Energy Prospectus

From John White at Roth Capital with my comments in blue.

We have employed a blended valuation of of FANG’s PV10% NAV per share and FANG’s Leverage Adjusted Multiple NAV per share which resulted in a blended NAV of $49.17 which we adjusted lower to $49.00 which is our price target.

FANG reported CFPS/EBITDA of $2.75/$496 million, beating the consensus figures of $2.72/$477 million. The better than expected results were due to higher revenues, significantly lower LOE, gathering and transportation and midstream expenses. Our CFPS/EBITDA estimates were $2.55/$504 million. FANG is also lowering its LOE/BOE and G&A/BOE 2020 guidance. Production and pricing was previously released. < Compares to my forecast of $2.79 operating CFPS.

FANG is lowering its LOE/BOE and G&A/BOE 2020 guidance. LOE/BOE guide is now in a range of $4.00 to $4.20. For reference, actual 1Q 2020 LOE/BOE was $4.35. Actual 2Q LOE/BOE is not meaningful due to shut-in/curtailed production. G&A/BOE guide is now in a range of $0.45 to $0.55. For reference actual 1Q 2020 G&A/BOE was $0.82. Actual 2Q G&A/BOE is not meaningful due to shut-in/curtailed production. This lower cost guidance implies an estimated total cash cost savings of over $43 million for the full year 2020.

FANG reiterated its 2020 production and capex guidance. Additionally, FANG reiterated its 4Q20 production guidance

We will further review these results and revise our estimates accordingly.

My valuation of FANG of $64 compares to First Calls price target of $54.

Diamondback Energy, Inc. (FANG, $27.71, Buy; Target $81.00)
Delivers additional cost reductions setting up the company to generate strong FCF in 2021 - Derrick Whitfield, the top energy sector analyst at Stifel.

- We view this release as positive. The positives include: i) an adjusted EBITDAX beat (0.4% above consensus) driven by lower than expected cash operating costs (8.5% below Stifel), ii) lowered LOE and G&A guidance, implying a $43mm savings for full-year 2020, iii) the reduction of $136mm of consolidated net debt during Q320, iv) a 2021 investment framework that is expected to deliver $525mm of pre-dividend FCF at $40/btl, and v) strong leading-edge DC&E costs in the Midland and Delaware (18% and 21% decrease from Q220 commentary, respectively). The only negative was interest expense guidance increasing by 5.7%. Net-net, Diamondback continues to strengthen its position as cost leaders in the Permian and stands to generate strong FCF (12% FCF yield) in 2021, assuming $40/bbl WTI

I have updated my forecast/valuation model for FANG based on Q3 results and their fresh guidance. My valuation declines by $1 to $63.00.
My model will be posted the EPG website this afternoon.