Diamondback Energy (NASDAQ: FANG) reported first-quarter results and announced changes to its capital allocation strategy in a letter to shareholders released alongside quarterly earnings.

The company increased its production guidance to over 520,000 barrels of oil per day, representing a 3% increase from its original 2026 guidance. Oil production averaged 521,000 barrels per day in the first quarter, exceeding the high end of the company's 502,000 to 512,000 barrel guidance range.

Diamondback plans to add two to three drilling rigs and maintain five completion crews for the remainder of the year to work down its inventory of drilled but uncompleted wells. The company invested $933 million in capital expenditures during the quarter, below the midpoint of its $900 million to $975 million guidance range.

The company generated $1.8 billion in net cash from operating activities and $1.7 billion in free cash flow during the first quarter. Diamondback recorded a $1.4 billion non-cash impairment charge related to SEC pricing methodology.

Diamondback announced it will eliminate its quarterly commitment to return a minimum percentage of free cash flow to shareholders, opting instead for flexibility in capital allocation decisions. The company increased its base dividend by 5% to $4.40 per share annually, marking a 10% increase for the year.

The company reduced consolidated gross debt by $600 million quarter-over-quarter to approximately $14.1 billion. In April, Diamondback repurchased $777 million in principal of its 2051 and 2052 senior notes for $632 million and fully repaid its $550 million term loan due in 2027.

Since the third quarter of 2025, the company has reduced total debt by approximately $3.7 billion, representing a 23% reduction.