Diamondback Energy, Inc. 2026 Q2 Earnings Call

Good morning, welcome to Diamondback Energy's second quarter 2026 conference call. During our call today, we will reference an updated investor presentation and letter to stockholders, which can be found on Diamondback's website. Representing Diamondback today are Kaes Van't Hof, CEO; Danny Wesson, COO; Jere Thompson, CFO; Al Barkmann, Chief Engineer. 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. 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 Case.

Good morning, everyone, I hope everybody read our shareholder letter last night. I continue to get good feedback from the investment community. As we've done over the last couple of years, we're just going to move straight into Q&A. Operator, please open the line up for questions.

Yeah, Neal, I think it's been pretty hard to predict what's going to happen globally over the last couple of months. Certainly our opinion and the data shows that inventories are draining, not only on the oil side, but on the product side. Absent permanent demand destruction, which we're hopeful is not the case, those inventories are going to have to be refilled. We can debate at what price those inventories need to be refilled, I do think that helps us get some confidence that there's a longer-term bid for oil to refill those inventories and meet global demand. In general, I think that does skew us towards the decision to grow production versus hold production flat. We were the first to respond to the price signals in March to increase our production for the year by 3% or 4% versus original plan.

The team executed on that very quickly to where we are today, up somewhere around 4% from where we started the year. I think the goalposts are for us going into next year, do we hold production flat, which we're kind of doing from these higher elevated levels right now in Q3, or do we grow organically off of this number in a capital efficient way? Right now the model spits out some form of low single-digit organic growth while maintaining capital efficiency and running five frac crews consistently throughout the year. I think in today's environment, betting on the need to refill inventories, that's probably where our head is today. As you've seen in the past, Diamondback can react quickly to the positive or the negative. I think in this environment, it's prudent to be able to do that.

There's a lot of uncertainty out there, Neal. I think our bet is that these global inventories, including SPRs, are going to need to be refilled, and that should be a positive for Diamondback shareholders and Diamondback's growth trajectory.

Yeah. I think slide 10 is the most important slide in our deck when it comes to the technical aspects of our business and how we're making the capital allocation decisions in the field. It's been in there for a couple of quarters now, and we've put in some data on year-to-date performance, and clearly, we're having a good year in 2026 so far. I steal a comment from one of our competitors because I think his comment's smart in that this is kind of a stacked innovation play, right? We've done a lot of things in terms of well construction, well targeting, stimulation, and that's leading to better results. We didn't get here overnight, right? We started by drilling wells in 30 days. Now we're drilling them in five.

Our culture and our organization is a continuous improvement culture that has led to these results today. High level, we try to blend the best mix of most wells per section, right on the bottom left of that slide, multiplied by the most production per well. Clearly, Diamondback operates at the lowest cost per well, and that should generate, or does generate, the most NPV per section or acre or asset in the basin. We're very proud of that, and we've got to keep working on that to continuously improve the business. Al, do you want to add anything on what we've changed and done over the last couple of years?

Yeah, like you said, I think it's really about maximizing the return on every DSU, every well that we put in a DSU, Neil. The specifics, when you think about well construction, doing larger tubulars, that allows us to flow the wells back more aggressively on the stimulation side and stage architecture and perforating. Then on the targeting side, the technical teams taking a deep dive, looking at how we target every well within the DSU, I think is what we're seeing leading to the outperformance on the page here.