Repayment of senior notes

(25
)

Repurchased shares under buyback program

(42
)

(332
)

Repurchased shares/units under Viper’s buyback program

(34
)

Proceeds from partial sale of investment in Viper Energy, Inc.

451

Dividends paid to stockholders

(548
)

(542
)

Dividends/distributions to non-controlling interest

(44
)

(34
)

Other

(71
)

(22
)

Net cash provided by (used in) financing activities

(269
)

(257
)

Net increase (decrease) in cash and cash equivalents

314

(111
)

Cash, cash equivalents and restricted cash at beginning of period

585

164

Cash, cash equivalents and restricted cash at end of period
$
899

$
53

Diamondback Energy, Inc.

Selected Operating Data

(unaudited)

Three Months Ended

March 31, 2024

December 31, 2023

March 31, 2023

Production Data:

Oil (MBbls)

24,874

25,124

22,624

Natural gas (MMcf)

50,602

50,497

47,388

Natural gas liquids (MBbls)

8,653

9,016

7,730

Combined volumes (MBOE)(1)

41,961

42,556

38,252

Daily oil volumes (BO/d)

273,341

273,087

251,378

Daily combined volumes (BOE/d)

461,110

462,565

425,022

Average Prices:

Oil ($ per Bbl)
$
75.06

$
76.42

$
73.11

Natural gas ($ per Mcf)
$
0.99

$
1.29

$
1.46

Natural gas liquids ($ per Bbl)
$
21.26

$
19.96

$
23.16

Combined ($ per BOE)
$
50.07

$
50.87

$
49.72

Oil, hedged ($ per Bbl)(2)
$
74.13

$
75.59

$
72.05

Natural gas, hedged ($ per Mcf)(2)
$
1.36

$
1.31

$
1.96

Natural gas liquids, hedged ($ per Bbl)(2)
$
21.26

$
19.96

$
23.16

Average price, hedged ($ per BOE)(2)
$
49.97

$
50.40

$
49.72

Average Costs per BOE:

Lease operating expenses
$
6.08

$
5.97

$
5.02

Production and ad valorem taxes

2.84

2.44

4.05

Gathering, processing and transportation expense

1.84

1.83

1.78

General and administrative – cash component

0.76

0.59

0.76

Total operating expense – cash
$
11.52

$
10.83

$
11.61

General and administrative – non-cash component
$
0.34

$
0.33

$
0.29

Depreciation, depletion, amortization and accretion per BOE
$
11.18

$
11.02

$
10.54

Interest expense, net
$
1.10

$
0.87

$
1.20

(1) Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl.
(2) Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices and include gains and losses on cash settlements for matured commodity derivatives, which we do not designate for hedge accounting. Hedged prices exclude gains or losses resulting from the early settlement of commodity derivative contracts.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as net income (loss) attributable to Diamondback Energy, Inc., plus net income (loss) attributable to non-controlling interest (“net income (loss)”) before non-cash (gain) loss on derivative instruments, net, interest expense, net, depreciation, depletion, amortization and accretion, depreciation and interest expense related to equity method investments, (gain) loss on extinguishment of debt, non-cash equity-based compensation expense, capitalized equity-based compensation expense, merger and integration expenses, other non-cash transactions and provision for (benefit from) income taxes, if any. Adjusted EBITDA is not a measure of net income as determined by United States generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA is useful because the measure allows it to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. The Company adds the items listed above to net income (loss) to determine Adjusted EBITDA because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Further, the Company excludes the effects of significant transactions that may affect earnings but are unpredictable in nature, timing and amount, although they may recur in different reporting periods. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of the Company’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets. The Company’s computation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts.

