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Barclays Raises Diamondback Energy Price Target On News Of Acquisition, Increased Guidance

Barclays raised its price target on shares of Diamondback Energy Inc (NASDAQ: FANG) by $3 to $88 after its agreement to enter into the Delaware Basin through an acquisition of 19,180 net acres for $560 million.

"We view FANG's entry into the Delaware Basin favorably, where initial well results have been strong, costs are coming down, and development is in the early stages," analyst Jeffrey Robertson wrote in a note.

The company also increased its 2016 guidance and stated it expects to achieve double-digit growth in 2017, while spending within cash flow.

"We value the acquisition at roughly $25k/acre, or about half of our estimate of the market value for FANG's acreage, and generally in-line with the Permian peer group average," Robertson said.

Robertson has increased his 2016, 2017, and 2018 production forecasts by 5 percent, 14 percent and 11 percent, respectively. The company recently added a fourth rig, and the analyst expects it to add a fifth one in the fourth quarter 2016 (in the Midland Basin), and a sixth rig in 2017 in the Delaware Basin.

"We think the company is well positioned to springboard production in the event of further commodity price increases, and continue to consolidate the Permian Basin," Robertson added.

Meanwhile, the analyst maintained his Equal Weight rating, but raised his full year EPS estimate to $0.66 from $0.47.

Jul 2016BarclaysMaintainsEqualweight
Jul 2016Morgan StanleyMaintainsOverweight
Jul 2016Bank of AmericaInitiates Coverage onBuy

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