Diamondback Vitality Inc introduced a Midland Basin acquisition in a press release posted on its website on Tuesday.
In that assertion, the corporate mentioned it has entered right into a definitive buy settlement to accumulate sure subsidiaries of Double Eagle IV Midco LLC in change for roughly 6.9 million shares of Diamondback widespread inventory and $3 billion of money, topic to customary changes.
The corporate mentioned within the assertion that it expects the transaction to shut on April 1, 2025, topic to the satisfaction of customary closing situations and regulatory approval.
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Diamondback Vitality revealed within the assertion that the money portion of the deal “is predicted to be funded by means of a mix of money readily available, borrowings underneath the corporate’s credit score facility, and/or proceeds from time period loans and senior notes choices”.
The corporate famous within the assertion that, as a part of this settlement, Diamondback and Double Eagle have additionally agreed to speed up growth on a portion of Diamondback’s non-core southern Midland Basin acreage.
Diamondback additionally mentioned within the assertion that it’s “committing … to promote not less than $1.5 billion of non-core belongings to speed up professional forma debt discount so as to preserve its sturdy stability sheet”. The corporate famous that it expects to cut back internet debt to $10 billion “and, long run, preserve leverage of $6 billion to $8 billion”.
“Double Eagle is essentially the most enticing asset remaining within the Midland Basin,” Travis Stice, Chairman and Chief Government Officer of Diamondback, mentioned within the assertion.
“With 407 areas adjoining to our core place, this largely undeveloped asset provides high-quality stock that instantly competes for capital,” he added.
“Moreover, we see worth uplift to our present stock as acreage overlap permits for significant lateral size extensions and infrastructure synergies. We look ahead to seamlessly implementing our trade main value and operational construction on this differentiated asset,” he continued,
Stice went on to notice within the assertion that “the Permian Basin continues to consolidate quickly”.
“We’ve got labored tirelessly during the last 13 years to place Diamondback to have the longest length of top of the range, low-breakeven stock; a place we’re solidifying with at present’s announcement,” he mentioned.
“Whereas we’re including a small quantity of leverage to finish this commerce, we’re assured that we are able to shortly scale back debt each naturally by means of our constant and rising Free Money Stream and thru our dedication to promote not less than $1.5 billion of non-core belongings,” he went on to state.
Cody Campbell and John Sellers, Co-Chief Government Officers of Double Eagle, mentioned within the assertion, “we’re excited to announce our settlement with Diamondback”.
“We consider our group has constructed a very standout asset that additional will increase Diamondback’s high-quality stock,” they added.
“It was vital to us that we preserve the stewardship of this asset going ahead not solely with a world-class Midland operator but additionally a gaggle that shares our core values and understands the significance of neighborhood influence in West Texas,” they continued.
First Massive Permian Deal of 2025
In a press release despatched to Rigzone by the Enverus group, Andrew Dittmar, a principal analyst on the firm, described the Diamondback-Double Eagle transaction as “the primary massive Permian deal of 2025”.
“Midland Basin juggernaut Diamondback Vitality is shopping for a part of the belongings of personal fairness funded Double Eagle IV for $3 billion in money and $1.08 billion in Diamondback fairness,” Dittmar highlighted.
“The deal provides 27,000 barrels per day of internet oil manufacturing plus 40,000 internet acres within the Midland Basin,” he identified.
Dittmar famous within the assertion that Diamondback has been some of the acquisitive firms within the Permian Basin all through its historical past and mentioned the corporate reworked itself from a mid-size operator to the second largest producer within the Midland Basin behind ExxonMobil, primarily based on gross operated oil volumes.
“With Pioneer Pure Assets bought to Exxon in 2023, Diamondback has taken over the mantel of being the premier massive Permian pure play with broadly comparable scale to Pioneer on the time of its sale,” Dittmar said.
“For an organization as centered on M&A within the Midland Basin as Diamondback, shopping for Double Eagle is a key precedence as a result of it represents one of many final present alternatives to get a big, high-quality asset from a non-public vendor,” he added.
“The acquisition worth seems to be excessive for Double Eagle’s remaining stock – not stunning given demand for belongings within the Permian contrasted with few alternatives,” he continued.
Dittmar mentioned within the assertion that Diamondback has a bonus over most different potential patrons due to its low drilling prices that may be utilized to acquired stock, premium fairness valuation, and willingness of sellers to take its inventory.
The Enverus Principal Analyst famous within the assertion that public firms have been largely centered on including undeveloped stock and highlighted that Diamondback “is structuring this take care of Double Eagle retaining a good portion of its present manufacturing within the southern Midland Basin and likewise placing an settlement to speed up growth on a part of Diamondback’s southern Midland place”.
“Diamondback additionally mentioned it could pursue $1.5 billion in non-core asset gross sales. Diamondback would doubtless look to its Delaware Basin belongings for gross sales alternatives, additional concentrating its deal with the Midland Basin,” Dittmar mentioned.
The Enverus analyst said that purchasing personal belongings has been elementary to Permian Basin M&A however added that “after three years of livid consolidation there are only a few remaining alternatives”.
“Remaining personal firms with high-quality drilling stock – like Fasken Oil & Ranch within the Midland Basin and Mewbourne Oil within the Delaware Basin – are multi-generation household firms not essentially focused on a sale just like the personal equity-built E&Ps,” he famous.
“Moreover previously, personal fairness corporations would reenter the play after a sale, however with stock more and more locked up by massive firms not focused on promoting, that has grow to be far more difficult,” he mentioned.
Whereas constructing a brand new place within the Permian is difficult, it may be completed, Dittmar mentioned within the assertion, including that the Double Eagle group has been as, or extra, efficient than anybody in constantly constructing new positions and promoting them at premium costs.
“The group’s sale of DoublePoint to Pioneer in April 2021 set a post-Covid file for Permian asset valuations and kicked off the shopping for frenzy of personal firms within the Basin,” Dittmar mentioned.
“Now 4 years later, the identical co-founders are promoting one of many final massive personal firms at acreage pricing that appears to be about 50 % increased than the 2021 sale,” he added.
“The Basin has developed considerably for the reason that 2021 sale together with operators unlocking new stacked intervals that may be economically developed, however on a worth per undeveloped drilling location Double Eagle additionally once more seems to be promoting at a premium worth,” he continued.
“The corporate can be retaining a big wedge of its present manufacturing within the southern Midland Basin. That gives an present platform to construct from or might be bought to a different operator,” he went on to state.
To contact the creator, e-mail andreas.exarheas@rigzone.com
