Source: Fortune
Summary
Diamondback Energy, a major oil and gas producer in West Texas’ Permian Basin, has declared a “green light” for the US energy sector to increase production amid the ongoing Iran war and high crude prices. The company is adding fracking crews and drilling rigs to West Texas, aiming to produce 520,000 barrels per day or more through the rest of the year. Diamondback’s CEO, Kaes Van’t Hof, cited a legitimate supply-demand imbalance and price signal as the catalyst to grow production.
Our Reading
The numbers tell one story. Diamondback Energy is adding both fracking crews and drilling rigs to West Texas. The company’s Permian oil production averaged 521,000 barrels per day in the first quarter, above its guidance. Diamondback is increasing its capital spending plan from $3.75 billion to $3.9 billion. CEO Kaes Van’t Hof says the price signal is the catalyst to grow production. The US energy sector is responding to the ongoing Iran war and high crude prices.
The announcement sounds like a familiar call to action. Diamondback is well-positioned to respond to the current macro environment, with its “stoplight” system now showing a “green light”. The company is focusing on fracking previously drilled oil wells to quickly hike oil output. Diamondback is adding more drilling rigs to replenish activity and build its DUCs back up. The US benchmark for oil was $105 per barrel on May 4, an 85% increase since the beginning of the year.
It’s a classic case of “price signal” meets “supply-demand imbalance”. Diamondback is bringing incremental barrels to the market immediately. The company’s CEO is confident in the face of uncertainty, citing the effective closure of the Strait of Hormuz and the resulting bottleneck in OPEC production. The US energy sector is responding to the Iran war and high crude prices, and Diamondback is leading the charge.
Author: Evan Null
