Q3 2025 Diamondback Energy Inc Earnings Call

Okay.

After the Speakers' presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.

To withdraw your question. Please press star one again.

Be advised that today's conference is being recorded.

Speaker #1: Good day, and thank you for standing by. Welcome to the Diamondback Energy third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.

I would now like to hand, the conference over to your first speaker today, Adam Lawlis VP of Investor Relations. Please go ahead.

Speaker #1: After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press *11 on your telephone; you will then hear an automated message advising your hand is raised.

Thank you Brian.

And welcome to Diamondback Energy's third quarter 2025 conference call during our call today, we will reference an updated investor presentation that letter to stockholders, which can be found on diamondbacks website.

Representing diamondback today are cadence mentor.

Speaker #1: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Adam Lawlis, VP of Investor Relations.

Danny Wilson and Jeremy Thompson CFO. 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.

Speaker #1: Please go ahead.

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.

Speaker #2: Thank you, Brianna. Good morning, and welcome to Diamondback Energy's third quarter 2025 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.

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.

Speaker #2: Representing Diamondback today are Case Van Hoff, CEO; Danny Wesson, COO; and Jerry Thompson, CFO. 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.

I'll now turn the call over to Kate.

Thanks, and I hope everybody read the letter last night.

We have done in the past we are just going to move straight into Q&A. So operator, let's open the line for questions. Please.

Speaker #2: 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 on the company's filings with the SEC.

Thank you at this time, we will conduct a question and answer session. Please standby.

Speaker #2: 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.

Our first question comes from Neal Dingmann of William Blair. Your line is now open.

Speaker #2: I'll now turn the call over to Case.

Good morning, guys nice quarter that feedback on my first question is on <unk> activity.

Speaker #3: Thanks, Adam, and I hope everybody read the letter last night. As we've done in the past, we're just going to move straight into Q&A.

Typically well I know you guys continue to talk about the stop signs scenario, depending on the bathroom condition seem liked some other Permian operators here recently.

Speaker #3: So, operator, let's open the line for questions, please.

Speaker #4: Thank you. At this time, we will conduct the question-and-answer session. Please stand by. Our first question comes from Neil Dingman of William Blair. Your line is now open.

To accelerate.

Even at these prices. So I'm just wondering does it does sort of others I guess lack of capital discipline.

As you just think about changing your plans.

Given you all are in a lower operator, and I guess, I'd say cash flow as cash flow.

Speaker #5: Good morning, Case. Nice quarter and nice to be back on. My first question is on activity. Specifically, while I know you guys continue to talk about the stop sign scenario depending on the macro condition, it seemed like some other permitting operators here recently continued to accelerate even at these prices.

Yes Neal.

Thank you.

We obviously track what everybody else is doing in the Permian, we have a lot of visibility into.

What's going on but we also have a lot of conviction and where we stand and you know.

What our plan is.

Yes, we can get into a game of who has the lowest cost structure reinvestment ratio, which which we do on a year to date basis.

Speaker #5: So I'm just wondering, does sort of others, I guess, lack of capital discipline cause you to think about changing your plans? Given you all are in a lower operator, and I guess I'd say cash flow is cash flow.

We have a 36% reinvestment rate.

Mid sixties oil you know I think thats something that would have been unheard of six or seven years ago.

Speaker #3: Yeah, Neil, I mean, I think we obviously track what everybody else is doing in the permitting. We have a lot of visibility into what's going on, but we also have a lot of conviction in where we stand.

As investors pushed us to generate more cash or free cash over cash flow and I think thats. The key point right. We are we are focused on generating free cash flow per share growing free cash flow per share over growing cash flow.

Speaker #3: And what our plan is, I think we can get into a game of who has the lowest cost structure reinvestment ratio, which we do.

Into a tiny was macro environment now when the when the when the.

Speaker #3: And on a year-to-date basis, we have a 36% reinvestment rate at mid-60s oil; I think that's something that would have been unheard of six or seven years ago.

You know assumptions change in the macro changes, we have the flexibility to change that.

We're just going to do it with a much lower share count.

Speaker #3: As investors pushed us to generate more free cash over cash flow. And I think that's the key point, right? We are focused on generating free cash flow per share, growing free cash flow per share, overgrowing cash flow into a tenuous macro environment.

Lower net debt.

And off of a lower cost structure.

No I'm glad to say that I'm glad you're not changing the stripes there and then.

Good question I mean, it gets more just generic maybe case for you or Danny around slide eight specifically continue to look at I guess I'd call. It your development style versus others.

Speaker #3: Now, when the assumptions change and the macro changes, we have the flexibility to change that. We're just going to do it with a much lower share count, lower net debt, and off of a lower cost structure.

<unk> continued to be lower I'm, just wondering specifically what differentiates your development style versus others is it the larger projects I mean does that factor in or what what what is the driver when I'm looking at this slide.

Yeah, I mean listen I think slightly is the most important slide in the deck.

Speaker #6: No, I'm glad to see that. I'm glad you're not changing the stripes there. And then second question, I guess more just generic, maybe Case, for you or Danny around slide eight, specifically continue to look at, I guess I'd call it your development style versus others.

It explains a lot about what we've done to study development in the basin and improve our development over time, you know I think.

In our company history Diamondback has been it's been very well known to have.

The lowest cost structure in the best execution.

Speaker #6: And you continue to be lower; I'm just wondering specifically what differentiates your development style versus others. Is it the larger projects? I mean, does that factor in, or what is the driver when I'm looking at this slide?

<unk> has been loss not loss, but it is it hasn't been highlighted which were trying to highlight here is that not only we're doing.

Drilling more wells per section, but the performance we have.

Speaker #3: Yeah, I mean, listen, I think slide eight's the most important slide in the deck. It explains a lot about what we've done to study development in the basin and improve our development over time.

Her well in that section, meaning the full section is developed in a more capital efficient manner is resulting in a lot higher overall returns per section right. We famous.

Speaker #3: I think in our company history, Diamondback's been very well known to have the lowest cost structure and the best execution. What I think has been lost—not lost, but it hasn't been highlighted—which we're trying to highlight here is that not only are we doing drilling more wells per section, but the performance we have per well in that section—meaning the full section is developed in a more capital-efficient manner—is resulting in a lot higher overall returns per section, right?

Famously moved to co development in 2019, now we're co developing all zones in the Midland Basin and sort of focusing on single well returns. We're really focused on what the return is per section or per D. S U and I'm really proud of what the two teams of endeavor and Diamondback.

Together and created the best of both worlds right you have the combination of the best inventory in the best cost structure, resulting in.

The lowest reinvestment rate in the outlets you see on slide eight so I think it's a very important slide that I'd like investors to pay a lot of attention to.

Speaker #3: We famously moved to co-development in 2019. Now we're co-developing all zones in the Midland Basin. And instead of focusing on single-wall returns, we're really focused on what the return is per section and per DSU.

Very good thank you Buddy.

Thanks Neil.

Thank you.

Our next question is from David <unk> of TD Cowen. Your line is now open.

Speaker #3: And I'm really proud of what the two teams at Endeavor and Diamondback have merged together and created the best of both worlds, right? You have the combination of the best inventory and the best cost structure resulting in the lowest reinvestment rate and the outputs you see on slide eight.

Thanks, guys for taking my questions. This morning.

Keith maybe you can talk about you know you guys talked about fourth quarter guidance and that sort of $925 million Capex for <unk> was you kind of get back into more of a maintenance mode.

Speaker #3: So I think it's a very important slide that I'd like investors to pay a lot of attention to.

Speaker #6: Very good. Thank you, buddy.

Generally I guess.

Speaker #3: Thanks, Neil.

Is that a decent kind of run rate for goalposts for 'twenty six to sort of hold that's 505000 barrels a day of crude flat kind of pro forma for the Viper deal.

Speaker #4: Thank you. Our next question is from David Deckelbaum of TD Cohen. Your line is now open.

Yeah, Dave.

Speaker #7: Thanks, guys, for taking my questions this morning. Case, maybe you can talk about—you guys talked about fourth quarter guidance and that sort of 925 million dollar CapEx.

That's kind of a new the new baseline is five 510 oil we're going to sell some we announced the sale of some production.

Production at Viper, So we'll go down to 505, five or 5000.

Speaker #7: For 4Q, as you kind of get back into more of a maintenance mode, generally, I guess are those—is that a decent kind of run rate for goalposts for 26 to sort of hold that 505,000 barrels a day of crude flat kind of pro forma for the Viper deal?

Barrels a day kind of run rate in Q1, I think if we decided to hold that production level flat.

We're in the range of our Q4 Capex is is it good is a good bogey to to look at all.

I'll kind of take you back to where we were in Q2, if you recall our original budget. This year for 2025 four.

