Diamondback Energy Inc.'s CEO Travis Stice said on Nov. 3 the shale producer sees no need to purchase a competitor following a wave of mergers in the Permian Basin, the top U.S. oil field.
The coronavirus pandemic has slashed oil demand and forced shale producers to cut costs to survive, prompting consolidation as companies size up in hopes of cutting operating costs.
"We do not need to increase our scale to further lower costs," Stice said during a call with analysts, noting Diamondback's well costs are about 30% lower than in 2019.
"We prefer not to make rash decisions at the bottom of the cycle," he added.
The company will defend its dividend, including further reducing capital costs if needed, in case of an extended oil price drop, Stice said.
Production of around 170,000 to 175,000 bbl/d is expected at year-end, with 2021 output likely to be flat, the company said. Until oil price rise significantly, "growth is off the table for us," Stice said.
Shares traded at $28.59 on Nov. 3, up 3.2%.
The company's promise to live within free cash flow and lower debt "sends exactly the right signal to shareholders," said Stephen Ellis, analyst with Morningstar, in a client note.
Diamondback reported a net loss of $1.11 billion, or $7.05 per share, for the third quarter after market close on Nov. 2.
On an adjusted basis, it earned 62 cents per share, beating analysts' estimates of 37 cents, according to Refinitiv IBES data.
Recent deals in the Permian Basin include Pioneer Natural Resource Co.'s $4.5 billion buyout of Parsley Energy Inc., ConocoPhillips Co.'s $9.7 billion deal for Concho Resources Inc., Chevron Corp.’s $4.2 billion purchase of Noble Energy, and Devon Energy Corp.’s $2.6 billion buy of rival WPX Energy Inc.
The Scoop and Stack plays are still in the money but only with improved well spacing and effective management of frac-driven interactions.
The deal would create the largest pure-play northern Midland Basin E&P with a 73,000-net-acre position and 12,000 boe/d of production that is expected to more than double through 2020.
Energy scholar Robert Bryce offers an unabashed view of the shale revolution, climate change and the future of energy. Spoiler alert: don’t expect oil and gas to disappear anytime soon.