filings.toolsItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are an independent oil and natural gas company currently focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. As discussed in Note 1—Description of the Business and Basis of Presentation and Note 18—Segment Information of the condensed notes to the consolidated financial statements, as of June 30, 2024, we have one reportable segment, the upstream segment.
Second Quarter 2024 Financial and Operating Highlights
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Recorded net income of $837 million.
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Paid dividends to stockholders of $352 million during the second quarter of 2024 and declared a combined base and variable dividend payable in the third quarter of 2024 of $2.34 per share of common stock.
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Had no repurchases of our common stock, leaving approximately $1.6 billion available for future purchases under our common stock repurchase program at June 30, 2024.
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Our cash operating costs were $11.67 per BOE, including lease operating expenses of $5.88 per BOE, cash general and administrative expenses of $0.63 per BOE and production and ad valorem taxes and gathering, processing and transportation expenses of $5.16 per BOE.
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Our average production was 474.7 MBOE/d.
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Drilled 71 gross horizontal wells in the Midland Basin and nine gross horizontal wells in the Delaware Basin, and turned 86 gross operated horizontal wells (79 in the Midland Basin and seven in the Delaware Basin) to production.
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Incurred capital expenditures, excluding acquisitions, of $637 million.
Transactions and Recent Developments
WTG Midstream Transaction
On July 15, 2024, the WTG joint venture completed the WTG Midstream transaction, and in connection with that closing we received 10.1 million common units of Energy Transfer LP and $190 million in cash, subject to customary adjustments. Of the 10.1 million common units received, approximately 4.1 million is held in escrow pursuant to a separate escrow agreement.
See Note 17—Subsequent Events of the condensed notes to the consolidated financial statements for further discussion of the WTG Midstream transaction.
Pending Endeavor Acquisition
On February 11, 2024, we entered into the Merger Agreement to acquire Endeavor for consideration consisting of a base cash amount of $8.0 billion, subject to adjustments under the terms of the Merger Agreement, and approximately 117.27 million shares of our common stock. The pending Endeavor Acquisition is expected to close in the third or fourth quarter of 2024, subject to regulatory approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction or waiver of certain other customary closing conditions. As a result of the pending Endeavor Acquisition, the Endeavor Stockholders are expected to hold, at closing, approximately 39.5% of our outstanding common stock. In a special meeting held on April 26, 2024, our stockholders approved the issuance of our common stock to Endeavor as consideration for the Endeavor Acquisition.
See Note 16—Endeavor Energy Resources, LP Acquisition of the condensed notes to the consolidated financial statements for further discussion of the pending Endeavor Acquisition.
Commodity Prices
Prices for oil, natural gas and natural gas liquids are determined primarily by prevailing market conditions. Regional and worldwide economic activity, extreme weather conditions and other substantially variable factors influence market conditions for these products. These factors are beyond our control and are difficult to predict. During the six months ended 2024 and 2023, WTI prices averaged $78.81 and $74.77 per Bbl, respectively, and Henry Hub prices averaged $2.21 and $2.54 per MMBtu, respectively.
For additional information around risks related to commodity prices, see Part II. Item 3. Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk.
Upstream Operations
Our activities are primarily directed at the horizontal development of the Wolfcamp and Spraberry formations in the Midland Basin and the Wolfcamp and Bone Spring formations in the Delaware Basin within the Permian Basin. Additionally, our publicly-traded subsidiary, Viper, is focused on owning and acquiring mineral interests and royalty interests in oil and natural gas properties primarily in the Permian Basin and derives royalty income and lease bonus income from such interests.
As of June 30, 2024, we had approximately 484,992 net acres, which primarily consisted of approximately 347,417 net acres in the Midland Basin and 137,255 net acres in the Delaware Basin.
The following table sets forth the total number of operated horizontal wells drilled and completed during the periods indicated:
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Drilled | Completed**(1)** | Drilled | Completed**(2)** | ||||||||||||||||||||||||||||||||||||||||||||
| Area: | Gross | Net | Gross | Net | Gross | Net | Gross | Net | |||||||||||||||||||||||||||||||||||||||
| Midland Basin | 71 | 67 | 79 | 72 | 140 | 134 | 180 | 161 | |||||||||||||||||||||||||||||||||||||||
| Delaware Basin | 9 | 8 | 7 | 6 | 19 | 17 | 7 | 6 | |||||||||||||||||||||||||||||||||||||||
| Total | 80 | 75 | 86 | 78 | 159 | 151 | 187 | 167 |
(1)The average lateral length for the wells completed during the second quarter of 2024 was 11,203 feet. Operated completions during the second quarter of 2024 consisted of 21 Lower Spraberry wells, 20 Wolfcamp A wells, 16 Wolfcamp B wells, 10 Middle Spraberry wells, nine Jo Mill wells, five Dean wells, three Wolfcamp D wells, one Second Bone Spring well and one Barnett well.
(2)The average lateral length for the wells completed during the first six months of 2024 was 11,343 feet. Operated completions during the first six months of 2024 consisted of 51 Lower Spraberry wells, 39 Wolfcamp A wells, 31 Wolfcamp B wells, 25 Jo Mill wells, 22 Middle Spraberry wells, nine Wolfcamp D wells, five Dean wells, three Upper Spraberry wells, one Second Bone Spring well and one Barnett well.
As of June 30, 2024, we operated the following wells:
| As of June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Vertical Wells | Horizontal Wells | Total | |||||||||||||||||||||||||||||||||
| Area: | Gross | Net | Gross | Net | Gross | Net | |||||||||||||||||||||||||||||
| Midland Basin | 2,581 | 2,441 | 2,450 | 2,228 | 5,031 | 4,669 | |||||||||||||||||||||||||||||
| Delaware Basin | 37 | 35 | 688 | 633 | 725 | 668 | |||||||||||||||||||||||||||||
| Total | 2,618 | 2,476 | 3,138 | 2,861 | 5,756 | 5,337 |
As of June 30, 2024, we held interests in 18,899 gross (5,413 net) wells, including 503 gross (77 net) wells in which we have a non-operated working interest.
