Diamondback Energy Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
FANG$178.96-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001539838-24-000094
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001539838-24-000150
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 151 previous paragraphs and 151 current paragraphs.
63 unchanged; 71 reworded; 17 added; 13 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 35 previous and 35 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
WTG Midstream Transaction
Current report
On July 15, 2024, the WTG joint venture completed the WTG Midstream transaction, and in connection with that closing we received 10.1 million common units of Energy Transfer LP and $190 million in cash, subject to customary adjustments. Of the 10.1 million common units received, approximately 4.1 million is held in escrow pursuant to a separate escrow agreement.
Current report
Pending Endeavor Acquisition
Current report
Commodity Prices
Current report
(2)The average lateral length for the wells completed during the first six months of 2024 was 11,343 feet. Operated completions during the first six months of 2024 consisted of 51 Lower Spraberry wells, 39 Wolfcamp A wells, 31 Wolfcamp B wells, 25 Jo Mill wells, 22 Middle Spraberry wells, nine Wolfcamp D wells, five Dean wells, three Upper Spraberry wells, one Second Bone Spring well and one Barnett well.
Current report
We are raising the midpoints of both total and net oil production for the full year 2024 due to production outperformance year-to-date. Additionally, we are lowering the midpoint for capital expenditures as well as increasing activity levels for the full year 2024 due to continued cost control and efficiency gains, respectively.
Current report
Lease operating expenses decreased in total and on a per BOE basis for the second quarter of 2024 compared to the first quarter of 2024 primarily due to a $16 million reduction in workover expense in the second quarter of 2024. This adjustment was largely offset by (i) a $7 million increase from higher production volumes, (ii) $5 million in increased spend on electrical generation and disposal related costs, and (iii) other individually insignificant changes.
Current report
General and administrative expenses decreased in the second quarter of 2024 compared to the first quarter of 2024 primarily due to reductions of $2 million in compensation and benefits costs and $2 million in professional fees.
Current report
Comparison of the Six Months Ended June 30, 2024 and 2023
Current report
The decrease in other operating income for the six months ended June 30, 2024 compared to the same period in 2023 primarily resulted from a reduction in revenue from midstream services due to the sale of the Deep Blue Water Assets in the third quarter of 2023.
Current report
The increase in gathering, processing and transportation expenses for the six months ended June 30, 2024 compared to the same period in 2023 is attributable to (i) $10 million from the growth in production volumes discussed above, and (ii) an additional $6 million in shortfall penalties related to certain minimum volume commitments. The remainder of the increase is due to pricing fluctuations on our gathering, processing and transportation contracts.
Current report
General and administrative expenses increased for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to an additional (i) $6 million in charitable contributions, (ii) $4 million in legal fees primarily related to certain SEC filings including our offering of Viper Class A Common Stock and various litigation matters, and (iii) $3 million in compensation and benefits costs due to increasing headcount and annual compensation adjustments. These increases were partially offset by a reduction of $4 million in professional fees.
Current report
Merger and integration expenses for the six months ended June 30, 2024 include costs associated with the stockholder vote and regulatory review process for the pending Endeavor Acquisition. Merger and integration expenses for the six months ended June 30, 2023 include $8 million in costs associated with legal and advisory fees incurred for the Lario Acquisition and $2 million in costs related to acquisitions in 2022.
Current report
See Note 16—Endeavor Energy Resources, LP Acquisition of the condensed notes to the consolidated financial statements for further details regarding the pending Endeavor Acquisition.
Current report
The decrease in loss on derivative instruments for the six months ended June 30, 2024 compared to the same period in 2023 primarily reflects an increase in the value of our natural gas contracts due to a decrease in market prices for natural gas compared to our contract prices. See Note 12—Derivatives of the condensed notes to the consolidated financial statements for further details regarding our derivative instruments.
Current report
On June 4, 2024, we terminated our undrawn Bridge Facility and recorded additional interest expense of $19 million and $28 million during the three and six months ended June 30, 2024, respectively, related to the amortization and write-off of debt issuance costs incurred for the Bridge Facility.
Current report
Issuance of April 2024 Notes
Removed paragraphs (13)
Previous report
•Sold 13.23 million shares of Viper’s Class A Common Stock for approximately $451 million in net proceeds, which we intend to use to fund a portion of the cash consideration for the pending Endeavor Acquisition.
