Good day and thank you for standing by. Welcome to the Diamondback Energy First Quarter 2026 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that 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, Corey.

Thank you very much. One moment. As a reminder to ask a question, you can press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Neil Mehta of Goldman Sachs. Neil, your line is open.

Yeah, good morning, Case, and good morning, team. So I guess the big development here today that you've been signaling is the move to a green light framework from yellow light, adding the two to three rigs and moving to the fifth completion crew. So, Case, maybe you just take a moment for the investors on the line to talk about the thought process that went into this decision and just how you're thinking about where and when to add activity.

...efficient manner and get it done very quickly.

Next case. And then the follow-up is just on the return of capital framework. You did move away from the fixed framework while you bumped the dividend. You indicated that you might be slowing down the buyback a little bit. So can you talk a little bit about that, what you intended to communicate with that? And then there is a very concentrated ownership base here, and if the family ultimately is going to sell into the market or sell down their stake, do you still view Diamondback as a logical buyer to help offset that potential risk on the stock?

We have a good track record of buying back our own stock in shares for dollars a share. You know, clearly with the stock where it has made a return for our stockholders, and I expect that to continue. You know, we recognize we also have a large shareholder that we found a way to help monetize their stake in a very efficient manner. And, you know, I think we're most focused on us creating, you know, allocating a ton of free cash to the balance sheet in times of beginning to change. You know, we have a great relationship with the family. I think we have the ability to help them monetize, and if we spree cash flow over the next couple quarters to pay down debt, we can help monetize their stake actually more efficiently.

That makes sense. Thank you, Kay.

Thank you very much. Our next question comes from the line of Scott Hanold of RBC Capital Markets. Scott, your line is open.

Yeah, thanks. We all had some pretty robust production performance in 1Q, and based on our chat last night, It sounds like, you know, your completions were as planned. Can you just walk through some specifics, you know, why performance was so strong? It sounds like it was a lot more well-performance just versus, you know, any other kind of dynamic. Just, you know, give us a little bit of caught on that. And is that something we should anticipate moving forward and what's embedded in guidance?

I think that's a good recipe for completions as well as the base.

And we've talked about it over the past few quarters. But some of the things we're seeing on the completion optimization side with, you know, perforating strategies, you know, rain design and sand loadings, you know, we think we're seeing some completion design. But also on the stuff we're doing on the workover side, some of the, you know, the acid jobs, the chlorine dioxide jobs, the surfactant jobs, we're starting to see that pay. Really, you know, layering on that machine learning, you know, as we continue to look at our data streams and processes and layered on machine learning and trying to, you know, start working towards, you know, implementing AI into our field operations, we're seeing that downtime come down and, you know, it's been a big part of our, of the beat in Q1, just really, you know, that little bits of optimization across the board starting to show through.

And as my follow-up, when you guided oil, you talked about it looks like you're inferring greater than, say, 520 a day. Can you just talk through, you know, if you continue to see this macro environment, how much desire is there to kind of continue to let that oil production grow versus, you know, curtail it? then, you know, is there a scenario where you'd actually even look to step it up even higher if the macro continues to be heightened?

Triple-digit oil price, this is a year where activity, you kind of just keep the efficiencies going and production continuing to cost, and it's going to be...

Thank you very much. Our next question comes from the line of Neil Dingman of William Blair. Neil, your line is open.

I'm on occasion teams. Thanks for fitting me in. And my question is also on your activity specifically, Kaze, how much, if any, will negative Waha prices impact, you know, what you might or might not do? And then same question with oil service prices and, you know, maybe ask about are you expecting OFS in place given, you know, what's going on with prices?

Yeah, Neil, I mean, on the Waha side, deeply negative, protected if we can get at length about money.

And so, you know, there's still quite a bit of capacity out there in the rig space and in the completion space. And, you know, where the calendars are not squeezed enough yet for them, I feel like, to be able to push pricing onto the guys when they go out and, you know, look for this additional equipment. We have seen, obviously, some inflation in some of the consumables, you know, and things that are tied directly to the commodity price. But, you know, those have been pretty minimal thus far, and we'll just have to see what activity does for 48 to see what, you know, we anticipate.

Thanks, Danny. And then second question just on capital allocation, especially given the continued, you know, record-free cash flow growth per share you'll likely have. Kay is wondering specifically, how do you believe capital for M&A stacks up, you know, maybe against buybacks or simply the near-term debt repayment? I mean, do you factor that in or maybe just talk about capital allocation?

