Why Is Diamondback (FANG) Up 2.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Diamondback Energy (FANG). Shares have added about 2.2% 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 catalysts.
Diamondback Q2 Earnings Miss Estimates on Lower Prices
Diamondback Energy reported second-quarter 2023 adjusted earnings per share of $3.68, missing the Zacks Consensus Estimate of $3.92 and deteriorating from the year-ago bottom line of $7.07. The underperformance reflects lower overall realization.
Meanwhile, revenues of $1.9 billion fell 30.7% from the year-ago quarter’s sales but marginally outperformed the Zacks Consensus Estimate (by $8 million) due to higher-than-expected production.
In good news for investors, the company is using the excess cash to reward them with dividends and buybacks. As part of that, FANG’s board of directors declared a quarterly cash dividend of 84 cents per share to its common shareholders of record on Aug 10. The payout will be made on Aug 17.
The company also executed $321 million of share repurchases during the second quarter of 2023 at $132.21 apiece.
Production & Realized Prices
FANG’s production of oil and natural gas averaged 449,912 barrels of oil equivalent per day (BOE/d), comprising 58% oil. The figure was up 18.3% from the year-ago quarter and surpassed our estimate of 432,895 BOE/d. While crude and natural gas output increased 19% and 18.4% year over year, respectively, natural gas liquids volumes rose 16% from the first quarter of 2022.
The average realized oil price during the most recent quarter was $71.33 per barrel, 34.4% lower than the year-ago realization of $108.80 but outperformed our projection of $66.32. Meanwhile, the average realized natural gas price plunged to 94 cents per thousand cubic feet (Mcf) from $6.15 in the year-ago period and missed our estimate of $1.92. Overall, the company fetched $45.94 per barrel compared with $70.65 a year ago.
Costs & Financial Position
Diamondback’s second-quarter cash operating cost was $10.66 per barrel of oil equivalent (BOE) compared to $12.24 in the prior-year quarter and our projection of $10.86. The cutback in costs came even though lease operating expenses rose to $4.88 per BOE from $4.59 in the second quarter of 2022.
FANG’s production taxes decreased 29.8% year over year to $3.61 per BOE, while gathering and transportation expenses moved down in the second quarter of 2023 to $1.66 per BOE from $1.76 during the corresponding period of 2022.
Diamondback spent $711 million in capital expenditure — $635 million on drilling and completion, $46 million on infrastructure, environment and $30 million on midstream. The company booked $547 million in free cash flows in the second quarter.
As of Jun 30, the Permian-focused operator had approximately $18 million in cash and cash equivalents, and $6.5 billion in long-term debt, representing a debt-to-capitalization of 28.8%.
Guidance
In 2023, FANG said it still looks to pump 435,000-445,000 BOE/d of hydrocarbon, up from the prior outlook of 430,000-440,000 BOE/d. Of this, oil volumes are likely to be 260,000-262,000 barrels per day. The company forecast a capital spending budget between $2.6 billion and $2.675 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, Diamondback has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Diamondback has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Diamondback is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, CNX Resources Corporation. (CNX), a stock from the same industry, has gained 6.9%. The company reported its results for the quarter ended June 2023 more than a month ago.
CNX Resources Corporation. reported revenues of $337 million in the last reported quarter, representing a year-over-year change of -28.8%. EPS of $0.29 for the same period compares with $0.61 a year ago.
CNX Resources Corporation. is expected to post earnings of $0.28 per share for the current quarter, representing a year-over-year change of +151.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for CNX Resources Corporation. Also, the stock has a VGM Score of C.
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