Intrinsic value of Diamondback Energy - FANG

Previous Close

$110.23

  Intrinsic Value

$13.32

stock screener

  Rating & Target

str. sell

-88%

Previous close

$110.23

 
Intrinsic value

$13.32

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of FANG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 10.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,928
  2,979
  4,455
  6,464
  9,120
  12,538
  16,830
  22,098
  28,435
  35,916
  44,599
  54,527
  65,724
  78,198
  91,947
  106,956
  123,205
  140,666
  159,311
  179,113
  200,046
  222,087
  245,220
  269,435
  294,727
  321,100
  348,566
  377,142
  406,855
  437,738
Variable operating expenses, $m
  436
  673
  1,007
  1,461
  2,061
  2,834
  3,803
  4,994
  6,426
  8,117
  10,079
  12,323
  14,854
  17,673
  20,780
  24,172
  27,844
  31,790
  36,004
  40,480
  45,210
  50,192
  55,420
  60,892
  66,608
  72,569
  78,776
  85,234
  91,949
  98,929
Fixed operating expenses, $m
  498
  509
  520
  531
  543
  555
  567
  580
  592
  605
  619
  632
  646
  660
  675
  690
  705
  721
  736
  753
  769
  786
  803
  821
  839
  858
  876
  896
  915
  936
Total operating expenses, $m
  934
  1,182
  1,527
  1,992
  2,604
  3,389
  4,370
  5,574
  7,018
  8,722
  10,698
  12,955
  15,500
  18,333
  21,455
  24,862
  28,549
  32,511
  36,740
  41,233
  45,979
  50,978
  56,223
  61,713
  67,447
  73,427
  79,652
  86,130
  92,864
  99,865
Operating income, $m
  995
  1,797
  2,928
  4,472
  6,516
  9,149
  12,459
  16,524
  21,416
  27,194
  33,901
  41,572
  50,224
  59,865
  70,492
  82,094
  94,655
  108,155
  122,571
  137,881
  154,066
  171,109
  188,997
  207,721
  227,280
  247,674
  268,914
  291,012
  313,990
  337,873
EBITDA, $m
  1,518
  2,606
  4,138
  6,228
  8,993
  12,555
  17,030
  22,526
  29,139
  36,948
  46,014
  56,380
  68,073
  81,102
  95,463
  111,142
  128,116
  146,358
  165,837
  186,526
  208,396
  231,425
  255,595
  280,896
  307,323
  334,880
  363,579
  393,439
  424,486
  456,757
Interest expense (income), $m
  38
  86
  167
  286
  453
  679
  979
  1,365
  1,849
  2,444
  3,159
  4,004
  4,984
  6,105
  7,368
  8,776
  10,328
  12,023
  13,857
  15,828
  17,932
  20,168
  22,530
  25,018
  27,629
  30,363
  33,218
  36,195
  39,295
  42,521
  45,874
Earnings before tax, $m
  909
  1,630
  2,642
  4,019
  5,837
  8,170
  11,094
  14,675
  18,972
  24,034
  29,898
  36,588
  44,119
  52,496
  61,716
  71,766
  82,633
  94,298
  106,743
  119,949
  133,899
  148,579
  163,979
  180,092
  196,917
  214,456
  232,719
  251,718
  271,470
  291,999
Tax expense, $m
  245
  440
  713
  1,085
  1,576
  2,206
  2,995
  3,962
  5,123
  6,489
  8,072
  9,879
  11,912
  14,174
  16,663
  19,377
  22,311
  25,461
  28,821
  32,386
  36,153
  40,116
  44,274
  48,625
  53,168
  57,903
  62,834
  67,964
  73,297
  78,840
Net income, $m
  664
  1,190
  1,929
  2,934
  4,261
  5,964
  8,099
  10,713
  13,850
  17,545
  21,825
  26,709
  32,207
  38,322
  45,052
  52,389
  60,322
  68,838
  77,922
  87,563
  97,746
  108,463
  119,704
  131,467
  143,749
  156,553
  169,885
  183,754
  198,173
  213,159

