Diamondback (FANG) Down 0.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since Diamondback Energy (FANG) last reported earnings. Shares lost about 0.5% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Diamondback waiting for a breakout? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Diamondback’s first-quarter earnings beat estimates for strong production

Diamondback Energy reported first-quarter 2024 adjusted earnings per share of $4.50, topping the Zacks Consensus Estimate of $4.29 and topping year-ago adjusted earnings per share of $4.10. The improved performance primarily reflects higher production and a decline in overall execution.

Meanwhile, revenues of $2.2 billion increased 15.7% from year-ago quarter sales and surpassed the Zacks Consensus Estimate by $137 million.

Good news for investors: the company uses excess cash to reward them with dividends and share buybacks. Accordingly, on May 15, FANG’s board of directors declared a quarterly cash dividend of 90 cents per share to its existing shareholders. The payment will be made on May 22. In addition to the regular dividend, FANG declared a special dividend of $1.07 per share.

During the first quarter of 2024, the company also repurchased $42 million of shares at $149.50 each.

Production and realized prices

FANG’s oil and natural gas production averaged 461,110 barrels of oil equivalent per day (BOE/d), representing 59% of oil. This number was up 8.5% compared to the same quarter last year, but was slightly off our estimate of 461,375.1 BOE/d. While crude oil and natural gas production increased by 8.7% and 5.6% year-on-year, respectively, liquefied petroleum gas volumes increased by 10.7%.

The average realized oil price in the last quarter was USD 75.06 per barrel, up 2.7% from a year ago, which was USD 73.11 and above our forecast of USD 70.81. Meanwhile, the average realized natural gas price fell to 99 cents per thousand cubic feet (Mcf) from $1.46 in the year-ago period and was below our estimate of $1.39. Overall, the oil and gas company settled at $50.07 a barrel, up from $49.72 a year earlier.

Costs and financial situation

Diamondback’s first-quarter cash operating expenses were $11.52 per barrel of oil equivalent (BOE), compared to $11.61 in the prior-year quarter and our forecast of $11.46. The decline in costs compared to the year-ago period reflected a sharp decline in production and ad valorem taxes to $2.84 per BOE from $4.05 in the first quarter of 2023. On a somewhat bearish note, FANG’s leasing operating costs increased by 21 .1% year over year to USD 6.08 per BOE, while collection and transportation costs increased in the first quarter of 2024 to USD 1.84 per BOE from USD 1.78 in the same period of 2023.

The story continues

Diamondback spent $609 million on capital expenditures – $580 million on drilling and completion, $25 million on infrastructure and environment and $4 million on midstream. In the first quarter, the company recorded free cash flow of $791 million.

As of March 31, the Permian operator had approximately $896 million in cash and cash equivalents and $6.6 billion in long-term debt, representing a debt-to-capitalization ratio of 26.9%.

Conductivity

FANG reiterated that it plans to pump approximately 458,000-466,000 BOE per day of hydrocarbons in 2024. Of this, oil volumes are likely to be between 270,000 and 275,000 barrels per day. The company also maintained its capital expenditure budget forecast of $2.3 billion to $2.55 billion.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

VGM results

Currently, Diamondback has a solid Growth Score of B, but its Momentum Score does slightly better at A. However, the stock is rated a C on the Value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending lower, and the magnitude of these revisions indicates a shift to the downside. Notably, Diamondback carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Diamondback is part of the Zacks Oil and Gas – Exploration and Production – United States industry. Antero Resources (AR), a company in the same industry, has gained 4.8% over the past month. More than a month ago, the company published its results for the quarter ended March 2024.

Antero Resources reported revenue of $1.12 billion in its most recently reported quarter, representing a year-over-year change of -20.3%. EPS of $0.07 for the same period compared to $0.51 a year ago.

For the current quarter, Antero Resources is expected to report a loss of $0.08 per share, representing a change of +71.4% from the prior-year quarter. The Zacks Consensus Estimate has changed -40.3% over the past 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Antero Resources. The stock also has a VGM Rating of D.

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