Diamondback Energy Inc

During the quarter we initiated a position in Diamondback Energy, an independent oil and natural gas company with high-quality acreage and a low-cost operating profile. Given the potential for tighter oil markets as crude and refined product inventories are rebuilt, we added exposure to a best-in-class U.S. shale producer with deep inventory, balance sheet strength and corporate action optionality. We believe Diamondback’s disciplined capital allocation and continued capital returns create multiple avenues for shareholder value creation through the commodity cycle.

Diamondback Energy saw shares rise as the sharp rise in oil prices drove a broad rally across US-based oil producers. As geopolitical tensions in the Middle East tightened the supply outlook, investors increasingly rewarded US producers for their leverage to higher commodity prices, potential for outsized cash generation and capacity for strong capital returns.

We added to both EOG and Diamondback Energy (FANG) as their share prices languished with falling crude oil prices. This presents a buying opportunity for us, as we believe both companies are well-positioned to benefit from a recovery in energy prices. Our conviction in Diamondback Energy is bolstered by its operational efficiency and strong asset base, which we expect will allow it to outperform peers when market conditions improve.

Diamondback has delivered well within the exploration and production sector, particularly as oil-biased E&Ps have shown resilience. The company is positioned favorably amidst a backdrop of OPEC+ management of oil supply and anticipated global demand growth. With the potential for geopolitical tensions and the return of withheld oil to the market, Diamondback stands to benefit from favorable pricing dynamics and operational leverage in a recovering market.