Diamondback Energy (FANG)
Posted: Fri Apr 24, 2015 5:05 pm
I took a hard look at my forecast model for FANG this afternoon. I have increased my valuation by $8.05 to $88.50/share. First Call's Price Target seems to go up each week and it is now at $91.15.
FANG is generating strong cash flow from operations, which should fund most, if not all of this year's capital program. YOY production growth should be 35% to 40% and they have several years of low risk drilling inventory. 55% of this year's oil production is hedged with SWAPs at $88/bbl.
Another reason it deserves a high multiple is the strong cash flow it gets from its large stake in Viper Energy Partners LP (VNOM).
FANG is a pure play on the Permian Basin, which makes it a prime takeover target.
I also recommend Permian companies CPE, LPI and MTDR. LPI is a top candidate for promotion to the Sweet 16. They are also prime takeover targets.
FANG is generating strong cash flow from operations, which should fund most, if not all of this year's capital program. YOY production growth should be 35% to 40% and they have several years of low risk drilling inventory. 55% of this year's oil production is hedged with SWAPs at $88/bbl.
Another reason it deserves a high multiple is the strong cash flow it gets from its large stake in Viper Energy Partners LP (VNOM).
FANG is a pure play on the Permian Basin, which makes it a prime takeover target.
I also recommend Permian companies CPE, LPI and MTDR. LPI is a top candidate for promotion to the Sweet 16. They are also prime takeover targets.