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    Earnings call· Jun 2026(Q2 FY26)

    Diamondback Energy Q2 FY26 earnings call FANG

    Aug 4, 2026 Source

    Executive summary

    Diamondback Energy Q2 FY26 — Strong Operational Execution and Strategic Capital Allocation

    Diamondback Energy delivered strong Q2 FY26 results, driven by robust operational execution and strategic capital allocation. The company achieved significant production growth and continued to enhance well productivity and drilling efficiency, particularly in the Wolfcamp D. Management emphasized a flexible capital allocation strategy, reducing net debt while selectively engaging in share buybacks, and is actively pursuing innovative projects like the Bryant Ranch data center power solution.

    Highlights

    5

    • Production grew by 4% year-to-date FY26 from the start of the year.

    • Waha gas prices turned positive for the entire month of July.

    • Achieved over 21 hours of average pumping time per day in Q2 FY26, a new operational efficiency milestone.

    • Wolfcamp D drilling costs hit stretch goals of $300 per foot, down from a budget of $3.50-$3.60 per foot.

    • Reduced net debt by $1.6 billion in Q2 FY26, translating to $5.60 per share of value.

    Concerns

    3

    • Casing prices are expected to increase by 1% to over 1% of total well cost in H2 FY26.

    • Lease operating expense (LOE) is not expected to trend down in H2 FY26, likely circling $6 per barrel or higher.

    • Ongoing geopolitical events contribute to heightened volatility in oil markets.

    Guidance & targets

    7
    CategoryTargetConfidence
    Organic production growth
    low single-digit organic growth
    high materiality
    High
    Frac crews operating
    5 frac crews consistently
    medium materiality
    High
    Quarterly capital run rate
    $1 billion to a little over $1 billion a quarter
    high materiality
    Medium
    Bryant Ranch data center project first gas
    as soon as the back half of 2027
    medium materiality
    High
    Bryant Ranch data center project grid-connected power
    as soon as 2028
    medium materiality
    Medium
    Casing price inflation
    1% to a little over 1%
    low materiality
    High
    Lease operating expense (LOE)
    circling that $6 number or a little higher
    medium materiality
    Medium

    Operational metrics

    20
    Production growth
    4%from where we started the year
    YTD FY26

    Company responded to price signals to increase production.

    Net debt reduction
    $1.6 billion
    Q2 FY26

    Translates to $5.60 a share of value from debt to equity.

    Value from net debt reduction
    $5.60
    Q2 FY26

    Value transferred from debt side to equity side.

    Shares repurchased
    over 5%
    FY25

    Company bought back over 5% of stock in 2025.

    Average pumping time per day
    over 21 hours
    Q2 FY26

    First full quarter of continuous pumping.

    Wolfcamp D drilling cost budget
    $3.50-$3.60
    Current

    Team's budget for drilling costs.

    Wolfcamp D drilling cost (stretch goal)
    $300
    Current

    Team is hitting their stretch goals for drilling costs.

    Barnett drilling cost target
    $400 or less
    Future

    Target to make returns competitive with base plan.

    EOR well productivity improvement (average)
    100 to 150 barrels per dayfrom a 150 to 200-barrel a day well
    Initial results

    Average uplift seen in initial 12-well surfactant project, with wide dispersion.

    EOR well productivity improvement (max)
    triple or quadruple
    Initial results

    Some wells saw production triple or quadruple.

    Lease operating expense
    below $6
    Q2 FY26

    Fell below $6/barrel, partially drove EBITDA beat.

    Quarterly capital run rate
    $1 billion to a little over $1 billion
    FY27

    To hold production flat.

    Non-D&C spend
    $600 million
    FY26

    Across science and midstream.

    Waha gas price
    positivecompared to Q2
    July

    Result of new pipes starting to flow.

    Frac fleet fuel type
    —
    Current

    Utilizing electric fleets mitigates inflation hurdle from rising fuel costs.

    Casing price inflation
    1% to a little over 1%of our total well cost
    H2 FY26

    Expected increase in casing prices.

    Pumping feet per day
    5,000 feet
    Future

    Next bogey for efficiency across all crews.

    Natural gas set aside for Bryant Ranch
    $200 million to $250 million
    Future

    Gas set aside for the data center power project.

    Deep Blue ownership
    30%
    Current

    Diamondback owns 30% of Deep Blue.

    Historical buyback price target
    $90
    Q3 2021

    Initial mid-cycle price target for buybacks post-COVID.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activityover 21 hourshours/day
    Realized price differentialpositive
    Basin level production volume4%%
    Cost of supply unit cash cost$300USD/foot
    FCF shareholder distributions$1.6 billionUSD

    Deals & partnerships

    2
    MultipleBolt-on acquisitions net of divestitures, primarily for Barnett leasing, extending laterals, or blocking up positions.$385 million

    Net of divestitures, these deals are typically small ($20M-$100M) but consistent, occurring about once a quarter.

    Double EagleContinuing leasing play in the Barnett position.

