MIDLAND, Texas, Nov. 02, 2026 (GLOBE NEWSWIRE) —
Diamondback Stockholders,
This letter is meant to be a supplement to our earnings release and is being furnished to the Securities and Exchange Commission (SEC) and released to our stockholders simultaneously with our earnings release. Please see the information regarding forward-looking statements and non-GAAP financial information included at the end of this letter.
Mega Themes
Before we talk about the quarter, we would like to give you some insight into what we see as the mega-themes of the Permian Basin over the next decade, Diamondback’s potential role in those mega-themes and why our strategy will benefit Diamondback stockholders. In our mind, these three mega-themes are: increased recoveries of oil in place, gas production growth and monetization through LNG and power demand and the growing AI / power / infrastructure buildout in West Texas and the Permian Basin.
The past decade in the Permian Basin was dominated by capital efficiency improvements, resource expansion and consolidation. This resulted in more assets in the hands of larger, well-run operators turning the dream of the shale revolution into a reality, producing more consistent returns on and of capital to the stockholders that helped fund it.
While we expect to maintain consistent returns, we anticipate the next decade will look different. Upstream consolidation in the Permian will continue, albeit at a more measured pace given how much has already occurred to date. Capital efficiency will continue to improve, but the pace of above ground mechanical improvements will naturally slow relative to what has been accomplished over the last ten years. Resource expansion will continue and new zones like the Barnett and Woodford (more on that later) are exciting, but it will be tough to match the resource growth we saw from developing the Wolfcamp B as a standalone horizontal bench in 2012 in the Midland Basin to the 8+ zones we are developing today.
Therefore, we will need to do more with what we have, directly and indirectly. We will continue to improve our position by increasing working interest (and mineral interest at Viper Energy, Inc. (“Viper”), our consolidated mineral and royalty subsidiary), extending laterals through trades, grinding down costs and being prepared for M&A opportunities if or when they present themselves.
As we mentioned earlier, we are also working on being at the forefront of three Permian mega-themes:
1. Improving Recoveries
We currently estimate that we extract approximately 10% of the oil in place in the Permian Basin today. Every percentage point of incremental recovery carries significant value to our stockholders, and we are therefore very focused on improving recoveries. There are several factors that contribute to the ultimate recovery of hydrocarbons from a well, but the list below represents the main factors we are focused on.
a) Development design:
Each project Diamondback executes is designed to maximize the return the Company receives on capital while ensuring resource recovery is maximized at an appropriate incremental rate of return hurdle. Our philosophy has resulted in Diamondback’s projects generating the highest average returns relative to our peer group. These outcomes are clearly seen on slide #10 of this quarter’s investor presentation.
Broadly, our relatively higher wells per section × better per well performance ÷ the lowest cost structure in the basin = the maximum return for every dollar of capital invested. Diamondback was an early adopter of co-development in the Midland Basin, moving to this methodology in 2019 for the core zones from the Middle Spraberry to the Wolfcamp B. Co-development of 8+ benches in the Midland Basin, optimized spacing and targeting, longer laterals and creative wellbore trajectories allow us to optimize our developments while preserving the value of our remaining inventory – an advantage we believe is unmatched in the basin.
b) Completion design:
Proper completion sizing is imperative to maximizing value from each development project. The advancement of completion technology into simulfrac and continuous pumping are positive cost stories from an operational standpoint, but they have also allowed us to pursue more aggressive stage designs with tighter cluster and stage spacing to increase reservoir contact and near-wellbore fracture complexity. We believe this, combined with our efforts around advanced chemical additives, is contributing to recent well outperformance relative to previous vintages seen on slide #10 of this quarter’s investor presentation.
c) Enhanced Oil Recovery (“EOR”):
Chemical EOR has the potential to meaningfully improve recovery factors and shallow base decline rates in unconventional reservoirs. Shallowing our corporate base decline by just 1% at current capital efficiency implies drilling 10 to 15 fewer wells to maintain flat oil production, extending inventory quality and duration.
Chemical EOR makes it easier for oil to flow through the reservoir to the wellbore. We have several ongoing pilots testing various surfactant designs both in the remedial and completion phases of our operations. These pilots are in the early stages, and we have seen a wide range of outcomes from our initial tests. We will continue to learn from these tests and refine our methodologies to continuously improve, just as we did on the completion side of the business over the last fifteen years.
Our goal is and has always been to be the best at converting rock into cash flow. We have demonstrated this ability consistently over the past decade and will continue to do so moving forward. We are confident the technologies and workflows we are developing today will propel us to higher recoveries in the future and we look forward to keeping our stockholders updated on our progress.
2. Gas Production and Monetization
In the third quarter, future gas growth out of the Permian Basin received significant attention as a WhiteWater-led consortium (that includes Diamondback) reached Final Investment Decision (“FID”) on another large diameter pipeline out of the basin. This pipe is called Solitude and is set to enter service in the second half of 2029. This project consists of two twin 48″ lines able to move 4.5 bcf/d out of the Permian to Katy and Gulf Coast markets, with potential to expand to 7.5 bcf/d. While the market was surprised that another pipe reached FID this quickly after multiple announcements over the last 18 months, we were not.
As we have said many times, the Permian Basin has not tried to produce gas yet. We expect the Permian to be the largest natural gas play as well as the largest oil play in the United States in the 2030s. Gas to oil ratios will naturally continue to expand, secondary zones in both the Midland and the Delaware Basins are gassier than what operators have targeted to date and there are gas-weighted exploratory zones that have not even been tested yet given the perpetual egress issues out of this basin.
As for Diamondback’s strategy, our goal is to continue to control more of our gas further downstream to a mix of end markets, primarily feeding the Gulf Coast LNG complex. We are working to build relationships with LNG players who are long offtake and short physical molecules. There should
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