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Good day, and thank you for standing by. Welcome to the Diamondback Energy Second Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Adam Lawlis, VP of Investor Relations. Please go ahead.

[Operator Instructions] Our first question comes from Arun Jayaram of JPMorgan Securities LLC.

Our next question comes from David Deckelbaum of TD Cowen.

Yes. I mean we've really leaned in a little bit more to our workover program this year. The spend -- the non-DC&E spend budget line item is a little larger this year than it has been in years past and really to allocate some more capital to working over older wells and trying to optimize the tail. And we've seen some really encouraging stuff out of that program. We don't have anything we can really quantify today, but we're going to continue to work that and get some data around it so we can talk to it in the future. But I think some of these wells that are 3, 4, 5 years old that have been impacted by offset fracs and whatnot, when we go into them and clean them out and put some asset or some other chemical optimization into the reservoir or stimulation into the reservoir, we're seeing almost 20% to 50% to 100% improvement in production on lower production volumes, but it's very encouraging what we're seeing on some of the work we're doing on the tail end of the production curve.

Our next call is from Neil Mehta of Goldman Sachs & Co.

Our next question comes from Scott Hanold of RBC Capital Markets.

You all every quarter seem to find ways of squeezing out more efficiency, getting drilled aids down and et cetera. Look, how many more things can you do? I mean drilling days can't go to 0, but like do you have a line of sight on how you can continue to improve efficiencies? Or are you getting to a point where you're more at the optimal level? And maybe if we understand what the leading-edge kind of metrics right now are versus averages, that would be helpful.

Scott, yes, thanks for the question. I'd love to talk about the ops guys and the nice reprieve and some of the stuff we talked about in these calls. So I think the drilling guys, in particular, have done a phenomenal job of really chasing that leading edge well and getting to that leading edge well more consistently. I think we've hit these 4- and 5-day wells that we talk about kind of sporadically throughout quarters in the past, but they're getting to where they're hitting them more consistently. And I think that's the real efficiency driver is how do we become more consistent and chasing those really record wells. We continue to push lateral lengths longer. We put in our letter highlighted a well that we drilled 30-plus thousand feet. I think it was a record well in Texas. And so, we're really pushing the limit of what we've known to be capable to do on the drilling side and I really don't know where the threshold limit is going to take us there. But the guys have done a really good job of just consistently eliminating the downtime out of the operation and chasing that leading edge well in every section of the drilling well. And on the completion side, they continue to do the same thing. They're just chasing that final frac efficiency, continuing to get better pad after pad and you see that in the results of the aggregate lateral footage per day, pushing 4,000 foot per day on the SimulFRAC crews. And look, I think there's opportunity to do some different things in the SimulFRAC world where we can -- we can grow that efficiency 15% to 20% more on top of that. So we're not done chasing those things. I think we'll continue to try and lead the pack in the Permian with regards to drilling and completion efficiency. I think at some point in time, we will reach a plateau, but we don't see it here in the near future.

Our next question is from John Freeman of Raymond James.

Our next question comes from Phillip Jungwirth of BMO.

Yes. But I think from a macro perspective, you can't take 60 rigs out of the Permian in 3 months and 20 to 30 frac spreads out of the Permian in 3 months and not see -- eventually see a production response. So I think we -- we kind of doubled down on our commentary. I think we're going to see U.S. production roll a bit here at these prices. It is taking a little bit longer than we all expected. But maybe that was the price reprieve we had in June, but it's just -- there's just too much activity being taken out of the U.S. basins.

Our next question comes from Scott Gruber of Citigroup.

I got it. And then on cash taxes, you guys realized a good bit of savings this year following the one Big Beautiful Bill. I think some of that is kind of a make-up in the second half. How do you think about '26 and beyond from a cash tax rate perspective?

Yes, Scott, this is Jere. 2026, we expect cash tax rate to kind of level out at 18% to 20% of pretax income when we look at 2025, we're expecting a 15% to 18% cash tax rate down from roughly 19% to 22%. So a reduction of roughly $300 million in total. About $200 million of this is one-time benefit. Two components of the $200 million here in 2025. The vast majority is related to the accelerated recovery of remaining unamortized R&E expenditures that were capitalized over the last 3 years. And then the remaining is related to the full expensing of depreciable equipment, primarily related to LWE we acquired earlier this year in the Double Eagle transaction.

Our next question is from Betty Jiang of Barclays.

I want to ask about the development mix. If I look at the development mix provided in the back of the slide, there is an increase in other zones and also Wolfcamp B, yet at the same time, you're able to maintain performance, if not better performance, which is quite impressive. So how do you see development mix evolving over time? And if you could just talk about what you're seeing in the other zone development performance wise versus the traditional zones?

Yes. My follow-up is on power. We started to see some gas power deals in the basin. Can you just give us an update on what you're seeing along that front? Where do you see the value-add opportunities for Diamondback?

Our next question is from Derrick Whitfield of Texas Capital.

Yes, completely fair. And then maybe shifting to operations. I wanted to lean in on Scott's earlier question on your 4 days spud to TD record. If you were to compare the segment performance of the 4 versus the average of the 8. Where do you guys see the greatest differences in performance? And more broadly, do most of your wells fall within a day or so the 8 average?

Yes. I mean, I think the 4-day well is -- it's in the top decile of our performance for sure. I mean, I think we had 30-something wells, we have 30-something wells that we've spud in less than -- I mean, spud to TD in less than 5 days, not in this quarter, but since in company history. And so the 8 days were all most of our wells are within a day or 2 of the 8 day average. But again, I'll echo the point I made earlier with Scott that, look, the drilling team has done a phenomenal job of really chasing the consistency and trying to consistently deliver that top-tier well and they're getting better at it. And so I think that's going to be the story and efficiency going forward is, hey, how do we continue to grab that 4- and 5-day well and work the things that caused us to go to 8 days out of the system. A lot of times it's an extra trip or some kind of bid selection or BHA selection optimization. And as we get more data and we're able to go back into the areas and optimize, we're going to see more consistent delivery of those ultrafast spud to TD times.

Our next question comes from Kevin MacCurdy of Pickering Energy Partners.

Kaes, your letter warrants of 25% casing cost inflation from tariffs. Can you remind us if you have any of that locked in? And how much of that inflation is baked into your 550 to 580-foot wall cost guidance?

Our next question is from Kalei Akamine of Bank of America.

Our next question is from Charles Meade of Johnson Rice.

Our next question is from Doug Leggate of Wolfe Research.

Our next question is from Leo Maria Mariani of ROTH.

Our final question is from Paul Cheng of Scotiabank.