Speaker #3: Yeah, David, that's kind of the new baseline: 510 oil. We're going to sell some—we announced a sale of some production of Viper. So, we'll go down to 505,000 barrels a day kind of run rate in Q1.

$4 billion of Capex that.

We cut by 10% immediately and then another $100 million after that so capex was down 500 million from.

Speaker #3: I think we decide to hold that production level flat. Somewhere in the range of our Q4 CapEx x is a good bogey to look at.

Post Liberation day moves that we've made and we've made those moves defensively thinking oil was going to get weaker a lot sooner.

And as a result production declined slightly so you know this year's number is a it's a very good number anytime we anytime we would slow down activity you know capex is going to outperform the change in production and now we're just kind of level it off.

Speaker #3: And I'll kind of take you back to where we were in Q2. If you recall, our original budget this year for 2025 was 4 billion dollars in CapEx.

Speaker #3: That we cut by 10% immediately, and then another 100 million after that. So CapEx was down 500 million from made—and we made those moves defensively, thinking oil was going to get weaker a lot sooner.

And this kind of call. It 75 to 975 range to hold that a new baseline of 510000 barrels a day going down to 505 and in Q1 of next year flat. So a lot of moving parts. This year, but we felt like it was a year, where we had to pivot mid year given the concerns on.

Speaker #3: And as a result, production declined slightly. So this year's number is a very good number. Anytime we slow down activity, CapEx is going to outperform the change in production.

Both both oversupply and the potential demand weakness, but.

We're all demand with demand looks strong and supply is the hot debate now.

Speaker #3: And now we're just kind of leveling off in this kind of—call it 875 to 975 range—to hold that new post-liberation day moves that we day going down to 505 in Q1 of next year flat.

I appreciate that color.

Considering it's it's the best slide in the deck slide eight our most important slide I feel compelled to ask a question on it but you know what.

When you look at those three graphs.

Speaker #3: So a lot of moving parts this year, but we felt like it was a year where we had to pivot mid-year given the concerns on both oversupply and the potential demand weakness.

As you move into more of the endeavor acquired acreage in 'twenty six should we anticipate any.

Any significant changes to those three graphs and you know is it fair to assume that that they're that or can you talk to your confidence levels around dwell productivity as you kind of start harvesting and putting together. These plans around some of the acquired pieces.

Speaker #3: But overall demand looks strong, and supply is the hot debate now.

Speaker #6: I appreciate that color. Considering it's the best slide in the deck, slide eight, or most important slide, I feel compelled to ask a question on it.

I'll, let al talk about the specifics, but I'll go back to the the announcements.

When we merged with endeavor.

Speaker #6: But when you look at those three graphs, as you move into more of the Endeavor acquired acreage in '26, should we anticipate any significant changes to those three graphs?

We told our investors that are basically if you took our pro forma average PV 10 per well.

We looked at it at the time of the deal. Our next five years at the time of the deal was going to improve by almost 20% and I think what youre seeing in slide eight is that that synergy coming through.

Speaker #6: Is it fair to assume that—or can you talk to your confidence levels around well productivity as you kind of start harvesting and putting together these plans around some of the acquired pieces?

Because not only did we get bigger, but we got better when we did that deal and al you would talk about 26, yeah, David I think.

Speaker #3: Yeah, I'll talk about the specifics, but I'll go back to the announcement when we merged with Endeavor. And then we told our investors that our basically, if you took our pro forma average PB10 per well, and looked at it at the time of the deal, our next five years at the time of the deal was going to improve by almost 20%.

You look at the 25, well performance and compare that.

The 23% 24, it's very consistent and you know as we look forward to 2006.

We expect that to be very consistent with the 24 and 25 program.

Speaker #3: And I think what you're seeing in slide eight is that that synergy coming through, because not only did we get bigger, but we got better when we did that deal.

I appreciate it guys good luck.

Thanks, Dave.

Speaker #3: And Al, you want to talk about '26?

Thank you.

Speaker #2: Yeah, David, I think if you look at the '25 well performance and compare that back to '23 and '24, it's very consistent. And as we look forward to '26, we expect that to be very consistent with the '24 and '25 program.

Our next question is from Arun <unk> of Jpmorgan Securities LLC. Your line is now open.

Good morning, gentlemen, case I was wondering if you could start a little bit on the efficiency gains front.

And maybe elaborate a little bit.

Speaker #6: I appreciate it, guys. Good luck.

Your further improvements on the drilling side and love to get a little bit more insights on this continuous pumped.

Speaker #3: Thanks, David.

Speaker #4: Thank you. Our next question is from Arun Jayaram, of JPMorgan Securities, LLC. Your line is now open.

Pumping.

<unk> that you're now implementing on your house.

How is this fleets and what could that do.

Or your dollar per foot, which I think has been in that $5 50 to $5 80 range in the Midland Basin.

Speaker #8: Good morning, gentlemen. Case, I was wondering if you could start a little bit on the efficiency gains front. And maybe elaborate a little bit on your further improvements on the drilling side and love to get a little bit more insights on this continuous pumping design that you're now implementing on your how Zeus Fleets and what could that do for your dollar per foot, which I think has been in that 550 to 580 range in the Midland Basin?

Let me give you some high level and then pass it to Daniel but from a high level perspective. This year, while costs have come down even in the face of steel.

Steel tariffs hitting our business to the tune of about 20% on our steel costs. So.

It's a credit to the team that with the headwinds of something we can't control steel tariffs hurting us we've been able to you know.

Find ways to increase efficiencies.

Even without service cost kind of plummeting throughout the year. So Danielle I don't want to give some detail on continuous pumping in the drilling side, yes on the drilling side you know, it's really been a story of getting more consistent with those kind of.

Speaker #3: Yeah, Arun, let me give you some high level and then pass it to Danny. But from a high level perspective, this year, well costs have come down even in the face of steel tariffs hitting our business to the tune of about 20% on our steel costs.

Uh huh.

You know top 10% performance wells in this quarter, we did about one out of every 10 wells was under five days and we were talking about one or two wells and previous quarters ever under five days. So it's just getting more consistent delivering this really really improve.

Speaker #3: So it's a credit to the team that with the headwinds of something we can't control, steel tariffs hurting us. We've been able to find ways to increase efficiencies even without service costs kind of plummeting throughout the year.

Speaker #3: So Danny, I don't know if you want to give some detail on continuous pumping and the drilling side.

Crescive drilling results and continuing to drive down the average spud to TD days.

Speaker #2: Yeah, on the drilling side, it's really been a story of getting more consistent with those kind of top 10% performance wells. And this quarter, we did about one out of every 10 wells was under five days.

And on the completions front continuous pumping we're really excited about.

We're not modeling any any material cost savings today, we you know we.

We do believe that.

Getting 20% more lateral footage completed in a day.

Speaker #2: And we were talking about one or two wells in previous quarters that were under five days. So it's just getting more consistent delivering those really, really impressive drilling results.

Add level, you know, we should see some savings flow through to that it's just hard to model that today with the additional equipment and everything that we have to set up to get the crews are running on continuous.

Speaker #2: And continuing to drive down the average spud to TD days. And on the completions front, the continuous pumping, we're really excited about. While we're not modeling any material cost savings today, we do believe that getting 20% more lateral footage completed in a day on a pad level, we should see some savings flow through to that.

Continuous pumping.

I do think the one thing that continuous pumping and more lateral footage per day does for US is it improves the cycle times and get any production that we've watered out when we go in and Frac in a contiguous feel that production comes back online faster and that's.

One of the key benefits that will.

We will accrue to our shareholders over the long haul.

Speaker #2: It's just hard to model that today with the additional equipment and everything that we have to set up to get the crews all running on continuous pumping.

Okay.

Super interesting.

My follow up is is case you brought back slide 25, which is on power Gen and you know some of the opportunities perhaps for diamondback.

Speaker #3: But I do think the one thing that continuous pumping and more lateral footage per day does for us is it improves the cycle times and gets any production that we've watered out when we go in and frack in a continuous field, that production comes back online faster.

Given your surface acreage youre natural gas output in West Texas.

As well as the fact that you do consume power for your own internal operations.

Speaker #3: And that's kind of one of the key benefits that we'll accrue to our shareholders over the long haul.

Thoughts on bringing back that slide and maybe just an update.

On your corporate development activities around.

Speaker #8: Super Super interesting. My follow-up is, Case, you brought back slide 25, which is on power gen and some of the opportunities perhaps for Diamondback, just given your surface acreage.

This important topic for investors.

Yeah, Jerry is going to give you all the details around I would just say generally we did that for a reason and we're starting to get a lot more confidence in what could be an interesting story for for diverse development and gas pricing over the over the coming years.