Previous report
Endeavor Acquisition
Previous report
Notes Offering
Previous report
Commodity Prices and Inflation
Previous report
We expect production to stay relatively flat in the second quarter of 2024 as we continue to promote our commitment to capital efficiency. We also anticipate that capital expenditures will remain flat due to lower well costs in 2024 and a reduction in drilling activity as a result of keeping production flat. We continue to see lower completion costs due to a continuous decline in raw materials and service costs. The majority of our wells are now being completed with either a simulfrac or simulfrac e-fleet, reducing our exposure to spot frac prices.
Previous report
Lease operating expenses remained relatively flat in total and on a per BOE basis for the first quarter of 2024 compared to the fourth quarter of 2023.
Previous report
Gathering, processing and transportation expenses in total and on a per BOE basis remained relatively flat in the first quarter of 2024 compared to the fourth quarter of 2023.
Previous report
General and administrative expenses increased in the first quarter of 2024 compared to the fourth quarter of 2023 primarily due to (i) $2 million in additional charitable contributions, (ii) $2 million in additional professional services, and (iii) other individually insignificant changes.
Previous report
General and administrative expenses for the three months ended March 31, 2024 remained relatively flat in total and on a per BOE basis compared to the same period in 2023.
Previous report
As of March 31, 2024, the maximum credit amount available under our Bridge Facility was $6.5 billion, with no outstanding borrowings and $6.5 billion available for future borrowings. The Bridge Facility matures 364 days after it has been drawn on. The Bridge Facility was further reduced on a dollar-for-dollar basis by the $5.5 billion principal amount of the April 2024 Notes, resulting in $1.0 billion currently available for future borrowings.
Previous report
On April 18, 2024, we issued $5.5 billion in aggregate principal amount of the April 2024 Notes for net proceeds of $5.5 billion, we intend to use the net proceeds to fund a portion of the cash consideration for the pending Endeavor Acquisition.
Previous report
Income Taxes
Previous report
We expect our cash tax rate to be 15% to 18% of pre-tax income for the year ended December 31, 2024. See Note 11—Income Taxes of the condensed notes to the consolidated financial statements.
Reworded paragraphs (71)
Previous wording
First Quarter 2024 Financial and Operating Highlights
Current wording
Second Quarter 2024 Financial and Operating Highlights
Previous wording
•Recorded net income of $768 million.
Current wording
•Recorded net income of $837 million.
Previous wording
•Increased our annual base dividend to $3.60 per share, paid dividends to stockholders of $548 million during the first quarter of 2024 and declared a combined base and variable dividend payable in the second quarter of 2024 of $1.97 per share of common stock.
Current wording
•Paid dividends to stockholders of $352 million during the second quarter of 2024 and declared a combined base and variable dividend payable in the third quarter of 2024 of $2.34 per share of common stock.
Previous wording
•Repurchased $42 million, excluding excise tax, of our common stock, leaving approximately $1.6 billion available for future purchases under our common stock repurchase program at March 31, 2024.
Current wording
•Had no repurchases of our common stock, leaving approximately $1.6 billion available for future purchases under our common stock repurchase program at June 30, 2024.
Previous wording
•Our cash operating costs were $11.52 per BOE, including lease operating expenses of $6.08 per BOE, cash general and administrative expenses of $0.76 per BOE and production and ad valorem taxes and gathering and transportation expenses of $4.68 per BOE.
Current wording
•Our cash operating costs were $11.67 per BOE, including lease operating expenses of $5.88 per BOE, cash general and administrative expenses of $0.63 per BOE and production and ad valorem taxes and gathering, processing and transportation expenses of $5.16 per BOE.
Previous wording
•Our average production was 461.1 MBOE/d.
Current wording
•Our average production was 474.7 MBOE/d.
Previous wording
•Drilled 69 gross horizontal wells in the Midland Basin and 10 gross horizontal wells in the Delaware Basin, and turned 101 gross operated horizontal wells (101 in the Midland Basin and none in the Delaware Basin) to production.
Current wording
•Drilled 71 gross horizontal wells in the Midland Basin and nine gross horizontal wells in the Delaware Basin, and turned 86 gross operated horizontal wells (79 in the Midland Basin and seven in the Delaware Basin) to production.
Previous wording
•Incurred capital expenditures, excluding acquisitions, of $609 million.
Current wording
•Incurred capital expenditures, excluding acquisitions, of $637 million.
Previous wording
See Note 17—Subsequent Events of the condensed notes to the consolidated financial statements for further discussion of the offering of our April 2024 Notes.
Current wording
See Note 17—Subsequent Events of the condensed notes to the consolidated financial statements for further discussion of the WTG Midstream transaction.