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  12,440
  19,220
  28,743
  41,704
  58,839
  80,890
  108,578
  142,570
  183,453
  231,716
  287,738
  351,788
  424,023
  504,503
  593,206
  690,041
  794,870
  907,522
  1,027,816
  1,155,570
  1,290,618
  1,432,819
  1,582,065
  1,738,288
  1,901,464
  2,071,615
  2,248,813
  2,433,176
  2,624,871
  2,824,114
Adjusted assets (=assets-cash), $m
  12,440
  19,220
  28,743
  41,704
  58,839
  80,890
  108,578
  142,570
  183,453
  231,716
  287,738
  351,788
  424,023
  504,503
  593,206
  690,041
  794,870
  907,522
  1,027,816
  1,155,570
  1,290,618
  1,432,819
  1,582,065
  1,738,288
  1,901,464
  2,071,615
  2,248,813
  2,433,176
  2,624,871
  2,824,114
Revenue / Adjusted assets
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
  0.155
Average production assets, $m
  8,588
  13,269
  19,843
  28,792
  40,621
  55,844
  74,959
  98,426
  126,650
  159,970
  198,646
  242,864
  292,732
  348,294
  409,532
  476,384
  548,754
  626,526
  709,573
  797,771
  891,004
  989,176
  1,092,210
  1,200,062
  1,312,714
  1,430,181
  1,552,513
  1,679,792
  1,812,132
  1,949,684
Working capital, $m
  -370
  -572
  -855
  -1,241
  -1,751
  -2,407
  -3,231
  -4,243
  -5,460
  -6,896
  -8,563
  -10,469
  -12,619
  -15,014
  -17,654
  -20,536
  -23,655
  -27,008
  -30,588
  -34,390
  -38,409
  -42,641
  -47,082
  -51,731
  -56,588
  -61,651
  -66,925
  -72,411
  -78,116
  -84,046
Total debt, $m
  3,098
  5,295
  8,381
  12,580
  18,132
  25,276
  34,247
  45,261
  58,507
  74,144
  92,295
  113,047
  136,451
  162,527
  191,267
  222,641
  256,606
  293,105
  332,080
  373,473
  417,228
  463,301
  511,657
  562,273
  615,142
  670,271
  727,683
  787,417
  849,526
  914,081
Total liabilities, $m
  4,031
  6,227
  9,313
  13,512
  19,064
  26,208
  35,179
  46,193
  59,439
  75,076
  93,227
  113,979
  137,383
  163,459
  192,199
  223,573
  257,538
  294,037
  333,012
  374,405
  418,160
  464,233
  512,589
  563,205
  616,074
  671,203
  728,615
  788,349
  850,458
  915,013
Total equity, $m
  8,409
  12,992
  19,430
  28,192
  39,775
  54,682
  73,399
  96,377
  124,014
  156,640
  194,511
  237,809
  286,639
  341,044
  401,007
  466,468
  537,332
  613,485
  694,804
  781,165
  872,458
  968,586
  1,069,476
  1,175,083
  1,285,390
  1,400,412
  1,520,197
  1,644,827
  1,774,413
  1,909,101
Total liabilities and equity, $m
  12,440
  19,219
  28,743
  41,704
  58,839
  80,890
  108,578
  142,570
  183,453
  231,716
  287,738
  351,788
  424,022
  504,503
  593,206
  690,041
  794,870
  907,522
  1,027,816
  1,155,570
  1,290,618
  1,432,819
  1,582,065
  1,738,288
  1,901,464
  2,071,615
  2,248,812
  2,433,176
  2,624,871
  2,824,114
Debt-to-equity ratio
  0.370
  0.410
  0.430
  0.450
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
Adjusted equity ratio
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  664
  1,190
  1,929
  2,934
  4,261
  5,964
  8,099
  10,713
  13,850
  17,545
  21,825
  26,709
  32,207
  38,322
  45,052
  52,389
  60,322
  68,838
  77,922
  87,563
  97,746
  108,463
  119,704
  131,467
  143,749
  156,553
  169,885
  183,754
  198,173
  213,159
Depreciation, amort., depletion, $m
  524
  809
  1,210
  1,756
  2,477
  3,405
  4,571
  6,002
  7,723
  9,754
  12,113
  14,809
  17,850
  21,237
  24,971
  29,048
  33,461
  38,203
  43,267
  48,645
  54,330
  60,316
  66,598
  73,175
  80,044
  87,206
  94,665
  102,426
  110,496
  118,883
Funds from operations, $m
  1,187
  1,999
  3,139
  4,690
  6,738
  9,369
  12,669
  16,714
  21,572
  27,299
  33,938
  41,518
  50,057
  59,560
  70,024
  81,437
  93,783
  107,040
  121,189
  136,207
  152,076
  168,778
  186,303
  204,642
  223,793
  243,759
  264,550
  286,180
  308,669
  332,042
Change in working capital, $m
  -139
  -202
  -283
  -386
  -510
  -656
  -824
  -1,012
  -1,217
  -1,436
  -1,667
  -1,906
  -2,150
  -2,395
  -2,640
  -2,882
  -3,120
  -3,353
  -3,580
  -3,802