Speaker #8: Your natural gas output in West Texas, as well as the fact that you do consume power for your own internal operations. I'm wondering about your thoughts on bringing back that side and maybe just an update on your corporate development activities around this important topic, at least for investors.

Yes, good observation around.

Last week, you may have seen that we committed up to 50 million a day of our Nat gas to competitive power adventures for their new one three gigawatt baseline ranch Powerplant in Ward County.

Speaker #3: Yeah, Jerry's going to give you all the details, Arun. I would just say, generally, we did that for a reason, and we're starting to get a lot more confidence in what could be an interesting story for Diamondback's development and gas pricing over the coming years.

We expect this to be operational in 2029. This was done under a long term supply agreement with pricing index to ERCOT and we view it as a creative in basin egress solution for our natural gas supply.

Speaker #2: Yeah, good observation, Arun. Last week, you may have seen that we committed up to $50 million a day of our NAT gas to competitive power ventures.

And although in this particular scenario it is low volumes, we feel it's a it's a small piece in a much larger story for us, which is consciously moving away from Wow and for reference there, but by year end 2026, we expect what exposure to be down to just over 40% of gas sales as compared to a little.

Speaker #2: For their new $1.3 gigawatt basin ranch power plant in Ward County. We expect this to be operational in 2029. This was done under a long-term supply agreement with pricing indexed to ERCOT.

70% today.

And Additionally, we continue to work on other power projects that could potentially use cheap diamondback gas and surface.

Speaker #2: And we view it as a creative inbasin egress solution for our natural gas supply. And although in this particular scenario, it is low volumes, we feel it's a small piece and a much larger story for us, which is consciously moving away from Waha.

Deep blue water and near term generation solutions to bring data centers to the Midland Basin.

And as I mentioned last quarter, it's a long process, but we look forward to updating the market when we have a firm project to discuss.

Speaker #2: And for reference there, by year-end 2026, we expect Waha exposure to be down to just over 40% of gas sales. As compared to a little over 70% today.

Great. Thanks, a lot Jerry.

Thanks Rune.

Speaker #2: And additionally, we continue to work on other power projects. They could potentially use cheap Diamondback gas and surface. Deep blue water and near-term generation solutions to bring data centers to the Midland Basin.

Thank you. Our next question is from Neil Mehta of Goldman Sachs <unk> Co. Your line is now open.

Yes, thank you so much and pace maybe.

Could you share your perspective on where we are with the macro I think you indicated in the letter you think we are at.

Speaker #2: And as I mentioned last quarter, it's a long process, but we look forward to updating the market when we have a firm project to discuss.

The yellow light right now so maybe spend some time thinking about how youre thinking about the moving pieces as we move into 2026.

Speaker #8: Great. Thanks a lot, Jerry.

Neil I mean, we spent a lot of time I think more time than ever this year on the macro.

Speaker #3: Thanks, Arun.

Speaker #4: Thank you. Our next question is from Neil Mehta of Goldman Sachs & Co. Your line is now open.

Unfortunately, we did have to put the yellow life into that in the release for the third time in a row.

Speaker #9: Yeah, thank you so much. And in case maybe I get you to share your perspective on where we are with the macro, I think you indicated in the letter you think we are at the yellow light right now.

I would just say generally the outlook kind of remains murky I think Fortunately, it's a debate on the supply side and it seems that that debate will be resolved sometime in the next couple of quarters.

Speaker #9: So maybe spend some time thinking about how you're thinking about the moving pieces as we move into 2026.

But a couple of things right I would say our attitude is we don't control the price of the product we produce.

Speaker #3: Yeah, Neil, I mean, we spent a lot of time I think more time than ever this year on the macro. Unfortunately, we did have to put the yellow light in the release for the third time in a row.

As an organization, we have 1700 people focused on producing more oil with less cost every day and that's what they've done right. We've been able to generate more free cash this year, 15% more per share.

Speaker #3: I would just say generally the outlook kind of remains murky. I think fortunately it's a debate on the supply side. And it seems that that debate will be resolved sometime in the next couple of quarters.

By oil prices being down 14%, so kind of turn to the tone from Hey, This isn't great too you know, we're going to figure it out and find a way.

Speaker #3: But a couple of things, right? I would say our attitude is we don't control the price of the product we produce. And as an organization, we have 1,700 people focused on producing more oil with less cost every day.

I think the longer this kind of murky macro lasse, the better things will be on the other end.

Diamondback in my mind is going to be one of the long term winners.

Speaker #3: And that's what they've done, right? We've been able to generate more free cash this year, 15% more per share despite oil prices being down 14%.

Whatever the macro presents to us.

Thanks case, and then the follow up is just on M&A and just I guess two components to it one you guys have done a great job selling noncore assets. So you could get your perspective.

Speaker #3: So I've kind of turned the tone from, "Hey, this isn't great," to, "We're going to figure it out and find a way." Because I think the longer this kind of murky macro lasts, the better things will be on the other end.

Are there other opportunities within the portfolio and I think.

Last quarter, you got to there was a lot of attention on.

Speaker #3: And Diamondback, in my mind, is going to be one of the long-term winners of whatever the macro presents to us.

Some of the comments about not being a seller, but I'd be terrified that was clarified your perspective on that.

So just just oh.

Two points comments would be great.

Speaker #9: Thanks, Case. And the follow-up is just on M&A and there's, I guess, two components to it. One, you guys have done a great job selling non-core assets.

I think on the noncore sales first off you know a credit to Jerry and the team you know, we sold 1 billion and a half of primarily 90% non E&P producing assets.

Speaker #9: So just your perspective of are there other opportunities within the portfolio? And I think last quarter you got there was a lot of tension on some of the comments about not being the seller.

At higher multiples than we trade and that in my mind cruise straight to the balance sheet puts our debt load in a good position for whatever the next couple of quarters. You know may hold so I think we've exhausted the majority are at Viper.

Speaker #9: But I think verified, clarified your perspective on that. So just on those two points, comments would be great.

As you might know you'd also executed a noncore or non Permian asset sale at a good number that we'll talk about a couple of hours but.

Speaker #3: Yeah, I think on the non-core sales first off, credit to Jerry and the team. We sold a billion and a half of primarily 90% non-EMP producing assets at higher multiples than we trade.

All in all feel really good about being able to execute on these in a challenging macro at good good valuations and then on the other side of the question. We get that question a lot on our position in the industry and I think generally.

Speaker #3: And that, in my mind, accrues straight to the balance sheet puts our debt load in a good position for whatever the next couple of quarters may hold.

Diamondback has the most coveted asset base in North America, and that's a very privileged position to be in but we didn't.

Speaker #3: So I think we've exhausted the majority of it. Viper as you might know, also executed a non-core or non-Permian asset sale at a good number that we'll talk about in a couple of hours.

We didn't we didn't just fall into it right we have to earn it acre by acre and so we take a lot of pride in our execution and our execution machine and what that means for long term shareholder value.

Speaker #3: But all in all, I feel really good about being able to execute on these in a challenging macro at good valuations. And then on the other side of the question, we get that question a lot on our position in the industry.

Thanks, Keith I appreciate that.

Thank you.

Our next question is from Phillip Jungwirth of BMO. Your line is now open.

Speaker #3: And I think generally Diamondback has the most coveted asset base in North America. And that's a very privileged position to be in. But we didn't just fall into it, right?

Hi, Thanks, good morning.

Good morning.

Circling back on the macro.

I haven't gotten more capital efficient this downturn may.

Speaker #3: We had to earn it acre by acre. And so we take a lot of pride in our execution and our execution machine and what that means for long-term shareholder value.

Maybe it takes until 'twenty seven but curious how you see a green light scenario playing out for the Permian broadly can.

Can you just talk about how less capital efficient it is to grow or stay in maintenance as we saw in 2022 and do you think the industry has the capacity to really accelerate if called upon.

Speaker #9: Thanks, Case. Appreciate the time.

Speaker #4: Thank you. Our next question is from Philip Jungworth of BMO. Your line is now open.

Yeah. So good question.

Speaker #10: Thanks. Good morning.

Were pontificating here, but I certainly believe the industry has the capability to do it. It's just a matter of how capital efficient it is and.

Speaker #3: Good Good morning.

Speaker #10: Circling back on the macro I mean, everyone's gotten more capital efficient this downturn. Maybe it takes until 27, but curious how you see a green light scenario playing out for the Permian broadly.

You know.

My thesis is when it is time for the Green light, which feels like going back to more of that.

Speaker #10: Can you just talk about how less capital efficient it is to grow versus stay in maintenance, as we saw in 2022? And do you think the industry has the capacity to really accelerate if called upon?

70 to 80 range on crude.

The capital that you're spending is going to be have a much higher rate of return than it does at $60 oil and.

