Diamondback Energy (FANG) Q3 Results - Nov 5

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Diamondback Energy (FANG) Q3 Results - Nov 5

Post by dan_s »

Each quarter there is at least one Sweet 16 that has a somewhat disappointing quarter. I'm surprise that it is FANG. This stock was trading at a higher multiple of operating cash flow for per share than the Sweet 16 average, so the selloff after hours is somewhat justified. However, Q3 results are not terrible. - Dan
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MIDLAND, Texas, Nov. 05, 2019 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the third quarter ended September 30, 2019 and announced 2020 capital and production guidance.

THIRD QUARTER 2019 HIGHLIGHTS

Q3 2019 net income of $368 million, or $2.26 per diluted share; adjusted net income of $239 million, or $1.47 per diluted share < Adjusted net income compares to my forecast of $300 million or $1.83/share.

Q3 2019 Consolidated Adjusted EBITDA of $732 million; adjusted EBITDA net of non-controlling interest of $699 million

Q3 2019 production of 287.1 MBOE/d (65% oil), up 2% over Q2 2019 and 133% over Q3 2018 < Compares to my Q3 forecast of 290,000 Boepd (69% oil). A "gassier" than expected mix and terrible gas prices are the primary reason for the earnings miss and selloff in after-hours trading.

Q3 2019 capital expenditures of $825 million; turned 88 wells to production

Updated 2019 CAPEX guidance of $2.85 - $2.90 billion, narrowed from $2.725 - $2.950 billion previously

Declared Q3 2019 cash dividend of $0.1875 per share payable on November 22, 2019; implies a 0.9% annualized yield based on the November 1, 2019 share closing price of $86.79

Repurchased 2,954,000 shares in Q3 2019 for ~$296 million; repurchases through Q3 2019 of $400 million represent 20.0% of the Board approved program for up to $2.0 billion of stock repurchases through December 31, 2020

On October 1, 2019, closed previously announced Drop-Down transaction to subsidiary Viper Energy Partners LP

2020 CAPITAL AND OPERATING PLAN HIGHLIGHTS

Full year 2020 production guidance of 310.0 - 325.0 MBOE/d, implied growth of 10% - 15% from midpoint of anticipated full year 2019 production

Full year 2020 oil production guidance of 205.0 - 215.0 MBO/d, implied growth of 10% - 15% from midpoint of anticipated full year 2019 production

Full year 2020 CAPEX guidance of $2.8 - $3.0 billion, including drill, complete and equip ("D,C&E") of $2.45 - $2.60 billion, $200 - $225 million of midstream capital and $150 - $175 million of infrastructure capital

Plan to operate between 20 - 23 drilling rigs and complete between 320 - 360 gross wells with an average lateral length of approximately 9,700 feet

Diamondback believes it can maintain flat exit 2019 to exit 2020 production with 15 operated drilling rigs and ~$1.7 billion of D,C&E capital assuming current service costs

"After growing significantly during the first two quarters of the year, Diamondback’s oil production declined in the third quarter due to the sale of our Central Basin Platform assets effective July 1, 2019, which removed ~5,800 barrels per day of low margin oil production from our asset base. Notwithstanding the effect of this sale, Diamondback’s overall production grew, but the oil percentage declined in the third quarter due to the completion of 18 wells in our Vermejo area in Reeves County and 14 wells in Glasscock County, five of which were DUCs drilled prior to the closing of the Energen merger. Wells in these two areas on average begin production with oil cuts of ~65% and made up over 35% of total gross wells completed in the third quarter, versus 12% of wells completed in the first half of 2019 and ~15% of expected fourth quarter wells. This completion mix, along with the return of significant oil volumes that were impacted by offset completions in the third quarter, is expected to result in fourth quarter 2019 oil production growth of ~3% from third quarter volumes. As a result of the change in our portfolio asset mix due to the Energen merger, we now expect to average 66% - 67% oil for full year 2019 and ~66% oil in 2020," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, “Our per lateral foot well costs continue to decline and we expect that a combination of continued efficiency gains and service cost tailwinds will drive well costs lower into 2020. As a result, we are initiating a capital efficient 2020 capital plan of $2.8 - $3.0 billion, which includes all facilities, midstream and infrastructure spending along with drilling and completion capital. We plan to complete over 10% more net lateral feet and over 20 more gross total wells within the same consolidated budget framework as 2019. This plan is expected to result in 10% - 15% estimated year over year oil production growth, while generating free cash flow after paying our dividend, based on a commodity price deck of $45 per Bbl WTI for oil, a realized price of $13 per Bbl for NGLs and a realized price of $1.50 for natural gas. Should commodity prices decline in 2020, we will be prepared to act responsibly and cut capital spending as we have done multiple times over the past few years. If commodity prices rally, we plan to use excess free cash flow to complete our buyback program or pay down debt. Over the long term, Diamondback intends to continue to grow production and free cash flow on a per share basis, while maintaining our best in class cost structure."
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Diamondback Energy (FANG) Q3 Results - Nov 5

Post by dan_s »

Note from John White at Roth Capital on November 6

We have employed a blended valuation of a 90% weighting of FANG’s PV10% NAV per share and a 10% weighting of FANG’s Leverage-Production Adjusted Multiple NAV per share which resulted in a blended NAV of $147.02 which we adjusted lower to $147.00 which is our price target.

Lower than expected realized oil, natural gas and NGL prices resulted in revenues of $956 million versus our estimate of 1,089 million. The lower revenues were partially offset by lower DD&A and G&A but actual adjusted EPS/EBITDA of $1.47/$699.0 million were lower than our figures of $1.71/$828.0 million and consensus numbers of $1.75/$818.4 million.

Actual realized crude oil price was $51.71/bbl compared to the consensus figure of $54.37/bbl and our estimate of $53.05/bbl and the actual realized natural price was $0.62/MMBtu compared to the consensus figure of $1.05/MMBtu and our estimate of $1.54/MMBtu as takeaway constraints continue to be under estimated.

We recommend buying on weakness as the lower realized prices are not controlled by FANG. Further, as previously announced, FANG expects realized prices to improve relative to the WTI crude oil price through the remainder of 2019 and 2020 as fixed differential contracts roll off and convert to FANG's commitments on the EPIC and Gray Oak pipelines or move to the current Midland market price. Based on current market differentials and estimated in-basin gathering costs, FANG expects to realize ~95% of WTI for the remainder of 2019 and ~100% of WTI in 2020, all including the effect of current basis hedges, firm transportation agreements and in-basin gathering costs.

Actual production for 3Q 2019 was 287,138 BOE per day, in line with our estimate of 284,229 BOE per day and in line with the consensus figure of 286,050 BOE per day.

Preliminary 2020 Guidance

FANG expects full year 2020 average daily production in a range of 310.0 to 325.0 MBOE per day and average daily oil production in a range of 205.0 to 215.0 MBO per day (66% oil). This is in line with our estimate of 320 MBOE per day and 66% oil. FANG expects full year 2020 capital expenditures in a range of an estimated capital spend of $2.8 - $3.0 billion and this is in line with our estimate of $2.8 billion and the consensus figure of $3.0 billion.
Dan Steffens
Energy Prospectus Group
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