Diamondback Energy (FANG) Q4 Results - Feb 23

[dan_s]

Stifel's Take:
Diamondback Energy, Inc. (FANG, $68.40, Buy; Target $103.00) -
Delivers strong Q420 and introduces best-in-class ESG stewardship initiative - Derrick Whitfield -
We view the Q4 release as positive.
The positives include: i) a total equivalent and oil production beat (2.6% and 1.4% above consensus, respectively) on lower than expected capex (12.8% below consensus), ii) materially better than expected cash operating costs (14.4% below Stifel), iii) announced significant changes to its ESG performance and disclosure, including Scope 1 and methane emissions intensity reduction targets as well as a "Net Zero Now" commitment, iv) positive F&D update with PD F&D cost decreasing from $10.87/boe in 2019 to $9.65/boe in 2020 and v) slightly positive 2021 oil guidance (+0.8%) adjusting for weather impacts and QEP's expected contribution.
The negatives include: i) slightly negative Q121 oil guidance adjusting for weather impacts and ii) higher than expected Midland well costs of $520-580/ft (vs. $520/ft 2H20 run-rate).
Net-net, Diamondback delivered a strong quarter and in-line 2021 guide. We believe management's ESG initiatives make the release a net positive.

I will be updating my forecast/valuation model for FANG tomorrow. My valuation will be going up. This is also great news for VNOM.

[dan_s]

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

FANG is currently trading for $73.79
My valuation has increased by $23 to $100 per share
My model assumes that the Guidon and QEP acquisitions close in Q1 2021