Energy Prospectus

This is why FANG was added to the Sweet 16: Proved reserves as of December 31, 2014 increased 77% year over year to 112.8 MMboe (67% oil, 17% natural gas, 16% natural gas liquids), with a PV-10 value of approximately $2.3 billion as calculated below. Additions replaced 793% (626% organically) of 2014 production with drill bit finding and development costs ("F&D") of $11.09/boe.

I am updating my forecast model and it will be posted to the website this afternoon.

As you read this, keep in mind that Callon Petroleum (CPE) holds a lot leasehold in this same area.

Diamondback continues to report strong Lower Spraberry results: • Diamondback completed a three-well pad targeting the Lower Spraberry on 660 foot inter-lateral spacing. The ST 4104LS, ST 4105LS and ST 4106LS have an average 5,214 foot lateral and were completed with an average of 23 stages. The three wells achieved an average peak 30-day 2-stream initial production ("IP") rate of 1,377 boe/d (92% oil) on electric submersible pump ("ESP") when normalized to a 7,500 foot lateral. This translates to 184 boe/d per 1,000 feet of lateral.
• Diamondback also completed its first Lower Spraberry 500 foot inter-lateral spacing test in Midland County. Early results are similar to wells on 660 foot inter-lateral spacing. The ST W 701LS has a 7,201 foot lateral and was completed with 31 stages while the ST W 702LS has a 7,291 foot lateral and 31 stages. The two wells have an average peak 30-day 2-stream IP rate of 1,340 boe/d (90% oil) on ESP when normalized to a 7,500 foot lateral, or 179 boe/d per 1,000 feet of lateral. As a reminder, Diamondback's Lower Spraberry inventory count reflects 660 foot inter-lateral spacing.
• The UL Mason Unit 2LS, Diamondback's second Lower Spraberry well in Andrews County, has a 7,619 foot lateral, completed with 33 stages, achieving an average peak 15-day 2-stream IP rate of 1,384 boe/d (91% oil) on ESP.
• The Estes B Unit 1602LS, Diamondback's first Lower Spraberry well in Dawson County, has an 8,289 foot lateral completed with 36 stages, achieving a peak 24 hour 2-stream IP rate of 1,067 boe/d (95% oil) on ESP, with an average peak 30 day 2-stream IP rate of 694 boe/d (93% oil).

• As a result of continued strong Lower Spraberry well results, Ryder Scott increased its estimate of Diamondback's PUD reserve levels on a two stream basis for 7,500 foot laterals in Midland County to 990 Mboe from 650 Mboe previously. The Company now believes the Lower Spraberry will average between 700 and 800 Mboe for 7,500 foot laterals across its identified inventory.
• As previously reported, Diamondback's Q4 2014 production increased 25% to 25.7 Mboe/d from 20.6 Mboe/d in Q3 2014. Full year 2014 production increased 166% over full year 2013 to 19.5 Mboe/d, above the 2014 guidance range of 17.0 to 19.0 Mboe/d.

"We are excited about the continued success of the Lower Spraberry with promising tests in Upton, Midland, Martin, Andrews and now Dawson Counties. As a result of the continued success, we have increased the Lower Spraberry estimated ultimate recoveries ("EUR") to almost one million barrels of oil equivalent in Midland County. At $50 oil, our Lower Spraberry wells in Midland County can generate a 50% rate of return at current costs and approximately 100% rate of return when including our mineral ownership," stated Travis Stice, Chief Executive Officer of Diamondback.

Mr. Stice added, "I'm pleased with our results in 2014 as our proved reserves grew by 77% and we replaced 793% (626% organically) of our 2014 production. Our F&D costs in 2014 were an attractive $11.09/boe. In 2014, our production volumes grew by 166% as compared to 2013. Lease operating expense ("LOE") increased during the quarter, reflecting the September acquisition of approximately 130 vertical wells with high LOE. Excluding the effects of acquisitions, LOE would have been $6.87/boe in 2014."

FANG is in good shape. They will fund most of their 2015 capital program with cash flows from operations.

I have increased my Fair Value Estimate to $77.00/share, compared to First Call's Price Target of $80.35.

I will spend more time on this one when we update the profile next week. It probably deserves a much higher valuation since I may need to adjust the production mix.

My updated forecast model will be on the website this afternoon.