MIDLAND, Texas—Today, Diamondback Energy Inc. (NASDAQ: FANG) prides itself on execution, low-cost operations and high cash margins and recoveries. Its 85,000 net acres are in the prime northern Midland Basin, and the company produces some 34,100 barrels of oil equivalent per day, of which 73% is oil.

Three years ago, however, Diamondback was far from the multibillion-dollar independent it is now. The company had some uncertain beginnings—in 2012 the private-equity backed firm was looking at two very different paths. It held some 25,000 acres on the fringe of the vertical Wolfberry play, and it was facing some execution challenges. It had grown its production to some 1,500 barrels of oil per day, but it was fully drawn on its borrowing base. The firm was considering selling out or doing an IPO, said Travis Stice, CEO, in a presentation at Hart Energy’s Executive Oil Conference.

Diamondback took its pure-play vertical Permian Basin story to the market, and results were less than disappointing. “We marketed the company to eight different buyers; but not one company even submitted a bid,” Stice said. That made the decision to launch an IPO the only choice, so Diamondback went public in October 2012.

Initially, the niche operator was planning on drilling its Wolfberry acreage with vertical wells. Shortly after its IPO, however, Diamondback changed its strategy and began to apply horizontal drilling techniques to its area. “We were countering conventional wisdom because we were drilling horizontal wells in an area that worked vertically,” Stice said.

It was a portentous move. Within nine months, Diamondback had drilled about a dozen horizontal wells. As the industry interest in Wolfcamp horizontal wells exploded, Diamondback benefited from being an early mover. It very aggressively rebuilt its portfolio through acquisitions, spending some $2.5 billion to acquire assets in its favored northern Midland Basin, an area that “is perhaps the most economic shale deposition anywhere in the world, certainly in the Lower 48,” Stice said.

Now, Diamondback has a robust, multi-year inventory on its acreage, with 1,350 gross locations that are economic at $50-per-barrel prices. At commodity prices in the range of $35 to $45 per barrel, Stice says the company has 700 locations and could keep two to three rigs running for 14 years. “We are poised to respond to oil prices,” he said. Low operating expenses, high productivity per employee and low G&A costs all help the company’s bottom line. “Our capital flexibility allows us to have some outstanding leverage ratios, and our balance sheet is strong.”

Cost reduction strategies have also been quite successful—the firm has brought its drill, complete and equip costs down 25% to 35% from their peak in 2014. “You have to be really low cost out here to win. If you want to be the last man standing in a low commodity price, you better make sure you can drill and complete these wells cheaply,” he said. And yet, Stice remains optimistic for the future. U.S. production will decline and worldwide demand will increase, he said. “I’m confident about certain things: It takes people and drilling rigs to produce oil; we produce a product the world needs; and oil prices will recover.”

And that’s how he’s positioning Diamondback—to operate profitably now by being as efficient and effective as possible, and to be in position to gallop when prices will certainly rebound.

Peggy Williams can be reached at pwilliams@hartenergy.com.