Previous wording
On February 11, 2024, we entered into the Merger Agreement to acquire Endeavor for consideration consisting of a base cash amount of $8.0 billion, subject to adjustments under the terms of the Merger Agreement, and approximately 117.27 million shares of our common stock. The Endeavor Acquisition is expected to close in the fourth quarter of 2024, subject to the satisfaction or waiver of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. As a result of the Endeavor Acquisition, the Endeavor Stockholders are expected to hold, at closing, approximately 39.5% of our outstanding common stock. In a special meeting held on April 26, 2024, our stockholders approved the issuance of our common stock to Endeavor as consideration for the Endeavor Acquisition.
Current wording
On February 11, 2024, we entered into the Merger Agreement to acquire Endeavor for consideration consisting of a base cash amount of $8.0 billion, subject to adjustments under the terms of the Merger Agreement, and approximately 117.27 million shares of our common stock. The pending Endeavor Acquisition is expected to close in the third or fourth quarter of 2024, subject to regulatory approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction or waiver of certain other customary closing conditions. As a result of the pending Endeavor Acquisition, the Endeavor Stockholders are expected to hold, at closing, approximately 39.5% of our outstanding common stock. In a special meeting held on April 26, 2024, our stockholders approved the issuance of our common stock to Endeavor as consideration for the Endeavor Acquisition.
Previous wording
Prices for oil, natural gas and natural gas liquids are determined primarily by prevailing market conditions. Regional and worldwide economic activity, extreme weather conditions and other substantially variable factors influence market conditions for these products. These factors are beyond our control and are difficult to predict. During the three months ended 2024 and 2023, NYMEX WTI prices averaged $76.91 and $75.99 per Bbl, respectively, and NYMEX Henry Hub prices averaged $2.10 and $2.74 per MMBtu, respectively.
Current wording
Prices for oil, natural gas and natural gas liquids are determined primarily by prevailing market conditions. Regional and worldwide economic activity, extreme weather conditions and other substantially variable factors influence market conditions for these products. These factors are beyond our control and are difficult to predict. During the six months ended 2024 and 2023, WTI prices averaged $78.81 and $74.77 per Bbl, respectively, and Henry Hub prices averaged $2.21 and $2.54 per MMBtu, respectively.
Previous wording
As of March 31, 2024, we had approximately 487,264 net acres, which primarily consisted of approximately 346,911 net acres in the Midland Basin and 140,033 net acres in the Delaware Basin.
Current wording
As of June 30, 2024, we had approximately 484,992 net acres, which primarily consisted of approximately 347,417 net acres in the Midland Basin and 137,255 net acres in the Delaware Basin.
Previous wording
(1)The average lateral length for the wells completed during the first quarter of 2024 was 11,463 feet. Operated completions during the first quarter of 2024 consisted of 30 Lower Spraberry wells, 19 Wolfcamp A wells, 16 Jo Mill wells, 15 Wolfcamp B wells, 12 Middle Spraberry wells, six Wolfcamp D wells and three Upper Spraberry wells.
Current wording
(1)The average lateral length for the wells completed during the second quarter of 2024 was 11,203 feet. Operated completions during the second quarter of 2024 consisted of 21 Lower Spraberry wells, 20 Wolfcamp A wells, 16 Wolfcamp B wells, 10 Middle Spraberry wells, nine Jo Mill wells, five Dean wells, three Wolfcamp D wells, one Second Bone Spring well and one Barnett well.
Previous wording
As of March 31, 2024, we held interests in 21,251 gross (5,411 net) wells, including 528 gross (85 net) wells in which we have a non-operated working interest.
Current wording
As of June 30, 2024, we held interests in 18,899 gross (5,413 net) wells, including 503 gross (77 net) wells in which we have a non-operated working interest.
Previous wording
The following table presents our current estimates, which do not take into account the pending Endeavor Acquisition, of certain financial and operating results for the full year of 2024, as well as production and cash tax guidance for the second quarter of 2024:
Current wording
The following table presents our current estimates, which do not take into account the pending Endeavor Acquisition, of certain financial and operating results for the full year of 2024, as well as production and cash tax guidance for the third quarter of 2024:
Previous wording
As noted in “—Commodity Prices and Inflation,” the markets for oil and natural gas are highly volatile and are influenced by a number of factors which can lead to significant changes in our results of operations and management’s operational strategy on a quarterly basis. Accordingly, our results of operations discussion focuses on a comparison of the current quarter’s results of operations with those of the immediately preceding quarter. We believe our discussion provides investors with a more meaningful analysis of material operational and financial changes which occurred during the quarter based on current market and operational trends.
