Insiders Are Selling Diamondback Energy

Sep.19.13 | About: Diamondback Energy (FANG)

In this article, I will feature one energy company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

Diamondback Energy (NASDAQ:FANG) focuses on the acquisition, development, exploration, and exploitation of onshore oil and natural gas reserves in the Permian Basin in West Texas.

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Insider selling during the last 30 days

  • Paul Molnar sold 40,868 shares on September 16-18, and currently holds 40,869 shares and 76,275 options or 0.3% of the company. Paul Molnar joined Diamondback in August 2011, as Vice President, Geoscience. Paul Molnar decreased his holdings by 25.9% in September.
  • Russell Pantermuehl sold 28,661 shares on September 16-18, and currently holds 19,144 shares and 88,482 options or 0.3% of the company. Russell Pantermuehl joined Diamondback in August 2011, as Vice President, Reservoir Engineering. Russell Pantermuehl decreased his holdings by 21.0% in September.
  • Michael Hollis sold 64,098 shares on September 16-17, and currently holds 17,144 restricted shares and 53,045 options or 0.2% of the company. Michael Hollis joined Diamondback in September 2011, as Vice President, Drilling. Michael Hollis decreased his holdings by 47.7% in September.
  • Randall Holder sold 16,786 shares on September 16-17, and currently holds 12,857 restricted shares and 37,500 options or 0.1% of the company. Randall Holder joined Diamondback in November 2011, as General Counsel and Vice President responsible for legal and human resources. Randall Holder decreased his holdings by 25.0% in September.
  • Teresa Dick sold 11,235 shares on September 16-18, and currently holds 9,671 shares and 47,336 options or 0.1% of the company. Teresa Dick has served as Chief Financial Officer and Senior Vice President since November 2009. Teresa Dick decreased her holdings by 16.5% in September.
  • Jeffrey White sold 33,572 shares on September 16-17, and currently holds 50,715 shares and 75,000 options or 0.3% of the company. Jeffrey White joined Diamondback in September 2011, as Vice President, Operations. Jeffrey White decreased his holdings by 21.1% in September.
  • William Franklin sold 2,780 shares on September 16, and currently holds 14,363 shares or less than 0.1% of the company. William Franklin joined Diamondback in August 2011, as Vice President, Land. William Franklin decreased his holdings by 16.2% in September.
  • Travis Stice sold 25,000 shares on September 16, and currently holds 34,943 shares or less than 0.1% of the company. Travis Stice has served as Chief Executive Officer since January 2012. Travis Stice decreased his holdings by 41.7% in September.

Insider selling by calendar month

Here is a table of Diamondback's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
September 2013 223,000 0
August 2013 0 0
July 2013 869,222 0
June 2013 6,000,000 0
May 2013 0 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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There have been 7,092,222 shares sold and there have been zero shares purchased by insiders this year.

Financials

Diamondback reported the second-quarter financial results on August 6, with the following highlights:

Revenue $45.4 million
Net income $14.5 million
Cash $81.9 million
Debt $0.3 million
Production 6,590 boe/d
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Outlook

Diamondback's full-year 2013 guidance is as follows:

Production 7,200-7,500 boe/d
Capital expenditures $290-$320 million
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Competition

Diamondback's competitors include Concho Resources (NYSE:CXO) and Linn Energy (LINE). Here is a table comparing these three companies.

Company FANG CXO LINE
Market Cap: 1.86B 11.05B 6.12B
Employees: 52 745 1,136
Qtrly Rev Growth (yoy): 1.83 0.40 0.42
Revenue: 116.88M 1.98B 1.93B
Gross Margin: 0.76 0.81 0.75
EBITDA: 79.04M 1.29B 995.57M
Operating Margin: 0.32 0.27 0.13
Net Income: 16.59M 179.57M -498.67M
EPS: 0.52 1.88 -2.24
P/E: 84.68 56.68 N/A
PEG (5-yr expected): 0.57 1.53 -1.98
P/S: 16.11 5.56 3.29
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Diamondback has the highest P/S ratio among these three companies, which could explain some of the insider selling. Concho Resources has seen four insider sell transactions and one insider buy transaction this year. Linn Energy has seen six insider buy transactions this year.

Conclusion

There have been eight different insiders selling Diamondback and there have not been any insiders buying Diamondback during the past 30 days. All eight of these insiders decreased their holdings by more than 10%.

Diamondback is trading at a P/E ratio of 84.68 and a forward P/E ratio of 17.70. Diamondback has a book value of $15.93 per share.

Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are high P/S ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.