The following tables present a reconciliation of the GAAP financial measure of net income (loss) attributable to Diamondback Energy, Inc. to the non-GAAP financial measure of Adjusted EBITDA:

Diamondback Energy, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(unaudited, in millions)

Three Months Ended

March 31, 2024

December 31, 2023

March 31, 2023

Net income (loss) attributable to Diamondback Energy, Inc.
$
768

$
960

$
712

Net income (loss) attributable to non-controlling interest

41

51

34

Net income (loss)

809

1,011

746

Non-cash (gain) loss on derivative instruments, net

44

(147
)

94

Interest expense, net

46

37

46

Depreciation, depletion, amortization and accretion

469

469

403

Depreciation and interest expense related to equity method investments

23

18

18

(Gain) loss on extinguishment of debt

(2
)

Non-cash equity-based compensation expense

21

21

16

Capitalized equity-based compensation expense

(7
)

(7
)

(5
)

Merger and integration expenses

12

8

Other non-cash transactions

1

12

(46
)

Provision for (benefit from) income taxes

223

264

207

Consolidated Adjusted EBITDA

1,639

1,678

1,487

Less: Adjustment for non-controlling interest

89

82

67

Adjusted EBITDA attributable to Diamondback Energy, Inc.
$
1,550

$
1,596

$
1,420

ADJUSTED NET INCOME

Adjusted net income is a non-GAAP financial measure equal to net income (loss) attributable to Diamondback Energy, Inc. plus net income (loss) attributable to non-controlling interest (“net income (loss)”) adjusted for non-cash (gain) loss on derivative instruments, net, (gain) loss on extinguishment of debt, merger and integration expense, other non-cash transactions and related income tax adjustments, if any. The Company’s computation of adjusted net income may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts. Management believes adjusted net income helps investors in the oil and natural gas industry to measure and compare the Company’s performance to other oil and natural gas companies by excluding from the calculation items that can vary significantly from company to company depending upon accounting methods, the book value of assets and other non-operational factors. Further, in order to allow investors to compare the Company’s performance across periods, the Company excludes the effects of significant transactions that may affect earnings but are unpredictable in nature, timing and amount, although they may recur in different reporting periods.

The following table presents a reconciliation of the GAAP financial measure of net income (loss) attributable to Diamondback Energy, Inc. to the non-GAAP measure of adjusted net income:

Diamondback Energy, Inc.

Adjusted Net Income

(unaudited, $ in millions except per share data, shares in thousands)

Three Months Ended March 31, 2024

Amounts

Amounts Per
Diluted Share

Net income (loss) attributable to Diamondback Energy, Inc.(1)
$
768

$
4.28

Net income (loss) attributable to non-controlling interest

41

0.22

Net income (loss)(1)

809

4.50

Non-cash (gain) loss on derivative instruments, net

44

0.25

(Gain) loss on extinguishment of debt

(2
)

(0.01
)

Merger and integration expense

12

0.06

Other non-cash transactions

1

0.01

Adjusted net income excluding above items(1)

864

4.81

Income tax adjustment for above items

(12
)

(0.06
)

Adjusted net income(1)

852

4.75

Less: Adjusted net income attributable to non-controlling interest

43

0.25

Adjusted net income attributable to Diamondback Energy, Inc.(1)
$
809

$
4.50

Weighted average common shares outstanding:

Basic

178,477

Diluted

178,477

(1) The Company’s earnings (loss) per diluted share amount has been computed using the two-class method in accordance with GAAP. The two-class method is an earnings allocation which reflects the respective ownership among holders of common stock and participating securities. Diluted earnings per share using the two-class method is calculated as (i) net income attributable to Diamondback Energy, Inc, (ii) less the reallocation of $5 million in earnings attributable to participating securities, (iii) divided by diluted weighted average common shares outstanding.

OPERATING CASH FLOW BEFORE WORKING CAPITAL CHANGES AND FREE CASH FLOW

Operating cash flow before working capital changes, which is a non-GAAP financial measure, represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities. The Company believes operating cash flow before working capital changes is a useful measure of an oil and natural gas company’s ability to generate cash used to fund exploration, development and acquisition activities and service debt or pay dividends. The Company also uses this measure because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements that the Company may not control and may not relate to the period in which the operating activities occurred. This allows the Company to compare its operating performance with that of other companies without regard to financing methods and capital structure.

