Diamondback Energy Inc. expects to grow production sharply in 2019 even as it dials back operations, spending $2.7 billion to $3.1 billion for the year in the process.
The Midland, Texas-based oil and gas company projects production of 275,000 to 290,000 barrels of oil equivalent per day in 2019, a 28% pro forma increase year over year, according to a Dec. 18 news release. Diamondback plans to spend about $2.35 billion to $2.7 billion of its planned 2019 capital expenditures for drilling and completion, with the remaining $350 million to $400 million dedicated to midstream and infrastructure growth investments.
Diamondback is aiming to reduce its rig count immediately, with plans to operate only 18 to 22 drilling rigs, as opposed to the 24 rigs now operating. After releasing two completion crews in December, the driller also looks to operate eight completion crews at the start of 2019. The company said the drop in oil prices led to the planned decrease in activity.
"Due to the dramatic decline in oil prices, realized pricing in the Permian Basin is near levels not seen since the end of 2016 while service costs have increased by ~35% during the same time period," Diamondback CEO Travis Stice said. "As a result, and as a sign of our commitment to capital discipline, we are reducing our planned 2019 activity to levels where we can operate within cash flow."
The company also intends to bump up its annual cash dividend by 50%, to 75 cents per common share. The increased dividend is payable starting in the first quarter of 2019.