Speaker #3: Yeah, so good question. I mean, we're pontificating here, but I certainly believe the industry has the capability to do it. It's just a matter of how capital efficient it is.

It's gonna be spent on a balance sheet, that's shrunk as well as the share count that shrunk. So that's kind of our thesis there I mean, we're certainly generating good returns at at 60, but I think today, we're conscious of the fact that you know, adding crude to a market that is clearly oversupplied. The debate is how oversupplied.

Speaker #3: And my thesis is when it is time for the green light, which feels like going back to more of that 70 to 80 range on crude, the capital that you're spending is going to have a much higher rate of return than it does at $60 oil.

It is not a prudent decision today.

Okay, Great and then coming back to <unk>.

Slide eight here in the deck.

Speaker #3: And it's going to be spent on a balance sheet that's shrunk as well as a share count that's shrunk. So that's kind of our thesis there.

I'd note that your relative ranking on well productivity improved versus the peers.

The question is more when you look at benchmarking on average wells per section.

Speaker #3: I mean, we're certainly generating good returns at 60, but I think today we're conscious of the fact that adding crude to a market that is clearly oversupplied, the debate is how oversupplied is not a prudent decision today.

Thanks leadership, you think can be attributed to you guys just have more core acreage, maybe less power less southern Midland exposure.

Where you have your peer zones.

Or do you think do you think peers are still leaving behind quite a bit of child wells.

Speaker #10: Okay, great. And then coming back to slide 8 here in the deck, I mean, we did note that your relative ranking on well productivity improved versus the peers.

Targeting zones, which.

You also have unique perspective, and given given the Piper.

Yeah listen I think.

Speaker #10: The question is more when you look at benchmarking on average wells per section, how much of Fang's leadership do you think can be attributed to you guys just have more core acreage, maybe less power and less southern Midland exposure where you have your fewer zones?

I think high level, the geology matters, a lot right and it's a huge driver.

As we develop our acreage we have different patterns in different areas and even you know across you know a couple of miles things change very very quickly, but I think the high level takeaway I can let I'll give some more details the high level takeaway is if you multiply wells per section times, well productivity per well.

Speaker #10: Or do you think peers are still leaving behind quite a bit of child wells targeting best zones which you also have unique perspective in given the Viper?

Speaker #3: Yeah, listen, I think high-level geology matters a lot, right? And it is a huge driver. As we develop our acreage, we have different patterns in different areas.

You're getting more oil per section or per <unk>.

At a lower cost structure, and I think that means more PV per acre.

And we've got a lot of acres to do that all.

Hey, you want to add there Joe.

Speaker #3: And even across a couple of miles, things change very, very quickly. But I think that the high level takeaway, and I can let Al give some more details though, the high level takeaway is if you multiply wells per section times well productivity per well, you're getting more oil per section or per DSU at a lower cost structure.

Phil if I I think.

Generally definitely agree with you there case, you know you've look at geology, obviously matters.

And you know diamondback position within the basin is very favorable.

But I think if you dig into the details there.

Youll find differences and development styles.

Speaker #3: And I think that means more PV per acre and we got a lot of acres to do that on. Anyone add there, Al?

Operators just within similar geology.

Speaker #2: Yeah, Philip, I think generally definitely agree with you there, Case. You look at geology, obviously matters. And Diamondback's position within the basin is very favorable.

And I think we feel like the.

The Diamondback development style is differential and really optimizes.

The return for every deal issue in every dollar that.

We're investing there.

Speaker #2: But I think if you dig into the details there, you'll find differences in development styles between operators just within similar geology. And I think we feel like the Diamondback development style is differential and really optimizes the return for every DSU and every dollar that we're investing there.

Alright. Thanks.

Thank you.

Our next question is from Bob Brackett of Bernstein Research. Your line is now open.

Hey, good morning, I'm going to return to the theme around traffic lights. If I contrast, the was the weeks, where you wrote the <unk> shareholder letter around the weeks after liberation day versus you're writing the shareholder letter now the differences Liberation day was new it was very unusual a strange environment right.

Speaker #10: Right, thanks.

Now, we're just kind of in a normal typical oil down cycle and therefore, you have more confidence in and taking that capex right is that our capex up is that a fair assessment.

Speaker #4: Thank you. Our next question is from Bob Brackett of Bernstein Research. Your line is now open.

Speaker #11: Good morning. I'm going to return to the theme around traffic lights. If I contrast the weeks where you wrote the one cue shareholder letter around the weeks after liberation day versus you writing the shareholder letter now, the difference is liberation day was new, it was very kind of unusual or strange environment.

Yeah, Bob I think that's fair.

<unk>.

Naturally we are not.

We don't like change right, we don't like sudden changes that are unexpected and I think.

I wouldn't call the liberation do a black Swan event for our industry, but it was certainly a change versus expectations going into the year and I think you know high level. We were also pretty concerned with the potential demand shock to that.

Speaker #11: And right now we're just kind of in a normal typical oil down cycle. And therefore you have more confidence in taking that CapEx right.

Speaker #11: Is that a CapEx up? Is that a fair assessment?

The numbers on the page of Liberation day implied I don't think Thats ended up happening in terms of trade and global trade, but.

Speaker #2: Yeah, Bob, I think that's fair. I think naturally we're not we don't like change, right? We don't like sudden changes that are unexpected. And I think I wouldn't call liberation day a black swan event for our industry, but it was certainly a change versus expectations going into the year.

The jury is still out but overall I think we ended up getting more comfortable with demand.

Not as much of a supply shock and again, that's kind of why I kind of say the attitude said.

This is what it is and we're going to find a way to make make more money.

Speaker #2: And I think high level we were also pretty concerned with the potential demand shock that the numbers on the page of liberation day implied.

Despite macro headwinds.

And I think you know I think one other thing one other thing Bob sorry to cut you off but one other thing that I have.

Speaker #2: I don't think that ended up happening in terms of trade and global trade, but the jury's still out. But overall, I think we ended up getting more comfortable with demand and not as much of a supply shock.

Whenever we come out of this whatever this is is that our long term shareholders and long only shareholders say what diamondback due through this down cycle. However, bad it gets and if they look back and say Oh no. They didn't.

Speaker #2: And again, that's kind of why I kind of say the attitude said this is what it is and we're going to find a way to make more money despite macro headwinds.

They didn't compromise the balance sheet they bought back shares they paid a dividend and production held in there I think that's a case study for this new business model of the low reinvestment rate high free cash flow.

Speaker #2: And I think one other thing, Bob, sorry to cut you off, but one other thing that I hope whenever we come out of this, whatever this is, is that our long-term shareholders and long-only shareholders say, "What did Diamondback do through this down cycle?

That our business will never be not volatile, but did we reduce volatility by.

By our actions through the through the cycle.

Very clear.

A follow up.

Speaker #2: However bad, it gets." And if they look back and say, "They didn't compromise the balance sheet, they bought back shares, they paid a dividend, and production held in there," I think that's a case study for this new business model of the low reinvestment rate high free cash flow that our business will never be not volatile, but did we reduce some volatility by our actions through the cycle?

You guys are hitting.

Shane over four zones per well and that's the work horses or the middle Sprayberry lower sprayberry again, the wolfcamp, a and b year to date, you've got 6% of your wells.

Other zones is that a development strategy or an exploration strategy. If I can sort of crude like contrast, like are you learning stuff or are you just folding in that sort of fit zone and workhorse mode.

Speaker #10: Very clear. On the follow-up, you guys are hitting a shade over four zones per well, and that's the workhorses are the middle sprayberry, lower sprayberry, and the wolf camp A and B.

Yeah Yeah.

Can give some details at a high level. This is most of that is moving into development. There are zones, we've tested but it sounds like the upper sprayberry in the Wolfcamp D is starting to get more capital.

Speaker #10: Year to date, you've got 6% of your wells hitting other zones. Is that a development strategy or an exploration strategy? If I can sort of crudely contrast, are you learning stuff or are you just folding in that sort of fifth zone in workhorse mode?

<unk> seeing less impact on overall productivity I think is a good thing for inventory ratio.

Yeah Bob.

It's really a combination of both of those strategies case mentioned upper Sprayberry Wolfcamp B.

Those zones or perspective, we're really allocating capital to those and co developing with the more traditional sort of co development zones within the Midland Basin I think the other piece of that is a resource expansion story and looking at some of the deeper zones like the Barnett.

Speaker #2: Yeah, I mean, Al can give some details. At a high level, most of that is moving into development. There are zones we've tested but zones like the upper sprayberry and the wolf camp D starting to get more capital.

Speaker #2: While seeing less impact on overall productivity, I think is a good thing for inventory duration.

Woodford.

Speaker #3: Yeah, Bob, it's really a combination of both of those strategies. Like Case mentioned, the upper sprayberry, wolf camp D, where those zones are prospective, we're really allocating capital to those and co-developing them with the more traditional sort of co-development zones within the Midland basin.

