Filloon On Diamondback; In The Bakken -- August 28, 2014

It's been a long time since we've heard from Mr Filloon. Over at SeekingAlpha, enjoy; the summary:

FANG still has significant downspacing to perform with 11 possible intervals to target horizontally. 

Production is growing fast, bolstered by acquisitions and improved well design. 

Its acreage is well-suited to pad production, as this area could have some of the tightest spacing in the country. 

The recent pullback in realized oil prices could be an issue, as expectations are for an inventory build at Cushing.

 The lede:

FANG continues to be a top operator in the Midland Basin with very good production rates.  The Permian operators have been very successful in 2013 and 2014. Midland has outperformed other US plays and the west Permian players. There has been a recent pullback affecting the Permian, Bakken, Eagle Ford, etc. We believe this has provided an opportunity, especially in the Midland Basin. We continue to like the northern Midland Basin players including Diamondback, Athlon, RSP Permian, and Parsley. 

These names have outperformed the southern operators like Approach and Laredo. Well results in the northern part of the basin have been significantly better, and the reason these names have seen a much higher stock appreciation. We continue to believe that operators in stacked plays will outperform in 2015. 

These provide an interesting situation for investors, as current intervals are downspaced, while others are tested. There could be significant upside, as acreage values will head higher as locations are added per section. Of these plays, the Permian looks to have the most upside. Not only are there several intervals to prove, but there is significant downspacing in current intervals, like the Wolfcamp.

Pad development continues to be the focus of US operators. We are seeing this in all over the country, including North Dakota, as the middle Bakken has seen the majority of traffic.

The Three Forks has emerged, and although the middle Bakken has produced better, the Three Forks has three benches to target. In mid- and western-McKenzie County, we have seen the lower Bakken silt emerge, but not by drilling the interval. Operators are fraccing into this zone, which has improved recoveries for companies like Triangle  and Whiting. Continental has been the Bakken leader with respect to pad development.

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