Americas Energy Oil & Gas E&P Highlight Capital Efficient Growth Outlook and Flexibility of Capital Returns Through Volat...

Equity Research 19 August 2026 | 9:15PM EDT

AMERICAS ENERGY: OIL & GAS - E&P

Highlight Capital Efficient Growth Outlook and Flexibility of Capital Returns Through Volatile Macro Environment

With this note, we 1) update estimates for FANG and VNOM, 2) reiterate our Buy Neil Mehta | rating on FANG with a raised 12-month price target of $220, 3) reiterate our Buy Goldman Sachs & Co. LLC

rating on VNOM with a raised price target of $57. Across the FANG/VNOM complex Jack Cavanagh | in 2026, we have seen management lean into capital efficient volume growth for Goldman Sachs & Co. LLC FANG as oil pricing has remained elevated with the prolonged supply disruption in the Middle East. We remain constructive on FANG, a high-quality, pure play Permian Jerry Speicher | Basin operator that continues to drive incremental capital efficiencies and strong Goldman Sachs & Co. LLC well productivity relative to peers (Exhibit 1). We seek more clarity around the Barnett development program and any impacts this program will have on natural gas mix within FANG’s consolidated production. Additionally, the removal of a minimum return of capital commitment for FANG leaves management with greater flexibility to execute on prudent capital allocation decisions in the context of extreme oil price volatility and acute macro unpredictability. For VNOM, we continue to view the no-capex business model as undervalued in the market with shares trading at an 11% FCF yield on average 2027/2028 estimates versus peer average of 6% (peers include PSK, LB, BSM, FNV, WPM). We also view management’s move away from the variable dividend and toward a larger base dividend and opportunistic flexibility for repurchases as a positive, particularly given the attractive valuation of the stock at current levels.

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Goldman Sachs Americas Energy: Oil & Gas - E&P

Exhibit 1: FANG is seeing strong YTD Midland oil productivity, partially driven by technical improvements in well construction and stimulation Cumulative Midland oil productivity of FANG wells in the first 6 months of 2026 versus the first 12 months of wells spud in 2023, 2024 and 2025 (Mbo/d per 1K ft of lateral length)

FANG Midland Basin Oil Productivity Over Time 18

Mbo per 1000 ft Lateral Length 12

Source: Enverus, Goldman Sachs Global Investment Research

On FANG activity, strong well productivity and ongoing Barnett development drives promising organic volume outlook. FANG continues to see a supportive macro environment for production growth as a result of the potential need for global inventory restocking, as a capital-efficient approach to any incremental growth remains a priority for management. During 2Q26, total production volumes of 1,018 Mboe/d exceeded the high end of company guidance, driven by outsized natural gas production of 1.4 Bcf/d during the quarter, as the company noted the stronger-than-expected natural gas volumes were driven by a mix of continued Barnett development and improving downstream gas marketing. Management noted the growing Barnett program could impact natural gas production mix to the upside over time. On well productivity, management pointed to the surfactant program as a key driver in the continued strength in well productivity, as the company executed on a 12-well program during the quarter with positive initial results. On the Barnett, FANG highlighted the first 4-well pad at Spanish Trail targeting the Barnett has been drilled and is expected to be completed in the next couple of months. Additionally, FANG noted that the Barnett opportunity has added significant value to the company’s internal NAV estimates. We see continued Barnett exploration and development as a…