Diamondback Energy (FANG) Valuation Update - Apr 3

[dan_s]

This morning FANG moved over my previous valuation of $200/share. At the time of this post it was trading at $202.14.

If you've been paying attention to the global oil market, you know that there has been a significant oil price increase. FANG is heavily weighted to oil, with no significant hedges in place. It is on-track to close a "Mega Merger" with Endeavor Energy in the 4th quarter that will push the Company's production over 800,000 Boepd (58% oil, 21% NGLs and 21% natural gas).

Big Paradigm Shifts are causing Big Money to rotate into high quality upstream companies:
> Fear of Recession has faded, and oil demand is growing much faster than previously forecasted by EIA and IEA.
> Demand for transportation fuels exceeds demand TODAY.
> U.S. Shale Oil production growth has stalled.
> OPEC+ will not raise production and Saudi Arabia might be the only country with the potential of a significant increase.
> Geopolitical Risk Premium is becoming more realistic with drone strikes taking Russian oil off the market.

I have updated my forecast/valuation model for my higher oil price deck and slightly lower natural gas prices.
My valuation of FANG increases by $13 to $213 per share. TipRanks' current price target is $198.95, but 11 of the 19 price targets in their database are dated prior to March 1st. From March 21st through today four analysts have updated their price targets to $210, $224, $215 and $186.

I will be updating all of my stock valuations using my updated oil & gas prices (that might be too low) before we publish the next newsletter on April 15 or 16.

My updated valuation models for FANG and all of the Sweet 16 will be posted to the EPG website this week.