Simmons Remains Bullish on Diamondback Energy (FANG) Following 2Q - PT to $109
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Simmons reiterated an Overweight rating on Diamondback Energy (NASDAQ: FANG), and raised the price target to $109.00 (from $106.00), following the company's 2Q earnings report.
Analyst Pearce Hammond commented, "FANG continues to offer an excellent defensive and offensive blend for investors, in our view. On the defensive side, we estimate YE'17 net D/EBITDAX at 0.8x (SCI E&P group avg: 2.5x). On the offensive side, FANG is just 8% hedged for '17 oil production at ~$46/ bbl and could deliver production growth of 18% and 27% in '16E and '17E, respectively (note: we employ a $60 price deck for '17E). This is well above the group average of -2% in '16E and +4% in '17E. Furthermore, as the company delineates their Southern Delaware acreage position, there is an opportunity for NAV accretion as we currently assume ~ $42,000/acre. The shares offer 17% upside to our revised PT/NAV and currently trade at 12.4x '17E EV/EBITDAX. While upside to our PT is not scintillating, we think FANG remains one of the highest quality companies in our coverage universe given their top tier acreage and a superb management team."
Shares of Diamondback Energy closed at $93.29 yesterday.
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