Free Cash Flow, which is a non-GAAP financial measure, is cash flow from operating activities before changes in working capital in excess of cash capital expenditures. The Company believes that Free Cash Flow are useful to investors as they provide measures to compare both cash flow from operating activities and additions to oil and natural gas properties across periods on a consistent basis as adjusted for non-recurring early settlements of commodity derivative contracts. These measures should not be considered as an alternative to, or more meaningful than, net cash provided by operating activities as an indicator of operating performance. The Company’s computation of operating cash flow before working capital changes, Free Cash Flow may not be comparable to other similarly titled measures of other companies. The Company uses Free Cash Flow to reduce debt, as well as return capital to stockholders as determined by the Board of Directors.

The following tables present a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP measure of operating cash flow before working capital changes and to the non-GAAP measure of Free Cash Flow:

Diamondback Energy, Inc.

Operating Cash Flow Before Working Capital Changes and Free Cash Flow

(unaudited, in millions)

Three Months Ended March 31,

2024

2023

Net cash provided by operating activities
$
1,334

$
1,425

Less: Changes in cash due to changes in operating assets and liabilities:

Accounts receivable

(95
)

(36
)

Income tax receivable

12

95

Prepaid expenses and other current assets

89

Accounts payable and accrued liabilities

(110
)

(26
)

Income taxes payable

70

17

Revenues and royalties payable

(35
)

60

Other

3

12

Total working capital changes

(66
)

122

Operating cash flow before working capital changes

1,400

1,303

Drilling, completions and infrastructure additions to oil and natural gas properties

(605
)

(622
)

Additions to midstream assets

(4
)

(35
)

Total Cash CAPEX

(609
)

(657
)

Free Cash Flow
$
791

$
646

NET DEBT

The Company defines the non-GAAP measure of net debt as total debt (excluding debt issuance costs, discounts, premiums and fair value hedges) less cash and cash equivalents. Net debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company’s outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. The Company believes this metric is useful to analysts and investors in determining the Company’s leverage position because the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt.

Diamondback Energy, Inc.

Net Debt

(unaudited, in millions)

March 31, 2024

Net Q1
Principal Borrowings/
(Repayments)

December 31, 2023

September 30, 2023

June 30, 2023

March 31, 2023

(in millions)

Diamondback Energy, Inc.(1)
$
5,669

$
(28
)

$
5,697

$
5,697

$
6,040

$
6,426

Viper Energy, Inc.(1)

1,103

10

1,093

680

654

700

Total debt

6,772

$
(18
)

6,790

6,377

6,694

7,126

Cash and cash equivalents

(896
)

(582
)

(827
)

(18
)

(46
)

Net debt
$
5,876

$
6,208

$
5,550

$
6,676

$
7,080

(1) Excludes debt issuance costs, discounts, premiums and fair value hedges.

DERIVATIVES

As of April 26, 2024, the Company had the following outstanding consolidated derivative contracts, including derivative contracts at Viper Energy, Inc. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate pricing and Crude Oil Brent pricing and with natural gas derivative settlements based on the New York Mercantile Exchange Henry Hub pricing. When aggregating multiple contracts, the weighted average contract price is disclosed.

Crude Oil (Bbls/day, $/Bbl)

Q2 2024

Q3 2024

Q4 2024

Q1 2025

Long Puts – Crude Brent Oil

110,000

80,000

53,000

11,000

Long Put Price ($/Bbl)
$
55.45

$
55.25

$
56.04

$
60.00

Deferred Premium ($/Bbl)
$
-1.49

$
-1.55

$
-1.57

$
-1.39

Long Puts – WTI (Magellan East Houston)

32,000

28,000

20,000

8,000

Long Put Price ($/Bbl)
$
55.63

$
56.07

$
58.00

$
60.00

Deferred Premium ($/Bbl)
$
-1.56

$
-1.58

$
-1.68

$
-1.68

Long Puts – WTI (Cushing)

39,000

51,000

48,000

22,000

Long Put Price ($/Bbl)
$
59.23

$
57.65

$
57.50

$
57.73

Deferred Premium ($/Bbl)
$
-1.49

$
-1.54

$
-1.67

$
-1.71

Costless Collars – WTI (Cushing)

