Morgan Stanley rate FANG as Overweight with a price target of $135.00.
October 10: "Big guidance raise, as we anticipated, and the acquisition overhang is cleared. Expect notable outperformance today."
No longer involved with Silver Hill. Reports that FANG was engaged in
discussions to potentially acquire Silver Hill drove significant underperformance
(4%) vs. Permian peers in the week since the story was reported. Today, FANG
cleared up the reports, saying that it is no longer involved in those negotiations.
We expect FANG to make up the underperformance and more today with this
news and the updated guidance outlook.
Big production beat and stronger 2017 guide indicates rapidly improving asset
base. As we expected, FANG delivered a large 3Q production beat 15% above
consensus and 7% above our estimate. FANG also unveiled preliminary 2017
volume guidance 12% above the Street at the midpoint. Our 2017 previous
production estimate of 58 MBoe/d was at the high end of the new guidance
range, which we believe is conservative.
Our new 2017 production estimate of 59 MBoe/d is above the high end of
guidance. 2017 capex guidance of $500-650 million was 24% below our prior
estimate at the midpoint. We are now estimating 2017 capex slightly above the
high end of guidance at $670 million.
Revising estimates. We are raising our 2016 and 2017 production estimates by 2%
to 43 and 58 MBoe/d. We are raising our 2016 and 2017 EBITDA estimates by 3%
and 1%, respectively.
Valuation Methodology & Risks. Our $135 PT is based on 100% of our NAV
model assuming 10% discount rate and implies 18.8x 2017e EV/EBITDA. Risk to
achieving our PT include commodity prices, well results, and multiple
compression of VNOM, FANG's mineral interest MLP.
Diamondback Energy (FANG)
Diamondback Energy (FANG)
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Diamondback Energy (FANG)
MIDLAND, Texas, Oct. 10, 2016 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (FANG) (“Diamondback” or the “Company”) today provided an operational update for the quarter ended September 30, 2016, increased 2016 production outlook and introduced preliminary guidance for the full year of 2017.
“Diamondback’s continued strong well performance and increased completion cadence during the third quarter reflects our ability to turn our growth engine back on into a rising commodity price after reducing completion activity in early 2016. We are now operating four rigs with a fifth rig to be added in the coming weeks and a sixth rig to be added early next year," stated Travis Stice, Chief Executive Officer of Diamondback.
Mr. Stice continued, "We have increased 2016 production guidance and introduced 2017 production guidance which shows production growth of more than 30% at the midpoint compared to updated 2016 expectations. Our existing asset base allows us to drive production growth within cash flow into 2017 and beyond at the current forward strip prices. The ability to drive multi-year organic growth, within cash flow on our existing asset base represents the standard we have always sought to achieve. We believe we are ideally positioned to pursue additional transactions provided they drive exceptional shareholder value while maintaining our disciplined approach to acquisitions. As has been rumored, we were engaged in discussions involving an acquisition but are not actively pursuing further negotiations at this time.”
OPERATIONS UPDATE:
Diamondback’s average daily production during Q3 2016 was 44,923 boe/d (73% oil), up 22% from Q2 2016 average daily production of 36,841 boe/d. Average realized prices during Q3 2016 were $42.11 per barrel of oil, $2.37 per Mcf of natural gas and $13.76 per barrel of natural gas liquids.
Diamondback’s subsidiary, Viper Energy Partners LP (“Viper”), had Q3 2016 production of 6,255 boe/d (75% oil), up 16% from Q2 2016 average daily production of 5,380 boe/d. Viper’s Q3 2016 average realized prices were $41.97 per barrel of oil, $2.39 per Mcf of natural gas and $12.56 per barrel of natural gas liquids.
In September 2016, Diamondback completed its previously announced acquisition in the Southern Delaware Basin.
GUIDANCE UPDATE:
Diamondback is increasing its 2016 production guidance to a range of 41.0 to 42.0 Mboe/d, up 6% from the midpoint of the July guidance range of 38.0 to 40.0 Mboe/d, as a result of continued strong well performance.
Diamondback now intends to complete 65 to 70 gross horizontal wells this year.
Diamondback’s 2016 capital expenditure guidance remains unchanged at $350 to $425 million.
Diamondback plans to add a fifth rig in the coming weeks.
Diamondback now intends to complete 65 to 70 gross horizontal wells this year.
Diamondback’s 2016 capital expenditure guidance remains unchanged at $350 to $425 million.
Diamondback plans to add a fifth rig in the coming weeks.
The Company is decreasing its full year 2016 lease operating expense (“LOE”) guidance to $5.50 to $6.00 per boe from a prior range of $5.50 to $6.25 per boe as a result of continued cost savings and efficiency improvements.
Diamondback’s preliminary full year 2017 production guidance is 52 to 58 Mboe/d, the midpoint of which is up over 30% from the midpoint of updated 2016 production guidance
Diamondback plans to complete 90 to 120 gross wells in 2017 with an average lateral length of approximately 8,500 feet.