Guidance
We are raising the midpoints of both total and net oil production for the full year 2024 due to production outperformance year-to-date. Additionally, we are lowering the midpoint for capital expenditures as well as increasing activity levels for the full year 2024 due to continued cost control and efficiency gains, respectively.
The following table presents our current estimates, which do not take into account the pending Endeavor Acquisition, of certain financial and operating results for the full year of 2024, as well as production and cash tax guidance for the third quarter of 2024:
| 2024 Guidance | |||||
| Net production - MBOE/d | 462 - 470 (from 458 - 466) | ||||
| Oil production - MBO/d | 273 - 276 (from 270 - 275) | ||||
| Q3 2024 oil production - MBO/d (total - MBOE/d) | 271 - 275 (459 - 466) | ||||
| (Unit costs $/BOE): | |||||
| Lease operating expenses, including workovers | $5.90 - $6.40 (from $6.00 - $6.50) | ||||
| General and administrative expenses - cash | $0.55 - $0.65 | ||||
| Non-cash stock-based compensation | $0.40 - $0.50 | ||||
| Depreciation, depletion, amortization and accretion | $10.75 - $11.50 (from $10.50 - $11.50) | ||||
| Interest expense (net of interest income) | $0.65 - $0.90 (from $1.65 - $1.85) | ||||
| Gathering, processing and transportation | $1.80 - $2.00 | ||||
| Production and ad valorem taxes (% of revenue) | ~7% | ||||
| Corporate tax rate (% of pre-tax income) | 23% | ||||
| Cash tax rate (% of pre-tax income) | 15% - 18% | ||||
| Q3 2024 cash taxes (in millions) | $220 - $260 |
Results of Operations
Comparison of the Three Months Ended June 30, 2024 and March 31, 2024
As noted in “—Commodity Prices,” the markets for oil and natural gas are highly volatile and are influenced by a number of factors which can lead to significant changes in our results of operations and management’s operational strategy on a quarterly basis. Accordingly, our results of operations discussion focuses on a comparison of the current quarter’s results of operations with those of the immediately preceding quarter. We believe our discussion provides investors with a more meaningful analysis of material operational and financial changes which occurred during the quarter based on current market and operational trends.
The following table sets forth selected operating data for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| June 30, 2024 | March 31, 2024 | ||||||||||
| Revenues (In millions): | |||||||||||
| Oil sales | $ | 1,998 | $ | 1,867 | |||||||
| Natural gas sales | 5 | 50 | |||||||||
| Natural gas liquid sales | 171 | 184 | |||||||||
| Total oil, natural gas and natural gas liquid revenues | $ | 2,174 | $ | 2,101 | |||||||
| Production Data: | |||||||||||
| Oil (MBbls) | 25,129 | 24,874 | |||||||||
| Natural gas (MMcf) | 51,310 | 50,602 | |||||||||
| Natural gas liquids (MBbls) | 9,514 | 8,653 | |||||||||
| Combined volumes (MBOE)(1) | 43,195 | 41,961 | |||||||||
| Daily oil volumes (BO/d) | 276,143 | 273,341 | |||||||||
| Daily combined volumes (BOE/d) | 474,670 | 461,110 | |||||||||
| Average Prices: | |||||||||||
| Oil ($ per Bbl) | $ | 79.51 | $ | 75.06 | |||||||
| Natural gas ($ per Mcf) | $ | 0.10 | $ | 0.99 | |||||||
| Natural gas liquids ($ per Bbl) | $ | 17.97 | $ | 21.26 | |||||||
| Combined ($ per BOE) | $ | 50.33 | $ | 50.07 | |||||||
| Oil, hedged ($ per Bbl)(2) | $ | 78.55 | $ | 74.13 | |||||||
| Natural gas, hedged ($ per Mcf)(2) | $ | 1.03 | $ | 1.36 | |||||||
| Natural gas liquids, hedged ($ per Bbl)(2) | $ | 17.97 | $ | 21.26 | |||||||
| Average price, hedged ($ per BOE)(2) | $ | 50.89 | $ | 49.97 |
(1)Bbl equivalents are calculated using a conversion rate of six Mcf per Bbl.
(2)Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices and include gains and losses on cash settlements for matured commodity derivatives, which we do not designate for hedge accounting. Hedged prices exclude gains or losses resulting from the early settlement of commodity derivative contracts.
Production Data. Substantially all of our revenues are generated through the sale of oil, natural gas and natural gas liquids production. The following tables provide information on the mix of our production for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| June 30, 2024 | March 31, 2024 | ||||||||||
| Oil (MBbls) | 58 | % | 59 | % | |||||||
| Natural gas (MMcf) | 20 | % | 20 | % | |||||||
| Natural gas liquids (MBbls) | 22 | % | 21 | % | |||||||
| 100 | % | 100 | % |
| Three Months Ended June 30, 2024 | Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Midland Basin | Delaware Basin | Other**(1)** | Total | Midland Basin | Delaware Basin | Other**(1)** | Total | ||||||||||||||||||||||||||||||||||||||||
| Production Data: | |||||||||||||||||||||||||||||||||||||||||||||||
| Oil (MBbls) | 20,867 | 4,248 | 14 | 25,129 | 20,055 | 4,768 | 51 | 24,874 | |||||||||||||||||||||||||||||||||||||||
| Natural gas (MMcf) | 38,399 | 12,818 | 93 | 51,310 | 37,494 | 12,894 | 214 | 50,602 | |||||||||||||||||||||||||||||||||||||||
| Natural gas liquids (MBbls) | 7,566 | 1,940 | 8 | 9,514 | 6,643 | 1,990 | 20 | 8,653 | |||||||||||||||||||||||||||||||||||||||
| Total (MBOE) | 34,833 | 8,324 | 38 | 43,195 | 32,947 | 8,907 | 107 | 41,961 |
(1)Includes the Rockies and High Plains for the three months ended June 30, 2024 and March 31, 2024, and Eagle Ford Shale, Appalachia, Barnett, Denver-Julesburg, Mid-Con, and Williston through May 1, 2024, the effective date on which they were divested.