And delineating those are around the basin and I think we're really excited about the results of those two zones.

And have some some really promising our well performance.

Public coming pretty soon.

That's super interesting thanks for that.

Speaker #3: I think the other piece of that is a resource expansion story and looking at some of the deeper zones like the Woodford and delineating those around the basin.

Thanks, Bob.

Thank you.

Our next question is from Scott Hanold of RBC capital markets. Your line is now open.

Speaker #3: Barnett and the

Thanks can you do you. Obviously you mentioned you you hit your target asset sales.

Speaker #3: And I think we're really excited about the results of those two zones and have some really promising well performance that'll be public coming pretty soon.

At this point, how do you view the equity ownership of those various interests you have.

And maybe specifically on deep Blue, where there are future capital calls like strategically does it make sense to own them as is there a monetization opportunity there.

Speaker #10: That's super interesting. Thanks for that.

Speaker #2: Thanks, Bob.

Yeah listen I think I think of the strategy of depot, who is playing out very nicely I think they've saved.

Speaker #4: Thank you. Our next question is from Scott Hanold of RBC Capital Markets. Your line is now open.

They've done an incredible job building the third party business that was not something that we were you know probably built to do it if it was 100% owned by Diamondback. So I think high level, where we're very happy with our 30% ownership it seems that market attention.

Speaker #11: Thanks.

Speaker #11: sales. At this point, how do you view the equity ownership, those various interests you have? And maybe specifically on deep blue where there are future capital calls like strategically, does it make sense to own them?

As.

Increased on water and water management throughout the basin.

Speaker #11: Is there a monetization opportunity there?

And I think that's good for valuations and then I think.

Speaker #2: Yeah, listen, I think the strategy of deep blue is playing out very nicely. I think they've done an incredible job building the third-party business that was not something that we were probably built to do if it was 100% owned by Diamondback.

Lastly, I think there's some tangential opportunities for deep blue when it comes to water for for power needs.

And some of the surface use management that we can do it at diamondback in conjunction with our our partner So I think high level, we're happy with the 30%.

Speaker #2: So I think high level we're very happy with our 30% ownership. It seems that the market attention has increased on water and water management throughout the basin.

At some point that business will monetize or look look different.

A large private investment, but right now.

Speaker #2: And I think that's good for valuations. And then I think lastly, I think there's some tangential opportunities for deep blue when it comes to water for power needs.

We're creating a lot of value in the shadows.

Got it and in the capital range, you generally get for maintenance any kind of equity interest capital call. It would be sort of included that or would that be outside of that.

Speaker #2: And some of the surface use management that we can do at Diamondback in conjunction with our partners. So I think high level we're happy with the 30%.

That'd be outside of that but we haven't seen one of those in a long time.

Got it Okay and my gut and my follow up question is just you know you talked a little bit about like targeting zones, and what you're all doing but like can you with 2026 is there any kind of a shift in activity allocation across both like acreage you know regionally within the Midland or even you know does the Delaware getting.

Speaker #2: At some point that business will monetize or look different than a large private investment. But right now, they're creating a lot of value in the shadows.

Speaker #10: Got Got it. And the capital range you generally get for maintenance, any kind of equity interest capital call would be sort of included that or would that be outside of that?

And you know do zones, such as like the Woodford and Barnett get a you know a little bit more attention as well.

Speaker #2: That'd be outside of that. But we haven't seen one of those in a long time.

I think the high levels of the Delaware is going to get less attention.

Speaker #10: Got it. Okay. And my follow-up question is, just you talked a little bit about targeting zones and what you're all doing, but can you with 2026, is there any kind of a shift in activity allocation across both acreage regionally within the Midland or even does the Delaware get attention?

Even in this year.

Pretty well held over there and most of the development sits further down on our development stack, but but I do think you'll continue to see like you can see on slide 15, the average percentage by zone in the Midland Basin continue to.

Speaker #10: And do zones such as the Woodford and Barnett get a little bit more attention as well?

No evolved with with new zones being added in.

And the challenge for the team as you know.

Speaker #2: Yeah, I think the high level, the Delaware is going to get less attention even than this year. We're pretty well held over there. And most of the development sits further down in our development stack.

Continuing to improve well productivity, despite adding what people perceive as lower quality zones, but I do think we also have some more Barnett Woodford test and we look forward to a full kind of asset update on that zone at some point next year.

Speaker #2: But I do think you'll continue to see like you can see on slide 15, the average percentage by zone in the Midland basin continue to evolve with new zones being added in.

Anything on testing those zones I think that's right I mean, I think you'll see us continue to delineate the zones around the Midland Basin then for.

26, I would expect that percentage to tick up.

Speaker #2: And the challenge for the team is continuing to improve well productivity despite adding what people perceive as lower quality zones. But I do think we also have some more Barnett, Woodford tests, and we look forward to the full kind of asset update on that zone at some point next year.

Kind of like <unk> seen over the past couple of years is as we figure out where we're the best well performance is throughout the basin in and allocate capital appropriately.

Look forward to that thank you.

Speaker #2: Al, do you want anything on testing those zones?

Thanks Scott.

Speaker #3: No, I think that's right. I mean, I think you'll see us continue to delineate those zones around the Midland basin and for '26, I would expect that that percentage to tick up kind of like you've seen over the past couple of years is as we figure out where the best well performance is throughout the basin and allocate capital appropriately.

Thank you.

Our next question comes from Kelly <unk> of Bank of America. Your line is now open.

Hey, good morning, guys.

Wanted to follow up on the topic of maintenance capital at $925 million per quarter. I'm wondering if you can put some definition around that because headline production, it's moved around quite a bit in the last 18 months. So what is the associated maintenance oil production level, maybe on an operated basis associated with that and then is this spend level.

Speaker #10: Look forward to that. Thank you.

Speaker #2: Thanks, Scott.

Speaker #4: Thank you. Our next question comes from Calle Akamine of Bank of America. Your line is now open.

We said that all the ratable non D&C spend.

Yeah, Hi.

A high level right.

Speaker #11: Hey, good morning, guys. I want to follow up on the topic of maintenance capital at 925 million dollars per quarter. Wondering if you can put some definition around that because headline production has moved around quite a bit in the last 18 months.

Some range of Q4, you know we recognize that if a company stays flat for the following year, which as you know maybe the base case today, we'll see what happens in the next couple of a couple of months, we recognize that the street likes to take Q4 numbers and multiplying by four.

Speaker #11: So what is the associated maintenance oil production level maybe on an operated basis associated with that? And then is this spend level inclusive of all the credible non-DNC spend?

That's kind of why we put capital out there where it is I still think theres a lot of things that could go our way.

Efficiencies steel prices et cetera that we have no visibility into today, but high level total D C and E plus non D C need capex.

Speaker #2: Yeah, Kelly, I mean, high level, right, it's some range of Q4. We recognize that if a company stays flat for the following year, which is maybe the base case today, we'll see what happens in the next couple of months.

Can be somewhere in that.

A range of outcomes, we put out for Q4 multiply by four and I think.

Speaker #2: We recognize that the street likes to take Q4 numbers and multiply them by four. And that's kind of why we put capital out there where it is.

If you normalize to where we were going into the year right last year, we were going to spend $4 billion for nearly 500000 barrels of oil a day and now we're going to spend somewhere in the range of less than that.

Speaker #2: I still think there's a lot of things that could go our way. Efficiencies, steel prices, etc., that we have no visibility into today. But high level, total DC and E plus non-DC and E CapEx is going to be somewhere in that range of outcomes we put out for Q4 multiplied by four.

For about five 510000 barrels of oil a day and I.

I think I put that capital efficiency up with with anyone as well as any any year outside of this year and Diamondback 's history.

We definitely do like modeling by multiplying by four.

Speaker #2: And I think if you normalize to where we were going into the year, right, last year we were going to spend $4 billion for nearly 500,000 barrels of oil a day.

My second question.

He told me that there is a lot of uncertainty around the 26 oil macro but you guys do have a very large backlog that gives you a lot of flexibility to shape a range of production outcomes for next year. So can you give us an update on where you expect to be with that backlog at year end and they talk about activating that you intend to reach into that bucket as you kind of reset the opinion.

Speaker #2: And now we're going to spend somewhere in the range of less than that for about 510,000 barrels of oil a day. And I think I put that capital efficiency up with anyone, as well as any year outside of this year in Diamondback's history.

Senior Frac operation is true what you guys are calling contingent which drilling or do you actually need to add another back to tap all of those opportunities.

Speaker #11: We definitely do like modeling by multiplying by four. For my second question, I appreciate that there's a lot of uncertainty around the 26 oil macro.

