A month has gone by since the last earnings report for Diamondback Energy (FANG - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Diamondback due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Diamondback Q3 Earnings Miss, Production Soars
Diamondback Energy reported disappointing third-quarter 2019 results. Weaker-than-expected natural gas price realizations caused this underperformance. Precisely, natural gas prices came in at 62 cents per thousand cubic feet (Mcf), missing the Zacks Consensus Estimate of $1.05 and the year-ago figure of $1.86 as well. Moreover, the company’s adjusted net income per share of $1.47 lagged the Zacks Consensus Estimate of $1.71 and also decreased 12% from the year-ago figure of $1.67.
Further, this Permian pure play’s total revenues of $975 million fell short of the Zacks Consensus Estimate of $1,051 million but soared nearly 82% from the year-earlier figure of $538 million, primarily due to increased contribution from the midstream services.
Production & Realized Prices
The 2018 buyouts of Energen Corporation and Ajax Resources helped Diamondback transform into one of the leading Permian Basin oil producers. Production of oil and natural gas averaged 287.1 thousand barrels of oil equivalent per day (MBOE/d) comprising 65% oil. The figure skyrocketed 133% from the year-ago quarter and also marginally surpassed the Zacks Consensus Estimate of 286.4 MBOE/d. While oil production surged 110.2% year over year, natural gas volumes more than tripled.
The average realized crude oil price in the third quarter was $51.71 per barrel, reflecting a 7.6% decrease from the year-ago realization of $56. Overall, the company fetched $36.20 per barrel compared with $46.59 a year ago.
Expenses & Financials
Third-quarter cash operating cost was $8.70 per barrel of oil equivalent (BOE), in line with the prior-year figure. Diamondback’s cash G&A expense was 59 cents, down from 78 cents in the third quarter of 2018. However, lease operating expense of $4.85 was up 11.8% year over year. Meanwhile, production taxes fell nearly 8% from the prior-year quarter to $2.31 per BOE.
Capital expenditure in the quarter totalled $825 million. The company shelled out $701 million on drilling and completion and spent another $28 million on non-operated properties. Plus, infrastructure and midstream budget amounted to $96 million.
As of Sep 30, 2019, this Permian-focused operator had $100-million in cash and cash equivalents, and long-term debt of $4.7 billion. The debt-to-capital ratio of the Zacks Rank #3 (Hold) company was 23.51%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company now expects 2019 output in the range of 281-282 MBOE/d compared with the prior guidance of 277-284 MBOE/d. Further, full-year capex is revised to $2.72-$2.95 billion from the prior expectation of $2.85-$2.90 billion.
Diamondback projects 2020 average daily production of 310.0-325.0 MBOE/d. Its average daily oil production is estimated between 205.0 and 215.0 MBO/d with expected capital spend of $2.8-$3.0 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.88% due to these changes.
At this time, Diamondback has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Diamondback has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.