Oil, Natural Gas and Natural Gas Liquids Revenues. Our revenues are a function of oil, natural gas and natural gas liquids production volumes sold and average sales prices received for those volumes.
Our oil, natural gas and natural gas liquids revenues for the second quarter of 2024 increased by $73 million to $2.2 billion compared to the first quarter of 2024. The increase consisted of (i) an additional $35 million attributable to higher average prices received for our oil production, partially offset by declines in the average prices for our natural gas and natural gas liquids production, and (ii) an additional $38 million attributable to the 3% increase in our combined volumes sold.
Net Sales of Purchased Oil. We have entered into purchase transactions and separate sales transactions with third parties to satisfy certain of our unused oil pipeline capacity commitments. The following table presents the net sales of purchased oil from third parties for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| (In millions) | June 30, 2024 | March 31, 2024 | |||||||||
| Sales of purchased oil | $ | 300 | $ | 116 | |||||||
| Purchased oil expense | 299 | 117 | |||||||||
| Net sales of purchased oil | $ | 1 | $ | (1) |
Other Revenues. The following table presents other insignificant revenue for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| (In millions) | June 30, 2024 | March 31, 2024 | |||||||||
| Other operating income | $ | 9 | $ | 10 |
Lease Operating Expenses. The following table shows lease operating expenses for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Amount | Per BOE | |||||||||||||||||||||||||||||||||||||||||||
| Lease operating expenses | $ | 254 | $ | 5.88 | $ | 255 | $ | 6.08 |
Lease operating expenses decreased in total and on a per BOE basis for the second quarter of 2024 compared to the first quarter of 2024 primarily due to a $16 million reduction in workover expense in the second quarter of 2024. This adjustment was largely offset by (i) a $7 million increase from higher production volumes, (ii) $5 million in increased spend on electrical generation and disposal related costs, and (iii) other individually insignificant changes.
Production and Ad Valorem Tax Expense. The following table shows production and ad valorem tax expense for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2024 | March 31, 2024 | ||||||||||||||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Percentage of oil, natural gas and natural gas liquids revenue | Amount | Per BOE | Percentage of oil, natural gas and natural gas liquids revenue | |||||||||||||||||||||||||||||
| Production taxes | $ | 103 | $ | 2.38 | 4.7 | % | $ | 82 | $ | 1.96 | 3.9 | % | |||||||||||||||||||||||
| Ad valorem taxes | 38 | 0.88 | 1.8 | 37 | 0.88 | 1.8 | |||||||||||||||||||||||||||||
| Total production and ad valorem expense | $ | 141 | $ | 3.26 | 6.5 | % | $ | 119 | $ | 2.84 | 5.7 | % |
In general, production taxes are directly related to production revenues and are based upon current year commodity prices. However, due to the settlement of an ongoing audit of production taxes from historical periods, the first quarter of 2024 includes a refund of $17 million, which reduced production taxes as a percentage of revenue for that period.
Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Ad valorem taxes remained relatively flat during the second quarter of 2024 compared to the first quarter of 2024.
Gathering, Processing and Transportation Expense. The following table shows gathering, processing and transportation expense for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Amount | Per BOE | |||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation | $ | 82 | $ | 1.90 | $ | 77 | $ | 1.84 |
The increase in gathering, processing and transportation expenses is primarily attributable to the growth in production volumes in the second quarter of 2024 compared to the first quarter of 2024.
Depreciation, Depletion, Amortization and Accretion. The following table provides the components of our depreciation, depletion, amortization and accretion expense for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| (In millions, except BOE amounts) | June 30, 2024 | March 31, 2024 | |||||||||
| Depletion of proved oil and natural gas properties | $ | 465 | $ | 452 | |||||||
| Depreciation and amortization of other property and equipment | 11 | 12 | |||||||||
| Other amortization | 2 | 2 | |||||||||
| Asset retirement obligation accretion | 5 | 3 | |||||||||
| Depreciation, depletion, amortization and accretion | $ | 483 | $ | 469 | |||||||
| Oil and natural gas properties depletion rate per BOE | $ | 10.77 | $ | 10.77 | |||||||
| Depreciation, depletion, amortization and accretion per BOE | $ | 11.18 | $ | 11.18 |
The increase in depletion of proved oil and natural gas properties of $13 million for the second quarter of 2024 compared to the first quarter of 2024 is due to the growth in production volumes.
General and Administrative Expenses. The following table shows general and administrative expenses for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||||||||||||||
| June 30, 2024 | March 31, 2024 | ||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Amount | Per BOE | |||||||||||||||||||
| General and administrative expenses | $ | 27 | $ | 0.63 | $ | 32 | $ | 0.76 | |||||||||||||||
| Non-cash stock-based compensation | 19 | 0.44 | 14 | 0.34 | |||||||||||||||||||
| Total general and administrative expenses | $ | 46 | $ | 1.07 | $ | 46 | $ | 1.10 |
General and administrative expenses decreased in the second quarter of 2024 compared to the first quarter of 2024 primarily due to reductions of $2 million in compensation and benefits costs and $2 million in professional fees.
Other Operating Costs and Expenses. The following table shows other operating costs and expenses for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | June 30, 2024 | March 31, 2024 | |||||||||||||||||||||
| Merger and integration expenses | $ | 3 | $ | 12 | |||||||||||||||||||
| Other operating expenses | $ | 19 | $ | 14 |
Merger and integration expenses in the first and second quarters of 2024 include costs associated with the stockholder vote and regulatory review process for the pending Endeavor Acquisition. See Note 16—Endeavor Energy Resources, LP Acquisition of the condensed notes to the consolidated financial statements for further details regarding the pending Endeavor Acquisition.