    Partnership for Barnett leasing, contributing to blocking up the position and enabling longer lateral development.

    Capital programs

    1
    Bryant Ranch Data Center Power Projectunderway

    Benefit: scalable, reliable power near Midland, Texas; 200-250 MMcf/d nat gas solution

    A shovel-ready development project on 30,000-acre Bryant Ranch, with secured distributed power generation, remediated land, and direct access to dedicated natural gas and water supply. Awaiting ERCOT's final determination for Batch 0 interconnection study.

    Risks & headwinds

    3
    Inflationary pressuresH2 FY26

    Casing prices expected to increase by 1% to over 1% of total well cost in H2 FY26. LOE expected to circle $6/barrel or higher in H2 FY26.

    Mitigation: Utilizing electric frac fleets to mitigate fuel cost inflation; driving efficiencies to offset variable costs.

    Geopolitical volatilityOngoing

    Heightened volatility on the upside and heightened volatility on the downside in oil markets.

    Mitigation: Focusing on the fundamental belief that crude oil drawn from inventories must be replaced, providing a long-term bid for oil.

    Midstream infrastructure for Barnett developmentAs Barnett development scales

    Infrastructure capital is higher in the beginning and then reduces.

    Mitigation: Working on tailored designs for new batteries to support large-scale Barnett development in areas without existing infrastructure.

    What to watch in Q3 FY26

    5

    Bryant Ranch Data Center Project Progress

    August 20 (ERCOT meeting), H2 2027 (first gas), 2028 (grid-connected power)
    CurrentAwaiting ERCOT's final determination for Batch 0 interconnection study.
    TargetDefinitive documentation signed with a hyperscaler; ERCOT approval for Batch 0.

    Why it matters

    This project represents a significant new in-basin gas solution and potential for material uplift in gas pricing, as well as new revenue streams from land and Deep Blue.

    We are closely monitoring communication out of Austin and remain confident in a project like ours with low water use and new generation ultimately meeting batch 0 standards. We'll give the market a larger update once we've signed the definitive documentation with a hyperscaler but are confident in the direction that this project is going.

    Q&A highlights

    5

    What is Diamondback's macro view on low worldwide inventory levels, and will this lead to continued strategic production growth into 2027?

    Kaes believes draining global inventories, including SPRs, will need to be refilled, providing a longer-term bid for oil. This supports a strategy of low single-digit organic growth for FY27, running 5 frac crews, while maintaining flexibility to react to market changes.

    “I think our bet is that these global inventories, including SPRs are going to need to be rebuilt. And that should be a positive for Diamondback shareholders and Diamondback's growth trajectory.”

    asked by Neal Dingmann · answered by Kaes Van't Hof

    2 min read6 chapters

    Detailed Narrative

    01

    Macro View & Inventory Rebuild

    Management believes global oil and product inventories are draining and will need to be refilled, providing a "longer-term bid for oil." This underpins their confidence in strategic production growth. They acknowledge market volatility🌐 but are betting on the need to rebuild inventories, including SPRs, which should be positive for Diamondback's growth trajectory.

    02

    Well Productivity & Capital Allocation

    Diamondback's operational strategy focuses on maximizing NPV per section by blending high wells per section, high production per well, and low cost per well. This "stacked innovation play" involves continuous improvement in well construction, targeting, and stimulation, leading to better results and capital efficiency. The company aims to continuously improve the business to maintain its position.

    03

    Gas Strategy & Data Centers

    The company sees a "gas mega theme" and aims to own more space to the Gulf Coast for large demand centers like power projects and data centers, as well as LNG terminals. They are developing a "wellhead to water gas strategy" and are actively pursuing a data center power project at their 30,000-acre Bryant Ranch location near Midland, Texas. This project aims to deliver scalable, reliable power and is awaiting ERCOT's final determination for interconnection.

    04

    Enhanced Oil Recovery (EOR)

    Diamondback is actively exploring EOR technologies, viewing it as a "mega theme" for improving oil recoveries. They have executed a 12-well surfactant project with "very positive" initial results, seeing production triple or quadruple in some wells. The company is learning which rock types and methodologies work best and is incorporating the technology into new well pads to understand its impact on new wells versus remedial work.

    05

    Barnett Development

    The company has expanded its Barnett position and is aggressively developing it, with the first 4-well pad (Spanish Trail) drilled and awaiting completion. They are focused on reducing drilling costs to "$400 or less per foot" to make returns competitive with the base plan. The Barnett is expected to become a larger portion of the development plan moving forward.

    06

    Wolfcamp D Efficiency

    Diamondback has significantly improved the cost efficiency of Wolfcamp D drilling, with costs hitting stretch goals of "$300 a foot" from a budget of "$3.50-$3.60 a foot." This, combined with acreage from the Endeavor merger, has made Wolfcamp D a more competitive part of their capital allocation program, contributing to consistent or improved productivity per foot despite adding new zones.

    AI-generated summary of the company’s earnings call. Not investment advice.