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Diamondback Energy Snags Endeavor Energy in $26B Permian Power Play

 |  February 12, 2024

Diamondback Energy announced its plans on Monday to acquire Endeavor Energy Partners, the largest privately held producer in the region. The deal, structured as a cash-and-stock transaction valued at approximately $26 billion, including debt, marks a pivotal moment amid a flurry of consolidation efforts within the Permian Basin.

Upon completion of the acquisition, the combined entity is poised to become the third-largest oil and gas producer in the Permian Basin, trailing only Exxon and Chevron, both of which have recently unveiled major deals of their own. This consolidation trend underscores the industry’s drive to bolster production capabilities and streamline operations to navigate the evolving dynamics of the energy sector.

Diamondback Energy’s CEO, Travis Stice, expressed confidence in the merger, highlighting the company’s track record as a premier low-cost operator in the Permian Basin. Stice emphasized the strategic benefits of the acquisition, citing the potential to leverage Diamondback’s operational expertise across a broader asset base and optimize capital allocation.

The deal is projected to result in a combined daily production output of 816,000 barrels of oil equivalent per day (boepd) and generate annual synergies of $550 million. Over the next decade, the merger is expected to yield cumulative net value exceeding $3 billion.

News of the impending acquisition had been circulating prior to the official announcement, with Reuters reporting on merger talks between Diamondback and Endeavor. The transaction, subject to regulatory approvals and customary closing conditions, is anticipated to be finalized in the fourth quarter of this year.

The agreement entails Diamondback issuing approximately 117.3 million shares of common stock and $8 billion in cash to acquire Endeavor. The sale represents a significant milestone for Endeavor, founded nearly four and a half decades ago by Texas oilman Autry Stephens. Stephens, renowned for his strategic acumen and portrayed in the TV documentary series “Black Gold,” transformed Endeavor into a formidable player in the Permian Basin through shrewd acquisitions and efficient resource extraction, reported CNBC.

Endeavor’s operations span approximately 350,000 net acres in the Midland portion of the Permian Basin, with production expectations ranging from 350,000 to 365,000 barrels of oil equivalent per day in 2024.

Upon completion of the transaction, Diamondback shareholders are poised to own 60.5% of the combined entity, with Endeavor retaining the remaining stake. The acquisition underscores Diamondback’s commitment to fortifying its position as a leading player in the Permian Basin, poised to capitalize on opportunities in an ever-evolving industry landscape.

Source: CNBC