Diamondback Lifts Dividend After $5.9B Free Cash Flow in 2025

Charles Kennedy

Tue, February 24, 2026 at 10:36 AM GMT+9 4 min read

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Diamondback Energy posted $5.9 billion in adjusted free cash flow in 2025, raised its base dividend by 5%, and outlined a flat production plan for 2026 as it prioritizes capital discipline, buybacks, and balance sheet repair.

Midland-based Diamondback Energy reported fourth-quarter 2025 oil production of 512,800 barrels per day, capping a year in which the Permian pure-play averaged 497,200 bpd of oil and 921,000 boe/d overall.

For the full year, the company generated $8.8 billion in operating cash flow and $5.9 billion in adjusted free cash flow on $3.5 billion of capital expenditures, implying a reinvestment rate of roughly 39%. Diamondback returned $3.2 billion to shareholders in 2025—54% of adjusted free cash flow—through dividends and $2.0 billion in share repurchases.

The board approved a 5% increase in the annual base dividend to $4.20 per share, with a fourth-quarter cash dividend of $1.05 per share payable in March.

Despite strong cash generation, Diamondback reported a fourth-quarter net loss attributable to shareholders of $1.46 billion, driven primarily by a $3.7 billion non-cash impairment tied to lower SEC pricing assumptions. For the full year, net income attributable to the company totaled $1.66 billion, while adjusted net income reached $3.87 billion.

Fourth-quarter adjusted EBITDA attributable to Diamondback was $2.0 billion, contributing to a full-year total of $9.5 billion.

Realized prices weakened year over year, with full-year oil realizations averaging $64.04 per barrel, down from $73.52 in 2024. Natural gas realizations improved to $0.89 per Mcf for the year, though Permian basis volatility, particularly at WAHA, remained a headwind in the fourth quarter.

For 2026, Diamondback is guiding to oil production of 500,000–510,000 bpd, effectively flat versus fourth-quarter 2025 levels when adjusted for asset changes. Total production is expected to range between 926,000 and 962,000 boe/d.

The company plans $3.6–$3.9 billion in capital spending this year, including $100–$150 million earmarked for exploratory development in deeper Midland Basin zones such as the Barnett and Woodford. Diamondback expects to complete 5.9–6.3 million net lateral feet in 2026, with average lateral lengths approaching 12,900 feet.

Management emphasized continued efficiency gains following its merger with Endeavor in 2024. In 2025, Diamondback drilled 463 wells and completed 503 wells, reducing average spud-to-total-depth times to around eight days and consistently completing more than 4,500 lateral feet per day.

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Proved reserves rose 2% year over year to 3.62 billion boe at year-end 2025, with proved developed producing reserves up 6% to 2.52 billion boe. The company achieved a 118% total reserve replacement ratio.

Diamondback highlighted progress delineating the Barnett and Woodford intervals in the Midland Basin, where it has secured rights to roughly 200,000 acres and identified about 600 net potential locations. Early wells have been drilled at approximately $1,000 per lateral foot, with management targeting a further 20% reduction as development scales.

The push into secondary and deeper zones reflects a broader Permian trend: operators are seeking to extend inventory life and improve capital efficiency as Tier 1 acreage becomes increasingly consolidated.

Asset sales—including the Environmental Disposal Systems business and an interest in the EPIC Crude pipeline—generated approximately $1.2 billion in fourth-quarter proceeds. Combined with free cash flow, Diamondback repaid $950 million of its term loan and repurchased $203 million in senior notes at a discount.

Consolidated total debt fell 11% quarter over quarter to $14.7 billion, with net debt at $14.6 billion as of December 31, 2025.

The company repurchased 13.84 million shares in 2025 and has already bought back an additional 2.27 million shares in early 2026. Of its $8.0 billion authorization, $2.3 billion remains available.

Meanwhile, subsidiary Viper Energy completed the sale of non-Permian assets in February for $617 million, using proceeds to fully repay its term loan and revolving credit facility borrowings.

Diamondback continues to manage Permian gas exposure amid WAHA basis volatility. Currently, roughly 70% of its gas volumes are tied to WAHA pricing, but long-haul pipeline commitments are expected to more than double to 800,000 MMBtu/d as new takeaway capacity comes online later in 2026.

The anticipated Permian gas debottleneck could improve realized pricing and bolster cash flow from a growing gas stream.

With output steady, capital restrained, and shareholder returns front and center, Diamondback is leaning into a mature shale model: maximize free cash flow, fortify the balance sheet, and opportunistically shrink the share count while selectively expanding inventory depth in the Midland Basin.

By Charles Kennedy for Oilprice.com

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