  -4,019
  -4,232
  -4,442
  -4,649
  -4,856
  -5,064
  -5,273
  -5,487
  -5,705
  -5,929
Cash from operations, $m
  1,326
  2,201
  3,422
  5,076
  7,248
  10,026
  13,493
  17,726
  22,789
  28,736
  35,605
  43,424
  52,206
  61,955
  72,664
  84,319
  96,902
  110,393
  124,769
  140,009
  156,095
  173,010
  190,744
  209,291
  228,649
  248,823
  269,824
  291,667
  314,374
  337,972
Maintenance CAPEX, $m
  -327
  -524
  -809
  -1,210
  -1,756
  -2,477
  -3,405
  -4,571
  -6,002
  -7,723
  -9,754
  -12,113
  -14,809
  -17,850
  -21,237
  -24,971
  -29,048
  -33,461
  -38,203
  -43,267
  -48,645
  -54,330
  -60,316
  -66,598
  -73,175
  -80,044
  -87,206
  -94,665
  -102,426
  -110,496
New CAPEX, $m
  -3,221
  -4,681
  -6,575
  -8,948
  -11,829
  -15,223
  -19,115
  -23,467
  -28,224
  -33,319
  -38,676
  -44,218
  -49,869
  -55,561
  -61,238
  -66,852
  -72,370
  -77,772
  -83,047
  -88,198
  -93,233
  -98,171
  -103,035
  -107,852
  -112,652
  -117,467
  -122,332
  -127,279
  -132,341
  -137,551
Cash from investing activities, $m
  -3,548
  -5,205
  -7,384
  -10,158
  -13,585
  -17,700
  -22,520
  -28,038
  -34,226
  -41,042
  -48,430
  -56,331
  -64,678
  -73,411
  -82,475
  -91,823
  -101,418
  -111,233
  -121,250
  -131,465
  -141,878
  -152,501
  -163,351
  -174,450
  -185,827
  -197,511
  -209,538
  -221,944
  -234,767
  -248,047
Free cash flow, $m
  -2,222
  -3,004
  -3,961
  -5,083
  -6,337
  -7,675
  -9,027
  -10,312
  -11,437
  -12,306
  -12,826
  -12,906
  -12,471
  -11,456
  -9,812
  -7,505
  -4,516
  -839
  3,519
  8,545
  14,217
  20,509
  27,394
  34,841
  42,823
  51,312
  60,286
  69,723
  79,607
  89,925
Issuance/(repayment) of debt, $m
  1,514
  2,197
  3,086
  4,200
  5,552
  7,145
  8,971
  11,013
  13,246
  15,637
  18,151
  20,752
  23,404
  26,076
  28,740
  31,375
  33,964
  36,499
  38,975
  41,392
  43,756
  46,073
  48,356
  50,616
  52,869
  55,129
  57,412
  59,734
  62,109
  64,555
Issuance/(repurchase) of shares, $m
  2,491
  3,393
  4,509
  5,828
  7,322
  8,942
  10,618
  12,266
  13,787
  15,081
  16,046
  16,588
  16,624
  16,082
  14,911
  13,071
  10,542
  7,315
  3,396
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4,005
  5,590
  7,595
  10,028
  12,874
  16,087
  19,589
  23,279
  27,033
  30,718
  34,197
  37,340
  40,028
  42,158
  43,651
  44,446
  44,506
  43,814
  42,371
  41,392
  43,756
  46,073
  48,356
  50,616
  52,869
  55,129
  57,412
  59,734
  62,109
  64,555
Total cash flow (excl. dividends), $m
  1,783
  2,586
  3,633
  4,945
  6,537
  8,412
  10,563
  12,967
  15,596
  18,412
  21,372
  24,434
  27,557
  30,702
  33,839
  36,941
  39,991
  42,975
  45,890
  49,937
  57,973
  66,582
  75,749
  85,457
  95,692
  106,441
  117,698
  129,456
  141,716
  154,479
Retained Cash Flow (-), $m
  -3,154
  -4,583
  -6,438
  -8,762
  -11,583
  -14,907
  -18,717
  -22,978
  -27,637
  -32,626
  -37,871
  -43,297
  -48,831
  -54,405
  -59,963
  -65,460
  -70,864
  -76,153
  -81,319
  -86,362
  -91,293
  -96,128
  -100,890
  -105,607
  -110,307
  -115,022
  -119,786
  -124,629
  -129,586
  -134,688
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -1,371
  -1,997
  -2,805
  -3,817
  -5,046
  -6,494
  -8,155
  -10,011
  -12,041
  -14,214
  -16,499
  -18,863
  -21,274
  -23,703
  -26,124
  -28,519
  -30,873
  -33,178
  -35,428
  -36,425
  -33,320
  -29,545
  -25,141
  -20,149
  -14,615
  -8,581
  -2,088
  4,827
  12,130
  19,791
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -1,315
  -1,828
  -2,441
  -3,143
  -3,912
  -4,713
  -5,509
  -6,257
  -6,917
  -7,452
  -7,835
  -8,050
  -8,089
  -7,957
  -7,670
  -7,247
  -6,718
  -6,110
  -5,455
  -4,628
  -3,446
  -2,451
  -1,648
  -1,026
  -569
  -250
  -45
  75
  132
  149
Current shareholders' claim on cash, %
  81.4
  68.1
  58.3
  50.9
  45.2
  40.8
  37.3
  34.5
  32.3
  30.5
  29.0
  27.9
  27.0
  26.3
  25.7
  25.3
  25.1
  24.9
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8
  24.8

