Diamondback Energy: Not Much Of A Slowdown In 2016
Richard Zeits • 12 Comments
Richard Zeits • 12 Comments
Tue, Sep. 6, 2:48 PM
- EOG Resources (EOG +6.7%) surges more than 6%, as analysts say its $2.5B acquisition of Yates Petroleum strengthens its Permian Basin presence at an inexpensive price.
- Tudor Pickering & Holt analysts say EOG is paying $7K-$8K/acre for the Delaware Basin properties, assuming a value on proven reserves that are producing and still being developed of ~$800M for the 29.6M boe/day EOG said it is picking up (48% oil).
- Simmons analyst Pearce Hammond calculates that the deal comes in well below some recent transactions in the play, including Diamondback Energy's (FANG +0.1%) $560M purchase of Luxe Energy, which he says came in at $26K-$27K/acre.
- Cowen analysts say EOG is paying less than $1M per new premium location, and the deal is $2/share accretive to net asset value just on initial locations.
Mon, Aug. 29, 6:25 PM
- Williams Capital believes oil industry fundamentals are solid despite current commodity price levels but is cautious overall and advises investors not to chase the recent run at current valuations.
- However, the firm recommends select underappreciated companies with lower expectations and re-rating potential, and thinks companies situated in core resource plays that can demonstrate further capital efficiency improvements with catalysts will continue to garner top valuations and M&A premiums.
- Two of Williams' favorites are SM Energy (NYSE:SM), which the firm says remains one of the cheapest names in the sector with a solid balance sheet and assets as well as a conservative management team, and Newfield Exploration (NYSE:NFX), which Williams sees thriving through the current downturn given its strong balance sheet, ample financial liquidity and strong hedge book.
- Also initiated with Buy ratings: Cabot Oil & Gas (NYSE:COG), Energen (NYSE:EGN), Gulfport Energy (NASDAQ:GPOR), Oasis Petroleum (NYSE:OAS), PDC Energy (NASDAQ:PDCE), Pioneer Natural Resources (NYSE:PXD).
- Driven largely by valuation, Williams assigns Hold ratings on Diamondback Energy (NASDAQ:FANG), Gastar Exploration (NYSEMKT:GST), Laredo Petroleum (NYSE:LPI), Parsley Energy (NYSE:PE), Rice Energy (NYSE:RICE) and Cimarex Energy (NYSE:XEC).
Mon, Aug. 8, 11:57 AM
- SM Energy’s (SM +7.2%) $980M purchase of drilling rights in the Permian Basin shows that producers are willing to pay a premium for access to one of the few spots where oil exploration still turns a profit, Bloomberg reports.
- SM will pay the equivalent of $39.5K/acre for drilling rights across 24,783 acres in the Permian Basin, will ahead of the $25K-$35K that acreage in the Permian’s Midland Basin section had been fetching as recently as May and almost doubling SM's holdings in the region.
- Other Permian producers also are trading higher, including: PXD +2.2%, CXO +1.8%, XEC +2.1%, CWEI +6.1%, APA +3.8%, FANG +2.1%, PE +1.2%, QEP +3.6%, RSPP +2.4%, APC +2.6%, DVN +3.7%, MTDR +2.3%.
Wed, Aug. 3, 3:28 PM
- The Permian energy producers remain "the envy" of their non-Permian peers following Q2 earnings beats (I, II) from Concho Resources (CXO +3.4%) and Diamondback Energy (FANG +1.8%), Deutsche Bank analysts say.
- Advantaged with solid balance sheets, strong margins, capital market access, improving well productivity and persistent pressure on costs, the Permian players are "visibly turning operating leverage into momentum," the firm writes.
- Q2 marked the second straight quarter that XCO reported a "beat-and-raise" set of results, with volumes, cash costs and cash flow all beating expectations while guiding full-year volumes higher and costs lower; CXO has now raised the midpoint of volume guidance from -2.5% Y/Y to +1% Y/Y in the last six months from an unchanged ~$1.2B budget, which Deutsche Bank says shows the strength of CXO’s asset base that continues to churn out strong results.
- FANG’s Q2 offered few financial surprises but finally delivered the first set of strong results from Howard county, with two wells registering average IP30s of ~1,300 boe/day; as the northern Midland basin has received increased industry attention, the firm says the results and FANG’s next set of Howard wells and northwest Martin county should be closely watched.
