Diamondback Energy (FANG) is a lesser-known diamond in the rough when it comes to energy stocks. Exxon Mobil (XOM), Chevron, and Shell might be more popular selections for investors due to their size and longstanding footprint in global petroleum.
Diamondback Energy is a decent large cap stock however with a market cap of $44.3 billion and it is an independent oil, natural gas exploration and extraction firm that operates primarily in the petroleum-rich Permian Basin of West Texas.
The question is whether now with all that’s going on in the world is a good time to snap up shares?
What Is Diamondback Energy Falling?
Diamondback is down from its high of $206.34 nearly a year ago in mid-April 2024. It had a sharp decline in earnings from 2024 as realized oil and natural gas prices dropped in tandem.
However, investors expect this stock to rebound throughout 2025 and one factor driving that about-turn is the dividend.
Management announced a quarterly dividend of $1.00 per share, representing a $4.00 annualized dividend and a yield of 2.52%. The previous dividend was $0.90.
Diamondback’s dividend payout ratio is currently 25.32% so there’s ample room on the upside to increase payouts if the Board of Directors so chooses, and further lure income investors.
Production volumes averaged 337,000 barrels per day (MBO/d) last year and is forecasted this year to land between 485 to 498 MBO/d translating to free cash flows of over $4 billion.
Big Oil might have higher dividend yields than Diamondback Energy. However, overlooking this stock might be a mistake if you enjoy investments in the energy sector. The gas exploration company has had mixed news lately but Diamondback Energy is still poised to ride the bullish coattails of economic policies.
What Hindrances Face Diamondback Energy?
There are a few obstacles that stand in the way of Diamondback’s success with the price of crude petroleum ranking among the top.
Petroleum prices offer one challenge for this energy stock to overcome. Prices were down in early March on the news of additional tariffs planned and a production boost coming from several OPEC countries. Crude oil futures stood at just over $68 a barrel in mid-March, down for $87 a barrel a year ago.
Another big worry out there comes from the supply side and imports in particular. Imported crude oil is usually cheaper for refineries to purchase even with overseas shipping costs. Foreign petroleum producers generally have fewer environmental regulations and lower labor costs to extract the oil.
Another factor is how refineries work to reduce the different types of crude oil to their final products. Because the United States imported crude oil for so long, refineries constructed infrastructure to match. They would need to retool their operations and invest billions to handle larger amounts of domestic crude.
It’s important to note that domestic production, while a generally detriment for crude oil in general because it’s more expensive to extract, might be a boon for the lower-cost operations for Diamondback Energy in the long run.
What Does Diamondback Energy Stock Have Going for It?
Despite setbacks and the possibility of less demand for crude, Diamondback Energy does have some things to look forward to.
Energy Policy
U.S. policies with a new administration may help Diamondback’s bottom line. The U.S. Department of Energy secretary, Chris Wright, stated one of his goals is to expand domestic energy production while reducing costs. He wants to streamline permitting while supporting research and development for fossil fuels.
Tariffs offer a mixed bag for Diamondback Energy. Increasing import duties for foreign products will no doubt raise prices across the entire economy, making it harder for ordinary Americans to spend money in a consumer-based economy. But the other side of the coin is oil imports may be hit with tariffs, so Diamondback’s products would be less expensive versus foreign sources of crude.
The U.S. EIA expects higher natural gas consumption and lower inventories to produce higher prices. The average price has a forecast of $4.20 per million British thermal units (MMBtu) for 2025 and $4.50 per MMBtu for 2026. These numbers are almost double the average price for 2024, which was $2.21 per MMBtu.
So, increased prices should see better results for Diamondback for the next two years. But, of course, these could change depending on how cold it gets during the winter.
Recent Purchases Are Fortifying FANG
Diamondback is not backing down from its assets in West Texas. Exxon Mobil and Chevron announced acquisitions to broaden shale operations in the region in 2024. Diamondback followed suit in February 2024 when it announced a $26 billion acquisition of Endeavor Energy Partners in a deal involving cash and stock. Endeavor was the largest privately held oil and gas company in the region.
The acquisition was needed to keep pace with old foes like Chevron and Exxon. The deal turned Diamondback into the third largest oil company drilling for shale oil behind both of them. The deal allows Diamondback Energy to produce more crude and natural gas, especially as prices of the latter are forecasted to rise.
In February 2025, Diamondback acquired subsidiaries of Double Eagle IV Midco. The deal, worth $4 billion, expands Diamondback Energy’s footprint by 40,000 net acres and 407 locations. Diamondback used $3 billion in cash and 6.9 million shares of common stock to complete the deal.
Both of these acquisitions expanded Diamondback’s presence on its home turf. The drilling locations and equipment were already in place for both of these deals. So, they made perfect sense from an infrastructure and drilling standpoint.
Should I Buy Diamondback Energy Stock?
29 analysts covering the stock give it a consensus rating of Strong Buy with expectations of a mean price target of $209.41.
So, if you want a large cap with some room to grow, take a closer look at Diamondback Energy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
