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A Diamondback Energy Must-Know: Production Mix and Realized Prices

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Mar. 15 2016, Updated 10:05 a.m. ET

Diamondback Energy’s production mix

As seen in the graph below, in 4Q15, Diamondback Energy’s (FANG) production mix was ~77% crude oil, ~12% natural gas liquids, and 11% natural gas. This means that FANG leans toward liquids production, with total liquids production at about 89%. Typically, upstream companies with high liquids productions have better operating margins.

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FANG’s production mix trend

FANG’s quarterly crude oil percentage in production mix showed an increase from ~68% in 1Q13 to ~79% in 4Q13, with an average rate of increase of ~4% QoQ. But during the last eight quarters, FANG’s crude oil percentage in production mix is averaging around ~75%. In 4Q15, the crude oil percentage in the company’s production mix increased by ~1% over 4Q14.

FANG’s realized prices

Excluding the effect of hedges, FANG’s average realized crude oil price in 4Q15 was $39.32 per barrel, down ~40% from $66.01 per barrel in 4Q14. In 4Q15, FANG’s average realized price for natural gas production decreased by ~45% to $2.14 per thousand cubic feet, compared to $3.91 per thousand cubic feet during the same period in 2014.

In 4Q15, FANG’s average realized price for natural gas liquids production decreased by ~47% to $12.68 per barrel, compared to $23.86 during the same period in 2014. FANG’s lower realized prices were compensated partially by its gains on commodity hedges. (We’ll evaluate FANG’s hedges in next part.)

Oil and gas producers

Other upstream companies from the S&P 500 (SPY) that have higher liquids percentages in their production mixes include Occidental Petroleum (OXY), Pioneer Natural Resources (PXD), and Murphy Oil (MUR). These companies have ~75%, ~72%, and ~63% liquids in their production mixes, respectively.

Continue reading for an instructive analysis of FANG’s hedging activities.

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