Energy Prospectus

Adjusted EPS compare to my forecast of $0.68 and First Call's estimate of $0.90. I am updating my forecast model now. - Dan

MIDLAND, Texas, Aug. 01, 2017 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ:FANG) ("Diamondback" or the "Company") today announced financial and operating results for the second quarter ended June 30, 2017, corrected for a change to adjusted net income from the prior release.

HIGHLIGHTS
•Q2 2017 net income of $158 million, or $1.61 per diluted share (adjusted net income of $123 million, or $1.25 per diluted share; corrected from prior released adjusted net income of $137 million, or $1.40 per diluted share)
•Q2 2017 production of 77.0 Mboe/d (75% oil), up 25% over Q1 2017 (15% organic growth) < Compares to my forecast of 70,300 Boepd
•Increasing full year 2017 production guidance to 74.0 - 78.0 Mboe/d, up 5% from prior full year guidance midpoint
•Lowering full year 2017 CAPEX guidance to $800 - $950 million from $800 million - $1.0 billion previously
•Q2 2017 cash operating costs of $7.66/boe, including LOE of $4.14/boe, cash G&A of $0.82/boe and taxes and transportation of $2.70/boe
•Lowering full year 2017 LOE guidance to $3.75 - $4.75 per boe and cash G&A to $0.75 - $1.25 per boe
•Two ReWard Wolfcamp A wells had average peak 30-day flowing 2-stream initial production ("IP") rates of 191 boe/d per 1,000' (83% oil)
•First completed Upper Wolfcamp A well in Pecos County had peak 30-day flowing IP rate of 219 boe/d per 1,000' (85% oil)
•First completed Lower Second Bone Spring well in Pecos County had peak 30-day flowing IP rate of 190 boe/d per 1,000' (91% oil)

"Diamondback has continued to build on its strong execution track record by increasing full year production guidance while decreasing CAPEX and cash cost guidance. We believe these results continue to affirm the strength of our business plan. Today we are positioned with acreage and well locations that provide many years of visible production growth. Our growth rate is determined by returns to shareholders, without reliance on the capital markets to fund our development plan. Our balance sheet remains strong and provides us the operational flexibility to increase and decrease activity as commodity price dictates, allowing us to grow differentially within cash flow," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, "We are impressed with the initial operated results out of the Wolfcamp A in the Southern Delaware Basin, and are extremely excited about our initial Second Bone Spring result on our Pecos acreage, providing us another zone that can compete for capital in our current portfolio. We will continue to lower well costs in the Delaware Basin with our organization's relentless focus on capital efficiency and full cycle economics."

Comments below are from John White at Roth Capital. FANG is one of the mid-caps that John follows closely. - Dan

FANG recently completed its first operated Lower Second Bone Spring well. The Kelley State 2H was drilled with a 4,724 foot lateral and achieved a peak 30-day flowing rate of 190 BOE per day per 1,000' or 898 BOE per day. This is, in our view, very significant. If the initial wells in this formation perform on par with the Wolfcamp A formation, this will pose meaningful potential for even more growth in FANG’s reserves and production.

New Guidance: FANG is lowering 2017 capex from the previous range of $800 million to 1.0 billion while increasing 2017 production guidance 4.8%. Previous guide was a range with a mid-point of 72,500 BOE per day which now moves to a higher range with a mid-point of 76,000 BOE per day. The lower capex and higher production guidance are due to better productivity and efficiency in the drilling and completion results. The positive cadence on the operations continues with lease operating expense per BOE guidance moving lower, to a range of $3.75 to $4.75, from the previous range of $4.75 to $5.75.

Production: FANG reported 2Q 2017 production of 76,977 BOE per day, nicely ahead of our estimate of 71,291 BOE per day and the consensus of 72,346 BOE per day. The higher than expected production was due to better than expected drilling and completion results.

Earnings and Cash Flow: Primarily due to the higher than estimated production, FANG also surpassed our estimates and the consensus estimates for earnings and cash flow. Actual adjusted EPS/CFPS/EBITDA were $1.25/$2.09/$218.4 million against our figures of $1.04/$1.82/$187.5 million and consensus of $0.91/$1.87/$197.1 million.

I have updated my forecast model for FANG. It will be posted to the EPG website later today.

My valuation increases to $125/share, which compares to First Call's price target of $118.86 (which s/b going up after the company's outstanding Q2 results and increase production guidance).