6,000

4,000

4,000

Long Put Price ($/Bbl)
$
65.00

$
55.00

$
55.00

Short Call Price ($/Bbl)
$
95.55

$
93.66

$
93.66

Basis Swaps – WTI (Midland)

12,000

12,000

12,000

$
1.19

$
1.19

$
1.19

Roll Swaps – WTI

40,000

40,000

40,000

$
0.82

$
0.82

$
0.82

Natural Gas (Mmbtu/day, $/Mmbtu)

Q2 2024

Q3 2024

Q4 2024

FY 2025

Costless Collars – Henry Hub

290,000

290,000

290,000

270,000

Long Put Price ($/Mmbtu)
$
2.83

$
2.83

$
2.83

$
2.50

Ceiling Price ($/Mmbtu)
$
7.52

$
7.52

$
7.52

$
5.42

Natural Gas Basis Swaps – Waha Hub

380,000

380,000

380,000

330,000

$
-1.18

$
-1.18

$
-1.18

$
-0.70

Investor Contact:
Adam Lawlis
+1 432.221.7467
[email protected]

Source: Rbcrichardsonbarr.com

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The post Diamondback Energy, Inc. Announces First Quarter 2024 Financial and Operating Results appeared first on Energy News Beat.

 

Energy News Beat

OKLAHOMA CITY, April 30, 2024 /PRNewswire/ — Chesapeake Energy Corporation (NASDAQ:CHK) today reported first quarter 2024 financial and operating results.

Net income of $26 million, or $0.18 per fully diluted share; adjusted net income(1) of $80 million, or $0.56 per share
Net cash provided by operating activities of $552 million
Adjusted EBITDAX(1) of $508 million; free cash flow(1) of $131 million
Delivered $112 million in adjusted free cash flow(1) yielding combined quarterly base and variable dividend of $0.715 per common share to be paid in June 2024
Produced approximately 3.20 bcf/d net (100% natural gas); building productive capacity with 46 combined DUCs and deferred TILs at the end of the quarter
Reaffirmed credit facility borrowing base and increased aggregate commitments to $2.5 billion

Nick Dell‘Osso, Chesapeake’s President and Chief Executive Officer, said, “Today’s results show the strength of our portfolio and strategy, further demonstrating that our company was built to withstand demand cycles. As we build productive capacity, we continue to focus on capital discipline and prudently respond to today’s market conditions. We remain excited about our pending combination with Southwestern which we expect will close in the second half of this year. The merger positions us to expand America’s energy reach to markets that are increasingly turning to natural gas to meet the growing demand for reliable, affordable, lower carbon energy to domestic and international consumers.”

Shareholder Returns Update

Chesapeake generated $552 million of operating cash flow and $112 million of adjusted free cash flow(1) during the first quarter. Chesapeake plans to pay its base and variable dividends on June 5, 2024 to shareholders of record at the close of business on May 16, 2024.

Including the first quarter base and variable declared dividends, Chesapeake has returned more than $3.4 billion to shareholders since 2021 through dividends and share buybacks.

Operations Update

Chesapeake’s net production in the first quarter was approximately 3.20 bcfe per day (100% natural gas), utilizing an average of nine rigs to drill 28 wells and place 29 wells on production while building an inventory of 24 drilled but uncompleted (DUCs) wells and 22 deferred turn in lines (TILs). Chesapeake is currently operating eight rigs and two completion crews. The company plans to drop an additional rig in the Marcellus around mid-year.

Given continued weak market dynamics, the company is executing its previously disclosed plan to defer completions and new well turn in lines, building short-cycle, capital efficient productive capacity which can be activated when supply and demand imbalances correct. At the end of the first quarter the company had 50 DUCs, approximately twice its normal average at current rig counts, and 22 deferred TILs. For the full-year, the company expects to drill 95 – 115 wells and place 30 – 40 wells on production, which is consistent with previous guidance.

