Diamondback Energy (FANG) Q4 Results - Feb 13

[dan_s]

MIDLAND, Texas, Feb. 13, 2018 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the fourth quarter ended December 31, 2017.

HIGHLIGHTS

Q4 2017 net income of $115 million, or $1.16 per diluted share; adjusted net income (as defined and reconciled below) of $153 million, or $1.56 per diluted share < Compares to my forecast of $123.4 million, or $1.25 per diluted share.
Q4 2017 production of 92.9 Mboe/d (74% oil), up 9% over Q3 2017 and 79% year over year; full year 2017 production of 79.2 Mboe/d (74% oil), up 84% year over year within operating cash flow
Proved reserves as of December 31, 2017 of 335.4 MMboe (62% PDP, 70% oil), up 63% year over year; 2017 proved developed finding and development ("PD F&D") costs of $9.09/boe
Full year 2018 production guidance of 108.0 – 116.0 Mboe/d, up over 40% at the midpoint from full year 2017 average daily production < My forecast was 104.0 Mboe/d

Full year 2018 CAPEX guidance of $1,300 - $1,500 million, including drill, complete and equip ("D,C&E") of $1,175 - $1,325 million and infrastructure of $125 - $175 million
Expect to turn 170 to 190 gross operated horizontal wells to production in 2018 with an average lateral length of approximately 9,300 feet
Initiating annual cash dividend of $0.50 per common share to be payable quarterly beginning with Q1 2018

“In a year where investor focus shifted from resource capture to resource execution and capital discipline in the Permian Basin, Diamondback delivered on its promises by achieving 84% year over year production growth within cash flow. After successfully integrating multiple large acquisitions and doubling our asset base, we decreased cash costs by over 10% year over year and increased proved reserves by over 60% while maintaining peer-leading capital efficiency. Capital discipline and growth within cash flow are not new concepts to Diamondback, with our 2018 plan calling for over 40% growth within cash flow at current commodity prices," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, "Diamondback continues to increase its focus on return on and return of capital, with our return on average capital employed nearly doubling in 2017 and expected to continue to rise given current commodity prices and our continued development of undeveloped acreage. We are also taking our first step toward rewarding shareholders for their support of our growth these last five years by initiating a $0.50 annual cash dividend to be payable quarterly beginning with the first quarter of 2018. Diamondback is now in a position to generate industry-leading organic growth as well as return capital to shareholders while continuing to reduce leverage. Our commitment to robust production growth at the highest margins and efficiencies of our peer group has not changed, and we will continue to be opportunistic through multiple avenues to maximize shareholder returns.”

[dan_s]

I have more work to do on the forecast, but my valuation of FANG is going way up. The company's production guidance of 35% to 40% YOY growth should draw a lot of "love" from the Wall Street Gang tomorrow. Plus, the growth is being funded by cash flow from operations and the small dividend will also help.

[dan_s]

TPH Comments: "Encouraging to see beats on both production (93mboepd vs. TPHe/Street 91) and capex ($305MM vs. TPHe/Street $330MM/$313MM) amidst months of worrisome operational commentary from offset Permian peers. 2018 budget spicy at first glance, $1.3-1.5B vs. TPHe/Street $1.3B, but includes more wells and +7% longer laterals than we modeled... TPHe implying a beat, as our legacy 113mboepd (Street 111) was already within 108-116 guidance. Staying mindful of the ongoing shift to manufacturing / development mode, truing up our model to the well count midpoint ($1.4B capex) puts us +5% above the prod'n midpoint, at 118mboepd. Company tops off release with the initiation of a 50c/shr annual dividend (0.4% yield) -- initiates shareholder returns and is something upon which future FCF can build. Name remains a fundamental long on top tier management and execution."

[dan_s]

I have finished updating my forecast/valuation model for FANG. I am raising my valuation $14 to $160/share, which compares to First Call's price target of $151.55.

It is a good bet that First Call's price target will rise after the rest of the Wall Street Gang updates their valuation models for what was said on the conference call. You should all listen to the CC replay.