Diamondback Energy (FANG) Update - April 13

[dan_s]

Diamondback's Update gives me a clue at what other Permian Basin companies will report. Note that their NGL prices in Q1 were much higher than my forecast of $18.00/bbl.

MIDLAND, Texas, April 12, 2021 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today provided an operational update for the first quarter of 2021 and announced revised full year 2021 guidance.

FIRST QUARTER 2021 UPDATE

Q1 2021 average production of 184.2 MBO/d (307.4 MBOE/d)

Q1 2021 average unhedged realized prices of $56.94 per barrel of oil, $22.94 per barrel of natural gas liquids and $3.05 per Mcf of natural gas, resulting in a total equivalent price of $42.36 per BOE

Q1 2021 average hedged realized prices of $46.81 per barrel of oil, $22.76 per barrel of natural gas liquids and $2.64 per Mcf of natural gas, resulting in a total equivalent price of $35.75 per BOE. Diamondback realized total hedging losses of $102 million in the first quarter, including $80 million of realized gains from the early termination of interest rate swaps

Q1 2021 estimated cash CAPEX of $280 - $300 million

Closed our previously announced acquisition of approximately 32,500 net acres in the Northern Midland Basin and certain related oil and natural gas assets from Guidon Operating LLC ("Guidon") on February 26, 2021 for approximately $375 million in cash and the issuance of an aggregate of 10.7 million shares of our common stock

Closed our previously announced acquisition of QEP Resources, Inc. ("QEP") in an all-stock merger on March 17, 2021 for an aggregate of approximately 12.2 million shares of our common stock

Diamondback today announced revised 2021 production, capital and operating guidance. This guidance has been updated to give effect to the QEP transaction, which was completed on March 17, 2021.

Updated full-year 2021 guidance:

Full year 2021 oil production guidance of 218 – 222 MBO/d (360 – 370 MBOE/d), including approximately 12 MBO/d (~19 MBOE/d) of contribution from Diamondback’s Williston Basin assets

Full year 2021 cash CAPEX guidance of $1.60 – $1.75 billion

The Company expects to drill between 200 and 215 gross (178 – 192 net) wells and complete between 275 and 285 gross (250 – 259 net) wells with an average lateral length of approximately 10,300 feet in 2021

[dan_s]

I have updated my forecast/valuation model for FANG. My valuation increases by $7 to $115/share.
During April, seven analysts have updated their price targets per TipRanks. Their valuations range from $89 to $121.
First Call's price target of $93.48 is the average of 32 analysts' price targets on file with Reuters. Some are outdated.
What I like:
> Fresh full-year guidance raises my confidence in the model, so I can raise my valuation multiple.
> I have dropped 2020 CFPS from the valuation formula. Now it is (2X 2021 CFPS + 2022 CFPS)/3 X 5
> In a "Post-Pandemic" world, FANG deserves a valuation of at least 6X operating cash flow per share.
> FANG's oil hedges that are below strip lower my estimated realized crude oil price for 2021 to $53.20/bbl.
> Higher NGL prices do offset some of the lower oil price. FANG's realized NGL price increased by 57% from Q4 to Q1.
> Realized natural gas prices are now much better in the Permian Basin thanks to ample pipeline takeaway capacity.
> FANG should generate over $2 Billion of FCF from operations this year and (thanks to acquisitions) report more than 21% YOY production growth.

FANG is one of the "Elite Eight" in our Sweet 16 Growth Portfolio