Diamondback Energy (FANG) Update - Feb 6

[dan_s]

FANG's Q4 production exceeded my forecast. My updated forecast/valuation model will be posted to the EPG website this afternoon.

Diamondback Energy, Inc. (FANG) ("Diamondback" or the "Company") today announced that its average daily production for the fourth quarter of 2019 was 301.3 MBOE/d (195.0 MBO/d), an increase of 5% from Q3 2019 average daily production of 287.1 MBOE/d and up 65% from Q4 2018 average daily production of 182.8 MBOE/d.

Average daily production for the full year 2019 was 283.0 MBOE/d (187.7 MBO/d), an increase of 27% from combined 2018 average daily volumes of 222.1 MBOE/d, with oil volumes increasing 26% year over year, after adjusting for the full year 2018 impact of the Energen transaction which closed on November 29, 2018.

Viper Energy Partners LP (VNOM) ("Viper"), a subsidiary of Diamondback, also announced today its fourth quarter 2019 average daily production volumes of 26.1 MBOE/d (16.5 MBO/d), an increase of 23% from Q3 2019 average daily production of 21.3 MBOE/d and up 29% from 20.2 MBOE/d in Q4 2018.

"Diamondback achieved ~5% sequential oil production growth in the fourth quarter of 2019, returning to growth after a dip in the third quarter, and setting the Company up well for our 2020 plan. The impact of offset frac interference experienced in the third quarter subsided in the fourth quarter with field level production in Howard County rebounding as expected. For the full year 2019, Diamondback grew oil production pro forma for the Energen acquisition over 26% year over year,“ stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, "Following our recent investment grade upgrade and debt refinancing, Diamondback ended 2019 meeting or exceeding every major synergy target laid out with the Energen transaction. With the focus now on 2020, we believe Diamondback is well-positioned to execute on our previously announced plan to deliver 10% - 15% year over year oil growth, while generating robust free cash flow at current commodity prices."

[dan_s]

Summary of https://seekingalpha.com/article/432115 ... est-update

Diamondback Energy has reported 4.5% increase in oil production on a sequential basis for Q4 2019, which allowed the company to beat its annual output targets.

Diamondback Energy will likely report an increase its profits for Q4 2019 as the company will benefit from production growth and higher commodity prices.

If Diamondback Energy continues to grow oil production at a robust pace, then it could alleviate concerns related to the production mix with declining oil percentage.

Diamondback Energy plans to increase total production by 9.5%to 14.8% in 2020 and can report strong levels of free cash flows of more than $675Mn.

[dan_s]

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

Things to consider:
> FANG's Q4 production of 301,300 Boepd exceeded my forecast.
> They have provided production guidance for 2020. My forecast is based on the midpoint, but FANG usually beats their guidance.
> ~40% of their 2020 production is hedged at an average price of about $56/bbl.
> FANG is trading at $77.14 at the time of this post.
> First Call's price target is $125.26
> Nine Wall Street firms have published new reports on FANG during January. Their price targets range from $105 to $148.
> FANG is one of the "Elite Eight" in the Sweet 16 and IMO the current share price is a deep discount to their NAV.