Diamondback Energy (FANG) Update - July 2
Posted: Fri Jul 02, 2021 11:49 am
FANG is trading for $97.84 at the time of this post. I am updating my valuation by $18 to $138.
Why?
> Diamondback is now on track to generate over $1 Billion of FCF from operations this year.
> Most of their "Bad Hedges" expire at year-end, sending operating cash flow from $3.8 Billion in 2021 to over $4.8 Billion in 2022. More cash flow in 2022 will increase the dividend, pay down more debt and add a few more drilling rigs.
> This company has some VERY GOOD leasehold in the Permian Basin; lots of high-return drilling inventory.
> Q2 will be the first full quarter since they closed the acquisitions of QEP and Guidon. I am expecting them to raise their production guidance.
> For 2020 their realized natural gas price was only $0.67/mcf. In Q1 2021 their realized ngas price was $2.64/mcf and their pipeline takeaway capacity has improved. Realized NGL prices went from $10.80/bbl in 2020 to $22.76/bbl in Q1 2021.
Why?
> Diamondback is now on track to generate over $1 Billion of FCF from operations this year.
> Most of their "Bad Hedges" expire at year-end, sending operating cash flow from $3.8 Billion in 2021 to over $4.8 Billion in 2022. More cash flow in 2022 will increase the dividend, pay down more debt and add a few more drilling rigs.
> This company has some VERY GOOD leasehold in the Permian Basin; lots of high-return drilling inventory.
> Q2 will be the first full quarter since they closed the acquisitions of QEP and Guidon. I am expecting them to raise their production guidance.
> For 2020 their realized natural gas price was only $0.67/mcf. In Q1 2021 their realized ngas price was $2.64/mcf and their pipeline takeaway capacity has improved. Realized NGL prices went from $10.80/bbl in 2020 to $22.76/bbl in Q1 2021.