Diamondback Energy, Inc. is an independent oil and natural gas company. The Company focuses on the acquisition, development, exploration and exploitation of unconventional onshore oil and natural gas reserves in the Permian Basin in West Texas. As of December 31, 2016, the Company's total net acreage position in the Permian Basin was approximately 105,894 net acres. As of December 31, 2016, the Company, through its subsidiary, Viper Energy Partners LP (Viper), owned mineral interests underlying approximately 107,568 gross acres primarily in Midland County, Texas in the Permian Basin. The Permian Basin area covers a portion of western Texas and eastern New Mexico. The Company's reserves are located in the Permian Basin of West Texas, in particular in the Clearfork, Spraberry, Wolfcamp, Cline, Strawn and Atoka formations. The Company refers to the Clearfork, Spraberry, Wolfcamp, Strawn and Atoka formations collectively as the Wolfberry play.

FINANCIAL RATIOS  of  Diamondback Energy (FANG)

Valuation Ratios
P/E Ratio -60.2
Price to Sales 18.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 29.9
Price to Free Cash Flow -236.6
Growth Rates
Sales Growth Rate 17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.2%
Cap. Spend. - 3 Yr. Gr. Rate 4.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 29.9%
Total Debt to Equity 29.9%
Interest Coverage -3
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. -3.9%
Return On Total Capital -4.6%
Ret/ On T. Cap. - 3 Yr. Avg. -5.7%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. -7.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 75.7%
Gross Margin - 3 Yr. Avg. 76.6%
EBITDA Margin 9.7%
EBITDA Margin - 3 Yr. Avg. 0.6%
Operating Margin -19.4%
Oper. Margin - 3 Yr. Avg. -47.3%
Pre-Tax Margin -31.3%
Pre-Tax Margin - 3 Yr. Avg. -45.8%
Net Profit Margin -31.3%
Net Profit Margin - 3 Yr. Avg. -38.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 20.9%
Payout Ratio 0%

FANG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FANG stock intrinsic value calculation we used $1205.111 million for the last fiscal year's total revenue generated by Diamondback Energy. The default revenue input number comes from 0001 income statement of Diamondback Energy. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FANG stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for FANG is calculated based on our internal credit rating of Diamondback Energy, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Diamondback Energy.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FANG stock the variable cost ratio is equal to 22.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $487 million in the base year in the intrinsic value calculation for FANG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Diamondback Energy.

