Diamondback Energy's (FANG) decision to pursue growth was not surprising, and there is appetite and capability for more if the elevated oil macro persists, RBC Capital Markets said Tuesday in a note.
Management moved away from the "stop light" analogy and has the inventory duration and quality to support growth, the firm said. This is a value enhancing decision that increases the free cash flow profile over the next few years, the brokerage said.
RBC models 988,000 barrels of oil equivalent per day, ahead of the new 2026 guidance of over 972,000 barrels of oil equivalent per day, while remaining in line with the $3.9 billion capital plan, according to the note.
The new plan is more opportunistic to drive shareholder value and sidelines variable dividends, RBC said.
The company will likely pay down about $1.3 billion of notes in early Q2, the firm said. Management's longer-term $10 billion net debt target has also been pulled forward and will likely be achieved in months. It may also target some of the pre-2030 bond maturities, the brokerage added.
RBC maintained an outperform rating on Diamondback Energy with a price target of $240.
Shares of Diamondback Energy were down 5.7% in Wednesday trading.
Price: $194.55, Change: $-11.64, Percent Change: -5.64%