Well I think on the continuous pumping thing the exciting thing is though you use one less crew most likely have to one less crew on an annual basis.

Speaker #11: But you guys do have a very large duct backlog that gives you a lot of flexibility to shape a range of production outcomes for next year.

But on the on the DUC backlog I.

Speaker #11: So can you give us an update on where you expect to be with that backlog at year end? And then talk about activating that.

I think what with oil prices being hanging in there all year and with the efficiencies you know where they are we've actually drilled probably more wells than we originally expected in the year and so we're still well positioned.

Speaker #11: Do you intend to reach into that bucket as you kind of reset the efficiency in your frac operations through what you guys are calling continuous drilling?

Speaker #11: Or do you actually need to add another frac to tap all those opportunities?

Paul that DUC lever, if we need to I think.

Speaker #2: Well, I think on the continuous pumping thing, the exciting thing is that you use one less crew most likely, half to one less crew on an annual basis but on the duct backlog, I think what with oil prices being hanging in there all year, and with the efficiencies where they are, we've actually drilled probably more wells than we originally expected in the year.

You know a lot goes on behind the scenes here to make sure we continue to execute flawlessly and hit numbers and make what looks easy on the outside as well.

Actually a lot harder on the inside so I think maintaining that DUC backlog as a structural advantage for us, particularly with our size and scale and we're putting pipe in the ground almost is cheapest.

Thinking about the Covid era.

Speaker #2: And so we're still well positioned to pull that duct lever if we need to. I think a lot goes on behind the scenes here to make sure we continue to execute flawlessly and hit numbers and make what looks easy on the outside is actually a lot harder on the inside.

Days.

That's a good capital to spend.

Thanks for the color thanks, guys.

Okay.

Thank you.

Our next question is from Kevin Mccurdy Pickering Energy Partners. Your line is now open.

Speaker #2: So I think maintaining that duct backlog is a structural advantage for us, particularly with our size and scale. And we're putting pipe in the ground almost as cheap as the COVID era days; that's I think that's good capital to spend.

Hey, good morning.

Case in your shareholder letter you mentioned the benefits of the studio acquisition for Viper and the potential M&A market for minerals and royalties I Wonder if you could just kind of expand on the benefits you see the Fang.

Beyond just the cash flow contributions for the minerals.

Speaker #11: Thanks for the color. Thanks, Case.

Yeah, I think I think I will say for the first time, but I do think there is a huge asset at Viper that.

Speaker #4: Thank you. Our next question is from Kevin McCurdy of Pickering Energy Partners. Your line is now open.

That's paid dividends at bank, that's not just royalty interest and that's just private data right, we have private well level data on on half of the wells in the Permian.

Speaker #6: Hey, good morning. Case, in your shareholder letter, you mentioned the benefits of the City Oil acquisition for Viper and the potential M&A market for minerals and royalties.

Every major.

Development or every major change in development as something we can see on a private level and I think for the engineers.

Speaker #6: I wonder if you could just kind of expand on the benefits you see to Fang. Beyond just the cash flow contributions for the minerals.

That allows us to study others faster than than anybody else that also allows us to change.

Speaker #2: Yeah, I think I want to say for the first time, but I do think there's a huge asset at Viper that pays dividends at Fang that's not just royalty interest.

The change with how we do things faster than everybody else and I think as.

Speaker #2: And that's this private data, right? We have private well-level data on half of the wells in the Permian and probably every major development or every major change in development is something we can see on a private level.

As the basin evolves companies are going to be testing different things, some riskier than others and some things are going to work and some things are and we can replicate that very quickly at scale at Diamondback al you want to add anything to that.

Speaker #2: And I think for the engineers that allows us to study others faster than anybody else, it also allows us to change how we do things faster than everybody else.

I think it's a huge advantage like cases, saying to have the private data and have be able to understand.

Not only what other operators are doing from a development standpoint, but also the actual well level performance and returns and that's really differential.

Speaker #2: And I think as the basin evolves, companies are going to be testing different things. Some riskier than others. And some things are going to work and some things aren't.

Any other data source out there.

Speaker #2: And we can replicate that very quickly at scale at Diamondback. Al, you want to add anything to that?

I appreciate the details there.

And then for my follow up you mentioned earlier that you had 70% of your.

Speaker #3: No, I think it's a huge advantage. Like Case is saying, to have the private data and have be able to understand not only what other operators are doing from a development standpoint, but also the actual well-level performance and returns.

Current gas volumes go into Walmart and you expect by year end.

2026 down to be.

That would be down to 40% and I Wonder if you could just walk through the pieces of it.

You know, what you've disclosed of where that gas.

Speaker #3: And that's really differential to any other data source out there.

We will go it's not going to work.

Yeah, Yeah, where are we on it too.

The pipelines coming on next year right now we have a good amount of space on on Whistler and.

Speaker #6: Appreciate the details there. And then for my follow-up, you mentioned earlier that you had 70% of your current gas volumes going to Waha and you expect by the year-end 2026 down to be that would be down to 40%.

And a black hole and then whatever what's the whitewater one coming on next year.

Black I'm, sorry, I forgot matter or sorry, Ron Whistler Matterhorn today Black Com comes on next next year, that's another probably two.

Speaker #6: And I wonder if you could just walk through the pieces of what you've disclosed of where that gas will go, if not going to Waha.

$202 50, a day and then.

Most energy transfer buying W. T G, which we're an investor and we've decided to work with them and commit some gas to do that he rents and pipeline going.

Speaker #2: Yeah, yeah. We're going to be on two of the pipelines coming on next year. Right now, we have a good amount of space on Whistler and Blackcomb.

You know going East and I think I think we've also then save some.

Speaker #2: And then whatever what's the Whitewater one coming on next year? Blackcomb.

Some gas to potentially go go west should one of those pipelines get built and have an opportunity to put gas on it or contributed a good amount of gas to power project and.

Speaker #3: Blackcomb.

Speaker #2: Sorry. Sorry, we're on Whistler,

Speaker #3: We're on Matterhorn.

Speaker #2: Matterhorn today. Blackcomb comes on next year. That's another probably 200, 250 a day. And then post-energy transfer buying WTG, which we were an investor in, we've decided to work with them and commit some gas to that Hugh Brinson pipeline going east.

I think.

Our investors demand us to do better on our gas realizations and we've listened to them and I think it's kind of.

Thank you.

Speaker #2: And I think we've also then saved some gas to potentially go west, should one of those pipelines get built. We have an opportunity to put gas on it or contribute a good amount of gas to a power project.

Thank you.

Our next question is from Doug Leggate of Wolfe Research. Your line is now open.

Thanks for.

We're having a new one.

I wanted to go back to the question about the coda inventory.

Speaker #2: And I think our investors demand us to do better on our gas realizations. And we've listened to them. And I think it's coming.

And the co development.

Obviously, when you talk about core I think we've touched on this a couple of years ago and I just wanted to get an update you talked about core you're generally talking about Europe.

Your best inventory, but in a co development you'd obviously, bringing in.

Speaker #6: Thank you.

Lower than tier one.

Speaker #4: Thank you. Our next question is from Doug Legate of Wolf Research. Your line is now open.

Locations I guess so.

When we think about the 10 years of quota inventory what does that look like on a development cadence in other words is it 14 15 or how do you think about it.

Speaker #12: Hey, thanks, Case, for having me on. I wanted to go back to the question about the core inventory. And the core development. Obviously, when you talk about core, I think we've touched on this a couple of years ago, and I just wanted to get an update.

Yeah, I mean, I'll, let al talk about.

What we put in a section the team at core but high level, we're completing about 500 wells a year and half.

Speaker #12: When you talk about core, you're generally talking about your best inventory. But in the core development, you're obviously bringing in lower than tier one locations, I guess.

<unk> 5050 500.

Core locations, which in my mind is sub 40.

Inventory you know Theres a lot of other inventory that opens up at higher oil prices, but.

Speaker #12: So when we think about the 10 years of core inventory, what does that look like on a development cadence? In other words, is it 14, 15, or how do you think about it?

Thats the inventory that we would model in an acquisition.

And that's the inventory that we're developing today.

Speaker #2: Yeah, I mean, I'll let Al talk about what we put in a section to deem it core. But high level, we're completing about 500 wells a year.

Yeah, No I got it you know I think when we kind of thinking about how we design idea issue for development.

We're looking at those zones.

Speaker #2: And have about 5,000, 5,500 core locations, which in my mind is sub-40 type inventory. There's a lot of other inventory that opens up at higher oil prices, but that's the inventory we would model in an acquisition.

Are the highest rate was the highest rate of return zones first.

And then looking at the zones.

Got it.

We can co develop and would interfere with those other zones.

So really holistically looking at Usu.