Derivative Instruments. The following table shows the net gain (loss) on derivative instruments and the net cash receipts (payments) on settlements of derivative instruments for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| (In millions) | June 30, 2024 | March 31, 2024 | |||||||||
| Gain (loss) on derivative instruments, net | $ | 18 | $ | (48) | |||||||
| Net cash received (paid) on settlements | $ | (28) | $ | (4) |
The change in gain (loss) on derivative instruments for the second quarter of 2024 compared to the first quarter of 2024 primarily reflects (i) a net increase in the value of interest rate swaps of $21 million due primarily to a decrease in future SOFR rates of $48 million offset by cash paid for the semi-annual cash settlement of $27 million in June 2024, (ii) a net increase in the value of our commodity contracts of $70 million primarily due to an increase of $29 million in cash received on settlements of natural gas contracts, and lower future market prices for oil compared to our contract prices, and (iii) cash payments of $25 million to settle treasury lock contracts associated with the issuance of the April 2024 Notes.
See Note 12—Derivatives of the condensed notes to the consolidated financial statements for further details regarding our derivative instruments.
Other Income (Expense). The following table shows other income and expenses for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | June 30, 2024 | March 31, 2024 | |||||||||||||||||||||
| Interest expense, net | $ | (44) | $ | (39) | |||||||||||||||||||
| Other income (expense), net | $ | 1 | $ | (3) | |||||||||||||||||||
| Gain (loss) on extinguishment of debt | $ | — | $ | 2 | |||||||||||||||||||
| Income (loss) from equity investments, net | $ | 15 | $ | 2 |
The increase in net interest expense for the second quarter of 2024 compared to the first quarter of 2024 primarily consists of (i) an additional $61 million in interest expense on senior notes due to the issuance of the April 2024 Notes, and (ii) an increase of $10 million in amortization of debt issuance costs primarily related to the termination of our Bridge Facility. These increases were partially offset by an additional $63 million in interest income due to holding funds raised for the pending Endeavor Acquisition in cash in short-term interest bearing accounts during the second quarter of 2024, and $4 million due to an increase in capitalized interest costs, which reduces interest expense.
See Note 8—Debt of the condensed notes to the consolidated financial statements for further details regarding outstanding borrowings and gain (loss) on extinguishment of debt.
Provision for (Benefit from) Income Taxes. The following table shows the provision for (benefit from) income taxes for the three months ended June 30, 2024 and March 31, 2024:
| Three Months Ended | |||||||||||
| (In millions) | June 30, 2024 | March 31, 2024 | |||||||||
| Provision for (benefit from) income taxes | $ | 252 | $ | 223 |
The change in our income tax provision for the second quarter of 2024 compared to the first quarter of 2024 was primarily due to the increase in pre-tax income between the periods which resulted largely from changes in revenues and operating expenses as discussed above. See Note 11—Income Taxes of the condensed notes to the consolidated financial statements for further discussion of our income tax expense.
Comparison of the Six Months Ended June 30, 2024 and 2023
The following table sets forth selected operating data for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues (In millions): | |||||||||||
| Oil sales | $ | 3,865 | $ | 3,362 | |||||||
| Natural gas sales | 55 | 117 | |||||||||
| Natural gas liquid sales | 355 | 319 | |||||||||
| Total oil, natural gas and natural gas liquid revenues | $ | 4,275 | $ | 3,798 | |||||||
| Production Data: | |||||||||||
| Oil (MBbls) | 50,003 | 46,570 | |||||||||
| Natural gas (MMcf) | 101,912 | 98,197 | |||||||||
| Natural gas liquids (MBbls) | 18,167 | 16,258 | |||||||||
| Combined volumes (MBOE)(1) | 85,155 | 79,194 | |||||||||
| Daily oil volumes (BO/d) | 274,742 | 257,293 | |||||||||
| Daily combined volumes (BOE/d) | 467,885 | 437,536 | |||||||||
| Average Prices: | |||||||||||
| Oil ($ per Bbl) | $ | 77.30 | $ | 72.19 | |||||||
| Natural gas ($ per Mcf) | $ | 0.54 | $ | 1.19 | |||||||
| Natural gas liquids ($ per Bbl) | $ | 19.54 | $ | 19.62 | |||||||
| Combined ($ per BOE) | $ | 50.20 | $ | 47.96 | |||||||
| Oil, hedged ($ per Bbl)(2) | $ | 76.36 | $ | 71.20 | |||||||
| Natural gas, hedged ($ per Mcf)(2) | $ | 1.20 | $ | 1.51 | |||||||
| Natural gas liquids, hedged ($ per Bbl)(2) | $ | 19.54 | $ | 19.62 | |||||||
| Average price, hedged ($ per BOE)(2) | $ | 50.44 | $ | 47.77 |
(1)Bbl equivalents are calculated using a conversion rate of six Mcf per Bbl.
(2)Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices and include gains and losses on cash settlements for matured commodity derivatives, which we do not designate for hedge accounting. Hedged prices exclude gains or losses resulting from the early settlement of commodity derivative contracts.
Production Data. Substantially all of our revenues are generated through the sale of oil, natural gas and natural gas liquids production. The following tables set forth the mix of our production data by product and basin for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Oil (MBbls) | 59 | % | 59 | % | |||||||
| Natural gas (MMcf) | 20 | % | 21 | % | |||||||
| Natural gas liquids (MBbls) | 21 | % | 20 | % | |||||||
| 100 | % | 100 | % |
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Midland Basin | Delaware Basin | Other**(1)** | Total | Midland Basin | Delaware Basin | Other**(1)** | Total | ||||||||||||||||||||||||||||||||||||||||
| Production Data: | |||||||||||||||||||||||||||||||||||||||||||||||
| Oil (MBbls) | 40,922 | 9,016 | 65 | 50,003 | 36,248 | 10,302 | 20 | 46,570 | |||||||||||||||||||||||||||||||||||||||
| Natural gas (MMcf) | 75,893 | 25,712 | 307 | 101,912 | 69,063 | 29,018 | 116 | 98,197 | |||||||||||||||||||||||||||||||||||||||
| Natural gas liquids (MBbls) | 14,209 | 3,930 | 28 | 18,167 | 12,184 | 4,071 | 3 | 16,258 | |||||||||||||||||||||||||||||||||||||||
| Total (MBOE) | 67,780 | 17,231 | 144 | 85,155 | 59,943 | 19,209 | 42 | 79,194 |
(1)Includes the Rockies and High Plains for the six months ended June 30, 2024 and 2023, and Eagle Ford Shale, Appalachia, Barnett, Denver-Julesburg, Mid-Con, and Williston through May 1, 2024, the effective date on which they were divested.
