Encana will acquire Athlon for about $7.1 billion, which implies a value of $98 a share for Diamondback Energy, according to Sterne Agee. The analyst firm said the valuation is based on the company's estimated third-quarter production of 19,800 barrels of oil equivalent a day, its $585 million of assumed debt, and the $1.7 billion market value for the units of Viper Energy Partners (VNOM) it owns.
Sterna Agee analysts Tims Rezvan and Truman Hobbs said that while sentiment towards the Permian Basin-focused equities waved recently, the basin "does offer a compelling stacked pay opportunity for well-capitalized operators to add many years of generally derisked oil-rich inventory that should provided compelling well-level IRRs in a $80+/b WTI environment."
TheStreet Ratings team rates DIAMONDBACK ENERGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DIAMONDBACK ENERGY INC (FANG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
You can view the full analysis from the report here: