Following along with an analyst's price target reduction, investors became slightly less bullish on Diamondback Energy's (FANG 0.53%) future on Hump Day. They traded out of the stock to leave it with a more than 5% loss that session. Other stocks did better, as the S&P 500 index closed with a 0.5% increase.
A $4 haircut
That morning, prognosticator Tim Rezvan, with KeyCorp's KeyBanc Capital Markets, made the move, lowering his Diamondback price target to $176 per share from the preceding level of $180. That wasn't enough of a cut to change the analyst's recommendation, apparently, as he maintained his overweight (buy) rating on the oil and gas company's equity.
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Rezvan's change is based on Diamondback's revision of its estimate for natural gas prices, according to reports. The analyst also factored in the June acquisition of Sitio Royalties by Diamondback's publicly traded subsidiary Viper Energy. Concurrent with the announcement of the transaction, Viper raised its base dividend by 10%.
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Key Data Points
Viper bought Sitio in an all-cash deal valued at $4.1 billion; the purchase closed in mid-August. At closing, Viper revised its third-quarter production guidance, forecasting that average total production would be 104,000 to 110,000 barrels of oil equivalent per day.
Black gold
Diamondback/Viper might be feeling rather flush these days, as last month the parent company posted a nearly 50% year-over-year increase in revenue (to $3.68 billion) in its second quarter. Adjusted net income was down, but the company was still well in positive territory with a profit of $785 million.
