The Diamondback Vitality – Endeavor Vitality mixture creates a Permian pure play with an enterprise worth of about $60 billion and 816,000 barrels of oil equal per day of pro-forma manufacturing.
That’s what Andrew Dittmar, Senior Vice President (SVP) of Enverus Intelligence Analysis (EIR), mentioned in a press release despatched to Rigzone, outlining that the deal launches Diamondback “effectively previous most friends” and places it “in a tier of the biggest independents after ConocoPhillips”.
“Outmaneuvering bigger rivals, Diamondback Vitality has secured the most important prize remaining amongst apparent Permian Basin acquisition targets by merging with Endeavor Vitality Assets in a cope with a $26 billion enterprise worth,” Dittmar mentioned within the assertion.
- Advertisement -
“With over 350,000 barrels of oil equal per day of 4Q23 manufacturing and 344,000 internet acres within the Midland Basin, Endeavor has a singular scale amongst personal Permian firms, and its buy is the biggest buyout of a non-public firm Enverus has tracked,” he added.
“With Pioneer Pure Assets set to be folded into ExxonMobil, Diamondback would be the commonplace bearer for Permian pure performs and can have an enviable mixture of scale, remaining stock high quality, and operational execution,” Dittmar went on to state.
Within the assertion, the EIR SVP highlighted that Diamondback is paying $8 billion in money, together with 117.3 million shares, and assuming Endeavor’s $900 million excellent observe.
“At an enterprise worth of $26 billion, the deal implies lower than $4 million per location for every of Endeavor’s ~3,300 internet places or about $37,000 per internet acre,” Dittmar added.
“That could be a low cost to the opposite two main Permian strategic offers introduced final yr, Occidental’s buy of CrownRock and ExxonMobils acquisition of Pioneer, every of which priced at north of $4 million per location,” he continued.
In keeping with Dittmar, a part of what makes Endeavor distinctive and so fascinating as an acquisition goal is the lengthy historical past of the corporate.
“Endeavor was capable of safe what’s now among the many most respected acreage within the Permian effectively earlier than the shale increase got here round and is without doubt one of the few acquisition targets that improves the standard of Diamondback’s portfolio,” he mentioned.
“The portfolio additionally has important overlap and creates alternatives for the sort of price financial savings and synergies buyers have pushed for,” he added.
Key to the Deal
Dittmar famous within the assertion that the important thing to securing the deal for Diamondback when negotiating in opposition to bigger rivals was probably its monitor report as a low price and environment friendly operator, which he mentioned gave Endeavor’s Stephens household “confidence in taking their fairness as the most important consideration within the deal”.
“With a 40 % possession stake within the mixed firm, the Endeavor group is prone to retain extra affect within the mixed enterprise than if cashing out or promoting to a bigger firm,” he mentioned.
“The truth that Diamondback is predicated in Midland additionally retains the enterprise native and eases the transition for the Endeavor group,” he added.
Dittmar mentioned within the assertion that the acquisition of Endeavor has a excessive probability of being the most important upstream deal of 2024 and mentioned it’s among the many final main excellent M&A puzzle items to place collectively within the Permian Basin.
“Endeavor’s remaining stock towered over personal friends, together with the following largest personal Mewbourne Oil, which has about 1,500 internet places and has additionally seen no rumors it will likely be on the market,” he mentioned.
“Past that, there’s a much-shortened record of personal fairness sponsored firms after over $80 billion have offered within the Permian Basin since 2021,” he added.
“Whereas there are a handful of potential public firm tie-ups, the following wave of Permian dealmaking will probably should be pushed by non-core asset gross sales from the large patrons,” he continued.
Among the many potential alternatives that might be placed on the desk are Diamondback’s Delaware Basin place and Permian Assets’ Midland Basin property, Dittmar mentioned within the assertion.
“Nonetheless, with stock being intently held by firms and beneficiant money circulation being generated from operations, there may be much less strain to promote non-core property than in prior consolidation waves,” he added.
“Whereas M&A may tick up in different areas, the market total ought to be set to gradual after a blockbuster 2023, with $192 billion in upstream M&A, has been adopted by scorching dealmaking exercise in 1Q24, with over $40 billion in upstream offers,” Dittmar famous.
Definitive Merger Settlement
Diamondback and Endeavor introduced in a joint assertion yesterday that they’ve entered right into a definitive merger settlement below which Diamondback and Endeavor will merge in a transaction valued at roughly $26 billion, inclusive of Endeavor’s internet debt.
The transaction consideration will consist of roughly 117.3 million shares of Diamondback widespread inventory and $8 billion of money, topic to customary changes, the businesses famous, including that the money portion of the consideration is anticipated to be funded by a mix of money readily available, borrowings below the Diamondback’s credit score facility and/or proceeds from time period loans and senior notes choices.
As results of the transaction, Diamondback’s current stockholders are anticipated to personal roughly 60.5 % of the mixed firm and Endeavor’s fairness holders are anticipated to personal roughly 39.5 % of the mixed firm, the assertion revealed.
The transaction was unanimously authorised by the board of administrators of Diamondback and has all needed Endeavor approvals, in response to the assertion.
“This can be a mixture of two robust, established firms merging to create a ‘should personal’ North American unbiased oil firm,” Travis Stice, the Chairman and Chief Government Officer of Diamondback, mentioned within the assertion.
“The mixed firm’s stock can have industry-leading depth and high quality that will probably be transformed into money circulation with the {industry}’s lowest price construction, making a differentiated worth proposition for our stockholders,” he added.
“This mixture meets all of the required standards for a profitable mixture: sound industrial logic with tangible synergies, improved mixed capital allocation, and important close to and long-term monetary accretion. With this mixture, Diamondback not solely will get larger, it will get higher,” he continued.
Autry C. Stephens, the Founder and Chairman of the Board of Endeavor, mentioned, “I’m grateful to the Endeavor group and happy with what now we have constructed since 1979”.
“We imagine Diamondback is the fitting associate for Endeavor, our staff, households, and communities. Collectively we are going to create worth for shareholders and our different stakeholders,” he added.
Lance Robertson, the President and Chief Government Officer of Endeavor, mentioned within the assertion, “as we glance towards the longer term, we’re assured becoming a member of with Diamondback is a transformational alternative for us”.
“Our success up up to now is attributable to the dedication and arduous work of Endeavor staff, and … [this] announcement is recognition by Diamondback of the numerous efforts from our group over the previous seven years, driving manufacturing progress, enhancing security efficiency and constructing a extra sustainable firm,” he added.
“We stay up for working collectively to scale our mixed enterprise, unlock worth for all of our stakeholders and guarantee our new firm is positioned for long-term success as we construct the premier Permian-focused firm in Midland,” he continued.
To contact the creator, e mail andreas.exarheas@rigzone.com
