Diamondback CEO Says Its Chemical Oil Recovery Push Is At The 'First Pitch'
Kaes Van't Hof puts spending on the technology at $50 million to $100 million and says more money follows only if returns beat drilling.
Diamondback Energy CEO Kaes Van't Hof said on the company's third-quarter earnings call that its chemical enhanced-oil-recovery work is at an early stage, with spending of "50 to 100 million total" and more capital only if the technology out-earns remaining drilling.
A small bet on a new technology
Diamondback, which explores for and produces oil and natural gas, mostly in the Permian Basin of West Texas, is testing chemical methods to pull more oil from existing wells. Asked by a Barclays analyst how far along it is, Van't Hof said, "I think we just threw the first pitch."
He compared the effort to an early Wolfcamp well in Upton County in 2012, and said the money is "not a huge dollar amount" set against a budget of "over $4 billion." The company's release puts full-year 2026 cash capital spending guidance at $3.95 billion to $4.00 billion. Van't Hof added that "if it works and gets better, it'll attract more capital."
A Roth Capital analyst asked whether recovery rates of roughly 10% could reach 11%. Van't Hof said 11% is achievable in the next couple of years. Getting from 10% to 20%, he said, looks possible in the next decade, based on use cases working in labs or early field tests.
Why Diamondback can wait
Van't Hof said Diamondback has "the longest duration inventory in the basin at the lowest cost structure," so it will be "the last company that has to try this stuff." If the methods earn better returns than the drilling the company has left, he said, it will shift more capital to them.
Green light and a higher 2027
On activity, Van't Hof said the company remains in "green light" mode, noting that it has been a couple of quarters since the stoplight "went into retirement." An analyst's question described the base case as 19 to 20 rigs and five frack crews, and Van't Hof said the program is level-loaded and should produce some organic growth.
Pressed by a Truist analyst on whether 2027 quarterly capital spending would exceed the fourth-quarter figure of about $1.05 billion, Van't Hof said "there's still a lot of variables." At $100 oil, he said, spending would probably be a little higher.
He also said Diamondback has gas-heavy zones in its inventory that it has not yet needed to drill, and that the Barnett, which an analyst put at about 20% of drilling activity, is driven by geology. He called the play "probably one of the best investments we've ever made." Diamondback's market value was $55.9 billion in Tuesday morning trading.
The 2027 spending plan is the next marker: Van't Hof said it depends on oil prices, and that the decision will become clearer over the next few months.
Sources
- Diamondback Energy Raises Dividend and 2026 Oil Production Outlook | OilPrice.com — oilprice.com
- Diamondback Energy (FANG) Beats Q3 Earnings and Revenue Estimates — Yahoo Finance
- Diamondback Forecasts Permian to Also Be Gas King by Next Decade — news.bloomberglaw.com
- Diamondback: Q3 Earnings Snapshot — Associated Press
- Document — sec.gov