Tue, Aug. 2, 4:18 PM
Mon, Aug. 1, 5:35 PM
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Fri, Jul. 15, 3:30 PM
- Diamondback Energy's (FANG -1.8%) stock price target is raised to a Street-high $110 from $100 at Wunderlich after the company's recent positive developments in terms of its operations, financials and acquisitive plans.
- Wunderlich says FANG already has showed world class execution in the Midland Basin and believes the entrance into the Delaware Basin bodes well not only for the company in terms of increased potential, but also affirms that the "other" side of the Permian competes for capital.
- Barclays also lifts its price target - by $3 to $88 - following the Delaware move, saying it expects FANG to achieve double-digit growth in 2017 while spending within cash flow.
Wed, Jul. 13, 7:55 AM
- Diamondback Energy (NASDAQ:FANG) -2.1% premarket after agreeing to acquire more than 19K net acres and related assets in the Southern Delaware Basin for $560M.
- The assets, primarily located along the Pecos River in Reeves and Ward counties, include ~1K boe/day of current net production.
- FANG also raises its 2016 production guidance to 38K-40K boe/day, up 11% from the midpoint of earlier guidance of 32K-38K boe/day, due to increasing activity from 3-4 rigs in H2 2016 as well as continued strong well performance.
- FANG now plans to complete 60-75 gross horizontal wells this year, vs. its prior outlook for 35-70 gross horizontal wells; as a result, the company raises its 2016 capex guidance to $350M-$425M from $250M-$375M prior.
- To help fund the deal, FANG announces a public offering of 5.5M common shares, with an underwriters option to purchase up to an additional 825K shares.
Tue, May 3, 4:14 PM
Mon, May 2, 5:35 PM
- AGU, AMED, AMSG, ARC, AVD, BFAM, BGFV, BKH, BPI, CAI, CALD, CALX, CAR, CBS, CERS, CHEF, CHUY, CRAY, CSU, DVN, ENLK, ENPH, EPIQ, ETSY, FANG, FARO, FMI, GLUU, GMED, GNMK, HCI, HI, HRZN, IAG, IL, ILMN, INN, JKHY, KAMN, KAR, KFRC, LCI, LYV, MAC, MDU, MTCH, MTDR, MXWL, MYGN, NDLS, NFX, NKTR, NTRI, NYMT, OCLR, OKE, OKS, OMI, PAYC, PBPB, PKD, PLT, PRMW, PRO, PZZA, QUAD, QUOT, REG, REGI, RIGL, RLOC, RPXC, RSYS, RTRX, RUBI, SM, SPA, STAG, SUPN, TAHO, TNAV, TXMD, USNA, VIAV, VNOM, VRSK, VVUS, WES, WGP, WR, WTR, WU, XCO, XPO, XXIA, ZEN
Tue, Apr. 19, 7:17 PM
- The risk-reward balance for select oil and gas stocks that emphasize balance sheet quality resilient 2016 production profiles looks "increasingly compelling" for long-term investors, Morgan Stanley analysts say.
- Stanley maintains a "balanced" view for 2016 in a second consecutive trough year, but the longer-term outlook grows more compelling; in each of the firm's recovery scenarios, the upside to net asset value reflects the commodity price required to deliver the call on U.S. production in 2019, and is ~166%, 107%, and 40% in its respective bull, base and bear cases.
- The firm's Overweight-rated E&P stocks are Anadarko Petroleum (NYSE:APC), Cimarex Energy (NYSE:XEC), Continental Resources (NYSE:CLR), Devon Energy (NYSE:DVN), Diamondback Energy (NASDAQ:FANG), Noble Energy (NYSE:NBL), Occidental Petroleum (NYSE:OXY) and Pioneer Natural Resources (NYSE:PXD).
- Now read Devon Energy +5% following Morgan Stanley upgrade
Mon, Apr. 18, 2:47 PM
- Goldman Sachs expects energy investors will maintain a "buy the dip" mentality, and suggests focusing specifically on its Buy-rated shale productivity favorites such as Hess (HES +4.3%), EOG Resources (EOG +2.2%), Cenovus Energy (CVE +0.3%), PDC Energy (PDCE +4.3%) and Diamondback Energy (FANG +1.7%).
