MIDLAND, Texas, Aug. 08, 2018 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ:FANG) announced financial and operating results for the second quarter ended June 30, 2018.

Additionally, Diamondback today announced it has entered into a definitive purchase agreement to acquire all leasehold interests and related assets of Ajax Resources, LLC (“the Seller” or “Ajax”) for $900 million in cash and 2.58 million shares of Diamondback common stock, subject to certain adjustments. The cash portion of this transaction is expected to be funded through a combination of cash on hand, cash proceeds from the previously announced drop down sale ("drop down") of mineral interests to Viper Energy Partners LP ("Viper"), borrowings under the Company's revolving credit facility and/or proceeds from one or more capital markets transactions, which may include a debt offering.

SECOND QUARTER HIGHLIGHTS

• Q2 2018 net income of $219 million, or $2.22 per diluted share; adjusted net income (as defined and reconciled below) of $158 million, or $1.59 per diluted share
• Q2 2018 production of 112.6 Mboe/d (73% oil), up 10% over Q1 2018 and 46% year over year
• Increasing pro forma full year 2018 production guidance range to 115.0 – 119.0 Mboe/d, up 4% from prior guidance midpoint; implies over 45% annualized growth at the midpoint from full year 2017 average daily production
• Q2 2018 cash dividend of $0.125 per share payable on August 27, 2018; implies a 0.4% annualized yield based on August 6, 2018 share closing price of $133.62
• Executed agreements to secure firm oil transportation out of the basin at fixed discounts to Gulf Coast pricing beginning Q3 2018; term sales agreements cover the remainder of expected production
• Executed agreement for option to acquire up to 10% equity interest in the EPIC Crude Oil Pipeline project; increases previously announced volume commitment from 50,000 bo/d to 100,000 bo/d (50% take or pay)
• Announced drop down sale of 1,696 net royalty acres to Viper for $175 million, subject to post-closing adjustments; expected to close in August 2018

AJAX ACQUISITION

• 25,493 net leasehold acres in the Northern Midland Basin, including ~21,000 net acres in Northwest Martin and Northeast Andrews counties; ~89% held by production (“HBP”)
• Producing over net 12,100 boe/d (88% oil) as of August 6, 2018
• 362 net identified potential horizontal drilling locations with an average lateral length of over 9,500 feet; ~220 net potential locations in the top quartile of Diamondback’s current inventory
• ~99% of acreage operated, with average 99% working interest and 23% average royalty burden
• Acreage HBP allows for 12+ well multi-zone pad development in the Middle Spraberry, Lower Spraberry and Wolfcamp A
• Ajax midstream infrastructure includes 40 Mb/d in saltwater gathering and disposal, 45 Mb/d of existing fresh water production and ownership of over 700 surface acres
• Accretive on NAV, acreage, top quartile inventory and 2019 financial metrics
• Company will issue 2.58 million shares of Diamondback common stock to the Seller valued at $345 million based on the August 6, 2018 closing price of $133.62
• Diamondback intends to finance the cash portion of the purchase price, subject to market conditions and other factors, through a combination of cash on hand, cash received from the recently signed mineral drop down to Viper, existing borrowing capacity and/or proceeds from one or more capital markets transactions, which may include a debt offering
• An effective date of July 1, 2018 with anticipated close at the end of October 2018, subject to continued diligence and closing conditions
• Upon completion, the pending Ajax acquisition will bring Diamondback’s total leasehold interests to approximately 230,000 net surface acres in the Permian Basin

“Diamondback extended its track record of successful execution in the second quarter, growing production 10% quarter over quarter, while maintaining its peer leading cash margins and return on average capital employed. Additionally, I am extremely pleased with our organization's continued ability to deliver on securing firm takeaway out of the Permian as we look to maximize our exposure to international pricing. Diamondback's oil marketing strategy in the near term is to secure firm transportation at fixed discounts to Gulf Coast pricing while not compromising realizations over the long term," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, "Diamondback’s announced acquisition of high quality assets from Ajax Resources provides additional Tier 1 resource directly adjacent to our existing acreage in Northwest Martin and Northeast Andrews counties. With approximately 220 net locations capable of generating 100% or greater IRRs at $60/Bbl across three zones, this transaction is accretive to our top quartile inventory, NAV and 2019 financial metrics. We expect the transaction to close at the end of October 2018, with interim Ajax development focused on large multi-well, multi-zone pad development to be assumed by Diamondback in November. Credit is due to the Ajax team for displaying impressive results in two emerging zones for the area, the Wolfcamp A and Middle Spraberry. These results highlight the value of this acreage in our existing portfolio, and more than doubles Diamondback's inventory to 680 net pro forma locations in this area."

Rich Little, Chief Executive Officer of Ajax Resources stated, “This transaction represents a logical transition for the Ajax asset base, as it complements Diamondback’s acreage position very well and further consolidates the Northern Midland Basin. I am extremely proud of what the Ajax team accomplished over the past three years. With the strong sponsorship and support of our private equity partner, Kelso, we were able to deploy the necessary resources and capital to delineate and strategically develop an underexploited asset base.”

OPERATIONAL HIGHLIGHTS

Diamondback’s Q2 2018 production was 112.6 Mboe/d (73% oil), up 46% year over year from 77.0 Mboe/d in Q2 2017, and up 10% quarter over quarter from 102.6 Mboe/d in Q1 2018.

During the second quarter of 2018, Diamondback drilled 53 gross horizontal wells and turned 50 operated horizontal wells to production. The average completed lateral length for second quarter wells was 9,300 feet. Operated completions during the second quarter consisted of 29 Wolfcamp A wells, 18 Lower Spraberry wells and three Wolfcamp B wells.

The Company operated 11 drilling rigs and five dedicated frac spreads during the second quarter of 2018, and plans to add its 12th and 13th operating rigs to development during the third quarter of 2018. Diamondback continues to expect to turn between 170 and 190 gross operated horizontal wells to production for the full year 2018.

OPERATIONS UPDATE

In Pecos County, Diamondback continues to exceed performance expectations from operated completions targeting the Wolfcamp A. The Company recently completed four Wolfcamp A wells with an average lateral of 9,995 feet. These wells achieved an average peak 30-day 2-stream flowing initial production ("IP") rate of 146 boe/d per 1,000 feet (86% oil).

In Reeves County, Diamondback recently completed two Wolfcamp A wells with an average lateral length of 10,228 feet. These wells have achieved a current average peak 30-day flowing IP rate of 219 boe/d per 1,000 feet (81% oil).

FINANCIAL HIGHLIGHTS

Diamondback's second quarter 2018 net income was $219 million, or $2.22 per diluted share. Adjusted net income (a non-GAAP financial measure as defined and reconciled below) was $158 million, or $1.59 per diluted share.

Second quarter 2018 Adjusted EBITDA (as defined and reconciled below) was $370 million, up 9% from $341 million in Q1 2018.

Second quarter 2018 average realized prices were $61.57 per barrel of oil, $1.54 per Mcf of natural gas and $28.02 per barrel of natural gas liquids, resulting in a total equivalent unhedged price of $50.26/boe, down 1% from $50.55/boe in Q1 2018.

Diamondback's cash operating costs for the second quarter 2018 were $8.83 per boe, including lease operating expenses ("LOE") of $4.16 per boe, cash general and administrative expenses of $0.87 per boe and taxes and transportation of $3.80 per boe.

As of June 30, 2018, Diamondback had $81 million in standalone cash and $322 million outstanding under its revolving credit facility.

During the second quarter of 2018, Diamondback spent $338 million on drilling, completion and non-operated properties, and $88 million on infrastructure and midstream.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.