Lower 48 player Diamondback Energy Inc. has raised its production guidance for 2021, reflecting the acquisition of two Permian Basin operators earlier this year.

Diamondback Midland acreage

The company said Monday it was targeting 2021 oil production of 218,000-222,000 b/d, or 360,000-270,000 boe/d, following the completion of its purchases of Guidon Operating LLC in February and QEP Resources Inc. in March. Diamondback previously targeted 178,000-185,000 b/d of oil for 2021, or 308,000-325,000 boe/d.

The bulk of production is slated to be in the Permian, with about 12,000 b/d of oil output, or 19,000 boe/d, to come from Williston Basin assets acquired from QEP. Diamondback has said it may divest the Williston assets.

CEO Travis Stice said the revised targets would remain relatively flat against pro forma 2020 production despite a recent rally in commodity prices.

“While commodity prices have improved, global spare oil production capacity remains high as global oil demand recovers from the pandemic,” Stice said. “Diamondback continues to see no need to grow oil production into this artificially undersupplied market, and instead plans to generate free cash flow to pay our dividend and pay down debt.”

A number of publicly listed Lower 48 operators have disclosed plans to keep production flat this year as they face pressure from investors to deliver returns over growth. Permian operators including Diamondback, ConocoPhillips and Pioneer Natural Resources Co. have in recent months called on their peers to practice discipline in the face of improving prices.

This year, Diamondback plans to spend $1.60-1.75 billion on capital projects, compared with previous projections of $1.35-1.55 billion. Stice said the revised guidance represents a 10% reduction in the standalone budget for 2020.

The Midland, TX-based independent expects to drill 178-192 net wells and complete 250-259 net wells. By comparison, the company spent $1.86 billion on capital projects in 2020, before its acquisitions closed. Last year it drilled 208 gross horizontal wells and turned 171 operated horizontal wells to production.

Diamondback also provided figures on its 1Q2021 performance, logging average oil production of 184,200 b/d, or 307,400 boe/d. The figures were affected by the Arctic freeze that caused Texas production to collapse in February, but Stice said output rebounded quickly.

The CEO previously said the storm downed Permian production for several days, but the company expected to make it up during the year.

During the quarter, Diamondback saw unhedged realized prices of $56.94/bbl of oil, $22.94/bbl of natural gas liquids (NGL) and $3.05/Mcf of natural gas, resulting in a total equivalent price of $42.36/boe.

Average hedged realized prices of $46.81 of oil, $22.76 of NGL and $2.64 of natural gas, resulting in a total equivalent price of $35.75.

The company expects to report total hedging losses of $102 million in the first quarter, including $80 million of realized gains from the early termination of interest rate swaps.