Diamondback Energy, Inc. will immediately reduce activity from nine completion crews to six and expects to drop two drilling rigs in April 2020 and a third later in the second quarter of 2020.
The drawback was announced in an operational update Monday, quoting recent commodity price volatility.
The Company has already dropped one completion crew as part of its original 2020 plan but is now releasing two more completion crews as a result of the recent and expected oil price weakness.
Diamondback says it will also reduce its capital budget for the year.
Drill, complete and equip spend for 2020 is expected to decrease through the combination of a lower completed well count and lower expected well costs, and corresponding infrastructure and midstream capital budgets are expected to decrease as well.
“As a result of current and expected oil price weakness, we have immediately reduced development activity and expect lower activity levels to continue until we see clear signs of commodity price recovery. While this decision is expected to result in lower 2020 oil production than originally forecast, we will maintain positive cash flow and protect our balance sheet and dividend. We have made these decisions before and they are driven by the goal of protecting shareholder returns over the long term. Our balance sheet is stronger than ever having recently been upgraded to investment grade. We believe that while this is clearly a challenging time for our industry, these are the conditions that Diamondback is prepared for,” stated Travis Stice, Chief Executive Officer of Diamondback.
Mr. Stice continued, “Diamondback has never been about growth for growth’s sake, which we have publicly emphasized consistently since 2015. Because the expected returns of our 2020 program have decreased, we have decided to wait for higher commodity prices to return to growth. We have flexibility on all of our rig and completion crew contracts, and are well-protected with hedges this year for a majority of our production, all of which will allow us to exit this downturn from a position of strength. The ability to develop resources at best in class efficiencies is clearly a differentiator in challenging environments, and since its inception Diamondback has been a leader in this regard. We are well positioned to be a long-term winner in this business due to our inventory depth and quality, best in class cost structure, return of capital program and quality balance sheet.”
To learn more on Diamondback's hedge position, visit their website.