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.

 

Energy News Beat

We present this month insights and commentary covering North America and the Global Natural Gas market in this new edition of our newsletter.

With geopolitics flaring in various areas around the world, all eyes have been on the global market. Whatever risks near the Strait of Hormuz, the LNG market has weathered the near storm conditions and carried on. A bit further south, several LNG supply deals sealed by Oman LNG L.L.C.with various suppliers. Meanwhile, the markets in Asia were active earlier on in the spot market as they took advantage of lower than usual prices to secure much needed gas supply.

We have a quick brief on the current status of the long awaited Mountain Valley Pipeline; Takeaways from the 30th edition of the FLAME conference; Commentary on Spain’s future role within the energy ecosystems of Europe and Africa; and last but not least discussion on if Vietnam will be able to eventually move away from coal and what this would entail for its overall energy mix.

We hope you enjoy these articles and interviews, and they give you greater insight into the energy market and industry all with the goal of increasing your knowledge and helping you make better energy decisions.

Source: Linkedin.com

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The post LNG Action Around the Globe appeared first on Energy News Beat.

 

Energy News Beat

Crude oil prices went lower today after the U.S. Energy Information Administration reported an inventory increase of 7.3 million barrels for the week to April 26.

This compared with a substantial draw of 6.4 million barrels for the previous week that pushed prices temporarily higher last week.

In gasoline, the authority reported an inventory rise of 300,000 barrels for last week, which compared with a modest draw of 600,000 barrels for the week before.

Gasoline production averaged 9.4 million barrels daily in the week to April 26, which compared with 9.1 million barrels daily during the previous week.

In distillate fuels, the EIA estimated an inventory draw of 700,000 barrels for the reporting period, with production averaging 4.5 million barrels daily.

Last week’s figures compared with an inventory build of 1.6 million barrels for the previous week, when production averaged 4.8 million barrels daily.

Last year, there was substantial concern that distillate production was consistently below demand prospects but now it appears the tables have turned and fears are rising about possible oversupply.

Reuters reported earlier this week that fuel traders were in a rush to secure storage space for their distillate stocks along the East Coast as demand underwhelmed. The report suggested warmer than usual winter was the culprit behind lower diesel and heating oil demand.

This lower demand pushed profit margins for refiners down substantially during the first quarter of the year, affecting their quarterly bottom lines, the report also said.

Oil prices, meanwhile, slipped further down today on the American Petroleum Institute’s latest weekly inventory report that showed a 4.9-million-barrel increase in crude oil stocks for the week to April 26. Support for lower prices also came from continued expectations of a ceasefire between Hamas and Israel.

Countering the decline, OPEC crude oil production declined by 100,000 barrels daily in April, according to a Reuters survey. The survey showed lower exports of crude from Iran, Iraq, and Nigeria, with the cartel’s total output at 26.39 million barrels daily during last month.

Source: Oilprice.com

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The post Large Crude Inventory Build Rocks Oil Prices appeared first on Energy News Beat.

 

Energy News Beat

One of Canada’s biggest oil and gas companies, Cenovus Energy (NYSE: CVE), booked higher-than-expected earnings for the first quarter of 2024 amid strong oil and gas production and record throughput volumes at its refineries.

Cenovus reported on Wednesday nearly doubled earnings per share of $0.45 (C$0.62) for Q1 2024 compared to the same period of 2023. The earnings were higher than the average analyst estimate of $0.39 (C$0.54), according to LSEG data cited by Reuters.

For the first quarter of 2024, refining throughput for Cenovus stood at 655,200 barrels per day (bpd)—a record volume – as Cenovus continues to improve its downstream reliability, the company said.

Crude throughput in the Canadian refining segment was 104,100 bpd in the first quarter, compared with 100,300 bpd in the fourth quarter of 2023.

In U.S. refining, crude throughput was 551,100 bpd in the first quarter, compared with 478,800 bpd in the fourth quarter.

“Throughput in the quarter increased primarily due to improved operating performance and availability across the company’s operated and non-operated refining assets, in addition to lower levels of planned maintenance when compared with the prior quarter,” Cenovus said.

