Diamondback Energy, Energen: 2 Permian Basin Oil Stocks For A Down Market
- Crude prices have fallen to multi-year lows.
- Permian Basin producers, however, are better positioned than their competitors to face a down market.
- Diamondback Energy and Energen, in particular, have two key strengths that put them in a strong position to face a soft pricing environment.
No Risk, No Reward: A Permian Trifecta For The Bold
- FANG and VNOM have an interesting, symbiotic relationship.
- ~50% of FANG's capital is targeting VNOM mineral acreage.
- RSPP acreage overlies VNOM mineral position know as Spanish Trail.
- After two years of significant gains, the recent pullback in Diamondback Energy makes the stock worth a second look.
- Strong oil volumes aren't being followed by organic reserve replacement.
- Even with industry low administrative expenses, investors are placing a premium on the oil in the ground that appears lofty.
- FANG still has significant downspacing to perform with 11 possible intervals to target horizontally.
- Production is growing fast, bolstered by acquisitions and improved well design.
- Its acreage is well-suited to pad production, as this area could have some of the tightest spacing in the country.
- The recent pullback in realized oil prices could be an issue, as expectations are for an inventory build at Cushing.
- FANG continues to be a top operator in the Midland Basin with very good production rates.
Multiple Catalysts Make Oversold Diamondback Energy Attractive
- FANG's Q2 2014 production was up 32% from Q1 2014 and 171% from Q2 2013 at 17.8 Mboe/d.
- On July 18, 2014, FANG announced the acquisition of 13,136 net acres in the Permian Basin with production of 2.2 Mboe/d and 5.2 MM of proved reserves.
- FANG spun off VNOM in Q2 2014. It retained ownership of 92% of the common units and all of the IDRs.
- FANG is working to cut costs and improve drilling and completion techniques for further profits.
Bonds In Small, Likely Highly Successful Oil And Gas Explorers And Producers May Lift Your Portfolio.David White • Aug. 6, 2014
- Moody's upgraded Athlon Energy's liquidity rating to SGL-2 from SGL-3 on September 6, 2013. It may be in line to receive a further upgrade.
- Moody's upgraded Diamondback Energy's Corporate Family Rating to B2 from B3. FANG may be in line for another upgrade within a year.
- Read further to learn more details about these issues. Upwardly trending bond ratings mean both ATHL and FANG are likely better bond and stock buys.
Permian Basin Small E&Ps That Bucked The Russell 2000 Decline Trend
- The Permian Basin was a prolific vertical well play. Now it is becoming a prolific horizontal well play.
- Small E&P companies often offer the potential for large profits, especially when they are operating in prolific fields.
- Three companies: FANG, CWEI, and CPE, are among the small companies that could bring investors good profits.
- All three of the above companies remained above their 50-day SMAs during a recent Russell 2000 downturn of about 9%. This shows strength.
Here Is Why Diamondback Energy Is Not A Diamond In The Rough
Diamondback Energy: Pure Permian Play Still Has Upside
Wed, Jan. 21, 7:49 AM
- Diamondback Energy (NASDAQ:FANG) -3.9% premarket after launching a public offering of 1.5M common shares of its common stock, with an underwriter's option to purchase up to an additional 225K shares.
- FANG says it intends to use the proceeds to repay a portion of the outstanding borrowings under its revolving credit facility.
Dec. 2, 2014, 3:13 PM
- Apache (APA -1%), Bill Barrett (BBG -5.6%) and Laredo Petroleum (LPI -4.9%) are downgraded to Neutral from Buy at Mizuho, as the firm lowers its crude oil price deck and views OPEC's decision not to cut production as a structural shift in crude oil markets.
- Although the current excess supply/weak demand situation will be resolved gradually, market fundamentals will increasingly drive crude prices in a ~$70/bbl world, the firm says; in the E&P space, it prefers APC, MRO, FANG, RSPP and RICE.
Nov. 11, 2014, 4:53 PM
- Diamondback Energy (NASDAQ:FANG) -3.1% AH as it launches a public offering of 2M common shares by certain selling stockholders, with an underwriters option to purchase up to an additional 300K shares.
- Entities controlled by Wexford Capital intend to sell 1.058M shares and Gulfport Energy (NASDAQ:GPOR) plans to sell 942k shares.
- All net proceeds will go to the selling stockholders.
Sep. 29, 2014, 12:26 PM
- Encana’s (ECA +2.3%) takeover of Athlon Energy (ATHL +24.6%) is good news for Diamondback Energy (FANG +2.3%) and Energen (EGN +2.2%), according to analysts at Sterne Agee.
- The acquisition implies a value of $98/share for FANG, Sterne says, based on FANG's 85K net acre leasehold position, estimated 19.8K boe/day of Q3 production, $585M of assumed debt, and a $1.7B market value for the Viper Energy Partners (NASDAQ:VNOM) units it owns.
- The firm sees even more upside for EGN, as ECA’s price implies a value of $102/share for EGN, based on 180K net acres across both sides of the Permian Basin, 48K boe/day of Q3 Permian Basin production, 132M cfe/day of Q3 San Juan Basin, and $835M of pro forma net debt as of Sept. 30.
- Permian producers Laredo Petroleum (LPI +5%), Parsley Energy (PE +5%) and RSP Permian (RSPP +4.8%) also are higher following the acquisition news.
