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What happened

Shares of Diamondback Energy (FANG 0.47%) are up 10% as of 11:45 a.m. EDT after the company issued guidance that hit on all the aspects that investors want to see from an exploration and production company.

So what

Diamondback Energy's operational and guidance update had everything that an investor wants to see. First, its estimated production results for the quarter were 44,900 barrels of oil equivalent per day (BOE/D), which was 22% higher than the prior quarter. As a result of this strong quarter and higher oil and gas prices as of late, the company increased its annual production guidance from 38 to 40 MBOE/D to 41 to 42 MBOE/D. 

That in and of itself may not sound like a huge enough jump to merit a 10% rise in the stock, but Diamondback also said that it will be able to achieve that higher guidance without changing its capital spending budget for the year. As of this announcement, Diamondback's management estimates it can achieve those higher rates and bring another rig on line -- its fifth in the field -- for the rest of 2016 while remaining in its previously stated range of $350 million to $425 million for capital spending. It will be able to achieve those incremental gains because its costs for items such as lease operations are going down.

Now what

If oil prices hold above $45 per barrel, Diamondback Energy estimates that it will be able to increase its capital spending budget for 2017 and increase its production to 52 to 58 MBOE/D. While that is great to hear, it is still contingent on a few things going right in the oil market. So before jumping into this stock because of the possibility of the promised results in 2017, just realize that they require oil prices to remain at least steady for a while.

That being said, Diamondback Energy appears to be one of the better bets on rising oil prices today. The company has a decent-looking balance sheet and won't need to spend months paying off debts before reaping profits from rising oil prices. However, that clean balance sheet has come at the expense of diluting current shareholder value. 

If oil prices were to hold where they are or even increase, though, perhaps the company's moves to preserve its balance sheet and be ready for this upturn will be well worth it for investors looking at the stock today.