The company also boosted first-quarter earnings thanks to a higher operating margin and a gain on asset divestitures in the first quarter of 2024.

At the end of last year, Cenovus said it expects to spend more capital in 2024 compared to 2023 to boost upstream production and capture better margins in the downstream segment.

“We will continue to progress strategic initiatives in our base business in 2024 that will enhance our integrated operations and further drive our ability to grow total shareholder returns, even in periods of price volatility,” Cenovus president and CEO Jon McKenzie said at the time.

Earlier this year, Cenovus chief commercial officer Drew Zieglgansberger said at the annual investor day that the company would boost its energy production by 19% over the next five years, to 950,000 boepd by 2028, in line with pipeline capacity growth.

Source: Oilprice.com

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The post Cenovus Tops Earnings Forecast as Refining Jumps to Record appeared first on Energy News Beat.

 

Energy News Beat

Exports of liquefied natural gas (LNG) from the United States fell in April for a fourth month in a row, as the Freeport export facility continues to struggle with operational issues and outages, according to data from financial firm LSEG       cited by Reuters.

U.S. LNG exports dropped to 6.19 million metric tons in April, down from 7.61 million tons exported in March, per LSEG data released on Wednesday.

Europe continued to be the top export destination for American LNG, but its share of all U.S. sales fell to 52.5% of the total volume, down from about 57% in March. Asia kept its second spot, receiving 32.6% of total U.S. LNG exports, relatively flat month-on-month.

Due to problems at Freeport LNG, America’s LNG exports have been falling this year each month compared to the previous month.

Freeport LNG, which has three natural gas-processing units, or trains, has been operating without at least one of these since January 2024, amid recurring mechanical issues and maintenance.

Last week, Freeport LNG Development LP reported an outage at its third train, which is right now the only one not under maintenance, Natural Gas Intelligence reported.

Freeport LNG has been operating below 80% of its capacity due to technical problems in recent months, which has reduced overall LNG exports out of America.

As a result, only five LNG cargoes departed in April from the Quintana, Texas, terminal, carrying a total of 330,000 tons, per the LSEG data quoted by Reuters. This compares to 21 cargoes with a total of 1.42 million tons exported from Freeport LNG in December.

“We still believe Freeport will not reach its typical summer utilization near 90% until June, at the earliest, given its previous struggles to complete maintenance in a timely manner,” Energy Aspects analyst David Seduski wrote in a note to clients last week, as carried by Reuters.

Source: Oilprice.com

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The post U.S. LNG Exports Continue to Fall as Freeport Plant Struggles With Outages appeared first on Energy News Beat.

 

Energy News Beat

The prospect of decreased crude oil supplies from Mexico, the top international supplier to the U.S. Gulf Coast (USGC), is creating uncertainty among heavy crude-focused refineries. Mexico’s state-owned energy company, Petróleos Mexicanos (Pemex), instructed its trading unit to cancel up to 436 Mb/d of crude exports for April to supposedly focus on processing domestic oil at its new 340-Mb/d Dos Bocas refinery and/or its existing plants. While the refinery’s startup is likely 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 to optimize operations and yields. Adding to the complexity of the situation is the upcoming startup of the Trans Mountain Pipeline expansion (TMX) and the recent reinstatement of U.S. sanctions on Venezuelan crude. In today’s RBN blog, we’ll examine the potential fallout resulting from Pemex’s decision at a time when heavy crudes elsewhere are also becoming less available.

Mexico’s energy ministry has stated that Dos Bocas will process about 179 Mb/d of crude oil this year, with plans to reach full capacity at 340 Mb/d; however, RBN’s downstream consulting practice, Refined Fuels Analytics (RFA), sees the future of Dos Bocas much differently. Previous announcements of its imminent startup have yet to result in any notable operations and we don’t see the facility reaching consistent levels of meaningful fuel output until 2026, with full ramp-up stretching to 2028. Assuming Dos Bocas does make it there (which certainly isn’t a given), our expectations are that utilization will only average about 60%. (See Here I Go Again for a detailed examination of Dos Bocas’ prospects.) There continue to be mixed signals as Pemex reversed at least 330 Mb/d of the planned cut for May, according to news reports, due to lower demand from domestic refineries.

