HOUSTON, Nov 6 (Reuters) - Shares of Diamondback Energy Inc plummeted 13% on Wednesday after the oil and gas firm disclosed a dip in third-quarter oil output, raising fresh concerns about well spacing in the top U.S. shale basin.
Diamondback is not the first U.S. shale producer to see its stock drop on concerns on well interference. Shares of Concho Resources Inc in August plummeted more than 20% after the company disclosed disappointing output from wells drilled in close proximity.
Diamondback reported financial results on Tuesday after the market close that missed analyst expectations for profits and oil production, as some of its acreage saw production interrupted by neighbors fracking a large number of wells nearby. It also added wells that produced a higher amount of natural gas.
Shares traded at $78.19, down 13.3% Wednesday, and have fallen about 15% this year. Four brokerages trimmed price targets for the shares on Wednesday.
"These are operational challenges, not reservoir problems," said Travis Stice, chief executive of Diamondback, who sought during a call Wednesday morning to reassure analysts that the wells that experience so-called "frack hits" from neighbors recover to full volumes.
The impact of the neighboring activity "abates" in the fourth quarter as Diamondback expects to return to oil growth, analysts with Cowen said in a client note.
Diamondback is better modeling its production forecasts for such well downtime, but expects "frack impacts to continue to be significant, primarily in the Midland Basin with operators in full field, multi-well pad development mode," Stice said.
Oil output is soaring in the Permian Basin of Texas and New Mexico, helping push U.S. production to record highs.
But aggressive drilling in parts of the Permian Basin is resulting in top acreage "being exhausted at a very quick rate," Pioneer Natural Resources CEO Scott Sheffield said in August. (Reporting by Jennifer Hiller Editing by Marguerita Choy)