Diamondback Energy (FANG) Update - Nov 5
Posted: Fri Nov 05, 2021 9:14 am
At the time of this post, FANG was trading for ~$113
I have updated my forecast/valuation model for FANG and it will be posted to the EPG website this afternoon.
> My current valuation increases by $16 to $158, primarily because I am now giving operating cash flow in 2021 and 2022 equal weight.
> Per my model, FANG's operating cash flow per share should be $21.36 in 2021 and $31.30 in 2022. A reasonable 12-month price target is 6X 2022 CFPS.
> FANG has very little oil hedged with SWAPS in 2022. They are using costless collars for 2022 with ceilings that range from $70.95 to $78.65.
> ~50% of 1H 2022 oil is unhedged and ~80% of their 2H 2022 oil is unhedged. No oil hedged beyond 2022 as of today.
> If WTI goes over $100/bbl in Q3 2022 when OPEC+ runs out of spare capacity (my SWAG), my valuation will go over $200/share.
FANG (as of today) plans to hold production flat in 2022. With capex the same as it was in 2021, the Company should generate over $4 billion of free cash flow from operations in 2022. They will increase dividends and fund an aggressive stock buyback.
If oil does go over $100/bbl, my guess is that they will add a few more drilling rigs that will boost production in 2H 2022.
Since FANG released Q3 results, five analysts have updated their price targets to $125 to $152.
I have updated my forecast/valuation model for FANG and it will be posted to the EPG website this afternoon.
> My current valuation increases by $16 to $158, primarily because I am now giving operating cash flow in 2021 and 2022 equal weight.
> Per my model, FANG's operating cash flow per share should be $21.36 in 2021 and $31.30 in 2022. A reasonable 12-month price target is 6X 2022 CFPS.
> FANG has very little oil hedged with SWAPS in 2022. They are using costless collars for 2022 with ceilings that range from $70.95 to $78.65.
> ~50% of 1H 2022 oil is unhedged and ~80% of their 2H 2022 oil is unhedged. No oil hedged beyond 2022 as of today.
> If WTI goes over $100/bbl in Q3 2022 when OPEC+ runs out of spare capacity (my SWAG), my valuation will go over $200/share.
FANG (as of today) plans to hold production flat in 2022. With capex the same as it was in 2021, the Company should generate over $4 billion of free cash flow from operations in 2022. They will increase dividends and fund an aggressive stock buyback.
If oil does go over $100/bbl, my guess is that they will add a few more drilling rigs that will boost production in 2H 2022.
Since FANG released Q3 results, five analysts have updated their price targets to $125 to $152.