Yeah, I mean, you know, Neil, I think, you know, my first day of my first finance job in New York City, I was asked the question, what can a company do with their free cash flow organically? So organic growth, we've decided the top end of our –

Makes sense. Thanks, Kate. Thanks, Danny.

Thank you very much. Our next question comes from the line of Arun Jairam of J.P. Morgan Securities. Arun, your line is open.

Yeah, good morning, gentlemen. Case, the calendar 26 and 27 strips are around 90 and 75. How do you think about your approach to development in a much stronger oil price than we sat just, call it 90 days ago? And I was wondering if you could just maybe highlight for the two to three incremental rigs, how are you thinking about capital allocation across your asset base, and is the deeper benches now an area that are now competing with capital as you get down some of those well costs in the Barnett?

Yeah, I'll let Danny now talk about the latest Barnett activity is to get ahead on the J-Net rigs at Diamondbacks. So while the top line looks like we're adding a bunch of activity in the back of the year, net to us, it won't be nearly as impacted.

Yeah, great. My follow-up is maybe for Jerry. You guys have taken, call it pro-form, a debt, I believe net debt down to $12.7 billion. Jerry, I was wondering if you could highlight, given the intention to pay down more debt in a higher commodity price environment, what are some of the targets you're looking for for the balance sheet from either a gross or a net debt perspective?

with where we are from a commodity pricing standpoint and some excess free cash flow generation. It looks like we'll be able to hit that much earlier. To move into the back end of the year, you know, I think we'll have an opportunity to not only reduce net debt, but on the balance sheet. And then once we get into the fourth quarter, take a look at obviously 50 million of 26 is outstanding. And then as we move into 2027, take a look at maybe doing a larger liability management exercise on the balance sheet with the idea of trying to take out as much as we can from a near-term maturity perspective, particularly as it relates to anything that matures prior to 2030. So I think we're in a really advantaged position to move our balance sheet from a position of strength.

Great. Thank you.

Thank you very much. Our next question comes from the line of John Freeman of Raymond James. John, your line is open.

Thank you. Good morning, guys. Even after increasing activity, the reinvestment rate for y'all still fell pretty sharply from what y'all were originally planning last quarter from 44% to 34% at the current strip. So obviously y'all had the ability if you wanted to even increase activity more and still would have likely had kind of an industry-leading kind of low reinvestment rate. I know that returns, you know, ultimately drive y'all's decisions, but is there like a reinvestment rate that y'all just want to stay below regardless of kind of the commodity environment?

Yeah, John, I mean, that's a good question. I mean, I think I'd probably take it a little different direction where…

That's great. And then just along those same lines, I know the original 2026 plan didn't forecast sort of any meaningful, you know, duct draws or builds. And can you just give us a rough idea of kind of how that looks now with the new plan?

Yeah, it's kind of about each of these crews will do about 100-ish wells a year, maybe a little more.

And so, you know, his fleets is kind of the right, you know, carry number of efficient we get. And the guys are always chasing the efficiency curve. And you can see it in our deck today, you know, the improvement quarter over quarter. And, you know, as the crews get more efficient and get more wells done, it either means we've got to release crews to keep the same well count or we've got to build more ducts to stay ahead of them. So, you know, it's a dynamic and fluid situation, but, you know, I think, you know, 20 to 30 wells for the year in total.

Thanks, guys. Appreciate it.

Thanks, John.

Thank you very much. Our next question comes from the line of Betty Jang of Barclays. Betty, your line is open.

Hi, good morning. Thank you for taking my question. I actually want to ask about your crude oil marketing. So 1Q pricing was a bit stronger. Can you just remind us your exposure to premium price indices and the marketing strategy in general on the oil side?

Yeah, I mean, from a strategy perspective, Betty, you know, we...

That makes sense.

And then I want to ask about the acquisition line item in OneQ. There are just a few hundred billion. Are you guys doing any organic acquisitions and maybe picking up both things that's at good pricing? Yeah, can you just speak to that?

You know, as a reminder, in that line item, we do have capitalized interest and capitalized G&A, and that made up small acquisitions and then, you know, let's call it $50 to $75 million in leasehold bonus.

That's helpful. Thank you.

Thank you very much. Our next question comes from the line of Philip Jungwirth of BMO. Philip, your line is open.