Speaker #2: And that's the inventory that we're Yeah, it's over the long term, we're doing the right things. It's not great over the next 12 months.

Speaker #2: developing today.

Think about optimizing the landing points in the zones that are being developed within that issue. So that we don't degrade the well performance.

It was maybe not secondary but lower tier horizon, when we develop the core zones right. So you know really trying to optimize so that we don't believe our children wells, we don't leave stranded wells.

We would then have to come back to.

It would be severely integrated from an economic standpoint.

It's a use it or lose it situation given that given the nature of the Midland Basin and.

I think Dan you would say you know, we we drill every fourth well for free relative to peers and that allows us to add those zones and developments where others are not.

So with the uplift of 10 years to a bigger number than or is that included in the 500 a year.

It's a dynamic number Frank I mean, theres going to be more and more wells added to it next year I think I think the Barnett and Woodford.

We'll probably.

Given recent results be.

My mind, a tier one development zone, there needs to be more well control and proof, but that's what we're working on every day.

Thank you for that my follow up is on gas I mean, obviously you touched on some of the pipes.

Coming online you guys do I guess about 500.

500 bps a year.

I'm trying to understand if you have your own.

<unk> solution outside of just waiting on someone else, adding infrastructure, whether it would be a power deal or something else but.

I mean at the end of the day at dollar $500 million a year is pretty meaningful for you. If that's a big bucket change in gas price and you're kind of giving it away right now so I'm just curious what's going on in the background in terms of how you improve your gas realizations.

Yeah, I mean, we kind of laid out the new pipes that we're gonna beyond.

When they come on at the end of 'twenty six.

I'll kind of take you back to the history of our.

Our company is unfortunately, whether we like it or not we grew through acquisition and as we grew through acquisition.

Most of the acreage that we bought was already dedicated sometimes to the sister Midstream company of the upstream company. So we've been working through through that I think with endeavor, we actually got a lot of them. We actually had a lot of molecules free to make decisions on to move further downstream, which has been helpful.

And we now have the size and scale to be able to contribute to these various pipes to get to different markets and I think it's going to move to you know.

Making sure we have the right diversity of markets downstream versus versus here, you know with the power kicker being something that's exciting as well so.

Over the long term, we're doing the right things its not great over the next 12 months, we protected that with.

Hedges, knowing that we can control the molecules further downstream, but that time is coming.

Great stuff. Thanks, so much.

Thanks, Doug.

Thank you.

Our next question is from Geos G of Daniel Energy Partners. Your line is now open.

Hey, guys I just had a quick follow up on the continuous pumping.

Just wondering how many fleets since deployed on today and I.

Speaker #2: We protected that with hedges, knowing that we couldn't control the molecules further downstream. But that time is coming.

Thank you everyone and five if memory serves and sort of you know how many will be rolled out in the next couple of quarters as you get to full deployment.

Speaker #12: Great stuff. Thanks, Alex.

Hey, Jeff Yeah, we're running two today and.

Speaker #2: Thanks, Doug.

And planning on converting the additional fleets.

Speaker #4: Thank you. Our next question is from Geoff Jay of Daniel Energy Partners. Your line is now open.

As soon as possible as soon as we can.

You know all the equipment lined out hopefully in the next quarter.

Speaker #13: Hey, guys. I just had a quick follow-up on the continuous pumping. Just wondering how many fleets it's deployed on today and I think you're running five memory serves.

And.

That will probably.

Kind of run for.

You know full time fleets with the physically.

Speaker #13: And sort of how many will be rolled out in the next couple of quarters as you get to full deployment?

Now as needed.

In a maintenance type scenario.

Excellent and then one quick follow up on sort of base production work, but you guys talked about last quarter.

Speaker #3: Hey, Geoff. Yeah, we're running two today. And planning on converting the additional fleets as soon as possible, as soon as we can get all the equipment lined out to hopefully in the next quarter.

Are there any updates there.

Any changes to kind of what you are seeing any improvements.

Yes.

We continue to allocate capital into.

Speaker #3: And anticipate that we'll probably kind of run four full-time fleets with the fifth fleet bouncing in and out as needed in a maintenance-type scenario.

And so you know working overwhelm older wells and optimizing the PDP tail and then real excited about some of the stuff. We've seen some of the results we've seen out of our.

Has it ization oxidation.

Speaker #13: Excellent. And then one quick follow-up on sort of base production work that you guys talked about last quarter. Are there any updates there? Are you any changes to kind of what you're seeing?

Stimulation work.

Also you know.

<unk> some other chemistries that we're doing some stimulation work downhole with in and seeing some encouraging reserve results early on we don't have enough data yet to really talk about anything but yeah. We continue to focus on optimizing the channel and deploying capital there and you feel like it's some of the highest return on capital we can span, albeit.

Speaker #13: Any improvements?

Speaker #3: Yeah, we've continued to allocate capital into working over wells, older wells, and optimizing the PDP tail and been real excited about some of the stuff we've seen, some of the results we've seen out of our assetization, oxidation stimulation work.

Vietnam large numbers, but you know if we can we can.

In.

You know do the work to delineate what's working.

Speaker #3: We're also trialing some other chemistries that we're doing some stimulation work down hole with and seeing some encouraging results early on. We don't have enough data yet to really talk about anything.

We can scale it and hopefully become a significant part of our capital deployment in four years, Yeah. I think that's also a huge.

Potential upside as you know as some of this work gets done and developed.

Speaker #3: But we continue to focus on optimizing the tail and deploying capital there. And you feel like it's some of the highest return capital we can spend, albeit not large numbers but if we can do the work to delineate what's working, we can scale it and hopefully become a significant part of our capital deployment and forward years.

Can you lower your reinvestment rate can you move more dollars from the D&C side too you know post completion work or production work and are you know lower of that cash.

Capital need to replace your production every year and you know what kind of said something in the letter never underestimate the American engineer and we got we got a lot of engineers, who are working on on the tail end of our production.

Speaker #2: Yeah, and I think that's also a huge potential upside is as some of this work gets done and developed, can you lower your reinvestment rate?

As that becomes a much more important part of our of our plan here.

Excellent thanks, guys.

Speaker #2: Can you move more dollars from the DMC side to post-completion work or production work? And lower that capital need to replace your production every year.

Thank you.

Our next question is from Leo Mariani of Ross. Your line is now open.

Speaker #2: And what kind of said something in the letter, never underestimate the American engineer and we got a lot of engineers here working on the tail end of our production.

Yeah, Hi, you guys laid out certainly the case for yellow light and instantly talk about how you might get back to the Green light I was hoping you could provide maybe a little bit more commentary on what you would kind of be a red light scenario as we roll into 2026 at this point.

Speaker #2: As that becomes a much more important part of our plan here.

Speaker #13: Excellent. Thanks, guys.

You know in terms of kind of cost and you know oil prices any kind of high level are you now sort of indications can help would be great.

Speaker #4: Thank you. Our next question is from Leo Mariani of Roth, your line is now open.

Yes, it's really it's really this oil price right.

Thank you.

Speaker #2: Yeah, hi, you guys laid out certainly the case for yellow light and certainly talked about a bit how you might get back to the green light.

We start to print months consecutively in the fifties and in print a month of near $50 oil I think it's I think everybody should be looking at their plan and say should have deferred capital here at these at these prices I think Fortunately, given where diamondbacks positioned today, we don't need to be the first person to look at that.

Speaker #2: I was hoping you could provide maybe a little bit more commentary on what you would kind of view a red light scenario as you roll into 2026 at this point.

Speaker #2: In terms of kind of costs and oil prices, any kind of high-level sort of indications you can help with would be great.

I think we can look at it behind the scenes.

We're executing year to date at $63 oil with a 36% to 37% reinvestment ratio you know that's a very very solid place to be in our dividend.

Speaker #3: Yeah, Leo, it's really just oil price, right? And I think if we start to print months consecutively in the 50s and print a month near $50 oil, I think everybody should be looking at their plan and say, "Should I defer capital here at these prices?" I think fortunately, given we're Diamondback's position today, we don't need to be the first person to look at that.

In danger in fact, it probably has room to grow balance sheet strong maturities are getting handle.

And costs are covered both so I think we're doing all the things we need to do to be prepared for for worse, but I'm also.

Speaker #3: I think we can look at it behind the scenes. But we're executing year-to-date at $63 oil with a 36, 37% reinvestment ratio. That's a very, very solid place to be in.

Shine when when things get better.

Okay.

Obviously, the yellow light scenario you guys have detailed kind of a number of strategies.

Wanted to kind of get a sense, just given that ILUVIEN reinvestment rate.

Speaker #3: Our dividend's not in danger. In fact, it probably has room to grow. Balance sheet strong, maturities are getting handled. And costs are at COVID lows.

Obviously kind of how are other uses of capital may come into play here.

