Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback”) announced the next step in its return of
Beginning in the third quarter of 2022, the Company’s Board of Directors has approved an increase to its return of capital commitment to at least 75% of Free Cash Flow (as defined below), from its previous commitment of at least 50% of Free Cash Flow. Additionally, the Company announced its intention to increase its base dividend to $3.00 per common share annually ($0.75 per quarter) beginning with the second quarter of 2022. When declared, this will represent a 7.1% increase from the Company's previous annual base dividend of $2.80 per share ($0.70 per quarter) and implies a 2.5% annualized yield based on the June 17, 2022 closing share price of $122.29. Diamondback’s base dividend will remain its primary mechanism for returning capital to stockholders, with additional return of capital expected to come in the form of variable dividends and opportunistic share repurchases.
For the second quarter of 2022, the Company plans to maintain its first quarter 2022 base-plus-variable dividend payout of $3.05 per share, which implies a 10.0% annualized yield based on the June 17, 2022 closing share price of $122.29. Diamondback has also repurchased 1,966,516 shares of its common stock for approximately $253 million to date during the second quarter at a weighted average price of approximately $128.42 per share. While the second quarter has not yet ended, the Company expects that the combination of these stock repurchases together with its expected base-plus-variable dividends for the quarter will constitute a return of capital to stockholders well in excess of 50% of Diamondback’s Free Cash Flow for the second quarter.
“We are pleased to announce our enhanced capital return framework,” stated Travis Stice, Chairman and Chief Executive Officer of Diamondback. “This is a natural progression of our shareholder returns program that began with the initiation of our base dividend in 2018, which has been increased 500% since then and continues to deliver significant value to our stockholders.”
Mr. Stice continued, “We have continued to use cash on hand to pay down debt and believe that we now have a strong balance sheet that can withstand another down cycle. The increased return of capital framework announced today displays the confidence we have in our forward outlook, with our high cash margins and low-cost structure driving an increasing return on capital. Going forward, we will continue to remain flexible, using a combination of our growing and sustainable base dividend, variable dividend and opportunistic share repurchase program to generate the highest value proposition for our shareholders.”
The Company expects to declare and announce its base and variable dividend for the second quarter in connection with its announcement of second quarter earnings on or about August 1, 2022, at which time the record date and payment date for those dividends will also be announced. Base and variable dividends remain subject to review and approval at the discretion of the Company’s Board of Directors.
Free Cash Flow, which is a non-GAAP financial measure, is cash flow from operating activities before changes in working capital in excess of cash capital expenditures.
COMMON STOCK REPURCHASE PROGRAM
On September 15, 2021 the Board of Directors of Diamondback authorized the Company to acquire up to $2.0 billion of common stock. To date, Diamondback has repurchased 6,151,038 shares of common stock at an average share price of $112.20 for a total cost of approximately $690 million. Diamondback intends to purchase common stock under the common stock repurchase program opportunistically with cash on hand, free cash flow from operations and proceeds from potential liquidity events such as the sale of assets. This repurchase program has no time limit and may be suspended from time to time, modified, extended or discontinued by the Board at any time. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and will be subject to market conditions, applicable legal requirements and other factors. Any common stock purchased as part of this program will be retired.