Diamondback plans to complete 90 to 120 gross wells in 2017 with an average lateral length of approximately 8,500 feet.
PRELIMINARY FULL YEAR 2017 GUIDANCE
Diamondback expects full year 2017 production to be between 52.0 Mboe/d and 58.0 Mboe/d. During 2017, the Company plans to complete 90 to 120 gross horizontal wells with an estimated total capital spend of $500 to $650 million from a five to seven rig program, should WTI prices remain above $45 per barrel.
Well costs are expected to range from $5.0 to $5.5 million for a 7,500 foot lateral horizontal well in the Midland Basin and $6.0 to $7.0 million in the Delaware Basin. Leading-edge Midland Basin well costs remain below $6.0 million for a 10,000 foot lateral well and below $5.0 million for a 7,500 foot lateral well.
“Diamondback’s continued strong well performance and increased completion cadence during the third quarter reflects our ability to turn our growth engine back on into a rising commodity price after reducing completion activity in early 2016. We are now operating four rigs with a fifth rig to be added in the coming weeks and a sixth rig to be added early next year," stated Travis Stice, Chief Executive Officer of Diamondback.
Mr. Stice continued, "We have increased 2016 production guidance and introduced 2017 production guidance which shows production growth of more than 30% at the midpoint compared to updated 2016 expectations. Our existing asset base allows us to drive production growth within cash flow into 2017 and beyond at the current forward strip prices. The ability to drive multi-year organic growth, within cash flow on our existing asset base represents the standard we have always sought to achieve. We believe we are ideally positioned to pursue additional transactions provided they drive exceptional shareholder value while maintaining our disciplined approach to acquisitions. As has been rumored, we were engaged in discussions involving an acquisition but are not actively pursuing further negotiations at this time.”
OPERATIONS UPDATE:
Diamondback’s average daily production during Q3 2016 was 44,923 boe/d (73% oil), up 22% from Q2 2016 average daily production of 36,841 boe/d. Average realized prices during Q3 2016 were $42.11 per barrel of oil, $2.37 per Mcf of natural gas and $13.76 per barrel of natural gas liquids.
Diamondback’s subsidiary, Viper Energy Partners LP (“Viper”), had Q3 2016 production of 6,255 boe/d (75% oil), up 16% from Q2 2016 average daily production of 5,380 boe/d. Viper’s Q3 2016 average realized prices were $41.97 per barrel of oil, $2.39 per Mcf of natural gas and $12.56 per barrel of natural gas liquids.
In September 2016, Diamondback completed its previously announced acquisition in the Southern Delaware Basin.
GUIDANCE UPDATE:
Diamondback is increasing its 2016 production guidance to a range of 41.0 to 42.0 Mboe/d, up 6% from the midpoint of the July guidance range of 38.0 to 40.0 Mboe/d, as a result of continued strong well performance.
Diamondback now intends to complete 65 to 70 gross horizontal wells this year.
Diamondback’s 2016 capital expenditure guidance remains unchanged at $350 to $425 million.
Diamondback plans to add a fifth rig in the coming weeks.
Diamondback now intends to complete 65 to 70 gross horizontal wells this year.
Diamondback’s 2016 capital expenditure guidance remains unchanged at $350 to $425 million.
Diamondback plans to add a fifth rig in the coming weeks.
The Company is decreasing its full year 2016 lease operating expense (“LOE”) guidance to $5.50 to $6.00 per boe from a prior range of $5.50 to $6.25 per boe as a result of continued cost savings and efficiency improvements.
Diamondback’s preliminary full year 2017 production guidance is 52 to 58 Mboe/d, the midpoint of which is up over 30% from the midpoint of updated 2016 production guidance
Diamondback plans to complete 90 to 120 gross wells in 2017 with an average lateral length of approximately 8,500 feet.
Diamondback plans to complete 90 to 120 gross wells in 2017 with an average lateral length of approximately 8,500 feet.
PRELIMINARY FULL YEAR 2017 GUIDANCE
Diamondback expects full year 2017 production to be between 52.0 Mboe/d and 58.0 Mboe/d. During 2017, the Company plans to complete 90 to 120 gross horizontal wells with an estimated total capital spend of $500 to $650 million from a five to seven rig program, should WTI prices remain above $45 per barrel.
Well costs are expected to range from $5.0 to $5.5 million for a 7,500 foot lateral horizontal well in the Midland Basin and $6.0 to $7.0 million in the Delaware Basin. Leading-edge Midland Basin well costs remain below $6.0 million for a 10,000 foot lateral well and below $5.0 million for a 7,500 foot lateral well.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Diamondback Energy (FANG)
I have updated the FANG forecast model. It will be posted to the EPG website later today.
Based on the company's guidance, my valuation increases by $10.75 to $112.75. This compares to Morgan Stanley's price target of $135.00 and First Call's price target of $107.07. I'm sure First Call's price target will be going way up after the company releases Q3 results, which crushed their previous guidance.
