Here's How Much You'd Have If You Invested $1000 in Diamondback Energy a Decade Ago
For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Diamondback Energy (FANG) ten years ago? It may not have been easy to hold on to FANG for all that time, but if you did, how much would your investment be worth today?
Diamondback Energy's Business In-Depth
With that in mind, let's take a look at Diamondback Energy's main business drivers.
Founded in 2007, Midland, TX-headquartered Diamondback Energy, Inc. is an independent oil and gas exploration & production company with its primary focus on the Permian Basin, where it has around 491,000 net acres. Its activities are concentrated in the Wolfcamp, Spraberry and Bone Spring formations.
Diamondback focuses on growth through a combination of acquisitions and active drilling in America's hottest and lowest-cost shale region. The upstream operator has a long history of acquisitions that include the 2018 buyouts of Energen Corporation and Ajax Resources, culminating in the 2021 purchase of shale explorer QEP Resources and privately held Midland-driller Guidon Energy.
At the end of 2022, Diamondback held around 2,033 million barrels of oil equivalent in proved reserves (53% oil, 69% proved developed). Diamondback’s average daily output totaled 386 thousand barrels of oil equivalent per day in 2022, of which almost 58% was oil.
Diamondback also has other oil and gas-related operations through Viper Energy Partners L.P. (54%-owned publicly traded royalty business) and Rattler Midstream Partners L.P. (100%-owned midstream business)..
The Permian ‘Super’ Basin
A sedimentary basin lying underneath the western part of Texas and the south-eastern part of New Mexico, the Permian Basin Shale covers roughly 75,000 square miles, almost half the size of California. Experts say that it’s cheaper to drill and complete oil wells in the Permian Basin as compared to most other major fields. Moreover, there are certain parts of the shale play whose well-returns are the best in the United States.
According to business information provider IHS Markit, the Permian play is estimated to hold a staggering 60-70 billion barrels of recoverable oil. Oil production in this unconventional play, meanwhile, continues to set records and currently churns out more than 5 million barrels a day, according to data from the Department of Energy. In fact, output from the Permian Basin currently makes up about a third of the total U.S. oil production. It is primarily because of the Permian shale that the United States has turned into the world's biggest oil producer.
Bottom Line
Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in Diamondback Energy a decade ago, you're probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in October 2013 would be worth $3,726.40, or a gain of 272.64%, as of October 16, 2023, and this return excludes dividends but includes price increases.
Compare this to the S&P 500's rally of 154.10% and gold's return of 44.75% over the same time frame.
Analysts are anticipating more upside for FANG.
Diamondback Energy focuses on growth through a combination of acquisitions and active drilling in the lucrative Permian Basin spread over west Texas and New Mexico. While many companies employ a similar strategy, a few have been as successful as Diamondback. The upstream company has consistently posted some of the strongest operational and financial results among the independent producers. With an attractive production profile, favorable industry trends and low breakeven economics, the margin of safety on investment is likely very high. Further, Diamondback Energy is focusing its attention on the generation of free cash flow and wealth creation, which shareholders should applaud. Overall, we view Diamondback Energy as a long-term oil and gas exploration and production play, which supports our Outperform recommendation.
The stock has jumped 6.95% over the past four weeks. Additionally, no earnings estimate has gone lower in the past two months, compared to 4 higher, for fiscal 2023; the consensus estimate has moved up as well.
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Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