Oil, Natural Gas and Natural Gas Liquids Revenues. Our revenues are a function of oil, natural gas and natural gas liquids production volumes sold and average sales prices received for those volumes.
Our oil, natural gas and natural gas liquids revenues for the six months ended June 30, 2024 increased by $477 million, or 13%, to $4.3 billion from the same period in 2023 primarily due to (i) an increase of $290 million attributable to the 8% growth in our combined volumes, and (ii) an additional $187 million attributable to higher average prices received for our oil production. Approximately 25% of the increase in production is attributable to Viper’s GRP Acquisition. The remainder of the growth comes from new wells added between periods.
Net Sales of Purchased Oil. Beginning in the third quarter of 2023, we entered into purchase transactions and separate sale transactions with third parties to satisfy certain of our unused oil pipeline capacity commitments. The following table presents the net sales of purchased oil from third parties for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Sales of purchased oil | $ | 416 | $ | — | |||||||
| Purchased oil expense | 416 | — | |||||||||
| Net sales of purchased oil | $ | — | $ | — |
Other Revenues. The following table shows the other insignificant revenues for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Other operating income | $ | 19 | $ | 46 |
The decrease in other operating income for the six months ended June 30, 2024 compared to the same period in 2023 primarily resulted from a reduction in revenue from midstream services due to the sale of the Deep Blue Water Assets in the third quarter of 2023.
Lease Operating Expenses. The following table shows lease operating expenses for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Amount | Per BOE | |||||||||||||||||||
| Lease operating expenses | $ | 509 | $ | 5.98 | $ | 392 | $ | 4.95 |
Lease operating expenses increased by $117 million, or $1.03 per BOE for the six months ended June 30, 2024 compared to the same period in 2023. The increase primarily consists of (i) $47 million in additional costs incurred for water services as a result of divesting the Deep Blue Water Assets in the third quarter of 2023, (ii) approximately $30 million due to the increase in combined production volumes between the periods, (iii) $16 million in increased spend on wellwork, (iv) $16 million in increased spend on electrical generation and disposal related costs, and (v) $8 million in increased third party water disposal services.
Production and Ad Valorem Tax Expense. The following table shows production and ad valorem tax expense for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Percentage of oil, natural gas and natural gas liquids revenue | Amount | Per BOE | Percentage of oil, natural gas and natural gas liquids revenue | |||||||||||||||||||||||||||||
| Production taxes | $ | 185 | $ | 2.17 | 4.3 | % | $ | 179 | $ | 2.26 | 4.7 | % | |||||||||||||||||||||||
| Ad valorem taxes | 75 | 0.88 | 1.8 | 124 | 1.57 | 3.3 | |||||||||||||||||||||||||||||
| Total production and ad valorem expense | $ | 260 | $ | 3.05 | 6.1 | % | $ | 303 | $ | 3.83 | 8.0 | % |
In general, production taxes are directly related to production revenues and are based upon current year commodity prices. Production taxes as a percentage of production revenues for the 2024 period decreased compared to the same period in 2023, primarily due to a refund of $17 million received for settlement of an audit in the first quarter of 2024.
Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Ad valorem taxes for the six months ended June 30, 2024 as compared to the same period in 2023 decreased by $49 million, primarily due to a reduction in the expected ad valorem tax rates for 2024 compared to the expected rates in the first half of 2023.
Gathering, Processing and Transportation Expense. The following table shows gathering, processing and transportation expense for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Amount | Per BOE | |||||||||||||||||||
| Gathering, processing and transportation | $ | 159 | $ | 1.87 | $ | 136 | $ | 1.72 |
The increase in gathering, processing and transportation expenses for the six months ended June 30, 2024 compared to the same period in 2023 is attributable to (i) $10 million from the growth in production volumes discussed above, and (ii) an additional $6 million in shortfall penalties related to certain minimum volume commitments. The remainder of the increase is due to pricing fluctuations on our gathering, processing and transportation contracts.
Depreciation, Depletion, Amortization and Accretion. The following table provides the components of our depreciation, depletion, amortization and accretion expense for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions, except BOE amounts) | 2024 | 2023 | |||||||||
| Depletion of proved oil and natural gas properties | $ | 917 | $ | 791 | |||||||
| Depreciation and amortization of other property and equipment | 23 | 33 | |||||||||
| Other amortization | 4 | 2 | |||||||||
| Asset retirement obligation accretion | 8 | 9 | |||||||||
| Depreciation, depletion, amortization and accretion | $ | 952 | $ | 835 | |||||||
| Oil and natural gas properties depletion rate per BOE | $ | 10.77 | $ | 9.99 | |||||||
| Depreciation, depletion, amortization and accretion per BOE | $ | 11.18 | $ | 10.54 |
The increase in depletion of proved oil and natural gas properties of $126 million for the six months ended June 30, 2024 as compared to the same period in 2023 resulted primarily from (i) $66 million due to an increase in the depletion rate resulting primarily from the addition of leasehold costs and reserves from Viper’s GRP Acquisition, and (ii) $60 million from the growth in production volumes.
General and Administrative Expenses. The following table shows general and administrative expenses for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (In millions, except per BOE amounts) | Amount | Per BOE | Amount | Per BOE | |||||||||||||||||||
| General and administrative expenses | $ | 59 | $ | 0.69 | $ | 50 | $ | 0.63 | |||||||||||||||
| Non-cash stock-based compensation | 33 | 0.39 | 27 | 0.34 | |||||||||||||||||||
| Total general and administrative expenses | $ | 92 | $ | 1.08 | $ | 77 | $ | 0.97 |
General and administrative expenses increased for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to an additional (i) $6 million in charitable contributions, (ii) $4 million in legal fees primarily related to certain SEC filings including our offering of Viper Class A Common Stock and various litigation matters, and (iii) $3 million in compensation and benefits costs due to increasing headcount and annual compensation adjustments. These increases were partially offset by a reduction of $4 million in professional fees.
