Sector Update: Energy Stocks Drifting Lower; Diamondback Energy Climbing on Midlands Basin Purchase, Improved Production Forecast


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Energy stocks were lower this afternoon, with the NYSE Energy Sector Index sinking about 0.6% while shares of energy companies in the S&P 500 were down 0.1% as a group. Crude oil for September delivery was up 23 cents at $102.18 per barrel while August natural gas was down 12 cents to $3.83 per 1 million BTU.

In company news, Diamondback Energy ( FANG ) was higher Monday afternoon after the oil and gas company announced plans to acquire additional acreage in the Midland Basin of Texas and increasing its FY14 production forecast.

The $538 million cash purchase is subject to certain adjustments and consists largely of operating leasehold interests with unrelated third parties. The company said the properties represent many years of growth potential, with nearly 400 identified horizontal drilling locations.

Separately, FANG boosted its projected FY14 daily production by another 1,000 barrels to a new range of 17,000 to 19,000 barrels of oil equivalent per day. The new estimates do not include any volumes from the upcoming Midlands Basin purchase.

The company intends to pay for the deal, in part, through an underwritten public offering of 5 million shares of its common stock, which at Friday's closing price of $86.66 a share, would generate around $433 million in gross proceeds. It also plans to use borrowings from its revolving credit facility to fund the rest of the purchase price.

FANG shares were ahead nearly 2% at $88.26 apiece in recent trade, earlier climbing to a session high of $89.87 a share. The stock has a 52-week range of 36.78 to $93.33 a share, rising almost 124% over the past 12 months.

In other sector news,

(+) HAL, (+0.1%) Q2 net income climbs 20% from year-ago levels to $774 mln, or $0.91 per share, matching Street view. Revenue rises 10% year over year to $8.05 bln, topping estimates by $17 mln. Boosts stock buyback by another $1 bln to $6 bln.

(-) HNR, (-1.3%) Gabon government issues Declaration of Commerciality for the Deussafu exploration block and also awards Exclusive Exploitation Authorization to HNR for the Ruche, Tortue, Moubenga and Walt Whitman offshore prospects.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

Referenced Stocks: FANG

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