Diamondback Curtails Some Oil Production to Reduce Gas Output

Diamondback Energy Inc. reduced some of its oil production in the second quarter to trim natural-gas output because there isn’t enough pipeline capacity to ship gas that’s pumped alongside the crude.

After years of operators flaring or venting natural gas, which is a by-product of oil production, the Texas-based explorer and other companies are seeking to profit from gas instead of sending the pollutants into the atmosphere.

But due to the massive scale of oil and gas production in the Permian Basin of West Texas and New Mexico, a region that yields more daily oil output than Organization of Petroleum Exporting Countries heavyweight Iraq, pipelines that transport supply from the area are full. Without capacity to move excess gas, it’s more profitable to lower production, Diamondback said.

“We just have a lot of gas production out of this basin, and that’s why we have such a focus on trying to generate more value for the gas that we’re producing,” Diamondback President Kaes Van’t Hof said Tuesday during an earnings conference call with analysts.

Still, Diamondback plans to produce more oil in 2024 than it originally projected as it joined other shale producers in recently raising full-year output forecasts. Aggressive production increases by shale drillers complicates efforts by OPEC and its allies to manage global prices.