Diamondback Energy, Inc. (FANG): what the price assumes

boothcheck covers Diamondback Energy, Inc. (FANG) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-26.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/FANG

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 5: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 8.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=11)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 46.5%); the trailing year was depressed.

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• One basin, one business: the annual filing describes Diamondback as managed as "one operating and reportable segment, the upstream segment", drilling horizontal wells in the Midland and Delaware halves of the Permian, with no refining arm and no international exposure to blur the read.

• The accounting method is where the risk shows up first: under full cost, the carrying value of the wells is retested every quarter against a trailing twelve-month average of realized commodity prices, and the annual report told holders a second charge was coming before it landed, stating that "we are currently projecting a material full cost ceiling impairment in the first quarter of 2026".

• The next real information event is the quarterly print scheduled for August 3, 2026, where the two questions are whether a recovering commodity market stops that test firing a third time and whether borrowings keep moving toward the 10.0 billion dollar mark management has named.

Bull Case

Two quarters of writedowns are what the income statement shows. The bank account shows something else, and the distance between those two documents is the bull case in one line.

Diamondback carries its wells under the full cost method. That means the recorded value of every property it owns is retested each quarter against a trailing twelve-month average of the commodity prices actually realized, and when that average falls, the test fires and the balance sheet takes a charge. It fired twice in a row, in the fourth quarter of 2025 and again in the first quarter of 2026, for 5.05 billion dollars between them. None of that money left the building. The annual report makes exactly this point when it summarizes the guarantor group's results, noting the charge "is not indicative of cash flows available for debt service". Across the same twelve months, operations generated 8.23 billion dollars.

What produces that flow is unusually simple for a company of this size. The filing places the work in "horizontal development of the Spraberry and Wolfcamp formations of the Midland Basin and the Wolfcamp and Bone Spring formations of the Delaware Basin". There is no downstream arm to subsidize, no overseas concession to defend, no trading book of consequence. The company drills one rock in two counties' worth of geology and sells what comes up.

Volumes are still climbing, and the filings show it in an unglamorous place. Depletion of proved properties rose by 2.1 billion dollars in 2025 against 2024, and the annual report attributes 1.5 billion dollars of that to growth in production volumes, with 672 million dollars coming from a higher depletion rate. Depletion rising because more barrels came out of the ground is the good version of that line item, and it is a harder number to dress up than most.

On what the wells earn before the accounting charge, the operating line ran close to a third of revenue over the trailing year. COTERRA (CTRA) reported an operating margin of 29.9% in its own filings, on revenue up 32.5% year over year. EOG reported 29.8%. Set against those, Diamondback's pre-charge economics look ordinary for the healthy end of this group, which matters because the group is not uniformly healthy: CHRD reported a 3.6% operating margin and CRC reported a negative one.

Management has also been selling what it does not need and paying down what it borrowed to buy the rest. The company divested approximately 1.7 billion dollars of non-core assets during 2025, ahead of the 1.5 billion dollars it had committed to, and moved its Endeavor subsidiaries into Viper on May 1, 2025 for 873 million dollars plus other consideration. In April 2026 it repaid the 550 million dollar term loan in full and terminated the facility.

The most recent quarterly filing carries a sentence that tells you what management currently believes about the market in front of it: "In order to capitalize on higher oil prices, we have made the decision to work down our drilled but uncompleted well inventory to bring incremental barrels to the market immediately". Drilled but uncompleted wells are the cheapest barrels a producer owns, because the expensive half of the job is already paid for. Pulling them forward is what a company does when it thinks the market ahead of it is better than the one behind.

Bear Case

The methods that reach today's quote and the methods that fall well short of it are not disagreeing about oil. They are disagreeing about whether the last twelve months were an accident.

Stripped down, the picture is this. Peer-multiple work lands roughly three times under the quoted level. The earnings-power lens, built on a five-year average operating figure with one-time charges added back, lands about three and a half times under it. The asset-value family, which reads book value against returns, lands around eleven times under. Only the forward-growth methods arrive at the market's number at all, and the closest of them gets there by holding today's exit multiple flat all the way to the end of its projection. Nobody has shown that it holds. It is assumed.

The bull answer is that the trailing year is distorted by non-cash charges, and it is. But a ceiling test is not a forecast anyone formed about the future. It is arithmetic run against a trailing twelve-month average of commodity prices that were genuinely realized in the market, so when it fires it is reporting that the deck fell. It fired for 3.65 billion dollars in the fourth quarter of 2025 and again for 1.40 billion dollars in the first quarter of 2026, and the annual report saw the second one coming without being able to size it: "we believe an additional material non-cash impairment of our assets is reasonably likely to occur in the first quarter of 2026; however, based on the number of factors that may impact our future estimate of proved reserves, we are currently unable to determine an estimate". A company that can tell you a writedown is on the way but not how large is telling you the input is outside its control.

