Diamondback Energy
FANG · NasdaqOil price, not volume, drove the revenue jump
The realized oil price rose 31.8% from the first quarter while daily oil volume rose 0.8%: the gain came mostly from price.
Q2 FY2026, the quarter to Jun 30, 2026 · 10-Q filed Aug 5, 2026
- Operating margin
- 45.2%
- Net income
- $1.9B
- Free cash flow, quarter
- —
Where Diamondback Energy's money goes
- 01
Oil price, not volume, drove the revenue jump
The realized oil price rose 31.8% from the first quarter while daily oil volume rose 0.8%: the gain came mostly from price.
Why it matters
The average realized oil price was $96.82 a barrel, against $73.47 in the first quarter, 31.8% higher. Daily oil production was 525,176 barrels, against 520,989, up 0.8%, and combined production was 1,017,659 barrels of oil equivalent a day against 979,356, up 3.9%. Against the first quarter, the filing attributes most of the gain in oil, gas and liquids revenue to higher prices received for oil.1
Oil carries the business. Oil sales were $4,627M of $5,562M in total revenues, 83.2%, against $2,852M of $3,678M a year earlier, 77.5%. The filing's backdrop is a supply shock: the conflict in the Middle East moved the global crude market "from a supply-demand surplus to a deficit", raising benchmark prices.1
AnalysisAnalysis: the year-on-year comparison mixes price with acquisitions that added volume, so the first quarter is the cleaner test of what changed. On that test, the drilling program held oil output roughly level and the market set the result. The quarter shows mainly what the same output earns at a higher oil price.
- 02
Flat depletion turned higher prices into margin
Revenue rose 51.22% while depletion barely moved, so operating margin reached 45.16%, against 30.97% a year earlier.
Why it matters
Total revenues rose 51.22% from a year earlier while total costs and expenses rose 20.13%, to $3.05B from $2.54B. The largest cost, depreciation, depletion, amortization and accretion, was $1,272M against $1,266M, up 0.47%, so its share of revenue fell to 22.9% from 34.4%. Operating income was $2,512M against $1,139M, 2.2 times.1
The filing ties the lower depletion rate to the ceiling test impairments of the last quarter of the prior year and the first quarter of this one: writing down the asset base left less book value to deplete per barrel. Part of the wider margin is therefore a consequence of earlier write-downs, alongside the higher price.1
Caveat: total revenues include $739M of purchased oil sales, matched by $730M of purchased oil expense, 98.8% of those sales. This pass-through, used to fill unused pipeline commitments, adds revenue with almost no profit, so it dilutes the reported operating margin. Its weight grew: purchased oil expense rose 120.54% from a year earlier.1
- 03
Write-downs swing earnings while operating cash holds steady
Operating cash flow of $3,589M was 1.9 times net income attributable to Diamondback, and it stayed positive through quarters of impairment-driven operating losses.
Why it matters
In the last quarter of the prior fiscal year the company reported an operating loss of $2,782M, yet operating cash flow that quarter was $2,343M. For that full year, operating income was $1,266M against operating cash flow of $8,758M: operating income was 14.5% of operating cash flow. In the first quarter of this year, operating income was $116M on revenue of $4,240M, while operating cash flow was $1,828M.1
The cause is full cost accounting. Each quarter the company caps the book value of its proved reserves at a ceiling based on trailing prices and writes off any excess at once. The filing states it plainly: "Impairment charges affect our results of operations but do not reduce our cash flow."1
AnalysisAnalysis: reported operating income tracks trailing prices through the ceiling test, while operating cash flow tracks the barrels sold and the price received. Comparing quarters on cash flow separates the business from the accounting cycle. This quarter, with no impairment, the two lines moved closer: operating cash flow was 1.9 times net income attributable, against 2.4 times a year earlier.
- 04
Debt and hedge gains lifted net profit past operating profit
Operating income rose 120.5%, but net income attributable rose 169.2%, helped by a $134M gain on retiring debt and a derivatives swing.
Why it matters
Operating income rose 120.5% from a year earlier, to $2,512M from $1,139M. Net income attributable to Diamondback rose 169.2%, to $1,882M from $699M. The gap comes from below the operating line: total other income was $123M, against an expense of $196M a year earlier.1
Two items explain most of that swing. A $134M gain on extinguishment of debt, against $55M a year earlier, which the filing ties mainly to a tender offer that bought back senior notes below face value. And a $49M gain on derivative instruments, against a $197M loss a year earlier. The debt gain alone was 5.1% of income before income taxes of $2,635M.1
Per share the gain is larger again. Diluted earnings per share were $6.65 against $2.38, up 179.4%, on 281.2 million diluted shares against 292.1 million, 3.7% fewer after repurchases. Viper's outside holders took a rising share: $173M, 8.4% of net income, against $40M, 5.4%, a year earlier.1
AnalysisAnalysis: a gain from retiring debt below face value depends on bond prices and is not a recurring part of the business, and derivative results reverse as prices move. The operating line is the better guide to what the barrels earned.