Corporate tax rate of 27% is the nominal tax rate for Diamondback Energy. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FANG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FANG are equal to 445.4%.

Life of production assets of 16.4 years is the average useful life of capital assets used in Diamondback Energy operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FANG is equal to -19.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5254.86 million for Diamondback Energy - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 98.611 million for Diamondback Energy is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Diamondback Energy at the current share price and the inputted number of shares is $10.9 billion.

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COMPANY NEWS

▶ Daniel Loeb Purchases 7 Stocks in 3rd Quarter   [Nov-13-18 05:20PM  GuruFocus.com]
▶ Permian Drillers Prepare To Go Into Overdrive In 2019   [Nov-11-18 03:00PM  Oilprice.com]
▶ Diamondback: 3Q Earnings Snapshot   [04:20PM  Associated Press]
▶ Dividends Are Making a Comeback in the Oil Patch   [Nov-04-18 09:30AM  Motley Fool]
▶ Viper Energy Misses, Continental Resources To Report Late   [Oct-29-18 04:17PM  Investor's Business Daily]
▶ With crude around $70, its time to sell your oil stocks   [Oct-21-18 08:28AM  MarketWatch]
▶ Vitol Is Taking a Bearish View of Crude Oil Prices   [Oct-16-18 04:12PM  TheStreet.com]
▶ EPIC Pipeline To Switch To Carrying Crude Oil   [Oct-05-18 10:16AM  Investor's Business Daily]
▶ Crude near 4-year high, here's what to watch   [Oct-02-18 01:53PM  CNBC Videos]
▶ It's Time to Stop Overlooking This Oil Stock   [Sep-25-18 07:16PM  Motley Fool]
▶ [$$] Carlyle Forms $620 Million Joint Venture With Diamondback Energy   [Sep-11-18 02:22PM  The Wall Street Journal]
▶ 3 Top Oil Stocks to Buy in September   [10:20AM  Motley Fool]
▶ 10 Oil Stocks That Are Worth a Second Look   [Sep-04-18 02:45PM  InvestorPlace]
▶ Diamondback Energy: Why This Decline Is Different   [Aug-21-18 11:31AM  TheStreet.com]
▶ Market Bites Diamondback   [Aug-20-18 06:00AM  Morningstar]
▶ Diamondback's Purchase of Energen Will Be Transformational   [Aug-16-18 06:52PM  TheStreet.com]
▶ What $9.2B acquisition means for Energen execs and metro Birmingham   [02:48PM  American City Business Journals]
▶ Closing Bell: LIVE MARKETS BLOG   [04:02PM  TheStreet.com]
▶ Stocks Slide As Turkey Imposes Tariffs; Chipotle Gets Upgrade   [09:38AM  Investor's Business Daily]
▶ Dow Jones Futures Sell Off As China Stock Meltdown Continues   [08:17AM  Investor's Business Daily]
▶ [$$] Diamondback to Acquire Energen as Oil Patch Consolidation Continues   [Aug-14-18 10:53PM  The Wall Street Journal]
▶ [$$] Diamondback to Acquire Energen   [08:29PM  The Wall Street Journal]
▶ [$$] Diamondback Energy to Buy Energen for About $9.2B   [04:31PM  The Wall Street Journal]
▶ Houston startup to sell Permian Basin assets to Midland energy co. in $1.2B deal   [Aug-09-18 03:41PM  American City Business Journals]
▶ Diamondback: 2Q Earnings Snapshot   [04:25PM  Associated Press]
▶ This Is a Good Time to Be Producing Oil   [Aug-03-18 09:00AM  TheStreet.com]
▶ SA company adds partner on Permian-to-Corpus pipeline   [Jul-27-18 03:25PM  American City Business Journals]
▶ The Permian Basin's Growing Pains Are Starting to Sting   [Jul-24-18 08:03PM  Motley Fool]
▶ 3 High-Octane Growth Stocks to Put on Your Watchlist   [Jul-18-18 05:10PM  Motley Fool]

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