The buybacks were very healthy this quarter, which is certainly nice to see but also wanted to see if you think in the yellow light scenario, perhaps other type of acquisitions bolt ons or whatever may merge. It also could benefit the company. So maybe just talk a little about M&A, you said kind of free cash flow there.

Speaker #3: So I think we're doing all the things we need to do to be prepared for worse, but also shine when things get better.

Speaker #13: Okay. And then obviously, the yellow light scenario, you guys have detailed kind of a number of strategies. Wanted to kind of get a sense just given the low reinvestment rate obviously kind of how other uses of capital may come into play here.

It certainly seems like the buyback is can continue to stay pretty healthy just wanted to confirm that.

Yeah, I think I think the primary use of free cash is still the base dividend second as you know buying back in our minds at least 1% of our public float per quarter and.

Speaker #13: The buybacks were very healthy this quarter, which is certainly nice to see. But also wanted to see if you think in the yellow light scenario, perhaps other type of acquisitions, bolt-ons, or whatever may emerge and also could benefit the company.

And that still leaves free cash to do other things I think.

The primary use after that would be you know continuing to pay down debt, but yeah, we're still doing a little bolt on deals here and there I think there's a lot of big trades that we've been working on that are not their cashless, but they're very value accretive.

Speaker #13: So maybe just talk a little bit about M&A use of kind of free cash flow there and certainly seems like the buyback is going to continue to stay pretty healthy.

Speaker #13: Just wanted to confirm that.

Speaker #3: Yeah, I think for the primary use of free cash is still the base dividend. Second is buying back, in our minds at least, 1% of our public float per quarter.

So yeah, we're not we're not sitting still here theres a lot of things for US left to do we're fortunate to have a very high working interest in everything that we develop a viper.

Speaker #3: And that still leaves free cash to do other things. I think the primary use after that would be continuing to pay down debt. But yeah, we're still doing little bolt-on deals here and there.

Viper continues to grow its business, but.

Terms of Big M&A, I think diamondback is going to be more more selective.

<unk> seen a few deals happened without our name on it and.

You know I think we're in a good position.

Speaker #3: I think there's a lot of big trades that we've been working on that are not they're cashless, but they're very value accretive. So yeah, we're not sitting still here.

Okay. Thank you.

Thank you.

Our final question is from Cheng Paul with Scotiabank. Your line is now open.

Speaker #3: There's a lot of things for us left to do. We're fortunate to have a very high working interest in everything that we develop. Viper continues to grow its business, but in terms of big M&A, I think Diamondback is going to be more selective.

Alright, thank you.

Alright.

Kind of team can't just too much debt.

If we look at the old program today.

Speaker #3: You've seen a few deals happen without our name on it. And I think we're in a good position.

Percentage of the way I would bet you I get the three miles so long ago.

And if we're looking at over the next several years based on your existing land position.

Speaker #13: Okay, thank you.

Program that you ship.

Second debt one of your a lot much larger Taco Bell Papa.

Speaker #4: Thank you. Our final question is from Cheng Paul of Scotiabank, your line is now open.

Proprietary technology using a lightweight proponent.

Speaker #14: Hi, thank you. Hi, team. I'm just curious, if we're looking at your program today, what percentage of the wells that you are in are three miles or longer?

To help them to improve that.

We coupled where you might be buying the uptick.

30%.

Wanted to see if you guys have looked at that Oh.

Speaker #14: And if we're looking at, over the next several years, based on your existing land position, how that program may shift? Secondly, one of your much larger customers is discussing their proprietary technology using a lightweight proponent, which will help them to improve their recovery rate, possibly by, say, up to 30%.

Anything similar in the months that you can deploy or tested or that this is truly equal part to me that that's what we mean nothing out there that you guys will be able to deploy.

Yes, okay.

Longer laterals and talked about what we've been working on and I'll take the second one.

Hey, Paul Yeah. So looking at the 25 plan, a three mile laterals and longer.

Speaker #14: I want to see if you guys have looked at that out there, is there anything similar in the market you can deploy or test it or that this is truly proprietary that that's really nothing out there that you guys will be able to deploy?

It makes up about 20%, 25% of the total program.

Really I think the exciting part is kind of pushing to those extended laterals right. So about 6% of the total was actually 17 five or 20000.

Speaker #14: Thank you.

Yeah, I think we've done some things on the longer laterals with.

Speaker #2: Yeah, I was going to take the longer laterals and talk about what we've been working on. I'll take the second one.

Different casing designs and pumping.

Speaker #3: Hey, Paul. Yeah, so looking at the 25 plan, three-mile laterals and longer. It makes up about 20, 25% of the total program. And really, I think the exciting part is kind of pushing to those extended laterals, right?

Plans to improve results on the on the longer laterals over time.

And then on your second question listen I think it's great.

There's a lot of technology being tested out in the basin I wouldn't sleep, but our ability to continue to test different technologies to not only improve recoveries.

Speaker #3: So about 6% of the total is actually 17.5 or 20,000.

On the front end, but also as well.

Wells deplete, increasing those recoveries you no longer.

Speaker #2: Yeah, I think we've done some things on the longer laterals with different casing designs and pumping plans to improve results on the longer laterals over time.

Dan you talked about later in the tail and maybe some other things that were.

We're working on as a group that we look forward to updating the market on but.

Speaker #2: And then on your second question, listen, I think it's great that there's a lot of technology being tested out in the basin. I wouldn't sleep on our ability to continue to test different technologies to not only improve recoveries on the front end, but also as wells deplete increasing those recoveries longer that Danny talked about later in the tail and maybe some other things that we're working on as a group that we look forward to updating the market on.

I would just say Paul in slide eight the results speak for themselves and we're very proud of what we do at the cost structure, we execute that and those are the decisions, we make to maximize returns and NPV per section.

Great.

My first question, when you're saying that it's 2025 per panel.

For 2025 over the next several years, how that program is going to look like.

Yeah, Paul It continues to grow and we can continue to push lateral lengths and I think.

Speaker #2: But I just say, Paul, in slide eight, the results speak for themselves, and we're very proud of what we do at the cost structure we execute at.

One thing we continue to watch is how you know some some peers in the basin are getting creative with pushing lateral length Ndsu's with you turn wells in J Hook wells and how can we think about how we can leverage that and longer DSO used to push lateral length, even further beyond three miles in.

Speaker #2: And those are the decisions we make to maximize returns and NPV per section.

Speaker #14: Great. And my first question, when you say there is 20, 25% of three-mile path for 2025, over the next several years, how that progress is going to look like?

And you know they are doing it today to take a 5000 foot DSO, you and make it a 10000 foot the issue that we're really contemplating can we take that.

Speaker #3: Yeah, yeah. Paul, it continues to grow, and we continue to push lateral length. And I think one thing we continue to watch is how some peers in the basin are getting creative with pushing lateral length in DSUs with U-turn wells and J-hook wells and how can we think about how we can leverage that in longer DSUs to push lateral length even further beyond three miles.

And thank our 10000 foot <unk> and make it a 20000 foot the issue and I think you know as.

As as operators continue to push the limits on this stuff, we're going to we're going to watch it in and deploy that technology.

You know rapidly we can do it successfully and continue to lower breakeven.

Speaker #3: And they're doing it today to take a 5,000-foot DSU and make it a 10,000-foot DSU. We're really contemplating, can we take that and take a 10,000-foot DSU and make it a 20,000-foot DSU?

If you think that you can get to 50% over the next five years.

No never never does but I think today, it's hard to see.

Engineered.

Speaker #3: And I think as operators continue to push the limits on this stuff, we're going to watch it and deploy that technology rapidly if we can do it successfully and continue to lower break-evens.

Yeah, but but today I think.

I think next year, we expect lateral length to be up.

So we're going to keep working on trades.

And other things to keep them as long as possible.

Okay perfect. Thank you.

Thanks, Paul.

Speaker #14: Do you think that you can get to, say, 50% over the next five years?

Thank you.

I am showing no further questions at this time I would now like to turn it back to Tom for closing remark.

Speaker #3: Never doubt us, but I think today it's hard to see.

Thanks, everybody for taking the time today, we're always available to answer any questions you might have and.

Speaker #14: You have a lot of smart engineers.

Speaker #3: Yeah, but today, I think next year we expect lateral length to be up. And we're going to keep working on trades and other things to keep them as long as possible.

We'll talk to you in a few quarters or in a quarter.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker #14: Okay. Perfect. Thank you.

Speaker #3: Thanks, Paul.

Speaker #4: Thank you. I am showing no further questions at this time. I would now like to turn it back to Case Monthoff for closing remarks.

Speaker #3: Thanks, everybody, for taking the time today. We're always available to answer any questions you might have. And we'll talk to you in a few quarters or in a quarter.