Diamondback Energy (FANG) - Q3 Results

[dan_s]

FANG reported adjusted EPS figure of $1.33, which compares to my forecast of $1.35

FANG reported operating CFPS of $2.27, compared to my forecast of $2.26

FANG announced it is increasing full year 2017 production guidance to a range of 77,500 to 78,500 BOE per day, up 3% from the prior full year guidance midpoint.

FANG is tightening the full year 2017 capex guidance to a range of $850 million to $900 million, down from the previous $800 million to $950 million. Based on my forecast, their capex should be fully funded by cash flow from operations.

Delaware Basin Operations Update: Well results continue to look strong.
> In Pecos County, FANG continues to see strong performance from early operated completions targeting the Wolfcamp A. FANG's first operated two-well pad, the State Neal Lethco 36-3201WA and State Neal Lethco 36-3202WA, achieved an average peak 30-day flowing IP rate of 130 BOE per day per 1,000 feet (88% oil). Subsequently, FANG topped these two wells’ flowing BOE per foot results with the Sibley 3-2 2WA and Sibley 3-2 3WA achieving an average 10-day peak flowing IP rate of 152 BOE per day per 1,000 feet (80% oil).
> Also in Pecos County but in the Lower Second Bone Spring formation, the Kelley State 2H reached a peak 30-day flowing IP rate of 195 BOE per day per 1,000 feet (92% oil) and attained a peak 90-day IP rate of 149 BOE per day per 1,000 feet (91% oil). FANG plans to continue to test this zone in 2018.
> In Reeves County, FANG completed a Wolfcamp A well with a 10,372 foot lateral and the Warlander 501 WA commenced with a current peak 10-day IP rate of 193 BOE per day per 1,000 feet (81% oil), with production continuing to increase.

[dan_s]

I have updated my forecast model for FANG. My valuation increases to $128/share, which compares to First Call's price target of $122.97.

My production forecast of 105,000 BOE per day for 2018 is probably too low.