Overall, Pemex has projected domestic crude oil processing will increase from 713 Mb/d in 2023 to an average of 1.04 MMb/d in 2024, with local refineries, including Dos Bocas, aiming for 1.7 MMb/d by year-end (a prospect we think is unachievable). Let’s take a step back and delve into the various grades of Mexican crude oil. Mexico produces and exports four distinct quality grades, ranging from light to heavy:

Olmeca, the lightest among them, boasts an API gravity of 38-39 and a sulfur content of 0.73% to 0.95% by weight, making it a valuable feedstock for lubricants and petrochemicals. Although Olmeca shares some similar product yields as Eagle Ford crude, the latter has lower sulfur content, particularly important for the naphtha cut used in gasoline production.
Isthmus falls into the medium-heavy category, with a typical API gravity of 32-33 degrees and sulfur content of 1.8%. Isthmus yields commendable amounts of gasoline and intermediate distillates such as diesel and jet fuel.
Maya, considered a heavy, high-sulfur grade, boasts an API gravity of 21-22 degrees and 3.4% to 3.8% sulfur. Maya produces lower yields of gasoline and diesel in simple refineries when compared to lighter crudes, necessitating high-conversion units for optimal processing.
Altamira, the heaviest and most sour, has an API gravity of 15.5-16.5 and a sulfur content of 5.5% to 6%. Similar to Maya, Altamira yields lower gasoline and diesel in simple refining setups compared to lighter crude oils, making it suitable for asphalt production due to its physical properties.

See Figure 1 below for more details around quality for these types of crude grades. (As we noted in The Weight, crude with a higher API gravity is lighter, or less dense, while oil with a lower API gravity is heavier, or denser.)

Figure 1. Typical Qualities of Pemex Crude Oils. Source: Pemex

The post When Worlds Collide – U.S. Gulf Coast Refiners Face Challenges To Accessing Heavier Crude Oil appeared first on Energy News Beat.

 

Energy News Beat

(Bloomberg) – TotalEnergies SE is increasingly making noise about moving its stock listing to New York, adding to chatter around European giants potentially being attracted by U.S. investors’ greater enthusiasm for oil and gas companies.

The French energy giant is considering the switch “in part because ESG policies in Europe have more weight,” Chief Executive Officer Patrick Pouyanne told a French senate hearing on climate-change goals Monday. “We are losing European shareholders,” while U.S. investors are buying the stock, he said.

The company will “seriously” study such a step and present its findings to the board in September, Pouyanne told analysts last week, expanding on an idea he first disclosed in an interview with Bloomberg Opinion earlier this month.

His comments are sure to cause discomfort around Europe’s major bourses. Speculation is already buzzing about the future of Shell Plc’s presence on the London exchange, while signs this week of investor resistance to Glencore Plc’s proposed coal spinoff might reignite talk of a U.S. listing.

“Europe’s virtuous attitude when it comes to ESG norms, free trade or say on pay may have been naive at times in front of trading partners that put economic interests above all,” said Eric Meyer, head of RBC Capital Markets in France.

A third of European mutual funds exclude oil and gas, compared with a negligible number of their U.S. peers with that view, Deutsche Bank AG analysts wrote in a March note, citing Morningstar Direct data.

The divergence over environmental, social and governance measurements shows up in valuations, with TotalEnergies’ stock priced at eight times earnings expected a year from now, against 12 times for U.S. giant Exxon Mobil Corp.

And considerations over ESG are not the only factor for European resources companies weighing their options, said RBC Capital’s Meyer.

“When there is a notable valuation gap between Wall Street and Europe, temptation is high to follow the money,” he said. “This is particularly true for the oil and gas industry, which is way more part of the fabric of the U.S. economy, more populated and better followed by investors.”

A representative for Euronext Paris, where Total is listed, declined to comment.

Source: Worldoil.com

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The post TotalEnergies considers moving stock listing to New York over favorable oil and gas views in U.S. appeared first on Energy News Beat.