Diamondback Energy Lives Up to Expectations

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Diamondback Energy Inc. (NASDAQ: FANG) reported third-quarter results after markets closed on Monday. The independent oil & gas company posted adjusted earnings per share of $0.54 on revenues of $142 million. In the same period a year ago Diamondback reported EPS of $0.40 on revenues of $111.95 million. Third-quarter consensus estimates called for EPS of $0.34 and revenues of $142.58 million.

On a GAAP basis the company posted a net loss of $0.03 per share compared with a loss of $2.40 per share in the third quarter of 2015. Adjusted net income in the third quarter of this year excluded a $46.37 million impairment charge. The company took an impairment charge of $273.74 million in the same period last year.

The company had announced third-quarter production in early October. Daily production rose 22% sequentially to 44,923 barrels of oil equivalent per day, of which 73% is oil. In the second quarter production totaled 36,841 barrels of oil equivalent per day. The average realized price per barrel was $42.11, up from $41.88 in the second quarter.

In October Diamondback also raised its production guidance for the 2016 fiscal year from a previously announced range of 38,000 to 40,000 barrels a day to a new range of 41,000 to 42,000 barrels a day.  Preliminary full year 2017 production guidance is 52,000 to 58,000 barrels of oil equivalent per day, the midpoint of which is up over 30% from the midpoint of updated 2016 production guidance.

The company also said it intends to complete 65 to 70 gross horizontal wells in 2016 and 90 to 120 gross horizontal wells in 2017. The capex forecast for 2016 is unchanged at $350 to $425 million, rising to $500 to $650 million in 2017, if crude prices remain above $45 a barrel.

In Monday’s press release CEO Travis Stice said:

Our strong financial performance during the third quarter reflects our ability to execute and achieve accretive growth for our shareholders. Our disciplined strategy during the first half of 2016 allowed us to maintain our financial flexibility and maximize the value of our world class resource. In doing so, we were able to respond quickly when commodity prices improved and are now just beginning to bear the fruit of our activity ramp. We recently added a fifth rig to the Midland Basin and plan to add a sixth rig to begin developing our Southern Delaware Basin acreage in the coming months.

The company had already telegraphed its third-quarter results, giving the stock a 4% bounce in early October.

The stock traded up about 0.6% at $94.49 after hours after posting a gain of 2.5% for the day to close at $93.96. The stock’s 52-week range is $55.48 to $106.84, and the consensus 12-month price target is $118.34. Over the past month the price target has increased by more than 10%.

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