Permian Basin pure-play Diamondback Energy Inc. is not budging on plans to keep oil production flat this year, despite increased market tightness because of Russia’s invasion of Ukraine, said CEO Travis Stice.

Diamondback “is committed to maintaining our current production levels, providing a significant supply of energy to our country and the world,” said Stice in presenting first quarter earnings. “While we believe that efficiently growing our production base is achievable over the long term, we do not feel that today is the appropriate time to begin spending dollars that would not equate to additional barrels until multiple quarters from today given the uncertainty and volatility currently in the market.”

Midland, TX-based Diamondback operates in the Permian’s Midland and Delaware sub-basins, which have led recent growth in Lower 48 drilling and production. High oil and natural gas prices have benefitted producers, who nonetheless face numerous headaches.

“Like many other industries, we are operating in a challenging environment,” Stice said. “We are seeing inflationary pressure across all facets of our business, with labor and materials shortages now present across the supply chain.” 

He added, “We are fortunate to have secured the necessary equipment, personnel and materials to run our capital program, but increasing activity today would result in capital efficiency degradation and would not meaningfully contribute to the global supply and demand imbalance in the oil market today.”

As a result, “we are focused on maintaining our operational excellence and producing one of the lowest cost and environmentally friendly barrels in the world. By doing so, we expect to continue generating differentiated returns, hitting our production and capital targets and returning at least 50% of our free cash flow to our stockholders.”

First quarter production averaged 381,378 boe/d, including 222,833 b/d of oil. These figures are up from 307,422 boe/d and 184,200 b/d in the first quarter of 2021.

Diamondback drilled 47 gross horizontal Midland wells during the quarter and 14 gross horizontal wells in the Delaware.

The company turned 54 operated horizontal wells to production in the Midland and 15 in the Delaware. Average lateral length for wells completed during the quarter was 9,658 feet, the company said.

Diamondback has set a capital expenditures budget of $1.75-1.9 billion in 2022, with $1.56-1.67 billion of the total going to drilling and completion, capital workovers and nonoperated properties.

The company is forecasting total net production of 369,000-376,000 boe/d in 2022, with oil accounting for 218,000-222,000 b/d of output.

Diamondback reported 1Q2022 net income of $779 million ($4.39/share), up from $220 million ($1.34) in the same period last year.