Current wording
As noted in “—Commodity Prices,” the markets for oil and natural gas are highly volatile and are influenced by a number of factors which can lead to significant changes in our results of operations and management’s operational strategy on a quarterly basis. Accordingly, our results of operations discussion focuses on a comparison of the current quarter’s results of operations with those of the immediately preceding quarter. We believe our discussion provides investors with a more meaningful analysis of material operational and financial changes which occurred during the quarter based on current market and operational trends.
Previous wording
(1)Includes the Rockies, High Plains, Eagle Ford Shale, Appalachia, Barnett, Denver-Julesburg, Mid-Con, and Williston.
Current wording
(1)Includes the Rockies and High Plains for the three months ended June 30, 2024 and March 31, 2024, and Eagle Ford Shale, Appalachia, Barnett, Denver-Julesburg, Mid-Con, and Williston through May 1, 2024, the effective date on which they were divested.
Previous wording
Our oil, natural gas and natural gas liquids revenues for the first quarter of 2024 decreased by $64 million to $2.1 billion compared to the fourth quarter of 2023. The decrease consisted of $38 million attributable to lower average prices received for our oil and natural gas production and $26 million attributable to the 1% decline in our combined volumes sold.
Current wording
Our oil, natural gas and natural gas liquids revenues for the second quarter of 2024 increased by $73 million to $2.2 billion compared to the first quarter of 2024. The increase consisted of (i) an additional $35 million attributable to higher average prices received for our oil production, partially offset by declines in the average prices for our natural gas and natural gas liquids production, and (ii) an additional $38 million attributable to the 3% increase in our combined volumes sold.
Previous wording
In general, production taxes are directly related to production revenues and are based upon current year commodity prices. However, due to the recent settlement of an ongoing audit of production taxes from historical periods, the first quarter of 2024 includes a refund of $17 million and the fourth quarter of 2023 includes a refund of $8 million, which primarily accounts for the decrease in production taxes between periods and as a percentage of revenue. The remainder of the decrease is largely attributable to the decline in production volumes.
Current wording
In general, production taxes are directly related to production revenues and are based upon current year commodity prices. However, due to the settlement of an ongoing audit of production taxes from historical periods, the first quarter of 2024 includes a refund of $17 million, which reduced production taxes as a percentage of revenue for that period.
Previous wording
Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. During the first quarter of 2024 compared to the fourth quarter of 2023, ad valorem taxes increased by $26 million due primarily to the fourth quarter of 2023 reflecting a reduction to the full year 2023 accrual for ad valorem taxes based on actual tax assessments received.
Current wording
Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Ad valorem taxes remained relatively flat during the second quarter of 2024 compared to the first quarter of 2024.
Previous wording
Gathering and Transportation Expense. The following table shows gathering and transportation expense for the three months ended March 31, 2024 and December 31, 2023:
Current wording
Gathering, Processing and Transportation Expense. The following table shows gathering, processing and transportation expense for the three months ended June 30, 2024 and March 31, 2024:
Previous wording
The increase in gathering and transportation expenses for the three months ended March 31, 2024 compared to the same period in 2023 is primarily attributable to the growth in production volumes discussed above. The rate increase is due to annual rate adjustments.
Current wording
The increase in gathering, processing and transportation expenses is primarily attributable to the growth in production volumes in the second quarter of 2024 compared to the first quarter of 2024.
Previous wording
Depletion of proved oil and natural gas properties in total and on a per BOE basis was flat in the first quarter of 2024 as compared to the fourth quarter of 2023.
Current wording
The increase in depletion of proved oil and natural gas properties of $13 million for the second quarter of 2024 compared to the first quarter of 2024 is due to the growth in production volumes.
Previous wording
Merger and integration expenses in the first quarter of 2024 relate to the pending Endeavor Acquisition as discussed in Note 16—Endeavor Energy Resources, LP Acquisition to the condensed notes to the consolidated financial statements.
Current wording
Merger and integration expenses in the first and second quarters of 2024 include costs associated with the stockholder vote and regulatory review process for the pending Endeavor Acquisition. See Note 16—Endeavor Energy Resources, LP Acquisition of the condensed notes to the consolidated financial statements for further details regarding the pending Endeavor Acquisition.
