Shares of Diamondback Energy (FANG) surged in afternoon trading after the independent oil and gas company raised its fiscal 2016 production guidance and provided an outlook for fiscal 2017. The company also confirmed that it was engaged in discussions over a potential acquisition, but that is no longer pursuing further talks.
GUIDANCE: Before the market open, Diamondback Energy provided a corporate update, saying that average daily production during the third quarter was 44,923 barrels of oil equivalent per day, up 22% from the daily production average in the second quarter of 36,841 boe/d. Looking ahead, the company raised its FY16 production view to a range of 41-42 Mboe/d, marking a 6% increase from the midpoint of the July guidance range of 38-40 Mboe/d, citing continued strong well performance. Diamondback added that its FY16 capital expenditure guidance remains the same at $350M-$424M and that it plans to add a fifth rig "in the coming weeks." The company also narrowed its FY16 lease operating expense view to $5.50-$6.00 per boe from the previous range of $5.50-$6.25 per boe as a result of "continued cost savings and efficiency improvements." In addition, Diamondback provided an outlook for FY17, saying that preliminary FY17 production is expected to be in the range of 52-58 Mboe/d.
ACQUISITION TALKS: Separately, Diamondback Energy chief executive officer Travis Stice said that the company is "ideally positioned" to pursue additional transactions. Stice also confirmed rumors that the company was engaged in talks involving an acquisition but is "not actively pursuing further negotiations at this time."
WHAT'S NOTABLE: On September 30, The Wall Street Journal reported that Diamondback Energy was nearing a deal to acquire Silver Hill Energy Partners. People familiar with the matter told the publication that Diamondback was the likely winner of an auction for private-equity owned Silver Hill. A deal for Silver Hill could value it at roughly $2.5B, The Journal said at the time.
PRICE ACTION: By market close yesterday, Diamondback Energy jumped 11.1% to $105.21.
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