The hedge book does not close that hole, and the filing says so in its own risk language: commodity derivatives "could result in financial losses, may fail to protect us from declines in commodity prices, prevent us from fully benefiting from commodity price increases". That is the honest description of a hedge program. It trims both tails and removes neither.

Then there is the question of who owns the barrels. The share count has grown about 12.3% a year since early 2022, which is not the profile of a business handing capital back; it is the profile of one buying assets with its own equity. The Endeavor transaction alone issued 117,267 thousand shares at closing, marked at 171.49 dollars each on the closing date. Every barrel that deal brought in arrives divided across a much larger denominator, and the borrowings that came alongside it are still being worked off.

One correction runs in the bear's favour on the flow itself. The 8.23 billion dollars generated from operations over the trailing year is a gross figure, and development spending consumed roughly 3.51 billion dollars of it. That spending is not discretionary in shale, where base decline is steep enough that standing still requires a rig program. What remains after the drilling is nearer 4.7 billion dollars, against an enterprise value close to 72 billion dollars.

Customer risk sits underneath all of it, disclosed plainly. The annual report states that "We do not require our customers to post collateral" and warns that the loss of one or more of them may adversely affect results. In a business selling an undifferentiated product to a short list of buyers, that exposure is structural rather than fixable.

None of this argues the wells are bad. It argues the equity is quoted as though two consecutive quarters of charges were noise, when those charges were generated by the single variable nobody inside the company controls.

Valuation

Almost every backward-looking measure of this company is currently reading a twelve-month window that contained two writedowns, so that window is where the section has to start.

Revenue over the twelve months through March 2026 came to 15.2 billion dollars. The operating line across the same period was a loss of about 291 million dollars. That is not a business that stopped working. It is 5.05 billion dollars of full cost ceiling charges landing inside a single trailing window. Add them back and the operating result for the period runs close to a third of revenue.

That distinction accounts for most of the disagreement among the methods. Lenses built on reported earnings, and lenses built on book value against returns, both read the quoted level as several times what they can defend, because the earnings and the book value they are reading absorbed the charges. Peer-multiple work lands under it for the same reason. Only the forward-growth methods reach it. When one family arrives and the static families do not, what is being paid for is durability: the market is underwriting economics the most recent reported year did not display.

The concrete version of that bet has less to do with Diamondback's execution than with the commodity deck. The ceiling test that produced both charges runs against a trailing average of realized prices, so the question a buyer at today's level is answering is whether that average marked a floor or a new normal. Management has taken a side, redirecting the 2026 capital plan toward completing already-drilled wells in order to capture a better market.

The cohort splits cleanly along that same line. COTERRA (CTRA) reported an operating margin of 29.9% on 8.01 billion dollars of revenue. EOG reported 29.8% on 23.88 billion dollars. APA reported 35.5%, though on revenue that fell 17.6% year over year. At the other end, CHRD reported 3.6% and CRC reported a negative figure. Diamondback's pre-charge economics belong with the first group, and its revenue base is second only to EOG inside this set, which is why a comparison drawn on trailing reported profit alone puts it in company it does not otherwise keep.

The balance sheet is not the fragile part. Interest expense reported for 2025 came to 244 million dollars, set against the 8.23 billion dollars operations generated over the trailing year, and the disclosed borrowing costs are ordinary: "average interest rate on borrowings under the Viper Revolving Credit Facility was 6.02%". Management has named a 10.0 billion dollar target for what it owes and sold approximately 1.7 billion dollars of non-core assets during 2025 toward it. What holders have paid for the scale is not fragility but ownership: the share count has grown about 12.3% a year since early 2022.

The two most recently reported quarters each carried a ceiling-test charge. The three before them carried none. That is the swing factor in every number above, and it is set in the commodity market rather than in West Texas.

Catalysts

The next scheduled report is the quarter due August 3, 2026, following the first-quarter results published May 5, 2026. That print is the first read on whether the recovering commodity market has lifted the trailing average that drives the ceiling test, and therefore whether a third consecutive charge arrives.

The balance-sheet housekeeping since the last quarterly filing has been steady and dated. On April 22, 2026 the company paid the remaining 550 million dollar principal on its 2025 term loan and terminated the agreement, and on April 13, 2026 it completed a tender offer to repurchase notes. Separately, Viper divested roughly 9,400 net royalty acres across the Denver-Julesburg, Eagle Ford and Williston basins, carrying about 4,750 barrels of oil per day of current production, and applied the proceeds to retire the 500 million dollar Viper term loan in full. Selling royalty acreage outside the core basin to retire borrowings is consistent with the stated deleveraging path, and it is a cleaner source of funds than issuing more equity.

The sell side has spent the past week disagreeing with itself. Between July 19 and July 24, 2026, Susquehanna raised its target to 255 dollars from 245, while UBS trimmed to 243 from 246, Citi cut to 221 from 245, and Truist cut to 220 from 242. Four revisions inside six days, moving in opposite directions and straddling the current quote, is a reasonable proxy for how much of this name rides on a commodity forecast rather than on anything the company will announce in August.