Marketing/LNG Update

In February, Chesapeake announced the signing of long-term LNG Sale and Purchase Agreements (SPAs). Under the SPAs, Chesapeake will purchase approximately 0.5 million tonnes per annum (“mtpa”) of LNG from Delfin LNG at a Henry Hub linked price with a targeted contract start date in 2028. Chesapeake will then deliver the LNG to Gunvor on a free-on-board basis with the sales price linked to the Japan Korea Marker (“JKM”) for a period of 20 years. These volumes represent 0.5 mtpa of the previously announced up to 2 mtpa HOA with Gunvor. The company continues to pursue additional LNG agreements to deliver on its LNG strategy.

Financial Update

In April 2024, the company’s borrowing base was reaffirmed and the aggregate commitments under our Credit Facility were increased by $500 million to $2.5 billion in total. Additionally, the sublimit available for the issuance of letters of credit were increased by $300 million to $500 million in total.

ESG Update

The company continues to work on direct emission reductions while also investing in adjacent technology and businesses to meet its 2035 Scope 1 and Scope 2 net zero commitment. The company achieved its 2025 interim GHG and methane intensity target last year and successfully recertified all assets under the MiQ and EO100 standards, maintaining 100% independent responsibly sourced gas certification across its entire portfolio.

Chesapeake’s culture of operational excellence and safety resulted in a ~40% year-over-year combined TRIR improvement, to an industry leading 0.14. Additionally, IR Magazine recognized Chesapeake for Best ESG Reporting by a small to mid-cap company, for the quality and depth of its 2022 sustainability report. The company’s 2023 sustainability report is expected to be published later this quarter.

Conference Call Information

Chesapeake plans to conduct a conference call to discuss its recent financial and operating results at 9:00 am EDT on Wednesday, May 1, 2024. The telephone number to access the conference call is 1-888-317-6003 or 1-412-317-6061 for international callers. The passcode is 9185107.

Financial Statements, Non-GAAP Financial Measures and 2024 Guidance and Outlook Projections

The company’s 2024 first quarter financial and operational results, along with non-GAAP measures that adjust for items typically excluded by certain securities analysts, are available on the company’s website. Non-GAAP measures should not be considered as an alternative to GAAP measures. Reconciliations of these non-GAAP measures and other disclosures are provided with the supplemental financial tables available on the company’s website at www.chk.com. Management’s updated guidance for 2024 can be found on the company’s website at www.chk.com.

Headquartered in Oklahoma City, Chesapeake Energy Corporation (NASDAQ:CHK) is powered by dedicated and innovative employees who are focused on discovering and responsibly developing our leading positions in top U.S. natural gas plays. With a goal to achieve net zero GHG emissions (Scope 1 and 2) by 2035, Chesapeake is committed to safely answering the call for affordable, reliable, lower carbon energy.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include our current expectations or forecasts of future events, including matters relating to the pending merger with Southwestern Energy Company (“Southwestern”), armed conflict and instability in Europe and the Middle East, along with the effects of the current global economic environment, and the impact of each on our business, financial condition, results of operations and cash flows, actions by, or disputes among or between, members of OPEC+ and other foreign oil-exporting countries, market factors, market prices, our ability to meet debt service requirements, our ability to continue to pay cash dividends, the amount and timing of any cash dividends and our ESG initiatives. Forward-looking and other statements in this release regarding our environmental, social and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as “expect,” “could,” “may,” “anticipate,” “intend,” “plan,” “ability,” “believe,” “seek,” “see,” “will,” “would,” “estimate,” “forecast,” “target,” “guidance,” “outlook,” “opportunity” or “strategy.” The absence of such words or expressions does not necessarily mean the statements are not forward-looking.

Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:

