Diamondback Energy (FANG) Update - Oct 13

[dan_s]

FANG Stock Thoughts from Tudor Pickering Holt (TPH)
On track for H2’20 and FY’21 guides; Dividend and balance sheet remain focus
Sector: NAm E&P | Ticker: FANG | Recommendation: BUY | Target: $46 | Close: $31.20

Truing up our model ahead of earnings keeps us in-line across H2’20 and FY’21. Shorter-term for Q3’20, we model 170.3mbpd of oil for $272MM of capex (Street 170.9mbpd of oil for $245MM of capex), and ending the year in Q4, we see crude production increasing to 172.7mbpd on slightly less capex q/q at TPHe $236MM (Street in-line on production for $296MM capex). Looking to next year, no change to our model showing maintenance production vs. Q4’20 levels achievable on 25-35% less spending y/y, as we continue to model 174.5mbpd oil for ~$1,427MM in capex (Street ~in-line at 174.6mbpd and $1,405MM capex) which results a 12% FCF yield and 5% FCF/EV in our model. Bigger picture, maintaining the current dividend (~4.9% yield) remains in focus along with debt reduction and future dividend growth. While TPHe YE’21 ND/EBITDA remains relatively elevated at ~2.5x using current strip, the long runway to maturities mitigates concern, but we’d look towards 2024-2025 when leverage nears ~2x for growth in the dividend, though the company may balance utilization of FCF before then.
-------------------
TipRanks: "In the last 3 months, 13 ranked analysts set 12-month price targets for FANG. The average price target among the analysts is $54.83."