Sources
- 1.Diamondback Energy 10-Q for the period to 2026-06-30 (the filing), Aug 5, 2026, read Nov 2, 2026
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Growth, profit and margin
Revenue went from $527.1M in FY2016 to $15.0B in FY2025, the operating margin from -13.0% to 8.4%, over 9 years.
- Revenue$15.0B
- Operating income$1.3B
- Operating margin8.4%
- Period
- Q2 FY2026
- Revenue
- $5.6B
- Operating income
- $2.5B
- Operating margin
- 45.2%
- Net income
- $1.9B
- Free cash flow
- —
Does the profit turn into cash?
- Operating cash flow$8.8B
- Capital expenditure—
- Free cash flow—
- Net income$1.7B
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
The figures
Margins, cash and growth for the period, each with what it was computed from.
Not reported, or not derivable
- gross margin: the company reports expenses by nature: no cost of revenue or gross profit line exists
- free cash flow: the quarter's cash flow is year to date in the filing and could not be differenced from the history
- fcf margin: the quarter's cash flow is year to date in the filing and could not be differenced from the history
- capex to revenue: the quarter's cash flow is year to date in the filing and could not be differenced from the history
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
This filing reports no breakdown of revenue by product, segment or region for the period.
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by nature: what they are (food, labor, occupancy, personnel, marketing), not what they were for, so there is no cost-of-revenue line and no gross profit.
| Cost line | Q2 FY2026 | Of revenue | Source |
|---|---|---|---|
| Total costs and expenses | $3.1B | 54.8% | Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-08-05 |
| Income (loss) from operations | $2.5B | 45.2% | Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-05 |
Operating figures the company states
From the text of the filing rather than its statements, each with the sentence that states it.
View source
The average lateral length for the wells completed during the second quarter of 2026 was 11,983 feet.
View source
Oil ($ per Bbl) $ 96.82 $ 73.47
View source
Our cash operating costs were $10.96 per BOE
View source
Daily combined volumes (BOE/d) 1,017,659 979,356
View source
Daily oil volumes (BO/d) 525,176 520,989
View source
We are currently operating 17 drilling rigs and five completion crews.
View source
Drilled 97 gross horizontal wells in the Midland Basin and turned 168 gross operated horizontal wells in the Midland Basin to production.
View source
Total 4,404 4,184 5,636 5,294 10,040 9,478
View source
Drilled 97 gross horizontal wells in the Midland Basin and turned 168 gross operated horizontal wells in the Midland Basin to production.
View source
As of June 30, 2026, we and Viper held interests in 44,314 gross (9,810 net) wells, including 1,909 gross (331 net) wells in which we have a non-operated working interest.
View source
As of June 30, 2026, we had approximately 902,005 net acres in the Permian Basin, which included approximately 808,401 net acres in the Midland Basin and 93,604 net acres in the Delaware Basin.
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement30 lines, as presented in the 10-Q
Cash flow statement5 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
| Line | Q2 FY2026 | A year earlier | Change | Source |
|---|---|---|---|---|
| Cash flows from operating activities: | ||||
| Net income (loss) | $2.06B | $739.0M | +178% | Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-08-05 |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
| Impairment of oil and natural gas properties | $0 | $0 | Source10-Q, us-gaap:ImpairmentOfOilAndGasProperties, as reported in the 10-Q filed 2026-08-05 | |
| (Gain) loss on extinguishment of debt, net (shown as a deduction) | ($134.0M) | $55.0M | +144% | Source10-Q, us-gaap:GainsLossesOnExtinguishmentOfDebt, as reported in the 10-Q filed 2026-08-05 |
| (Gain) loss on derivative instruments, net (shown as a deduction) | ($49.0M) | -$197.0M | Source10-Q, us-gaap:DerivativeGainLossOnDerivativeNet, as reported in the 10-Q filed 2026-08-05 | |
| Statement of Cash Flows | ||||
| Cash, cash equivalents and restricted cash at end of period | $464.0M | $221.0M | +110% | Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-08-05 |
Balance sheet33 lines, as presented in the 10-Q
About this data
- Source
- Diamondback Energy 10-Q, accession 0001539838-26-000142, filed Aug 5, 2026, read on Nov 2, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
What holds Diamondback Energy's model up, and what could bend it
Competitive edge
Low cash costs on concentrated Midland acreage
Cash operating costs were $10.96 per barrel of oil equivalent, against $96.82 realized per barrel of oil, leaving wide room before price erodes cash margin.
The detail
The filing puts cash operating costs at $10.96 per barrel of oil equivalent, covering lease operating expenses, cash general and administrative expenses, production and ad valorem taxes, and gathering, processing and transportation. General and administrative expenses were $72M, 1.29% of total revenues.1
The company holds about 902,005 net acres in the Permian Basin, and all of the quarter's operated drilling and completions were in the Midland Basin. Wells completed in the quarter had an average lateral length of 11,983 feet, and the company operates 10,040 gross wells.1
AnalysisAnalysis: long laterals on contiguous acreage spread the fixed cost of each pad, road and pipeline over more rock, and a steady fleet repeats the same well design. That is how a price-taker competes: on the cost of each barrel, which it controls, rather than the price, which it does not.