Other Operating Costs and Expenses. The following table shows the other operating costs and expenses for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Merger and integration expenses | $ | 15 | $ | 10 | |||||||
| Other operating expenses | $ | 33 | $ | 66 |
Merger and integration expenses for the six months ended June 30, 2024 include costs associated with the stockholder vote and regulatory review process for the pending Endeavor Acquisition. Merger and integration expenses for the six months ended June 30, 2023 include $8 million in costs associated with legal and advisory fees incurred for the Lario Acquisition and $2 million in costs related to acquisitions in 2022.
See Note 16—Endeavor Energy Resources, LP Acquisition of the condensed notes to the consolidated financial statements for further details regarding the pending Endeavor Acquisition.
The decrease in other operating expenses for the six months ended June 30, 2024 compared to the same period in 2023 primarily resulted from a reduction in midstream services costs due to the sale of the Deep Blue Water Assets in the third quarter of 2023.
Derivative Instruments. The following table shows the net gain (loss) on derivative instruments and the net cash receipts (payments) on settlements of derivative instruments for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Gain (loss) on derivative instruments, net | $ | (30) | $ | (282) | |||||||
| Net cash received (paid) on settlements | $ | (32) | $ | (38) |
The decrease in loss on derivative instruments for the six months ended June 30, 2024 compared to the same period in 2023 primarily reflects an increase in the value of our natural gas contracts due to a decrease in market prices for natural gas compared to our contract prices. See Note 12—Derivatives of the condensed notes to the consolidated financial statements for further details regarding our derivative instruments.
Other Income (Expense). The following table shows other income and expenses for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Interest expense, net | $ | (83) | $ | (93) | |||||||
| Other income (expense), net | $ | (2) | $ | 28 | |||||||
| Gain (loss) on extinguishment of debt | $ | 2 | $ | (4) | |||||||
| Income (loss) from equity investments, net | $ | 17 | $ | 30 |
Interest expense, net decreased $10 million for the six months ended June 30, 2024 compared to the same period in 2023. This decrease primarily consisted of (i) an increase in interest income of $74 million, which reduces interest expense, (ii) an additional $29 million in capitalized interest costs, which reduce interest expense, and (iii) a decrease of $12 million in interest expense on our revolving credit facility due to lower average borrowings outstanding in the first half of 2024. These reductions were largely offset by (i) an increase of $73 million in interest expense on senior notes related primarily to the issuance of the April 2024 Notes and Viper’s 7.375% Senior Notes which were issued in the fourth quarter of 2023, and (ii) an increase of $32 million in amortization of debt issuance costs primarily related to our Bridge Facility and to a lesser extent, our Term Loans.
See Note 8—Debt of the condensed notes to the consolidated financial statements for further details regarding outstanding borrowings.
Other income (expense), net for the six months ended June 30, 2023 includes a $53 million gain on the sale of equity method investment in Gray Oak as discussed further in Note 4—Acquisitions and Divestitures to the condensed notes to the consolidated financial statements.
Provision for (Benefit from) Income Taxes. The following table shows the provision for (benefit from) income taxes for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Provision for (benefit from) income taxes | $ | 475 | $ | 372 |
The change in our income tax provision for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to the increase in pre-tax income resulting largely from higher revenues from oil and natural gas liquids, along with changes in operating expenses and other income (expenses) as discussed above. See Note 11—Income Taxes of the condensed notes to the consolidated financial statements for further discussion of our income tax expense.
Liquidity and Capital Resources
Overview of Sources and Uses of Cash
Historically, our primary sources of liquidity have included cash flows from operations, proceeds from our public equity offerings, borrowings under our revolving credit facility, proceeds from the issuance of senior notes and sales of non-core assets. Our primary uses of capital have been for the acquisition, development and exploration of oil and natural gas properties, repayment of debt and returning capital to stockholders. At June 30, 2024, we had approximately $8.5 billion of liquidity consisting of $6.9 billion in standalone cash and cash equivalents and $1.6 billion available under our credit facility. On August 2, 2024, we terminated the undrawn $500 million Tranche B Loans previously available. As a result, in addition to our stand alone cash and credit facility, we currently have $1.0 billion available under the Tranche A Loans of our Term Loan Agreement for purposes of funding the cash consideration for the pending Endeavor Acquisition. As discussed below, our revised capital budget for 2024 is $2.35 billion to $2.45 billion, which does not take into account the pending Endeavor Acquisition. As of June 30, 2024, we have no debt maturities until 2026.
Future cash flows are subject to a number of variables, including the level of oil and natural gas production and volatility of commodity prices. Further, significant additional capital expenditures will be required to more fully develop our properties. Prices for our commodities are determined primarily by prevailing market conditions, regional and worldwide economic activity, weather and other substantially variable factors. These factors are beyond our control and are difficult to predict as discussed further in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023. In order to mitigate this volatility, we enter into derivative contracts with a number of financial institutions, all of which are participants in our credit facility, to economically hedge a portion of our estimated future crude oil and natural
gas production as discussed further in Note 12—Derivatives of the condensed notes to the consolidated financial statements and Item 3. Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk. The level of our hedging activity and duration of the financial instruments employed depend on our desired cash flow protection, available hedge prices, the magnitude of our capital program and our operating strategy.
Cash Flow
Our cash flows for the six months ended June 30, 2024 and 2023 are presented below:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Net cash provided by (used in) operating activities | $ | 2,863 | $ | 2,938 | |||||||
| Net cash provided by (used in) investing activities | (1,200) | (1,874) | |||||||||
| Net cash provided by (used in) financing activities | 4,663 | (1,207) | |||||||||
| Net increase (decrease) in cash | $ | 6,326 | $ | (143) |
Operating Activities
The decrease in operating cash flows for the six months ended June 30, 2024 compared to the same period in 2023 primarily resulted from (i) an increase in our cash operating expenses, excluding purchased oil expense, of approximately $78 million, (ii) a reduction of approximately $367 million due to fluctuations in other working capital balances due primarily to the timing of when collections were made on income taxes receivable, accounts receivable and payments made on accounts payable (iii) an increase in $206 million cash paid for taxes. These were partially offset by an increase of $450 million in total revenue, excluding sales of purchased oil, and (ii) an additional $74 million in interest income. See “—**Results of Operations” for discussion of significant changes in our revenues and expenses.
