Jim Cramer’s Latest Lightning Round: 10 Stocks to Watch

3. Diamondback Energy, Inc. (NASDAQ:FANG)

Number of Hedge Fund Holders: 44

Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company, primarily engaged in the acquisition, development, exploration, and exploitation of unconventional onshore reserves within the prolific Permian Basin of West Texas.

The company concentrates its efforts on the Spraberry and Wolfcamp formations in the Midland Basin, as well as the Wolfcamp and Bone Spring formations in the Delaware Basin, extending its reach into New Mexico. In addition to its upstream activities, it also manages midstream infrastructure assets located in both the Midland and Delaware Basins.

When asked about the company, Cramer said “Diamondback’s a little too much oil for me”.

In October, Diamondback Energy (NASDAQ:FANG) provided an update regarding its production and capital expenditure expectations for the third quarter of 2024, which contained adjustments resulting from its merger with Endeavor Energy Resources, L.P., finalized on September 10.

The merger is anticipated to allow the company to achieve operational efficiencies, cut costs through the elimination of overlapping rigs, and optimize production methodologies.

Previously, Endeavor has emphasized rapid production growth, which has contributed to the swift depletion of its resources in the highly productive Midland Basin. The good news is that Diamondback Energy (NASDAQ:FANG) is committed to generating free cash flow, which positions the newly merged entity to moderate production levels and prolong the viability of its high-quality assets.

For the upcoming quarter, the company projects oil production to fall between 319,000 and 321,000 barrels per day, while total production is expected to range from 565,000 to 569,000 barrels of oil equivalent per day. It has also set a cash capital expenditure guidance of $675 million to $700 million for Q3 2024.

Diamond Hill Capital stated the following regarding Diamondback Energy, Inc. (NASDAQ:FANG) in its first quarter 2024 investor letter:

“Though valuations have increased, we continue identifying high-quality companies we believe the market is overlooking. We accordingly initiated four new positions in Q1: Generac Holdings, Diamondback Energy, Inc. (NASDAQ:FANG), Johnson Controls International and Humana. FANG is a scaled, low-cost energy exploration and production company in one of the US’s most prolific shale basins. The company focuses on cost efficiency and prudent, sustainable management of its assets, and we believe the company is well-positioned for free cash-flow generation over the long term. Further, we have confidence in the management team, which we believe is well-aligned with shareholders. We initiated a position in FANG at a compelling price relative to our estimate of intrinsic value in February, just ahead of the company’s announced and attractive acquisition of Endeavor.”