Wunderlich Raises Diamondback Energy Price Target, Cheers Delaware Deal

Wunderlich raised its price target on shares of Diamondback Energy Inc FANG to $110 from $100 following the Delaware deal.

"While the near-term figures for FANG decline due to the dilution from the equity raise, we expect the Delaware deal to be accretive overall and allow the company to expand further into the Permian via acquisitions," analyst Jason Wangler wrote in a note.

The entry in to Delaware makes sense given increased potential in terms of footprint and drilling inventory. In addition, the entry comes at an opportune time given the recent successes of many companies in the region.

"[G]iven the company's operational expertise – we expect FANG to become a top-tier player in the region quickly. Given the minimal production and reserves currently on the assets, we look for FANG to get to work quickly in late-2016 or early-2017 to define and develop the play," Wangler noted.

Diamondback commented that at $55/bbl, it believes the company would grow production by double digits within cash flows.

"This could get FANG close to 50,000 boe/day by year-end 2017 and half way to its 100,000boe/day bogey. We believe these goals are achievable given the company's asset base and expect the growth over the coming years to meet these initiatives," Wangler added.

Wangler has a Buy rating on the stock, which was up 1.07 percent to $92.01.