Investing Activities
The majority of our net cash used for investing activities during the six months ended June 30, 2024 and 2023 was for drilling and completion costs incurred in conjunction with our development program as well as the purchase of oil and gas properties including the Lario Acquisition in the first quarter of 2023.
Capital Expenditure Activities
Our capital expenditures excluding acquisitions and equity method investments (on a cash basis) were as follows for the specified period:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Drilling, completions and non-operated additions to oil and natural gas properties(1) | $ | 1,165 | $ | 1,215 | |||||||
| Infrastructure additions to oil and natural gas properties | 76 | 88 | |||||||||
| Additions to midstream assets | 5 | 65 | |||||||||
| Total | $ | 1,246 | $ | 1,368 |
(1) See “—Transactions and Recent Developments—Upstream Operations” above for additional detail on wells drilled and turned to production during the three and six months ended June 30, 2024 and 2023.
Financing Activities
During the six months ended June 30, 2024, net cash provided by financing activities was primarily attributable to $5.5 billion of proceeds from the issuance of the April 2024 Notes and $451 million in proceeds from the public offering of Viper’s Class A common stock. These cash inflows were partially offset by (i) $900 million of dividends paid to stockholders, (ii) $98 million in dividends paid to non-controlling interest, (iii) $93 million of debt issuance costs primarily associated with the April 2024 Notes, Term Loan Agreement and Bridge Facility, (iv) $86 million in repayments on our credit facilities, net of borrowings, (v) $42 million of repurchases as part of the share repurchase programs, and (iv) $37 million in cash paid for tax withholdings on vested employee stock awards.
During the six months ended June 30, 2023, net cash used in financing activities was primarily attributable to (i) $710 million of repurchases as part of the share and unit repurchase programs, (ii) $692 million of dividends paid to stockholders, (iii) $134 million paid for the retirement of principal outstanding on certain senior notes, and (iv) $59 million in distributions to non-controlling interest. These cash outflows were partially offset by an additional $415 million in borrowings under credit facilities, net of repayments.
Capital Resources
Our working capital requirements are primarily supported by our cash and cash equivalents and available borrowings under our revolving credit facility. We may draw on our revolving credit facility to meet short-term cash requirements, or issue debt or equity securities as part of our longer-term liquidity and capital management program and to finance the pending Endeavor Acquisition. Further, the Tranche A Loans and net proceeds from the April 2024 Notes, are also available to finance the cash portion of the pending Endeavor Acquisition. Because of the alternatives available to us, we believe that our short-term and long-term liquidity are adequate to fund not only our current operations, but also our near-term and long-term capital requirements.
As we pursue our business and financial strategy, we regularly consider which capital resources, including cash flow and equity and debt financings, are available to meet our future financial obligations, planned capital expenditure activities and liquidity requirements. Our future ability to grow proved reserves and production will be highly dependent on the capital resources available to us. Any prolonged volatility in the capital, financial and/or credit markets and/or adverse macroeconomic conditions may limit our access to, or increase our cost of, capital or make capital unavailable on terms acceptable to us or at all.
Revolving Credit Facilities and Other Debt Instruments
As of June 30, 2024, our debt, including the debt of Viper, consisted of approximately $12.0 billion in aggregate outstanding principal amount of senior notes, and $177 million in aggregate outstanding borrowings under revolving credit facilities.
As of June 30, 2024, the maximum credit amount available under our credit agreement was $1.6 billion, with no outstanding borrowings and $1.6 billion available for future borrowings. Our credit agreement matures on June 2, 2028, and we may further extend it by one one-year extension pursuant to the terms set forth in the credit agreement. Upon consummation of the pending Endeavor Acquisition, the maximum credit amount available under our credit agreement will increase to $2.5 billion.
As of June 30, 2024, the maximum credit amount available under the Term Loan Agreement was $1.5 billion, with no outstanding borrowings and $1.5 billion available for future borrowings. Our Term Loan Agreement matures on the anniversary of the Closing Date for Tranche A Loans and the second anniversary of the Closing Date for Tranche B Loans. On August 2, 2024, we terminated our undrawn Tranche B Loans, resulting in $1.0 billion currently available for future borrowings under the Tranche A Loans of our Term Loan Agreement.
On June 4, 2024, we terminated our undrawn Bridge Facility and recorded additional interest expense of $19 million and $28 million during the three and six months ended June 30, 2024, respectively, related to the amortization and write-off of debt issuance costs incurred for the Bridge Facility.
Issuance of April 2024 Notes
On April 18, 2024, we issued the April 2024 Notes for net proceeds of $5.5 billion, which will be used to fund a portion of the cash consideration for the pending Endeavor Acquisition.
Viper’s Credit Agreement
The Viper credit agreement, as amended, matures on September 22, 2028 and provides for a revolving credit facility in the maximum credit amount of $2.0 billion, with a borrowing base of $1.3 billion and an elected commitment amount of $850 million, based on Viper LLC’s oil and natural gas reserves and other factors. As of June 30, 2024. the Viper credit agreement had $177 million of outstanding borrowings and $673 million available for future borrowings.
For additional discussion of our debt as of June 30, 2024, see Note 8—Debt of the condensed notes to the consolidated financial statements.
Capital Requirements
In addition to future operating expenses and working capital commitments discussed in “—**Transactions and Recent Developments—Upstream Operations”, our primary short and long-term liquidity requirements, excluding those of Viper, consist primarily of (i) capital expenditures, (ii) payments of principal and interest on our revolving credit agreements and senior notes, (iii) payments of other contractual obligations, (iv) cash used to pay for dividends and repurchases of securities, and (v) the cash portion of the consideration for the pending Endeavor Acquisition.
