FANG
Posted: Wed Nov 04, 2015 6:21 pm
Diamondback Energy Inc: 3Q15 Beat; 2016 Volumes Intact on Reduced Activity
Drew Venker, CFA – Morgan Stanley
November 4, 2015 2:56 AM GMT
FANG reported a strong production driven beat and raise highlighted by lower well costs and strong initial results from the Wolfcamp A. Activity levels were tempered heading into 2016 but consistent with our expectation for 4 rigs. Raising our PT to $90 from $85 on lower well costs. Positive update.
Unchanged view on 2016 activity levels. Diamondback recently ramped down to 4 from 5 rigs and dropped 1 completion crew (currently at 1) with plans to remain at this level in 4Q15. At the oil strip, we believe the company will remain at 4 rigs through 2016, which we estimate generates 12% YoY production growth on spending of $380 million. Consensus estimates are slightly higher at 13% for $500 million, which likely still reflects a modest activity ramp in 2016. Given the tempered activity discussion, production beat, and lower well costs we expect 2016 spending estimates to come down across the street with a minimal change to production.
FY15 production guidance raised, capex lowered. On the back of the 7% production beat, FANG raised the midpoint of FY15 production guidance 2% while lowering capex to the low-end of current $400-$450 million guidance.
Positive results from initial triple stacked lateral. During the quarter, FANG completed its first Wolfcamp A well on top of Wolfcamp B and Lower Spraberry completions. The Wolfcamp A well produced at a 30-day rate of 138 Boe/d per 1,000' of lateral, slightly below nearby Wolfcamp B completions; however, the well is currently tracking an EUR of 750-850 MBoe, significantly above Spanish Trail Wolfcamp B EURs of 638 MBoe while the other wells on the stacked pad are producting in line with company EURs. Based on these positive results, we expect the Wolfcamp A to compete for additional capital in 2016.
Drew Venker, CFA – Morgan Stanley
November 4, 2015 2:56 AM GMT
FANG reported a strong production driven beat and raise highlighted by lower well costs and strong initial results from the Wolfcamp A. Activity levels were tempered heading into 2016 but consistent with our expectation for 4 rigs. Raising our PT to $90 from $85 on lower well costs. Positive update.
Unchanged view on 2016 activity levels. Diamondback recently ramped down to 4 from 5 rigs and dropped 1 completion crew (currently at 1) with plans to remain at this level in 4Q15. At the oil strip, we believe the company will remain at 4 rigs through 2016, which we estimate generates 12% YoY production growth on spending of $380 million. Consensus estimates are slightly higher at 13% for $500 million, which likely still reflects a modest activity ramp in 2016. Given the tempered activity discussion, production beat, and lower well costs we expect 2016 spending estimates to come down across the street with a minimal change to production.
FY15 production guidance raised, capex lowered. On the back of the 7% production beat, FANG raised the midpoint of FY15 production guidance 2% while lowering capex to the low-end of current $400-$450 million guidance.
Positive results from initial triple stacked lateral. During the quarter, FANG completed its first Wolfcamp A well on top of Wolfcamp B and Lower Spraberry completions. The Wolfcamp A well produced at a 30-day rate of 138 Boe/d per 1,000' of lateral, slightly below nearby Wolfcamp B completions; however, the well is currently tracking an EUR of 750-850 MBoe, significantly above Spanish Trail Wolfcamp B EURs of 638 MBoe while the other wells on the stacked pad are producting in line with company EURs. Based on these positive results, we expect the Wolfcamp A to compete for additional capital in 2016.