I just got off the FANG Q4 conference call. For now, I am holding my valuation at $162/share, but this one has a lot of upside if oil prices go where I think they are heading. I just want to see a full quarter post-merger with Energen, so that I can confirm some line items in my forecast/valuation model. Check out Stifel's valuation below.
From Derrick Whitfield received on Feb. 20:
Diamondback Energy, Inc. (FANG, $104.80, Buy; Target $201.00) - Announces strong quarter and provides encouraging 2019 outlook and synergy update -
Derrick Whitfield - We view the quarter and year-end release as positive. The positives include: i) strong Q418 production on higher than expected capex, ii) strong capital efficiency implied in 2019 guidance (bopd flat, capex down ~2%), iii) impressive synergy progress (70% of primary synergy value already captured), and iv) strong 2nd Bone Spring Shale results (implying potentially superior economics to WC-A in the area) in Pecos. The negatives include: i) slight miss on Q418 EBITDA (5.0% below consensus) and ii) higher than expected Q418 capex (9.0% above consensus). We caution investors to note the misses on EBITDA (oil and gas realizations) and capex were messaged by management. Net-net, we believe the strength of FANG's 2019 guidance and synergy update should far outweigh Q418 concerns.
Diamondback Energy (FANG): Note from Stifel on Feb 20
Diamondback Energy (FANG): Note from Stifel on Feb 20
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Diamondback Energy (FANG): Note from Stifel on Feb 20
TPH comments:
FANG Q4'18 Quick Look
Slight positive on synergies execution improving 2019 guidance; Q4 EPS missed on realizations
Sector: NAm E&P | Ticker: FANG | Recommendation: BUY | Target: $140 | Close: $104.80
EGN integration off to a strong start reflected in quick synergy wins in both the Midland ($215/ft achieved vs. $223/ft 2020 target) and Delaware ($55-60/ft achieved vs. $50/ft 2019 target). As a result, budget was tempered (to $2.7-3.0B from $2.7-3.1B; TPHe/Street $2.7B/$2.9B), despite increases to well count (to 290-320 from 280-320) and avg. lateral length (to 9,400ft from 9,200ft); production guide unchanged. A neutral Q4 (TPHe) includes better production (183mboepd vs. TPHe/Street 178/173; 130mbpd oil vs. TPHe/Street 125/121) for higher capex ($525MM vs. TPHe/Street $500MM/$482MM), but given conversations heading into earnings, spotlight may shine on realized pricing of $45.51/bbl (drove clean EPS miss; $1.21 vs. consensus $1.61). Driver is hedge protection that's currently out of the money, but the go-forward outlook is in-line with TPHe in 2019 (85-90% of WTI in Q1, 87-92% Q2, and 90-95% H2) and ahead of TPHe in 2020 (100% vs. TPHe 97%). Through this multi-year timeframe, we see the above (along with our assumptions on D&C activity) as generative of an average ~4% FCF yield, and supportive of average exit/exit production growth of ~15%. On the call, looking for detail around cost savings achieved thus far (and line of sight to incremental improvements), as well as color on the game plan for the CBP.
FANG Q4'18 Quick Look
Slight positive on synergies execution improving 2019 guidance; Q4 EPS missed on realizations
Sector: NAm E&P | Ticker: FANG | Recommendation: BUY | Target: $140 | Close: $104.80
EGN integration off to a strong start reflected in quick synergy wins in both the Midland ($215/ft achieved vs. $223/ft 2020 target) and Delaware ($55-60/ft achieved vs. $50/ft 2019 target). As a result, budget was tempered (to $2.7-3.0B from $2.7-3.1B; TPHe/Street $2.7B/$2.9B), despite increases to well count (to 290-320 from 280-320) and avg. lateral length (to 9,400ft from 9,200ft); production guide unchanged. A neutral Q4 (TPHe) includes better production (183mboepd vs. TPHe/Street 178/173; 130mbpd oil vs. TPHe/Street 125/121) for higher capex ($525MM vs. TPHe/Street $500MM/$482MM), but given conversations heading into earnings, spotlight may shine on realized pricing of $45.51/bbl (drove clean EPS miss; $1.21 vs. consensus $1.61). Driver is hedge protection that's currently out of the money, but the go-forward outlook is in-line with TPHe in 2019 (85-90% of WTI in Q1, 87-92% Q2, and 90-95% H2) and ahead of TPHe in 2020 (100% vs. TPHe 97%). Through this multi-year timeframe, we see the above (along with our assumptions on D&C activity) as generative of an average ~4% FCF yield, and supportive of average exit/exit production growth of ~15%. On the call, looking for detail around cost savings achieved thus far (and line of sight to incremental improvements), as well as color on the game plan for the CBP.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group