2024 Capital Spending Plan
Our board of directors has approved an increased 2024 capital budget for drilling, midstream, infrastructure and environmental of approximately $2.35 billion to $2.45 billion, which does not take into account the pending Endeavor Acquisition. We estimate that, of these expenditures, approximately:
-
$2.15 billion to $2.23 billion will be spent primarily on drilling 275 to 290 gross (259 to 273 net) horizontal wells and completing 310 to 330 gross (285 to 304 net) horizontal wells across our operated and non-operated leasehold acreage in the Northern Midland and Southern Delaware Basins, with an average lateral length of approximately 11,800+ feet;
-
Approximately $200 million to $220 million will be spent on infrastructure and midstream expenditures, excluding the cost of any leasehold and mineral interest acquisitions.
The amount and timing of our capital expenditures are largely discretionary and within our control. We could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including but not limited to the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners. We are currently operating 10 drilling rigs and three completion crews. We will continue monitoring commodity prices and overall market conditions and can adjust our rig cadence and our capital expenditure budget in response to changes in commodity prices and overall market conditions.
Interest on April 2024 Notes
On April 18, 2024, we issued $5.5 billion in aggregate principal amount of the April 2024 Notes, as discussed further in Note 8—Debt. As a result, we expect to incur additional future cash interest costs on the April 2024 Notes of approximately $152 million in 2024, $607 million cumulatively in the years from 2025 through 2026, $541 million cumulatively in the years from 2027 and 2028, and $4.7 billion cumulatively between 2029 and 2064.
Return of Capital Commitment
Beginning in the first quarter of 2024, our board of directors has approved a return of capital commitment of at least 50% from 75% of free cash flow to our stockholders through repurchases under our share repurchase program, base dividends and variable dividends. The remainder of our free cash flow will be used primarily to reduce debt. On August 1, 2024, our board of directors declared a combined base and variable dividend for the second quarter of 2024 of $2.34 per share of common stock.
Free cash flow is a non-GAAP financial measure. As used by us, free cash flow is defined as cash flow from operating activities before changes in working capital in excess of cash capital expenditures and other adjustments as determined by us. We believe that free cash flow is useful to investors as it provides a measure to compare both cash flow from operating activities and additions to oil and natural gas properties across periods on a consistent basis.
Since the inception of the stock repurchase program, we repurchased an aggregate of 19.3 million shares of our common stock for a total cost of $2.4 billion, excluding excise tax, as of August 2, 2024. Subject to regulatory restrictions and other factors discussed elsewhere in this report, we intend to continue to purchase shares under this repurchase program opportunistically with available funds primarily from cash flow from operations and liquidity events such as the sale of assets while maintaining sufficient liquidity to fund our capital expenditure programs, however, the stock repurchase program is at the discretion of our board of directors and can be amended, terminated or suspended at any time. See Note 9—Stockholders' Equity and Earnings (Loss) Per Share of the condensed notes to the consolidated financial statements.
Guarantor Financial Information
Diamondback E&P is the sole guarantor under the indentures governing the outstanding Guaranteed Senior Notes.
Guarantees are “full and unconditional,” as that term is used in Regulation S-X, Rule 3-10(b)(3), except that such guarantees will be released or terminated in certain circumstances set forth in the indentures governing the Guaranteed Senior Notes, such as, with certain exceptions, (i) in the event Diamondback E&P (or all or substantially all of its assets) is sold or disposed of, (ii) in the event Diamondback E&P ceases to be a guarantor of or otherwise be an obligor under certain other indebtedness, and (iii) in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of the relevant indenture.
Diamondback E&P’s guarantees of the Guaranteed Senior Notes are senior unsecured obligations and rank senior in right of payment to any of its future subordinated indebtedness, equal in right of payment with all of its existing and future senior indebtedness, including its obligations under its revolving credit facility, and effectively subordinated to any of its existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.
The rights of holders of the Guaranteed Senior Notes against Diamondback E&P may be limited under the U.S. Bankruptcy Code or state fraudulent transfer or conveyance law. Each guarantee contains a provision intended to limit Diamondback E&P’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance. However, there can be no assurance as to what standard a court will apply in making a determination of the maximum liability of Diamondback E&P. Moreover, this provision may not be effective to protect the guarantee from being voided under fraudulent conveyance laws. There is a possibility that the entire guarantee may be set aside, in which case the entire liability may be extinguished.
The following tables present summarized financial information for Diamondback Energy, Inc., as the parent, and Diamondback E&P, as the guarantor subsidiary, on a combined basis after elimination of (i) intercompany transactions and balances between the parent and the guarantor subsidiary, and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor. The information is presented in accordance with the requirements of Rule 13-01 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiary operated as an independent entity.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Summarized Balance Sheets: | (In millions) | ||||||||||
| Assets: | |||||||||||
| Current assets | $ | 7,514 | $ | 1,269 | |||||||
| Property and equipment, net | $ | 20,928 | $ | 20,780 | |||||||
| Other noncurrent assets | $ | 37 | $ | 28 | |||||||
| Liabilities: | |||||||||||
| Current liabilities | $ | 1,854 | $ | 1,974 | |||||||
| Intercompany accounts payable, non-guarantor subsidiary | $ | 2,269 | $ | 2,217 | |||||||
| Long-term debt | $ | 10,967 | $ | 5,544 | |||||||
| Other noncurrent liabilities | $ | 2,985 | $ | 2,835 |
| Six Months Ended June 30, 2024 | |||||
| Summarized Statement of Operations: | (In millions) | ||||
| Revenues | $ | 3,738 | |||
| Income (loss) from operations | $ | 1,652 | |||
| Net income (loss) | $ | 1,140 |
Critical Accounting Estimates
There have been no changes in our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Pronouncements
See Note 2—Summary of Significant Accounting Policies of the condensed notes to the consolidated financial statements for recent accounting pronouncements not yet adopted, if any.
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