Diamondback Energy, Inc.

Hello, and thank you for standing by. Welcome to the Diamondback Energy third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. It is now my pleasure to introduce Vice President of Investor Relations, Adam Lawless.

Thank you, Andrew. Good morning and welcome to Diamondback Energy third quarter 2022 conference call. During our call today, we will reference an updated investor presentation, which can be found on Diamondback's website. Representing Diamondback today are Travis Dice, Chairman and CEO, Kay Stantoff, President and CFO, and Danny Wesson, COO. During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance, and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I'll now turn the call over to Travis Sice.

Thank you, Adam. And before we start with my prepared remarks this morning, I want to encourage each of you to please take advantage of one of our greatest privileges we have as Americans, our freedom to elect our representatives. Please take the time out of your busy schedules today to go vote if you've not already done so. Welcome to Diamondback's third quarter earnings call. At Diamondback, we pride ourselves on our execution. Our commitment to being the lowest cost operator in the Permian Basin has and will continue to position us for success through the cycle. The third quarter was no exception. In the quarter, we produced over 224,000 barrels of wool per day and generated approximately 1.7 billion in operating cash flow. Our CapEx was once again within our guidance range, leading to free cash flow of nearly 1.2 billion. As we previously announced, we increased our return of capital commitment and stated that beginning this quarter, we would return at least 75% of free cash flow back to our shareholders, up from at least 50% previously. At 75%, total capital returned was nearly 875 million, with dividends totaling 403 million, or $2.26 per share. The remaining 472 million went towards our opportunistic share repurchase program, where we bought back nearly 4 million shares at an average price of approximately $120 a share. To date, we've spent approximately $1.2 billion of our $4 billion buyback authorization, repurchasing nearly 6% of our shares outstanding since September of last year when we initiated our program. In October, we announced the pending acquisition of the assets of Firebird Energy, a company with a large, contiguous position in the Midland Basin. We feel Firebird has the right balance of cash flow and inventory, and the acquisition is immediately accretive on all relevant per share financial metrics while providing a long runway of high quality drilling opportunities. With over 350 locations, we expect to have well over a decade of running room at our projected one rig development pace. In conjunction with the acquisition, we announced that we would sell at least 500 million of non-core assets by the year-end 2023, with net proceeds primarily used to pay down debt. Since then, we closed on a $155 million sale of non-core assets in the Delaware Basin, jump-starting our program and ensuring continuous improvement to our investment-grade balance sheet. We will continue to pursue strategic divestitures including the sale of certain assets within our Rattler portfolio, generating unrealized value for our shareholders. In closing, we know our business. We know we have some of the best inventory in the United States with our low-cost operational machine in place. We have the unique ability to generate significant repeatable returns through the drill bit for decades to come. In 2019, we began co-developing our primary targets, Since then, we've learned how to optimize our development patterns and spacing, and as a result, are seeing material improvement in well productivity over the past 36 months. In fact, our well performance this year is back at 2019 levels, when we were primarily targeting one-off wells in our bed zones, which, while having great performance in economics, had the potential to strand significant components of our inventories. leading to material parent-child concerns down the line. Fortunately, we're well positioned for the future. We expect to close on the Firebird transaction at the end of November and slow the development pace on that asset from three rigs to one. We're working with our service providers to ensure that we have the most efficient and cost-effective personnel and equipment in place for next year, including the two E-Fleet Simulfrac crews we've secured from Halliburton. the first of which is already in the field and performing well. All of this will provide operational momentum as we move into 2023. We expect to deliver the same operational results you've come to expect from Diamondback. While we won't be giving detailed 2023 guidance today, we believe that we will be able to generate low single-digit co-former oil production growth next year by maintaining our current standalone activity levels plus the one additional Firebird rig. It's not easy to operate in this environment, but our size, scale, and quality of inventory uniquely position us to deliver differentiated results and create meaningful value for our shareholders. Before I open up for questions, I want to address all the Diamondback employees that are on the phone. At Diamondback, we've just celebrated our 10 years as a public company. growing from a $500 million market cap to almost $30 billion today. The people around me this morning, and sometimes me individual, get too much credit for this success. It's you, the men and women of Diamondback, that deserve the credit. It's your pursuit of excellence, your desire to be the very best version of yourself, your dedication to integrity that is responsible for our success. It remains my privilege to represent you. Thank you for all that you do. Operator, please open the line for questions.