Diamondback Energy (FANG) Update - Feb 19

[dan_s]

FANG was trading for $78.75 at the time of this post.

Five Wall Street analysts have updated their forecast/valuations this morning. They all rate FANG a BUY with price targets of $125 to $137.

I am still adjusting my forecast/valuation model, but my valuation will be close to the top of that range.

Like CXO, FANG also reported a big increase in their NGL prices from Q3 to Q4 ($11.61 to $15.93 per barrel). In 2018, FANG's realized NGL price was over $26/bbl, so there is still lots of room for increasing NGL prices.
Thanks to lots of pipeline takeaway capacity coming online in 2H 2019, all of the Permian Basin companies are getting much better oil, gas and NGL prices. The differential has gone positive for Permian oil and I'm expecting much better NGL prices throughout 2020 for West Texas. FANG also has a hedging program that insulates them from the recent dip in oil prices.

FANG's operating cash flow should be approximately $3.5 Billion in 2020. FCF should fund their stock repurchase program and increasing dividends.

My updated model will be posted to the EPG website late today.