Diamondback Energy (FANG) Update - Sept 17

[dan_s]

Shares of Diamondback Energy Inc. FANG, +3.11% charged up 4.3% in premarket trading Friday, after the oil and gas company announced a new $2 billion stock repurchase program. The company said late Thursday that the new buyback program was part of the acceleration of its plan to return 50% of free cash flow to shareholders in the fourth quarter, given strong operational performance and improved capital efficiency, as a time of that the macro backdrop is supportive.

Cowen analyst David Deckelbaum said the move is "notable," given the company has beat production and capital expenditure expectations for both the first and second quarters. He also said that the company introduced the concept of future use of variable dividends as a return mechanism, once the expected return on share repurchases is below the company's cost of capital. Deckelbaum reiterated the outperform rating on the stock and the $108 price target, which implies a 35% gain off Thursday's closing price of $80.07.

My valuation of FANG is $140