Energy Prospectus

Permian Pure Play Diamondback Adds Heft to Portfolio with QEP, Guidon Tie-Ups . NGI

Diamondback Energy Inc. is expanding its leasehold in the Permian Basin with two separate cash and stock deals valued at a combined roughly $3 billion that are seen boosting cash flow and shareholder returns. The Midland, TX-based independent agreed to acquire QEP Resources in an all-stock transaction valued at around $2.2 billion, including QEP’s net debt of $1.6 billion. Under the deal, already approved by each company’s board, QEP shareholders would receive 0.05 shares of Diamondback common stock for each share of QEP common stock, representing an implied value to each QEP stockholder of $2.29 per share based on the closing price of Diamondback common stock on Dec. 18.

Read this: https://www.naturalgasintel.com/permian ... n-tie-ups/

Diamondback Energy Update from BMO Capital Markets Research Team
Phillip Jungwirth - E&P - US
It's a Holiday Tri-Party; Revising Estimates Post QEP/Guidon
Mkt $45.02 $50.00 $7,112
Rating Price Target Mkt Cap.
• We're revising our estimates following Diamondback's announced all-stock, no premium $2.1B
acquisition of QEP Resources and $0.9B (57% stock) purchase of Guidon Operating. < will add ~23 million shares to FANG
• For Diamondback, we view the transactions being double-digit accretive across most metrics, while
leverage-neutral.
• Acquired acreage expands Diamondback's Northern Midland footprint, which we view as higher
returns than most of the Permian acreage outside of Spanish Trail and Howard County.

Detailed presentation from FANG: https://diamondbackenergy.gcs-web.com/s ... e79673e014

I am updating my 2021 forecast for FANG with the assumption that both acquisitions close by February 28th.
Guidon acquisition likely to close first and add ~17,500 BOE per day. QEP will add about 30,000 BOE per day.

FANG is trading for $44.25 at the time of this post.

Here is what the Wall Street Gang thinks of the QEP & Guidon acquisition:

BMO Capital analyst Phillip Jungwirth reiterated a Market Perform rating and $50.00 price target on Diamondback Energy (NASDAQ: FANG) following the company's announced all-stock, no premium $2.1B acquisition of QEP Resources and $0.9B purchase of Guidon Operating. The acquisitions of QEP and Guidon expand Diamondback's Martin County position and are contiguous with its Spanish Trail North area. BMO Capital's 2021/22 EBITDA per share estimates for FANG increase by 9/12% assuming an end of 1Q21 close.

Stephens analyst Gail Nicholson raised the firm's price target on Diamondback Energy (FANG) to $67 from $56 and keeps an Overweight rating on the shares following the company's bolt-on acquisitions of QEP Resources (QEP) and privately held Guidon Energy, which she said expand the company's position in Andrews and Martin counties and are "accretive across multiple metrics." Diamondback was already "one of our favorite names to play in oil price recovery," said Nicholson, who thinks the acquisitions "enhance the narrative."

Susquehanna analyst Bascome Majors said the Diamondback Energy (FANG) acquisition of QEP Resources (QEP) and Guidon strengthens its Midland Basin portfolio and is accretive to cash flow metrics in 2021/22 and is about neutral to his estimates. He expects the excess cash flow will be used to pay down debt. Major maintained his Positive rating and $65 price target on Diamondback Energy shares

Siebert Williams (NYSE:WMB) Shank & Co analyst Gabriele Sorbara reiterated a Buy rating on Diamondback (NASDAQ:FANG) on Monday, setting a price target of $63, which is approximately 37.43% above the present share price of $45.84.

The current consensus among 13 TipRanks analysts is for a Strong Buy rating of shares in Diamondback, with an average price target of $54.65. The analysts price targets range from a high of $67 to a low of $45.5. < Keep in mind that only four of the analysts' reports included in the TipRank rating are dated after the acquisitions were announced on Monday.

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

My valuation only increases $1 to $64 because I am using what I believe to be a conservative "WAG" that Diamondback will just hold production flat in 2021.
The Company's production s/b ~295,000 BOE per day at year-end 2021
The acquisitions should take production up to ~370,000 BOE per day with a mix of approximately 57% crude oil, 22% natural gas and 21% NGLs
Operating cash flow should be $2.8 to $3.0 Billion in 2021
Adjusted earnings per share (ignoring MTM adjustments on hedges) s/b $5.95 with operating cash flow of $16.00 per share.
FANG should be trading in a range of 4X to 5X operating CFPS and the valuation multiple should go up after the acquisitions close and the Company provides detailed guidance for 2021.