Midland, TX-based Diamondback Energy Inc. (FANG) has priced a public offering of 1,750,000 common shares, with a 30-day over-allotment option to the underwriter for an additional 262,500 shares.
The closing of the offering is expected to occur on Jan 26, 2015, subject to certain customary conditions.
The energy explorer’s net proceeds from this offering – before accounting for underwriting discount and estimated offering costs – is likely to be approximately $106 million. Diamondback plans to use the proceeds to pay back a part of its outstanding borrowings under its revolving credit facility.
Diamondback, which went public in October 2012, is an independent exploration and production company engaged in the acquisition, finding and development of unconventional onshore oil and gas properties. The company’s operations are concentrated primarily in the Permian Basin of West Texas. Additionally, Diamondback owns the majority and general partner interest of Viper Energy Partners L.P. (VNOM), a partnership with mineral interests spread over a number of Permian Basin properties.
Having done a stellar job at raising production and reserves from its assets, analysts are predicting strong earnings growth for Diamondback in 2014. The Zacks Consensus Estimate for the year is $2.42, representing 93% earnings per share growth over 2013.
But with crude prices dipping below $50 a barrel and gas prices unable to break past $3, Diamondback has been able to extract less value for its products. This has pressured the group’s profit margins, reflected in this year’s Zacks Consensus Estimate. At $2.13 per share, it corresponds with 12% year-over-year decline.
As a result, Diamondback currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at Midstates Petroleum Co. Inc. (MPO) and Sabine Oil & Gas Corp. (SOGC) as good buying opportunities. These domestic upstream energy operators – sporting a Zacks Rank #2 (Buy) – have solid secular growth stories with potential to rise from current levels.
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