Declining Oil and Gas Prices Burden US Shale Producers: Diamondback Energy Gives Initial Signals

Diamondback Energy has announced that the prices for its own oil and gas production have fallen in the third quarter. The company thus joins a series of US shale producers that have reported similar developments within a week. From July to September, oil prices declined noticeably due to global concerns about the growth in oil demand. Additionally, US natural gas prices fell to multi-year lows, with prices at the Waha Hub in West Texas frequently turning negative at record levels. Diamondback reported that the average hedged realized prices for oil in the third quarter were $72.32 per barrel, a decrease from $78.55 in the second quarter. For natural gas sales after hedging, 60 cents per thousand cubic feet were achieved, compared to $1.03 in the previous quarter. However, unhedged natural gas sales resulted in a loss of 26 cents per thousand cubic feet. Diamondback's warning comes shortly after a similar report from Occidental Petroleum and just a week after industry giant Exxon Mobil announced that its upstream earnings could be impacted by up to $1 billion. In the third quarter, Diamondback recorded an accounting derivatives gain of $135 million, contrasting with $46 million in the previous quarter. Additionally, the company had previously raised its production forecast for the third quarter to 565,000 to 569,000 barrels of oil equivalent per day following the $26 billion acquisition of Endeavor Energy.