Good day, and thank you for standing by. Welcome to the Diamondback Energy 3rd Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Adam Lawless, VP of Investor Relations. Please go ahead. Thank you. At this time, we will conduct the question and answer session. Please stand by. Our first question comes from Neil Dingman of William Blair. Your line is now open.

Morning, Kay. It's nice to quarter and net you back on. My first question is on activity. Specifically, while I know you guys continue to talk about the stop sign scenario depending on the macro condition, it seems like some other Permian operators here recently continue to accelerate even at these prices. So I'm just wondering, does this, you know, sort of others, I guess, lack of capital discipline, cause you to think about changing your plans, you know, given you all are a lower operator? And, you know, I guess I'd say cash flow is cash flow. Yeah, Neil, I'm glad to see that, I'm glad you're not changing the stripes there. And then, second question, I guess more just generic, maybe case for you or Danny around slide eight, specifically, continue to look at, I guess I'd call it your development style versus others, and you continue to be lower, I'm just wondering specifically, what differentiates your development style versus others? Is it the larger projects, does that factor in, or what is the driver when I'm looking at this slide?

Yeah, I mean, listen, I think slide eight is the most important slide in the deck. It explains a lot about what we've done to study.

Very good. Thank you, buddy.

Thank you. Our next question is from David Dekelbaum of TD Cohen. Your line is now open.

Thanks, guys, for taking my questions this morning. Case, maybe you can talk about, you know, you guys talked about fourth quarter guidance and that sort of $925 million CapEx for 4Q as you kind of get back into more of a maintenance mode. Generally, I guess, you know, is that a decent kind of run rate for goalposts for 26 to sort of hold that 505,000 barrels a day of crude flat kind of pro forma for the Viper deal? Yeah, David, you know, I appreciate that color. Considering it's the best slide in the deck, slide eight, or most important slide. I feel compelled to ask a question on it, but when you look at those three graphs, as you move into more of the Endeavor acquired acreage in 26, should we anticipate any significant changes to those three graphs? Is it fair to assume that, or can you talk to your confidence levels around well productivity as you kind of start harvesting and putting together these plans around some of the acquired pieces?

Appreciate it, guys.

Thank you. Our next question is from Arun Jayaram of JPMorgan Securities, LLC. Your line is now open.

Good morning, gentlemen. Case, I was wondering if you could start a little bit on the efficiency gains front and maybe elaborate a little bit on your further improvements on the drilling side and love to get a little bit more insights on this continuous pumping design that you're now implementing on your house use fleets. And what could that do for your dollar per foot, which I think has been in that 550 to 580 range in the Midland Basin?

You know, this year we were talking about one or two wells in five days. So it's just getting impressive drilling results and continuing to drive down the average SPUD to TD days. And on the completions front, you know, the continuous pumping, we're following any part to model that today with the additional equipment and everything that we have to set up to get the crews all running on continuous pumping.

I do think the one thing that continuous pumping and more lateral footage per day does for us is it improves the cycle times and gets, you know, any production that we've watered out when we go in and frack in a, you know, continuous field, that production comes back online.

Super interesting. My follow-up is, Case, you brought back slide 25, which is on PowerGen and, you know, some of the opportunities, you know, perhaps for Diamondback, just given your surface acreage, your natural gas output in West Texas, as well as the fact that you do consume power for your own internal operations. I'm wondering, thoughts on bringing back that slide and maybe just an update on, you know, your corporate development activities around this important topic, at least for investors.

Gas pricing.

Great. Thanks a lot, Jerry.

Thank you. Our next question is from Neil Mehta of Goldman Sachs & Co. Your line is now open.

Yeah, thank you so much. And in case, maybe I get you to share your perspective on where we are with the macro. I think you indicated in the letter you think we are at the yellow light right now. So maybe spend some time thinking about how you're thinking about the moving pieces as we move into 2026.

Just on cost every day, and that's what they've done, right? We've been able to generate more free cash this year, 15% more per share, despite oil prices being down 14%. So I've kind of turned the tone from, hey, this isn't great to because, you know, I think the longer this kind of murky macro lasts, you know, the better things will be on the other end. And, you know, Diamondback, in my mind, is going to be one of the long-term winners.

Thanks, Case. And the follow-up is just on M&A, and there's, I guess, two components to it. One, you guys have done a great job selling non-core assets. So just your perspective of are there other opportunities within the portfolio? And I think, you know, last quarter you got, there was a lot of tension on some of the comments about, you know, not being the seller. But I think clarified, clarified your perspective on that, you know. And so just on those two points, comments would be great.