Thanks. Good morning. Can you talk about how you're viewing Viper ownership and what's optimal for Diamondback? Just because you did sell some in the quarter, but still own 39%. The company's free cash flow outlook's obviously stronger, so less need for divestitures. But is there any minimum level of ownership you kind of look to maintain? And how does that play into the overall capital allocation decisions? Okay, great. And then in the 2022-23 upcycle, private operators, they did drive an outsized share of rig additions, overall oil growth. You guys have a unique view here being based in Midland. And just wondering how you'd characterize the ability of privates in the Permian to respond to what we're now seeing as far as higher oil prices versus a couple years ago, just because it also has implications for tightening of OFS markets. Great.

Thank you very much. One moment for our next question. Our next question comes from the line of Scott Gruber of Citigroup. Scott, your line is open.

Yes, good morning. Maybe I'll extend upon the last line of inquiry, kind of in light of what you just mentioned about the impact of the private case. How do you think about Diamondbacks' volumes, say over the next five to ten years on an organic basis? is, you know, do you think about Diamondback kind of being in modest kind of growth mode over the next five to ten years? And this may happen, you know, kind of stepwise when called upon, you know, by the market. But do you step higher during periods of elevated prices like today and then maintain that new level so that net-net you're growing? Or, you know, when commodity prices are soft, do you pare back on activity and let production fade back down? I'm just curious how you think about the longer-term trajectory. And it would certainly help differentiate Diamondback. And then turning back to the capital efficiency of the investment program, it does appear to improve on the margin with the updated plan, but it's hard to separate the duck draw impact from adding rigs in the barnet where you're still ramping on learnings and efficiency. So just in general, how would you describe the kind of underlying trend and capital efficiency, you know, especially as you lap the impact of the duck draw, say, kind of into 2027, do you think you'll be able to show improvement kind of relative to the initial program this year?

Yeah, listen, I think things like duck draws and when you develop, I mean.

That's great. Appreciate the caller. Thank you, Chase.

Thank you very much. Our next call comes from the line of Derek Whitfield of Texas Capital. Derek, your line is open.

Good morning, Alan. Thanks for taking my questions. Case, perhaps for you, just regarding your share buyback and its guiding principles, where do you view mid-cycle pricing now in light of the current Middle East conflict and the risk premium associated with that? And could you speak to what you're seeing in degradation of inventory quality across the Permian, clearly beyond down the back?

Practical terms, where the situation is right now, and, you know, within not going to be the case to now than it's ever been. I think it's early for us to say inventory depth and quality

perspective, but also the costs at which we execute on it. I wanted to shift over to the Barnett, referencing the play outline on page 16. How large could you reasonably grow this position beyond $200,000 that you're highlighting on the slide deck? And you clearly have one of the most prolific buyers of assets in Midland working with you, so certainly you have that in your favor.

you know, six, seven, eight, eight section positions, you know, those probably come to market. So I think it's going to happen. I think the position is going to grow. But I think, you know, we have the sizable base we need to continue to grow it. Thank you very much.

Our next question comes from the line of Kevin McCutchey of Clickering Energy Partners. Kevin,

your line is open. Hey, good morning. Can you provide any color on the cadence of the net net lateral footage per quarter throughout the year, and also the lateral length per well. We would assume the additional 200,000 lateral feet is back half-weighted, but any color there

would help. Looking at, you know, that stick we went up to. Great, and lateral lengths per well should increase throughout the year too, is that right? Yeah, so, you know, looking at Q1, I think that was... Got it, appreciate that. And maybe it's a follow-up, any updates on the surfactant tests? We're looking at it, team studying it, work with our next deployment kind of early this quarter. Yeah, and Kevin, you know, one thing I'd add to that, you know, we tested 50 wells or so last year, barrel a day uplift, four or five hundred barrels a day, and some wells were zero. And now We're trying to figure out what do we do right in the 400 or 500-barrel-a-day wells and what do we do wrong in the zeros. We're going to figure that out. This is version 1.0, and that's what kind of gets me excited. I think from a high level, this basin and dime breakthroughs related to increasing recovery.

It would certainly be very meaningful. I appreciate the update.

Thank you very much. Our next question comes from the line of Gabe Dowd at Truist. Gabe Dowd, your line is open.

Hey, sorry about that, guys. Thanks for the time. Just going back to the return of capital framework and pursuing growth this year, which obviously makes sense. But just curious if you could maybe talk a little bit about what an upper bound of oil production growth would be for Diamondback. Again, assuming you have the green light on the macro, is it fair to assume that it's 5% for Diamondback? Or would there be an environment where it could be even higher than that?