A stock of drilled wells lets output rise quickly
The company turned 168 gross operated wells to production while drilling 97, drawing on wells already drilled to lift output without waiting for new drilling.
The detail
In the quarter Diamondback drilled 97 gross horizontal wells and turned 168 to production, all in the Midland Basin. Daily combined production was 1,017,659 barrels of oil equivalent, against 979,356 in the first quarter, 3.9% higher. The filing says it expects to raise output "in part by continuing to convert portions of our drilled but uncompleted well balance."1
AnalysisAnalysis: completing an already drilled well is faster than starting a new one, so the inventory acts as a throttle the company can open when prices rise. With 17 drilling rigs running and capital spending the filing calls "largely discretionary", it can also slow the program when prices fall. The inventory is finite, so the throttle works in bursts rather than indefinitely.
Viper collects royalties well beyond Diamondback's own wells
Diamondback and Viper hold interests in 44,314 gross wells, against the 10,040 it operates, so royalty income reaches past its own drilling.
The detail
Viper, a public company Diamondback controls and consolidates, owns mineral and royalty interests and derives "royalty income and lease bonus income" from them. Together the two held interests in 44,314 gross wells, against 10,040 gross wells Diamondback operates.1
Viper's shares also work as a financing tool. During the half year the company sold Viper stock in a secondary offering and, after the quarter, agreed a further drop down of mineral interests into Viper in exchange for units. Outside holders' share of net income rose to $173M, 8.4%, against $40M, 5.4%, a year earlier.1
AnalysisAnalysis: a royalty owner takes a share of revenue without paying for wells, so Viper earns on drilling by Diamondback and by other operators. The cost of the arrangement is that a growing slice of the profit belongs to outside holders.
What to watch
The margin rests on a supply-shock oil price
The realized oil price was 31.8% above the first quarter's, a rise the filing ties to a Middle East supply deficit it calls beyond its control.
The detail
The filing says oil, gas and liquids prices move with conflict, trade policy, OPEC+ production, weather and the economy, and that "These factors are beyond our control and are difficult to predict." It ties this year's higher benchmark prices to the conflict in the Middle East, which moved the global crude market from surplus to deficit.1
AnalysisAnalysis: with daily oil volume up 0.8% from the first quarter and the oil price up 31.8%, the quarter's result is mostly a price outcome. If the deficit eased, the same output would earn less, and the depletion charge that stayed flat while revenue rose would weigh more heavily on a smaller revenue base.
Pipeline limits turned gas sales negative
Natural gas sales were minus $276M against $97M a year earlier, offsetting 6.0% of oil sales, as Permian takeaway constraints pushed Waha prices below zero.
The detail
The filing attributes the negative gas line to widening differentials between Waha Hub and Henry Hub, "primarily driven by regional natural gas takeaway constraints in the Permian Basin, which resulted in periods of negative pricing at Waha Hub." Its gas basis swaps also lost value as differentials widened. Natural gas liquids still earned $435M, against $367M a year earlier.1
The company expects the impact to be reduced later in the year as its secured takeaway capacity increases, while warning that realized prices stay subject to "future supply, demand, transportation availability and other market factors."1
AnalysisAnalysis: gas comes out of the same wells as the oil, so it cannot be shut in on its own. If new pipeline capacity slips, the negative line can recur whatever the oil price does.
Falling trailing prices can bring write-downs back
Ceiling test impairments held first-quarter operating income to $116M on $4,240M of revenue, and the filing warns of material write-downs if trailing prices fall.
The detail
The company tests the book value of its reserves every quarter against trailing prices. It warns that if those prices fall, "we may have material write-downs in subsequent quarters." It says it does not currently expect an additional impairment in the third quarter. In the last quarter of the prior year the company reported an operating loss of $2,782M.1
AnalysisAnalysis: these charges cost no cash in the quarter they are booked but reduce reported earnings and equity. Because the ceiling reflects prices with a lag, a fall in oil would reach the income statement only after several quarters, when the reported margin could swing sharply even if cash flow held.
Sources
- 1.Diamondback Energy 10-Q for the period to 2026-06-30 (the filing), Aug 5, 2026, read Nov 2, 2026
Diamondback Energy, further in
Member research, then your own questions on ChatGPT.
What could change the outlook
What Diamondback Energy's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- What the margin depends on once the oil price moves
How much of the quarter's margin comes from price, from lower depletion and from cost discipline, and which of those the company can hold if the supply deficit eases.
- Where the cash goes now the payout floor is gone
With the minimum return commitment removed and the buyback authorization raised, a read of how management weighs repurchases, debt retirement and drilling, and what each choice reveals.
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Have a question about Diamondback Energy?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- How much of Diamondback's operating margin would remain if its realized oil price fell back to the first-quarter level?
- Why did Diamondback's natural gas sales turn negative, and what would new Permian pipeline capacity change for it?
- Why does Diamondback's operating cash flow stay positive in quarters when ceiling test impairments produce operating losses?
Business Lens describes Diamondback Energy from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.