Previous wording
The change in gain (loss) on derivative instruments for the first quarter of 2024 compared to the fourth quarter of 2023 primarily reflects a decrease in the value of interest rate swaps of $100 million due to an increase in SOFR rates, and a decrease in the value of our oil commodity contracts of $64 million due to increasing market prices for oil compared to our contract prices. Net cash paid on settlements of derivatives in the fourth quarter of 2023 includes $27 million for the semi-annual settlement of our interest rate swaps. See Note 12—Derivatives of the condensed notes to the consolidated financial statements for further details regarding our derivative instruments.
Current wording
The change in gain (loss) on derivative instruments for the second quarter of 2024 compared to the first quarter of 2024 primarily reflects (i) a net increase in the value of interest rate swaps of $21 million due primarily to a decrease in future SOFR rates of $48 million offset by cash paid for the semi-annual cash settlement of $27 million in June 2024, (ii) a net increase in the value of our commodity contracts of $70 million primarily due to an increase of $29 million in cash received on settlements of natural gas contracts, and lower future market prices for oil compared to our contract prices, and (iii) cash payments of $25 million to settle treasury lock contracts associated with the issuance of the April 2024 Notes.
Previous wording
The increase in net interest expense for the first quarter of 2024 compared to the fourth quarter of 2023 primarily consists of an additional $10 million in amortization of debt issuance costs related primarily to our Bridge Facility and Term Loan Agreement.
Current wording
The increase in net interest expense for the second quarter of 2024 compared to the first quarter of 2024 primarily consists of (i) an additional $61 million in interest expense on senior notes due to the issuance of the April 2024 Notes, and (ii) an increase of $10 million in amortization of debt issuance costs primarily related to the termination of our Bridge Facility. These increases were partially offset by an additional $63 million in interest income due to holding funds raised for the pending Endeavor Acquisition in cash in short-term interest bearing accounts during the second quarter of 2024, and $4 million due to an increase in capitalized interest costs, which reduces interest expense.
Previous wording
The reduction in our income tax provision for the first quarter of 2024 compared to the fourth quarter of 2023 was primarily due to the decrease in pre-tax income between the periods which resulted largely from a decrease in the value of our derivative instruments as discussed above. See Note 11—Income Taxes of the condensed notes to the consolidated financial statements for further discussion of our income tax expense.
Current wording
The change in our income tax provision for the second quarter of 2024 compared to the first quarter of 2024 was primarily due to the increase in pre-tax income between the periods which resulted largely from changes in revenues and operating expenses as discussed above. See Note 11—Income Taxes of the condensed notes to the consolidated financial statements for further discussion of our income tax expense.
Previous wording
The following table sets forth selected operating data for the three months ended March 31, 2024 and 2023:
Current wording
The following table sets forth selected operating data for the six months ended June 30, 2024 and 2023:
Previous wording
Production Data. Substantially all of our revenues are generated through the sale of oil, natural gas and natural gas liquids production. The following tables set forth the mix of our production data by product and basin for the three months ended March 31, 2024 and 2023:
Current wording
Production Data. Substantially all of our revenues are generated through the sale of oil, natural gas and natural gas liquids production. The following tables set forth the mix of our production data by product and basin for the six months ended June 30, 2024 and 2023:
Previous wording
(1)Includes the Rockies, High Plains, Eagle Ford Shale, Appalachia, Barnett, Denver-Julesburg, Mid-Con, and Williston.
Current wording
(1)Includes the Rockies and High Plains for the six months ended June 30, 2024 and 2023, and Eagle Ford Shale, Appalachia, Barnett, Denver-Julesburg, Mid-Con, and Williston through May 1, 2024, the effective date on which they were divested.
Previous wording
Our oil, natural gas and natural gas liquids revenues for the three months ended March 31, 2024 increased by $199 million, or 10%, to $2.1 billion from the same period in 2023 primarily due to an increase of $191 million attributable to the 10% growth in our combined volumes. Approximately 19% of the increase in production is attributable to the GRP Acquisition and an additional 9% is attributable to including a full quarter of production from the Lario Acquisition. The remainder of the growth comes from new wells added between periods.
Current wording
Our oil, natural gas and natural gas liquids revenues for the six months ended June 30, 2024 increased by $477 million, or 13%, to $4.3 billion from the same period in 2023 primarily due to (i) an increase of $290 million attributable to the 8% growth in our combined volumes, and (ii) an additional $187 million attributable to higher average prices received for our oil production. Approximately 25% of the increase in production is attributable to Viper’s GRP Acquisition. The remainder of the growth comes from new wells added between periods.
