Diamondback Energy (FANG) Q4 Preview - Feb 19

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Diamondback Energy (FANG) Q4 Preview - Feb 19

Post by dan_s »

FANG is currently trading at $103.30 as I post this.

Since January 1, 2019 five analysts have submitted fresh reports on FANG to Reuters / First Call. They all rate the stock a BUY and their valuations range from $130 to $189 (Barclays on 1/16/2019). My valuation in our January newsletter was $162.

Things to look for in their Q4 earnings release:
> FANG merged with Energen on 11/29/2018, so I am very interested in the company's December production.
> FANG's most recent production guidance for 2019 is 275,000 to 290,000 Boepd (~69% crude oil). I am eager to see if they confirm this guidance.
> FANG is an "Aggressive Growth" company. Production was up ~58% YOY in 2018 and will be up more than 125% YOY in 2019 at the midpoint of the guidance above. A large chunk of the growth in 2019 is due to the merger.
> Oil prices will have a BIG IMPACT on my valuation because FANG did not have much of their production hedged before the merger. Energen did have a lot of their oil production for 2019 hedged at $61.14/bbl.
> Good news is that the Midland to Cushing oil price differential is way down from where it was in Q4 and the pipeline takeaway capacity shortage will soon be resolved. The pipeline issue impacts FANG's gas price more than their oil price.
> Based on my forecast/valuation model (at lower oil prices than where the NYMEX strip is today), cash flow from operations should be more than enough to cover their 2019 capex budget of $2.7 to $3.1 Billion.
Dan Steffens
Energy Prospectus Group
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