Diamondback Surges Most in 3 Years as Production Forecast Risesby
Company boosts forecast for 2016 output by 6 percent
Company to see $350 to $425 million in capital spending
Diamondback Energy Inc. rose the most since 2013 after the oil and natural gas explorer increased its 2016 production outlook in a preview of third-quarter results.
The Midland, Texas-based company raised its guidance for this year to a range of 41,000 to 42,000 barrels of oil equivalents per day, up 6 percent from the July guidance, according to the preliminary earnings report released Monday. Investors responded by boosting shares as much as 11 percent to $105.27 in New York.
Diamondback Energy focuses on developing and exploring onshore oil and gas reserves in the Permian Basin in West Texas, which has proved to be one of the most economic basins during the market downturn. The company said it intends to finish 65 to 70 horizontal wells this year.
"We are now operating four rigs with a fifth rig to be added in the coming weeks and a sixth rig to be added early next year," said Travis Stice, chief executive officer of Diamondback Energy, in a statement.
The company also said it’s lowered its operating expenses through continued cost-cutting and improvements in efficiency. It plans to spend $350 to $425 million on drilling, completion and infrastructure in 2016, according to the statement.
Diamondback Energy said it expects 2017 production to fall between 52,000 and 58,000 barrels of oil equivalent a day, with 90 to 120 horizontal wells completed, if West Texas Intermediate crude prices stay above $45 per barrel. WTI crude traded at $51.29 a barrel at 11:20 a.m. in New York, bolstered by Russia’s comment that it would back an agreement among members of the Organization of Petroleum Exporting Countries to cut production.
In the statement, Diamondback CEO Stice said the company was engaged in discussions about a potential acquisition earlier in the year, but that it’s "not actively pursuing further negotiations at this time."