Should Diamondback’s ERCOT Gas Power Push Reshape How FANG Investors View Its Long-Term Strategy?

• Conduit Power, LLC recently announced financial agreements with Diamondback Energy and Granite Ridge Resources to develop 200 megawatts of new natural gas power generation across ERCOT’s Load Zone West in Texas, with phased installations targeting commercial operation starting in 2026.
• This arrangement gives Diamondback exposure to fixed capacity-based returns and preferred access to power proceeds in a region facing growing grid reliability challenges from intermittent renewables and rising demand.
• We’ll now examine how Diamondback’s move into ERCOT-focused gas-fired power generation could influence its investment narrative and long-term positioning.

The latest GPUs need a type of rare earth metal called Terbium and there are only 35 companies in the world exploring or producing it. Find the list for free.

Diamondback Energy Investment Narrative Recap

To own Diamondback, you need to believe it can keep turning its low cost Permian position into resilient cash flows despite commodity swings and gradual inventory aging. The Conduit Power deal adds a relatively small, capacity style income stream and modest power cost hedge, but it does not materially change the near term focus on disciplined Permian development or the key risk that weaker oil and gas prices could pressure future free cash flow and shareholder returns.

Among recent announcements, Diamondback’s continued US$1.00 per share quarterly base dividend through 2025 stands out alongside the Conduit Power news. Together, they underline a business model that still leans on stable, Permian driven cash generation as the main catalyst, with incremental power exposure potentially helping offset rising electricity and water handling costs that could otherwise weigh on margins over time.

But while cash returns look appealing today, investors should also be aware of the growing risk that rising water and power costs in the Permian could...

Read the full narrative on Diamondback Energy (it's free!)

Diamondback Energy's narrative projects $15.6 billion revenue and $4.5 billion earnings by 2028. This requires 5.2% yearly revenue growth and about a $0.7 billion earnings increase from $3.8 billion today.

Uncover how Diamondback Energy's forecasts yield a $179.03 fair value, a 16% upside to its current price.

Exploring Other Perspectives

Five Simply Wall St Community fair value estimates cluster between about US$145 and US$477, showing just how far apart individual views can be. Against this wide spread, the key question remains whether Diamondback’s cost discipline and power exposure can offset risks from higher Permian operating costs and more marginal drilling inventory over time, so it is worth comparing several of these viewpoints before forming your own view.

Explore 5 other fair value estimates on Diamondback Energy - why the stock might be worth 6% less than the current price!

Build Your Own Diamondback Energy Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Diamondback Energy research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Diamondback Energy research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Diamondback Energy's overall financial health at a glance.

Looking For Alternative Opportunities?

The market won't wait. These fast-moving stocks are hot now. Grab the list before they run:

• Outshine the giants: these 26 early-stage AI stocks could fund your retirement.
• Trump has pledged to "unleash" American oil and gas and these 22 US stocks have developments that are poised to benefit.
• We've found 12 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com