conservation measures and technological advances could reduce demand for natural gas and oil;
negative public perceptions of our industry;
competition in the natural gas and oil exploration and production industry;
the volatility of natural gas, oil and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles;
risks from regional epidemics or pandemics and related economic turmoil, including supply chain constraints;
write-downs of our natural gas and oil asset carrying values due to low commodity prices;
significant capital expenditures are required to replace our reserves and conduct our business;
our ability to replace reserves and sustain production;
uncertainties inherent in estimating quantities of natural gas, oil and NGL reserves and projecting future rates of production and the amount and timing of development expenditures;
drilling and operating risks and resulting liabilities;
our ability to generate profits or achieve targeted results in drilling and well operations;
leasehold terms expiring before production can be established;
risks from our commodity price risk management activities;
uncertainties, risks and costs associated with natural gas and oil operations;
our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used;
pipeline and gathering system capacity constraints and transportation interruptions;
our plans to participate in the LNG export industry;
terrorist activities and/or cyber-attacks adversely impacting our operations;
risks from failure to protect personal information and data and compliance with data privacy and security laws and regulations;
disruption of our business by natural or human causes beyond our control;
a deterioration in general economic, business or industry conditions;
the impact of inflation and commodity price volatility, including as a result of armed conflict and instability in Europe and the Middle East, along with the effects of the current global economic environment, on our business, financial condition, employees, contractors, vendors and the global demand for natural gas and oil and on U.S. and global financial markets;
our inability to access the capital markets on favorable terms;
the limitations on our financial flexibility due to our level of indebtedness and restrictive covenants from our indebtedness;
our actual financial results after emergence from bankruptcy may not be comparable to our historical financial information;
risks related to acquisitions or dispositions, or potential acquisitions or dispositions, including risks related to the pending merger with Southwestern, such as the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the possibility that our stockholders may not approve the issuance of our common stock in connection with the proposed transaction; the possibility that the stockholders of Southwestern may not approve the merger agreement; the risk that we or Southwestern may be unable to obtain governmental and regulatory approvals required for the proposed transaction, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; the risk that the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all; risks related to limitation on our ability to pursue alternatives to the merger; risks related to change in control or other provisions in certain agreements that may be triggered upon completion of the merger; risks related to the merger agreement’s restrictions on business activities prior to the effective time of the merger; risks related to loss of management personnel, other key employees, customers, suppliers, vendors, landlords, joint venture partners and other business partners following the merger; risks related to disruption of management time from ongoing business operations due to the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of our common stock or Southwestern’s common stock; the risk of any unexpected costs or expenses resulting from the proposed transaction; the risk of any litigation relating to the proposed transaction; the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; and the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the proposed transaction or it may take longer than expected to achieve those synergies or benefits;
our ability to achieve and maintain ESG certifications, goals and commitments;
legislative, regulatory and ESG initiatives, addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal;
federal and state tax proposals affecting our industry;
risks related to an annual limitation on the utilization of our tax attributes, which is expected to be triggered upon completion of the merger, as well as trading in our common stock, additional issuances of common stock, and certain other stock transactions, which could lead to an additional, potentially more restrictive, annual limitation; and
other factors that are described under Risk Factors in Item 1A of Part I of our Annual Report on Form 10-K.

We caution you not to place undue reliance on the forward-looking statements contained in this release, which speak only as of the filing date, and we undertake no obligation to update this information. We urge you to carefully review and consider the disclosures in this release and our filings with the SEC that attempt to advise interested parties of the risks and factors that may affect our business.

IMPORTANT INFORMATION FOR INVESTORS; ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the merger between Chesapeake and Southwestern, Chesapeake has filed and will file relevant materials with the Securities and Exchange Commission (the “SEC”). On February 29, 2024, Chesapeake filed with the SEC a registration statement on Form S-4 (as amended on April 11, 2024 and as may be further amended from time to time, the “Form S-4”) to register the shares of Chesapeake common stock to be issued in connection with the merger. The Form S-4 includes a joint preliminary proxy statement of Chesapeake and Southwestern that also constitutes a preliminary prospectus of Chesapeake (the “joint proxy statement/prospectus”). The information in the Form S-4 is not complete and may be changed. After the Form S-4 is declared effective, a definitive proxy statement/prospectus will be mailed to stockholders of Chesapeake and Southwestern. This communication is not a substitute for the Form S-4, the joint proxy statement/prospectus or any other document that Chesapeake or Southwestern (as applicable) has filed or may file with the SEC in connection with the merger. BEFORE MAKING ANY VOTING DECISION, INVESTORS ARE URGED TO CAREFULLY READ THE FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT CHESAPEAKE, SOUTHWESTERN, THE MERGER, THE RISKS RELATED THERETO AND RELATED MATTERS.

