Energy Prospectus

DIAMONDBACK ENERGY, INC. PROVIDES REVISED 2020 GUIDANCE AND UPDATED HEDGE POSITIONS

MIDLAND, Texas, March 31, 2020 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (FANG) ("Diamondback" or the "Company") today provided revised full year 2020 guidance and updated hedge positions.

REVISED 2020 GUIDANCE HIGHLIGHTS

Full year revised 2020 production guidance of 295.0 - 310.0 MBOE/d
Full year revised 2020 oil production guidance of 183.0 - 193.0 MBO/d
Q4 2020 exit rate production guidance of 170.0 – 180.0 MBO/d (275.0 – 290.0 MBOE/d)
Full year 2020 CAPEX guidance of $1.5 - $1.9 billion, including drill, complete and equip ("D,C&E") spend of $1.31 - $1.63 billion, $100 - $150 million of midstream capital and $90 - $120 million of infrastructure capital
The Company plans to exit the third quarter of 2020 operating eight drilling rigs, and exit 2020 operating seven drilling rigs, and will cut further should conditions warrant
After returning from a one to three month frac holiday, the Company plans to operate between three and five completion crews, and complete between 170 - 200 gross (153 – 180 net) wells with an average lateral length of approximately 10,000 feet in 2020
Diamondback believes it can maintain Q4 2020 exit rate oil production through 2021 with a four to five completion crew cadence, six to eight operated drilling rigs and a capital budget 20% - 30% less than 2020’s $1.5 - $1.9 billion capital budget
“Diamondback’s revised 2020 capital budget and operating plan reflects the swift changes we have made in short order as our industry deals with a market that is changing daily due to an unprecedented global demand shock. Size, scale and cost structure are paramount in this market, and Diamondback’s cost structure is built to withstand commodity price shocks. Almost all of our anticipated 2020 production is now hedged and we have built downside protection in 2021 to prepare for lower for longer oil prices,” stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued “A majority of our oil production will flow through the Epic and Gray Oak pipelines beginning in April, where we have both firm transportation on each respective pipeline and associated long-term firm sales contracts tied to the length of our firm transportation commitments. The majority of our remaining oil production, which is currently exposed to the Midland market, is protected in the form of basis hedges. In addition, less than 10% of our current oil production receives West Texas Light pricing. The combination of firm transportation, long-term firm sales agreements, pipeline equity ownership, and financial protection via hedges provide a solid foundation for Diamondback through these uncertain times.”

DERIVATIVES UPDATE

The Company now has a total of 178.8 thousand barrels per day protected in 2020, with 98% of those hedges having unlimited downside protection as a swap, put or collar. The Company has an average of 83.5 thousand barrels per day of hedge protection in 2021 through a combination of collars and swaps. These hedge positions are consolidated to include hedges in place at Viper Energy Partners LP (“Viper”).

Three analysts have updated their price targets since the March 31st press release. Their valuations range from $36 to $62 per share.

I've updated my forecast/valuation model for FANG and it will be posted to the EPG website.

With so much of their oil hedged for 2020, even if WTI averages $25/bbl all year, FANG should generate enough cash flow from operations to cover their Capex budget.

I am using WTI oil prices of $25 in Q2, $35 in Q3 and $45 in Q4. If oil does stay under $25/bbl all year, there will be a dramatic drop in global oil supply.