Thanks, Case. Appreciate the time.

Thank you. Our next question is from Philip Jungworth of BMO. Your line is now open.

Thanks. Good morning. But circling back on the macro, I mean, everyone's gotten more capital efficient this downturn. Maybe it takes until 27, but curious how you see a green light scenario playing out for the Permian broadly. Can you just talk about how less capital efficient it is to grow versus stay in maintenance, as we saw in 2022? And do you think the industry has the capacity to really accelerate as it's called upon?

Yeah, it's a market that is clearly oversupplied.

the debate is how oversupplied is not a prudent decision okay great and then coming back to uh to slide eight here in the deck um i mean we did note that your relative ranking on well productivity improved first appears um the question is more when you look at benchmarking on average wells per section um how much of spang's leadership do you think can be attributed to when you guys just have more core acreage maybe less power and less southern midland exposure where you have your peer zones, or do you think peers are still leaving behind quite a bit of child wells targeting best zones, which you also have unique perspective in, given the Piper?

Great. Thanks.

Thank you. Our next question is from Bob Brackett of Bernstein Research. Your line is now open.

Good morning. I'm going to return to the theme around traffic lights. If I to contrast the weeks where you wrote the 1Q shareholder letter around the weeks after Liberation Day versus you writing the shareholder letter now. The difference is Liberation Day was new. It was very kind of unusual, strange environment. And right now we're just kind of in a normal, typical oil down cycle. And therefore, you have more confidence in taking that CapEx right. Is that capex up. Is that a fair assessment?

Yeah, Bob, I think that's very clear.

On the follow-ups, you guys are hitting a shade over four zones per well, and the workhorses are the middle spray berry, lower spray berry, and the wolf camp A and B. You know, year-to-date, you've got 6% of your wells hitting other zones. Is that a development strategy or an exploration strategy, if I can sort of crudely contrast. Like, are you learning stuff or are you just folding in that sort of fifth zone in workhorse mode?

Yeah, I mean, Al can give us some details. At a high level, most of that is moving into development. There are zones we've tested, and the Wolf Camp D is starting to get more capital.

That's super interesting. Thanks for that. Thanks, Bob.

Thank you. Our next question is from Scott Hanold of RBC Capital Markets. your line is now open.

Thanks. You know, Kay, as you obviously mentioned, you hit your target asset sales. At this point, how do you view the equity ownership of those various interests you have? And maybe specifically on Deep Blue where, you know, there are future capital calls, like strategically, does it make sense to own them? Is there a monetization opportunity there? Got it. And the capital range you generally get for maintenance, any kind of equity interest capital call would be sort of included that or would that be outside of that got it okay and my got my follow-up question is is just you know you talked a little bit about like targeting zones and what you're all doing but like can you with 2026 is there any kind of a shift in activity allocation across both like acreage you know regionally within the midland or even you know does the delaware get attention and you know do zones such as like the woodford and barnett get a you know a little bit more attention as well.

Yeah, I think the high level of the Delaware is going to get less attention even than this year.

Look forward to that. Thank you.

Thank you. Our next question comes from Calais Akamain of Bank of America. Your line is now open.

Hey, good morning, guys. I want to follow up on the topic of maintenance capital at $925 million per quarter. Wondering if you can put some definition around that, because headline production has moved around quite a bit in the last 18 months. So, what is the associated maintenance oil production level, maybe on an operated basis, associated with that? And then, is this spend level inclusive of all the rateable non-DNC spend?

We definitely

do like modeling by multiplying by four for my second question. I appreciate that there's a lot of uncertainty around the 26 oil macro, But you guys do have a very large stuff backlog that gives you a lot of flexibility to shape a range of production outcomes for next year. So can you give us an update on where you expect to be with that backlog at year end and then talk about activating that? Do you intend to reach into that bucket as you kind of reset the efficiency in your frack operations through what you guys are calling continuous drilling, or do you actually need to add another frack to tap all those opportunities? Thanks for the color.

Thank you. Our next question is from Kevin McCurdy of Pickering Energy Partners. Your line is now open.

Hey, good morning. Case, in your shareholder letter, you mentioned the benefits of the CIDIO acquisition for Viper and the potential M&A market for minerals and royalties. I wonder if you could just kind of expand on the benefits you see to FANG, you know, beyond just the cash flow contributions for the minerals.

Yeah, I think I'll say for the first time, but I do think there's a huge asset. at Viper.