Investors may obtain free copies of the Form S-4 and the joint proxy statement/prospectus, as well as other filings containing important information about Chesapeake or Southwestern, without charge at the SEC’s Internet website (http://www.sec.gov). Copies of the documents filed with the SEC by Chesapeake may be obtained free of charge on Chesapeake’s website at investors.chk.com/. Copies of the documents filed with the SEC by Southwestern may be obtained free of charge on Southwestern’s website at https://ir.swn.com/CorporateProfile/default.aspx.

Participants in Solicitation

Chesapeake and Southwestern and certain of their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction contemplated by the joint proxy statement/prospectus. Information regarding Chesapeake’s directors and executive officers and their ownership of Chesapeake’s securities is set forth in Chesapeake’s filings with the SEC, including Chesapeake’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 21, 2024, and its Definitive Proxy Statement on Schedule 14A, which was filed with the SEC on April 26, 2024. To the extent such person’s ownership of Chesapeake’s securities has changed since the filing of Chesapeake’s proxy statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC thereafter. Information regarding Southwestern’s directors and executive officers and their ownership of Southwestern’s securities is set forth in Southwestern’s filings with the SEC, including Southwestern’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 22, 2024, and an amendment to its Annual Report on Form 10-K/A, which was filed with the SEC on April 29, 2024. To the extent such person’s ownership of Southwestern’s securities has changed since the filing of Southwestern’s proxy statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC thereafter. Additional information regarding the interests of those persons and other persons who may be deemed participants in the proxy solicitations may be obtained by reading the joint proxy statement/prospectus and other relevant materials that will be filed with the SEC regarding the proposed transaction when such documents become available. You may obtain free copies of these documents as described in the preceding paragraph.

No Offer or Solicitation

This release relates to the proposed transaction between Chesapeake and Southwestern. This release is for informational purposes only and shall not constitute an offer to sell or exchange, or the solicitation of an offer to buy or exchange, any securities or a solicitation of any vote or approval, in any jurisdiction, pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.

 View original content to download multimedia:https://www.prnewswire.com/news-releases/chesapeake-energy-corporation-reports-first-quarter-2024-results-302132188.html

Source: Rbcrichardsonbarr.com

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The post CHESAPEAKE ENERGY CORPORATION REPORTS FIRST QUARTER 2024 RESULTS appeared first on Energy News Beat.

 

Energy News Beat

U.S. crude oil prices continued to plummet on Wednesday, falling over 3% and Brent crude right behind it, shedding over 2.8% on a surprise U.S. inventory build and uncertainty about interest rate cuts and the future of oil demand growth.

On Wednesday at 11:56 a.m. ET, West Texas Intermediate (WTI) was trading at $79.44, down 3.04%, losing $2.49 per barrel on the day. Brent crude was trading at $83.90 per barrel, down 2.81% for a loss of $2.43 on the day.

Earlier on Wednesday, the Energy Information Administration (EIA) released U.S. inventory data, showing a surprise build in crude stockpiles of 7.3 million barrels for the week to April 26, compared with a substantial draw of 6.4 million barrels for the previous week that pushed prices temporarily higher last week.

This week’s crude inventory report from the EIA shows inventory levels at the highest since last June.

On Tuesday, new U.S. economic data suggested that the Federal Reserve will keep interest rates steady, with hoped-for rate cuts looking further away now.

Also weighing on oil prices was the re-emergence of the on-again-off-again prospect of a ceasefire in the Middle East.

“The crude market is weighed down by continued hopes for a ceasefire,” Reuters cited Ole Hansen of Saxo Bank as saying on Wednesday. “In addition, stubborn U.S. inflation has further reduced rate cut expectations.”

Likewise, ANZ Banking Group Ltd analysts told Bloomberg in a note on Wednesday that inflation continues to increase concerns about oil demand ahead of the summer driving season in the U.S., while “the potential for a cease-fire agreement between Israel and Hamas has eased concerns of an escalation of the conflict and any possible disruptions to supply.”

Source: Oilprice.com

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The post Oil Prices Plummet 3% on US Inventory Build, Inflation appeared first on Energy News Beat.