Diamondback Energy (FANG)

dan_s · Post by **dan_s** » Thu Feb 11, 2016 6:57 pm

I have updated my forecast model for FANG and it will be available on the EPG website this evening.

FANG trades at the highest multiple of cash flow within the Sweet 16. My current valuation is $77/share, compared to First Call's price target of $80.94.

NONE of their production is hedged beyond 2015, so there will be a big drop in their revenues and cash flows in Q1.

A high valuation is justified by their peer leading results in the Permian Basin where they have a lot of running room in some very good leasehold. FANG also has a big stake in Viper Energy Partners LP (VNOM), which generates cash flow for them. FANG has a strong balance sheet and access to the capital markets, which many upstream companies do not. It is a pure play on the Permian Basin and heavily weighted to oil.