Peer Cohorts (Per Segment, With Filing Citations)

Upstream (single reportable segment) (reported)

• CHRD (Chord Energy Corp)
• FY2025 10-K: …measured at their estimated fair value. Derivative assets and liabilities arising from derivative contracts with the same counterparty are reported on a net basis, as all existing counterparty contracts provide for net settlement. The Company has not designated any derivative instruments as hedges for accounting…
• FY2025 10-K: …marked-to-market each reporting period, with changes in fair value recorded in the other income (expense) section of the Company's Consolidated Statements of Operations as a net gain or loss on derivative instruments. As of December 31, 2025, the remaining contingency for the 2025 year was met, which resulted in a…
• CRGY (Crescent Energy Company)
• FY2025 10-K: …to our oil and gas producing activities. Substantially all of our operations and assets are located onshore in the United States, and substantially all of our revenues are attributable to United States customers. The Company's Chief Operating Decision Maker ("CODM") is the Chief Executive Officer. The CODM uses…
• FY2025 10-K: …Contents Exhibit No. Description 4.18* Eighth Supplemental Indenture, dated as of December 15, 2025 among Vital Midstream Services, LLC, Crescent Energy Finance LLC, the guarantors named therein, and U.S. Bank Trust Company, National Association, as trustee. 4.19 Indenture, dated as of March 26, 2024, among Crescent…
• CRC (California Resources Corp)
• FY2025 10-K: …entries necessary to arrive at the information for the Company on a consolidated basis. The financial information may not necessarily be indicative of the financial condition and results of operations had the Unrestricted Subsidiaries operated as independent entities. 141 Condensed Consolidating Balance Sheets As of…
• FY2025 10-K: …if any, are recognized at the end of each reporting period. We apply the market approach for certain recurring fair value measurements, maximize our use of observable inputs and minimize use of unobservable inputs. We generally use an income approach to measure fair value when observable inputs are unavailable. This…
• CTRA (COTERRA ENERGY INC.)
• FY2025 10-K: …of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less. For contracts with an original expected term of one year or…
• FY2025 10-K: …allow it to offset assets and liabilities from separate derivative contracts with that counterparty. 79 Table of Contents 6. Fair Value Measurements Financial Assets and Liabilities The following fair value hierarchy table presents information about the Company's financial assets and liabilities measured at fair…
• EOG (EOG RESOURCES, INC.)
• FY2025 10-K: ReservesMember 2025-12-31 0000821189 eog:DerivativeContractsSeptemberClosedYearOneMember eog:CollarMember srt:NaturalGasReservesMember 2025-01-01 2025-12-31 0000821189 eog:DerivativeContractsSeptemberClosedYearOneMember eog:CollarMember srt:NaturalGasReservesMember 2025-12-31 0000821189…
• FY2025 10-K: :NaturalGasProductionMember eog:OtherInternationalMember 2025-01-01 2025-12-31 0000821189 eog:GainsLossesOnMarkToMarketCommodityDerivativeContractsAndOtherDerivativeContractsNetMember eog:UnitedStatesOfAmericaSegmentMember 2025-01-01 2025-12-31 0000821189…
• APA (APA Corporation)
• FY2025 10-K: …balance from this customer was current as of December 31, 2025. This improvement follows several periods prior to 2025 during which EGPC payments were delayed and the receivable balance increased. While recent collections have been timely, the Company continues to closely monitor its exposure to EGPC, as payment…
• FY2025 10-K: …growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant…
• AR (ANTERO RESOURCES CORPORATION)
• FY2025 10-K: …Corporation's consolidated financial statements. ​ 55 Table of Contents Exploration and Production Segment The following table sets forth selected operating data of the exploration and production segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Amount of ​ ​ ​ ​ ​ ​ December 31, ​ Increase ​ Percent ​ ​ ​ ​ ​…
• FY2025 10-K: 001433270 ar:NaturalGasGatheringAndCompressionMember 2023-01-01 2023-12-31 0001433270 ar:MarketingsMember 2023-01-01 2023-12-31 0001433270 ar:ExplorationMember 2023-01-01 2023-12-31 0001433270 ar:ConvertibleSeniorNotes4.25PercentDue2026Member 2024-03-14 0001433270 us-gaap:LeaseAgreementsMember 2025-12-31 0001433270…
• RRC (RANGE RESOURCES CORPORATION)
• FY2025 10-K: 1 Insider Trading Policy 10-K 19.1 2/21/2024 21* Subsidiaries of Registrant 22* Subsidiary Guarantors 23.1* Consent of Independent Registered Public Accounting Firm 23.2* Consent of Netherland, Sewell & Associates, Inc., independent consulting engineers 31.1* Certification by the Chief Executive Officer of Range…
• FY2025 10-K: , marketing and midstream companies and industrial users. Our NGLs production is typically sold to petrochemical end users, refiners, marketers/traders (both domestically and internationally) and natural gas processors. Our oil production is sold to crude oil processors, transporters and refining and marketing…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.