Diamondback Energy (FANG) Valuation Update - May 2

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Diamondback Energy (FANG) Valuation Update - May 2

Post by dan_s »

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

At the time of this post FANG was trading at $134.53.

My valuation adjusts $1 lower to $177.

TipRanks: "In the last 3 months, 14 ranked analysts set 12-month price targets for FANG. The average price target among the analysts is $173.93. The 14 price targets range from $139 (Bank of America) to $207 (Piper Sandler and Siebert Williams Shank)" < All three updated this morning.

Diamondback's oil and NGLs are basically unhedged because they only have 6,000 bpd of Q2 oil hedged with collars that have $60.00 floors and $114.57 ceilings. ~55% of their natural gas for the remainder of the year is hedged with collars that have floors at $3.14 to $3.18.

The Company's BOD obviously thinks that their share price is cheap because they are aggressively buying it back. The dividends will probably stay below my forecast for 2023 and then go back to over $10/share in 2024. < Personally, I like higher dividends, but in the long-run a lower share count will raise the stock valuation.

If your investment goal is high yield dividends, VNOM is a better fit.

Diamondback is on a pace to generate over $3 billion in free cash flow this year. If WTI does average $90/bbl in 2024 (my current oil price forecast), then this Company could generate $4.5 billion in free cash flow next year.

Diamondback and Viper are rock solid companies with lots of running room in the Permian Basin.
Dan Steffens
Energy Prospectus Group
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