- Even after the Doha collapse, Goldman maintains its forecast for Q4 2016 WTI of $45/bbl and FY 2017 average of $58/bbl, as low near-term oil prices should ultimately enable mechanisms that will bring oil markets into better balance.
- Now read Goldman names nine favorites for Goldilocks ideal $35 oil
Thu, Apr. 14, 12:58 PM
- Simmons analysts raise EPS estimates and price targets for oil and gas E&P stocks to reflect a mark-to-market update to the forward curve through 2018.
- “Our E&P coverage universe now offers ~13% upside potential on average as upward revisions to our price targets were more than offset by the bounce in equities,” Simmons says.
- The firm's top large-cap E&P stocks: Apache (APA +0.2%), Concho Resources (CXO -0.3%), EOG Resources (EOG -0.1%), Noble Energy (NBL -0.7%), Pioneer Natural Resources (PXD +0.8%).
- Favorite small- to mid-cap names: Diamondback Energy (FANG -0.7%), Newfield Exploration (NFX -0.3%), Parsley Energy (PE -0.4%).
- Simmons' top natural gas pick: Gulfport Energy (GPOR -1.5%).
- Now read Apache: Turnaround and future growth
Thu, Apr. 7, 2:26 PM
- Goldman Sachs says crude oil at $35/bbl is the Goldilocks ideal - priced neither too high nor too low but just right - to make shares of U.S. explorers worth buying, suggesting investors and use volatility to add to positions of shale productivity winners.
- The $30-$35 range should keep behavior of U.S. oil producers unchanged and accommodate $55-$60 oil in 2017, Goldman says, providing opportunity for equities, while a near-term rally to $45-$50 oil would reduce 2017 upside but still be favorable for equities, at least temporarily.
- Goldman says it favors "secular productivity winners" EOG Resources (EOG -0.6%), Diamondback Energy (FANG +1.3%) and PDC Energy (PDCE -4.4%), as well as stocks in “the next rung down,” including Hess (HES -3.5%), Cenovus Energy (CVE -1.8%), Anadarko Petroleum (APC -1.1%), Encana (ECA -4%), Continental Resources (CLR -2.1%) and Whiting Petroleum (WLL -0.6%).
- Now read Oil, interest rates and game theory: Why prices have further to fall
Thu, Mar. 24, 6:45 PM
- At least 15 companies in the hard-hit E&P energy industry have announced new share offerings this year, and nearly all have been rewarded by stock investors who normally would cringe as their holdings are diluted.
- Amid widespread worries about energy companies collapsing under debt loads, analysts and investors say shareholders more easily stomach the dilution if it means the companies are adding cash to strengthen their balance sheets.
- Some companies did not urgently need cash but stood to "immunize” their balance sheets in case the oil markets remain ugly into 2017, and others have asset sales pending but the newly raised money means they do not have to worry about timing of proceeds, says Wunderlich's Irene Haas.
- But "the low-hanging fruit [has] been picked," says Christian Ledoux, senior portfolio manager at South Texas Money Management, "not because [other companies] don’t want to, but because they won’t be able to attract investors" until oil prices are much higher.
- E&P companies that have outperformed the S&P 500 Energy Index by more than 10 percentage points since their respective offerings YTD: EGN, OAS, DVN, MRO, NFX, CPE, FANG, WFT, QEP, HES, SYRG.
- Outperforming the index by 1-10 percentage points: PXD, GPOR, PDCE, MTDR
- Underperforming the index: COG
Tue, Mar. 15, 12:28 PM
- Oasis Petroleum (OAS -5.1%) is upgraded to Overweight with a $9 price target, raised from $6, at J.P. Morgan, which believes OAS is well positioned operationally vs. peers and that the company’s enhanced completions in the Bakken generate top-tier returns.
- The firm also downgrades Whiting Petroleum (WLL -10.7%) to Neutral from Overweight with an $8 price target, primarily to reflect valuation after shares have surged 140% from their late-February low.
- J.P. Morgan favors companies that can sustain or quickly re-establish positive operating momentum as the industry begins fighting the decline curve; its top picks are Callon Petroleum (CPE -2.7%), Diamondback Energy (FANG -1%), Newfield Exploration (NFX -2.9%), Parsley Energy (PE -0.4%) and PDC Energy (PDCE -0.9%).