Diamondbacks production will ramp up in 2017 as they move to a six rig program. My valuation is based on the midpoint of their 2017 production guidance, but my guess is that they beat the guidance since well results continue to top pre-drill type curves. If oil moves over $60/bbl, I expect them to add a couple more rigs.
FANG trades at a much higher multiple of cash flow from operations than the Sweet 16 average, but it is justified by their strong production and proven reserve growth while keeping capex inline with operating cash flows.
FANG's update should be encouraging news for holders of CXO, EOG, PE, PXD, RSPP and SM. All of these companies have large positions in the Permian Basin.
Based on the company's guidance, my valuation increases by $10.75 to $112.75. This compares to Morgan Stanley's price target of $135.00 and First Call's price target of $107.07. I'm sure First Call's price target will be going way up after the company releases Q3 results, which crushed their previous guidance.
Diamondbacks production will ramp up in 2017 as they move to a six rig program. My valuation is based on the midpoint of their 2017 production guidance, but my guess is that they beat the guidance since well results continue to top pre-drill type curves. If oil moves over $60/bbl, I expect them to add a couple more rigs.
FANG trades at a much higher multiple of cash flow from operations than the Sweet 16 average, but it is justified by their strong production and proven reserve growth while keeping capex inline with operating cash flows.
FANG's update should be encouraging news for holders of CXO, EOG, PE, PXD, RSPP and SM. All of these companies have large positions in the Permian Basin.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Diamondback Energy (FANG)
Canaccord Genuity’s Sam Burwell raised his price target from $103 to $116:
To put the company’s 2017 preliminary guidance in perspective, the new range was not only above previous consensus (48.6 MBoe/d), but nearly surpassed our prior number also which had been one of the highest on the Street (52.3 MBoe/d). The impressive guidance illustrates why FANG should continue to be one of the top performers in the Permian. Such growth is made possible by a depth of quality inventory in both the Midland and Delaware Basins, top-tier corporate-level capital efficiency and a sterling balance sheet, all of which help underpin our BUY thesis.
Raymond James’s John Freeman raised his price target from $104 to $117:
Diamondback’s 3Q operational update represents a clear beat and raise, with production guidance boosted meaningfully despite a largely unchanged drilling pace. Our read is that well productivity has improved meaningfully, a conclusion supported by recently pulled state production data. Finally, despite earlier rumors indicating it might be close to a deal, Diamondback is out of the running to acquire Silver Hill Energy, a prudent move, in our view. Given the prime Permian acreage, improving well productivity, and operational expertise, we reiterate our Outperform rating.
Wunderlich’s Jason Wangler raised his target to $130 from $110:
We are raising our estimates and price target on Diamondback Energy (FANG) following the company’s announcement of significantly higher 3Q16 production, increased 2016 expectations and stronger-than-expected growth in 2017 that FANG can achieve by spending near cash flows. These results and expectations are predicated on FANG ramping activity; and that process is ongoing with FANG adding a fifth rig in the coming weeks and a sixth rig slated for early 2017. The company has been able to continue to show strong organic growth throughout the downturn while bolting on nice acquisitions, including its Delaware purchase over the summer, that giveFANG a strong economic inventory, solid cash flows and a pristine financial position that should drive continued success for the company.
To put the company’s 2017 preliminary guidance in perspective, the new range was not only above previous consensus (48.6 MBoe/d), but nearly surpassed our prior number also which had been one of the highest on the Street (52.3 MBoe/d). The impressive guidance illustrates why FANG should continue to be one of the top performers in the Permian. Such growth is made possible by a depth of quality inventory in both the Midland and Delaware Basins, top-tier corporate-level capital efficiency and a sterling balance sheet, all of which help underpin our BUY thesis.
Raymond James’s John Freeman raised his price target from $104 to $117:
Diamondback’s 3Q operational update represents a clear beat and raise, with production guidance boosted meaningfully despite a largely unchanged drilling pace. Our read is that well productivity has improved meaningfully, a conclusion supported by recently pulled state production data. Finally, despite earlier rumors indicating it might be close to a deal, Diamondback is out of the running to acquire Silver Hill Energy, a prudent move, in our view. Given the prime Permian acreage, improving well productivity, and operational expertise, we reiterate our Outperform rating.
Wunderlich’s Jason Wangler raised his target to $130 from $110:
We are raising our estimates and price target on Diamondback Energy (FANG) following the company’s announcement of significantly higher 3Q16 production, increased 2016 expectations and stronger-than-expected growth in 2017 that FANG can achieve by spending near cash flows. These results and expectations are predicated on FANG ramping activity; and that process is ongoing with FANG adding a fifth rig in the coming weeks and a sixth rig slated for early 2017. The company has been able to continue to show strong organic growth throughout the downturn while bolting on nice acquisitions, including its Delaware purchase over the summer, that giveFANG a strong economic inventory, solid cash flows and a pristine financial position that should drive continued success for the company.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group