I appreciate the details there. And then for my follow-up, you mentioned earlier that you had 70 percent of your current gas volumes going to Waha, and you expect by the year-end 2026, that would be down to 40 percent. And I wonder if you could just walk through the pieces of what you've disclosed of where that gas will go, if not going to Waha.

Thank you.

Our next question is from Doug Legate of Wolf Research. Your line is now open.

Thanks, Chase, for having me on. I wanted to go back to the question about the core inventory and the co-development. Obviously, when you talk about core, I think we've touched on this a couple of years ago, and I just wanted to get an update. You talk about core, you're generally talking about your best inventory, but in the co-development, you're obviously bringing in lower than tier one locations, I guess. So when we think about the 10 years of code inventory, what does that look like on a development cadence? In other words, is it 14, 15, or how do you think about it?

It would be severely degraded from an excellent development.

So would that uplift the 10 years to a bigger number then, or is that included in the 500 per year?

Next year, I think we'll probably, given recent results, be, in my mind, a tier...

Okay, thank you for that. Case, my follow-up is on gas. I mean, obviously, you touched on some of the pipes that are coming online. You guys do, I guess, about 500 Bs a year. I'm trying to understand if you have your own solution outside of just waiting on someone else adding infrastructure, whether it be a power deal or something else. But, I mean, at the end of the day, a dollar, $500 million a year is pretty meaningful for you for every buck change in gas price. And you're kind of giving it away right now. So I'm just curious, what's going on in the background in terms of how you improve your gas realizations?

Yeah, I mean...

Thanks, Ellis.

Thank you. Our next question is from Geoff J of Daniel Energy Partners. Your line is now open.

Hey, guys. I just had a quick follow-up on the continuous pumping. Just wondering how many fleets it's deployed on today. And, you know, I think you're running five memory serves. And sort of, you know, how many will be rolled out, you know, in the next couple of quarters as you get to full deployment?

Hey, Jeff, yeah.

Excellent. And then one quick follow-up on sort of base production work that you guys talked about last quarter. Are there any updates there? Are you, you know, any changes to kind of what you're seeing, any improvements?

Yeah, we've seen out of our town hall with and on. We don't have enough data yet to really talk about anything. But, you know, we continue to focus on optimizing the tail and deploying capital there. And I feel like it's some of the highest return capital we can spend.

Thanks, guys.

Thank you. Our next question is from Leo Mariani of Roth. Your line is now open.

Yeah, you guys laid out certainly the case for yellow light and certainly talked about a bit how you might get back to the green light. I was hoping you could provide maybe a little bit more commentary on what you would kind of view a red light scenario as you roll into 2026 at this point, you know, in terms of kind of costs and, you know, oil prices, any kind of high level, you know, sort of indications you can help with would be great. The details, kind of a number of strategies, wanted to kind of get a sense, just given that the low reinvestment rate may come into play here. The buybacks were very healthy, you know, this quarter, which is certainly nice to see, but also wanted to see if you think in the yellow light scenarios or whatever, May merged also could, you know, benefit the company. So let me just talk a little bit about M&A, use of kind of free cash flow there, and certainly seems like the buyback has continued to stay pretty healthy. I just wanted to confirm that.

The primary use of free cash is still buying back, in our minds, at least 1% of our public float per quarter, and that still leaves free cash to do other things. I think the primary use after that would be continuing to pay down debt, but we're still doing a little bolt-on deals here and there. I think there's a lot of big trades that we've been working on that are cashless, but they're very value accretive.

Okay, thank you.

Our final question is from Cheng Paul of Scotiabank. Your line is now open.

Hi, thank you. Hi, team. Keith, just curious that if we're looking at your program today, what percentage of the well that you are in the three miles or longer? And if we're looking at over the next several years, based on your existing land position, how that program may shift. Second, that one of your much larger person is talking about their proprietary technology using a lightweight proponent, and that will help them to improve their recovery rate maybe by, say, up to 30%. I want to see if you guys have looked at that uh out there is there anything similar in the market you can deploy or test it uh or that this is truly proprietary that that's really nothing out there that uh you guys will be able to deploy thank you great and now my first question when you're saying that it's 20 25 percent of three mile parts for 2025 over the next several years that how that progress is going to look like Further beyond 3-mile-an-foot DSU, we're a 10,000-foot DSU and make it a 20,000-foot DSU. Do you think that you can get to, say, 50% over the next five years? You have a lot of smart engineers. Okay, perfect. Thank you.

Thanks, Paul.

Thank you. I am showing no further questions at this time. I would now like to turn it back to Kay Sponthoff for closing remarks. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.