Previous wording
Net Sales of Purchased Oil. Beginning in the third quarter of 2023, we entered into purchase transactions and separate sale transactions with third parties to satisfy certain of our unused oil pipeline capacity commitments. The following table presents the net sales of purchased oil from third parties for the three months ended March 31, 2024 and 2023:
Current wording
Net Sales of Purchased Oil. Beginning in the third quarter of 2023, we entered into purchase transactions and separate sale transactions with third parties to satisfy certain of our unused oil pipeline capacity commitments. The following table presents the net sales of purchased oil from third parties for the six months ended June 30, 2024 and 2023:
Previous wording
Other Revenues. The following table shows the other insignificant revenues for the three months ended March 31, 2024 and 2023:
Current wording
Other Revenues. The following table shows the other insignificant revenues for the six months ended June 30, 2024 and 2023:
Previous wording
Lease Operating Expenses. The following table shows lease operating expenses for the three months ended March 31, 2024 and 2023:
Current wording
Lease Operating Expenses. The following table shows lease operating expenses for the six months ended June 30, 2024 and 2023:
Previous wording
Lease operating expenses increased by $63 million, or $1.06 per BOE for the three months ended March 31, 2024 compared to the same period in 2023. The increase primarily consists of (i) $26 million in additional costs incurred for water services as a result of divesting our Water Assets in the third quarter of 2023, (ii) approximately $19 million due to the increase in combined production volumes between the periods, and (iii) $16 million in increased spend on wellwork.
Current wording
Lease operating expenses increased by $117 million, or $1.03 per BOE for the six months ended June 30, 2024 compared to the same period in 2023. The increase primarily consists of (i) $47 million in additional costs incurred for water services as a result of divesting the Deep Blue Water Assets in the third quarter of 2023, (ii) approximately $30 million due to the increase in combined production volumes between the periods, (iii) $16 million in increased spend on wellwork, (iv) $16 million in increased spend on electrical generation and disposal related costs, and (v) $8 million in increased third party water disposal services.
Previous wording
Production and Ad Valorem Tax Expense. The following table shows production and ad valorem tax expense for the three months ended March 31, 2024 and 2023:
Current wording
Production and Ad Valorem Tax Expense. The following table shows production and ad valorem tax expense for the six months ended June 30, 2024 and 2023:
Previous wording
In general, production taxes are directly related to production revenues and are based upon current year commodity prices. Production taxes as a percentage of production revenues for the 2024 period decreased compared to the same period in 2023, primarily due to a refund of $17 million received for settlement of an audit in the first quarter of 2024, which was partially offset by a $9 million increase in production volumes.
Current wording
In general, production taxes are directly related to production revenues and are based upon current year commodity prices. Production taxes as a percentage of production revenues for the 2024 period decreased compared to the same period in 2023, primarily due to a refund of $17 million received for settlement of an audit in the first quarter of 2024.
Previous wording
Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Ad valorem taxes for the three months ended March 31, 2024 as compared to the same period in 2023 decreased by $26 million, primarily due to a reduction in the expected ad valorem tax rates for 2024 compared to the expected rates in the first quarter of 2023.
Current wording
Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Ad valorem taxes for the six months ended June 30, 2024 as compared to the same period in 2023 decreased by $49 million, primarily due to a reduction in the expected ad valorem tax rates for 2024 compared to the expected rates in the first half of 2023.
Previous wording
Gathering and Transportation Expense. The following table shows gathering and transportation expense for the three months ended March 31, 2024 and 2023:
Current wording
Gathering, Processing and Transportation Expense. The following table shows gathering, processing and transportation expense for the six months ended June 30, 2024 and 2023:
Previous wording
Depreciation, Depletion, Amortization and Accretion. The following table provides the components of our depreciation, depletion, amortization and accretion expense for the three months ended March 31, 2024 and 2023:
Current wording
Depreciation, Depletion, Amortization and Accretion. The following table provides the components of our depreciation, depletion, amortization and accretion expense for the six months ended June 30, 2024 and 2023:
Showing the first 40 of 71 pairs. Open the source sections for the rest.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
(2)Includes the Rockies and High Plains.
Previous report — wording carried elsewhere
Comparison of the Three Months Ended March 31, 2024 and 2023
Previous report — wording carried elsewhere
(2)Includes the Rockies and High Plains.
Previous report — wording carried elsewhere
Item 3. Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk. The level of our hedging activity and duration of the financial instruments employed depend on our desired cash flow protection, available hedge prices, the magnitude of our capital program and our operating strategy.