Energy Prospectus

Diamondback is going to announced Q3 results today after the markets close. FANG was trading at $110.61 at the time of this post.
My pre-release valuation is $142.00

Two respected energy sector analysts updated their price target on October 26.
> John Freeman at Raymond James rates FANG a Buy with a price target of $165.00
> Vincent Lovaglio at Mizuho Securities rates FANG a Buy with a price target of $147.00

If Diamondback's Q3 results and guidance match my forecast model, my valuation will increase to approximately $165.00 because I am now giving equal weight to 2021 and 2022 operating cash flow per share. I have also increased the commodity prices in my valuation models to $80/bbl of WTI oil and $4.25/mcf of HH gas.
The Company also produces more than 75,000 bpd of high value NGLs.

I do expect Diamondback's Adjusted Net Income per share to beat First Call's Q3 EPS forecast of $2.77.

Viper Energy Partners LP (VNOM) will also release Q3 results today.

Fang shows its teeth!

A beat

https://seekingalpha.com/pr/18538261-di ... -increases

A highlight in their slide deck

- No Federal Land exposure!

MIDLAND, Texas, Nov. 01, 2021 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the “Company”) today announced financial and operating results for the third quarter ended September 30, 2021.

THIRD QUARTER 2021 HIGHLIGHTS

Q3 2021 average production of 239.8 MBO/d (404.3 MBOE/d) < Beat my forecast of 235 MBO per day and total of 392 M BOE per day.

Q3 2021 Permian Basin production of 223.0 MBO/d (374.3 MBOE/d)

Q3 2021 cash flow from operating activities of $1,199 million; Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $1,131 million < Compares to my forecast of $1,123 million operating cash flow

Q3 2021 cash capital expenditures of $391 million; Q3 2021 activity-based capital expenditures incurred of approximately $430 million

Q3 2021 Free Cash Flow of $740 million < My full-year FCF forecast is $2.2 billion, so FANG is on pace to achieve it.

Closed previously announced full redemption of $432 million remaining aggregate principal amount of 5.375% bonds due 2025

Announced commitment to return 50% of Free Cash Flow to stockholders beginning in Q4 2021; Board authorized $2 billion share repurchase program as part of this commitment

Repurchased 268,291 shares of common stock at an average price of $82.02 during the third quarter of 2021

Flared 0.8% (1.6% including QEP) of gross natural gas production in the third quarter of 2021; 0.9% (1.6% including QEP) in the first nine months of 2021

RECENT HIGHLIGHTS

Increasing annual dividend by 11.1% to $2.00 per share; declared Q3 2021 cash dividend of $0.50 per share payable on November 18, 2021; implies a 1.9% annualized yield based on the October 29, 2021 share closing price of $107.19

Closed previously announced divestiture of Williston Basin assets on October 21, 2021; net cash proceeds of $586 million after closing price adjustments

Closed previously announced full redemption of $650 million aggregate principal amount of 0.9% bonds due 2023

Agreed to drop down transaction ("Drop Down") of water midstream assets to subsidiary Rattler Midstream LP (NASDAQ:RTLR) ("Rattler") for gross consideration of $160 million, subject to certain closing adjustments; expected to close in Q4 2021

Closed sale of Mustang Springs Gas Gathering assets for net consideration of approximately $54 million, after certain post-closing adjustments

GUIDANCE UPDATE

Full year 2021 oil production guidance of 222 - 223 MBO/d (370 - 372 MBOE/d), up from 219 - 222 MBO/d (363 - 370 MBOE/d) previously, after giving effect for Q4 2021 Williston Basin production through October 21, 2021 < This will increase my valuation.

Lowering full year 2021 cash CAPEX guidance to $1.49 - $1.53 billion, down 4% at the midpoint from $1.525 - $1.625 billion previously

Initiating Q4 2021 oil production guidance of 221 - 225 MBO/d (368 - 375 MBOE/d); includes ~3 MBO/d (~5 MBOE/d) of estimated net Q4 2021 Williston Basin production

Initiating Q4 2021 Permian Basin oil production guidance of 218 - 222 MBO/d (363 - 370 MBOE/d)

Initiating Q4 2021 cash CAPEX guidance of $435 - $475 million < Compares to Q4 operating cash flow of approximately $1.2 Billion.

Diamondback believes it can maintain Q4 2021 Permian Basin oil production through full year 2022 assuming Q4 2021's run rate CAPEX spend

“Diamondback continued building on its execution track record in the third quarter, generating a record $740 million of Free Cash Flow while keeping capital costs under control. Efficiency gains, particularly in the Midland Basin drilling and completion programs, have mitigated the inflationary pressures seen on well costs and have led to our second decrease in capital guidance this year, now down 10% from guidance presented in April 2021. Through the third quarter of 2021, Diamondback has generated $1.65 billion of Free Cash Flow, and we have used this Free Cash Flow to reduce our gross debt by $1.3 billion and increase our dividend for the third time this year, now up 33% from a year ago,” stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice continued, “In addition, we are well-positioned to deliver on the enhanced return of capital program we recently outlined, where we expect to distribute 50% of quarterly Free Cash Flow beginning with the fourth quarter’s performance. This program consists of our sustainable and growing base dividend, which is well protected below $40 oil, and a combination of share repurchases and variable dividends which will be used interchangeably depending on which method presents the best return to our stockholders.”

Mr. Stice continued, “As we move into 2022, we are still seeing excess oil supply and varying demand recovery profiles across the globe. As such, we remain committed to capital discipline and our plan to return excess Free Cash Flow to our stockholders. Therefore, we are committing to maintaining our fourth quarter 2021 Permian oil volumes throughout next year and we believe this can be accomplished by spending the amount of capital implied by our fourth quarter 2021 guidance run-rate. This capital range accounts for the inflationary pressures we have seen so far this year and anticipate next year. By keeping our oil production flat in 2022, we expect to be in a position to maximize Free Cash Flow, grow our dividend, further pay down debt and overall return more capital to stockholders.” < Keep in mind that Mr. Stice has a habit of "under-promising and then over-delivering" on production guidance. I am forecasting a production increase of 5% from 2021 to 2022.
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I will update my forecast/valuation model this evening and post it to the EPG website this evening. I'm taking off to work out at LA Fitness since I have been starring at the computer screen all day. Have to rest these old eyes for awhile.