Diamondback Energy (FANG) Q4 Results

[dan_s]

MIDLAND, Texas, Feb. 14, 2017 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the fourth quarter ended December 31, 2016.

HIGHLIGHTS

Q4 2016 production of 51,900 Boe/d (73% oil), up 16% over Q3 2016 and 38% year over year < Compares to my Q4 production forecast of 47,000 Boe/d.

Full year 2016 production of 43.0 Mboe/d (73% oil), up 30% year over year

Q4 2016 average realized prices were $46.72 per barrel of oil, $2.53 per Mcf of natural gas and $17.70 per barrel of natural gas liquids, resulting in a total equivalent price of $38.72/boe, up 13% from the Q3 2016 total equivalent price of $34.39/boe

Q4 2016 cash operating costs of $8.48/boe, including LOE of $4.89/boe and cash G&A of $0.92/boe

Proved reserves as of December 31, 2016 of 205.5 MMboe (68% oil), up 31% year over year; proved developed finding and development ("PD F&D") costs of $7.26/boe

Previously announced pending acquisition of Brigham Resources expected to close at the end of February 2017

Increasing pro forma full year 2017 production guidance to 69.0 to 76.0 Mboe/d, up from 64.0 to 73.0 Mboe/d

Operating six horizontal rigs, including first operated rig in the Southern Delaware Basin, with plans to add two additional rigs after the closing of the pending Brigham Resources acquisition

“Diamondback achieved over 40% production growth in the second half of 2016 by showcasing our ability to respond quickly to a rising commodity price environment. We ended the year operating five rigs, and as I said in November, we are just beginning to bear the fruit of our activity ramp. We recently added a sixth operated rig, our first in the Southern Delaware Basin, and plan to add two more rigs to the Delaware Basin following the closing of the pending Brigham transaction at the end of February," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, “After doubling our Tier 1 acreage in the second half of 2016, our focus now shifts to execution. Diamondback's success has and continues to be driven by our ability to identify accretive opportunities, integrate these efficiently into operations and convert resource into cash flow. Our resource expansion into the Southern Delaware Basin marks another opportunity to expand our operational leadership in regards to low cost operations, best in class well productivity and, above all, creating shareholder value. Our updated 2017 guidance implies over 65% production growth at the midpoint, while conservatively preparing for potential service cost inflation with respect to capital guidance. Our pro forma balanced footprint secures Diamondback's ability to generate leading growth rates within cash flow for years to come."

I will update my forecast model tonight. - Dan

[dan_s]

One thing I really like about FANG is that their presentation of quarterly results is clear and their guidance is very accurate. Plus, they always seem to generate production growth at or above the top of their guidance. The numbers are VERY GOOD on this one.

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

My valuation increase by $7.00/share to $137.00. This compares to First Call's price target of $126.43, which will surely be going up since FANG beat Q4 production guidance by a wide margin and they have increased production guidance for 2017. It looks like YOY production growth will be near 70% in 2017. WOW!

I expect production growth to accelerate this spring after they close the Brigham deal and add more rigs. My forecast assumes 2018 production of 105,000 BOE per day. My guess is that will turn out to be way to low. THIS ONE HAS A LOT OF UPSIDE FOR US IF OIL GOES OVER $60.

NOTE that all of the Sweet 16 that have reported so far got a big increase in the realized NGL price from Q3 to Q4. It is not a big deal for FANG since NGLs are only 15% of production, but it is a big boost in revenues for several of our Sweet 16. As I have pointed out in my last two podcasts, there is a lot of upside for NGLs this year.