Diamondback Vitality Inc. is seeking to promote non-core belongings within the western Permian Basin because the oil producer appears to money in on an more and more lively deal market in US shale.
The corporate is working with a monetary adviser to hunt a purchaser for belongings round Pecos County, Texas, in line with individuals accustomed to the matter, who requested to not be recognized as a result of the method is confidential. No last determination has been made and Diamondback might decide to carry onto the belongings, the individuals added.
The transfer makes strategic sense and would allow the Midland, Texas-based explorer to chop debt faster, in line with KeyBanc Capital Markets.
“Diamondback is definitely drilling stronger wells than business friends on this a part of the basin,” Tim Rezvan, a KeyBanc analyst, wrote in a be aware to traders on Wednesday. “Above-average outcomes naturally improve the attractiveness of this acreage.”
Whereas it’s not clear what the belongings would fetch in a sale, Diamondback raised its non-core asset sale goal to $1 billion from $500 million in February. The shares rose 1.3% in pre-market buying and selling Wednesday, giving the corporate a market worth of about $27 billion.
A consultant for Diamondback declined to remark.
Following the latest shock output minimize from OPEC+ that helped give a flooring to grease costs, deal exercise in US shale is choosing up, as oil and fuel producers look so as to add new stock after shying away from dealmaking lately. Ovintiv Inc. agreed to purchase belongings within the Permian this month from EnCap Investments for $4.3 billion.
“We consider these things could incentivize Diamondback to pursue non-core gross sales, akin to Pecos County,” Rezvan wrote.
Most shale producers used report earnings final 12 months to pay down debt and at the moment are ready to purchase in-production belongings in addition to undeveloped acreage that will prolong their drilling areas.
Diamondback “goes to be affected person and prudent in the case of promoting belongings,” Chief Monetary Officer Kaes Van’t Hof stated throughout a convention name with analysts Feb. 22. The corporate is extra prone to promote pipeline belongings than exploration properties, he stated. Two earlier asset gross sales concerned acreage that wouldn’t be developed for years, he stated.
–With help from Mitchell Ferman and David Wethe.