I think –

Okay. Thanks, Kay. That's helpful. And then a follow-up for me would just be, is there any update around your surface position in light of maybe, you know, a new market entry in that regard? Curious if there's any update on the conversations you're having there.

Yeah, Casey.

Got it. Okay, that's helpful.

Thank you very much. Our next call comes from the line of Charles Made of Johnson Rice. Charles, your line is open.

good morning case you and your your team there uh i'd like to go back to the i think with the big the big question this morning of the uh the acceleration of capex could you can you give us kind of a an inside baseball account of how that how you came to that decision and you know i can imagine you know it could be the case that that your board left with a certain amount of latitude um or alternatively is this kind of thing where where you you know kind of arranged in short order maybe a telephone telephonic or zoom board meeting and just had a quick 30 minute meeting where you made the case and then uh and then acted on it i'm not so much interested interested in the kind of autopsy of your decision but i'm more trying to get some insight into how the dynamics for work for you guys as as as a fast mover in response and in this volatile oil tape. Great, that's all for me.

Thank you very much. Our next question comes from the line of Leo Mariani of Roth. Leo, your line is open.

Hey, everybody. There's been some discussion of some pretty weak Waha prices in 2Q. Wanted to get a sense whether or not you think that could be some short-term negative volume impact for the company. Are there some wells that have maybe a lower oil cut where you say, hey, maybe it's worth shedding some of those wells in for a little period of time here, just given how bad the gas price is or just any color kind of around that dynamic and how you're thinking about it would be helpful.

On midstream development and flaring, that's probably a sense of issues as weak as it is.

Okay, that's helpful. Sounds like you still have flow assurance. This would be more of an economic decision for the company. And then just wanted to talk a little bit on what you all said on the growth part of it. Obviously, your guidance for the year on oil, it's a little bit open-ended with a $520,000 plus. Clearly, you guys did the $520,000 in one queue. It looks like your guide is telling us we're getting $520,000 again. You did talk about a little growth. So, I mean, if the oil environment holds here, people should be thinking about probably that plus and a little bit of growth here in the second half of the year. Is that kind of a fair way to look at it?

Okay, makes perfect sense.

Thank you very much. As a reminder to ask a question, you will need to press star 11 on your telephone. and wait for your name to be announced. To withdraw your question, please press star one one again. Our next question comes from the line of Doug Legate of Wolf Research.

Hey, thanks, Phyllis, I appreciate you having me on. Guys, I wonder if I could come back to one of the comments earlier about the balance sheet. Jerry, is it inconceivable that when we look out with no variable dividend taken out of the capital, you know, the capital returns structure, that your net debt balance sheet could basically go to zero over the next two or three years. Would you allow it to go to that level?

I think generally...

I appreciate that. My follow-up, Phil, is not so much about your growth than what you're seeing from your non-operated positions. And I guess this is particularly, it might be a Viper question, but obviously we've seen some privates add rigs and there's a lot of non-op working interest that basically can influence what happens to the growth story for you guys on a consolidated basis, how would you characterize that? What are you seeing on your non-op, you know, I guess, requests for activity? That's helpful.

Thank you very much. Thank you very much. Our next question comes from the line of James West of Milius Research. James, your line is open.

Hey, thanks, guys. I just wanted to, I know everything's pretty fluid right now, and you're kind of quarter by quarter, but you have to be thinking about a market that's significantly changed in the last 60 days and an oil price that will be structurally higher. So understanding you've raised your guidance for this year, but how are you thinking about the out years and how you want to set up the company to either continue to grow at this bid single-digit rate or not, 27, 28, 29? I'm not looking for guidance, but just kind of how your longer-term thinking is evolving.

Yeah, you know, obviously we have to think about the long-term.

Absolutely, that's very helpful. And then as you think about your inventory depth versus your peers, you guys are obviously in a leading position, but what would you consider your – or how would you kind of phrase it, your position versus probably the peers in the market today? given the huge longevity we think you have.

Yeah, listen, we're very fortunate. We have an incredible inventory quality and duration.

Thank you very much. I'm showing no more questions at this time. I would now like to turn it back to Case Van Hoff for closing remarks.

Yeah, thank you, everybody, for your interest. Just reach out to the...

Thank you for your participation at today's conference. This does conclude the program, and you may now disconnect.