Sep. 17, 2014, 5:37 PM
Sep. 17, 2014, 4:29 PM
- Diamondback Energy (NASDAQ:FANG) -2.8% AH on news it is launching a secondary offering of 2.5M common shares by certain entities controlled by Wexford Capital and Gulfport Energy (NASDAQ:GPOR), with an underwriters' option to purchase up to an additional 375K shares.
- All of the net proceeds will go to the selling stockholders.
Jul. 21, 2014, 8:24 AM
- Diamondback Energy (NASDAQ:FANG) -1.9% premarket agrees to acquire leasehold interests in Texas' Midland Basin from unnamed sellers for a combined $538M.
- FANG says the acquisition includes 14,773 gross acres with net production of ~2,173 boe/day in May from 131 gross producing wells; net proved reserves are ~5.2M boe; FANG expects the deal to add 13,136 net acres to its total position in the Midland Basin, increasing it to more than 85K net acres.
- To fund the deal, FANG plans to launch of a public offering of 5M common shares; the underwriters will have an option to purchase up to an additional 750K shares.
- FANG also raises its projected FY 2014 daily production by another 1K to a new range of 17K-19K boe/day, not including any volumes from the Midlands Basin purchase.
May. 8, 2014, 2:26 PM
- Diamondback Energy (FANG -2.5%) is lower after reporting below consensus Q1 earnings and Brean Capital downgrades shares to Hold from Buy.
- FANG reported strong well results in the Permian Basin, including its first operated test of the emerging Lower Spraberry shale formation and its best well to date in the Wolfcamp shale with a 30-day rate of 1,991 boe/day.
- FANG also said it filed to raise up to $100M via an IPO of its mineral interests.
- However, Brean Capital says in its downgrade that $76 is fair value for the shares; should its long-run assumptions for $85/bbl crude oil, $4.50/Mcf natural gas and $34/bbl of natural gas liquids prove conservative and prices instead average $100/$5/$42, FANG shares could be worth up to $113, but price declines to $80/$3.50/$32 could result in shares at $66 (Briefing.com).
Apr. 11, 2014, 9:54 AM
- Diamondback Energy's (FANG +5.1%) target price is raised to a Street-high $80 from $74 at Mizuho, which cites FANG's better than expected guidance in its operations update yesterday.
- The firm says FANG's well results continue to impress, particularly the Nail Ranch 2601H Wolfcamp B well in Martin County, which resembles some of FANG's best wells to date given its short lateral; FANG also continues to add acreage, picking up another 1,500 net acres in Martin County and 126 net mineral acres at the Spanish Trail lease (Briefing.com).
- Brean Capital also raises its target price, to $73 from $66.
Nov. 5, 2013, 9:57 AM
- Diamondback Energy (FANG +6.2%) springs higher at the open following strong Q3 results, which some analysts see as a "mini-version" of Pioneer Natural Resources and its strong Permian Basin presence (earlier).
- During Q3, FANG's first horizontal Middle Spraberry test well, the Sarah Ann 3814H, had a peak 24-hour initial production rate of 733 boe/day (90% oil).
- Sterne Agee raises its price target on FANG shares to $74 from $54.
Oct. 24, 2013, 12:26 PM
- Diamondback Energy (FANG +5.1%) rallies after announcing last night that its oil and gas production will double next year.
- FANG predicts full-year 2014 production averaging 15K-16K boe/day, and sees Q3 output in line with expectations at 7,400 boe after anticipating ending 2013 with production in the upper range of 7,200-7,500 boe.
- The free cash flow will allow the company to pursue acquisitions, Simmons analysts say in reiterating its Overweight rating; also, FANG's stock is the cheapest in terms of valuation of all companies exposed to the Permian.
Aug. 14, 2013, 2:58 PM
- Diamondback Energy (FANG -3.7%) slips today after announcing a 4M share public offering, subject to market and other conditions.
- The underwriters will also have an option to purchase up to an additional 600K shares of common stock.
- The company intends to use the net proceeds to fund its pending acquisitions of additional acreage in the Permian Basin, and to use any remaining net proceeds to fund a portion of its exploration and development activities.
- Credit Suisse is the sole book runner.
May. 16, 2013, 12:33 PMDiamondback Energy (FANG +3.2%) is raised to Buy from Hold with a $35 target price (from $25) at Wunderlich, which believes strong results from 13 Wolfcamp B-targeted horizontal wells (11 operated) shows the operational expertise, asset strength and horizontal potential for FANG, while the recent equity offering puts it in a position to fund and accelerate its growth. | Comment!
Dec. 18, 2012, 5:37 PM
Nov. 15, 2012, 2:47 PMDiamondback Energy (FANG +4.5%) is initiated at C.K. Cooper with a Buy rating and $26 price target. The firm likes FANG's strong history of drilling success with a success rate over 90%, and sees significant upside as the company accelerates its operated vertical and horizontal programs exclusively targeting oil bearing formations. | Comment!
Nov. 6, 2012, 12:42 PMDiamondback Energy (FANG +3.2%) benefits from a raft of new favorable analyst coverage. Wells Fargo, for one, believes it brings an impressive growth profile, driven by low-risk Wolfberry drilling along with upside potential in the Wolfcamp and potentially other formations, as horizontal drilling takes hold in the Permian basin. Other new coverage: I, II, III, IV. | Comment!
FANG vs. ETF Alternatives
Diamondback Energy Inc is an independent oil and natural gas company. It is currently engaged in the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.
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