NEW YORK: US oil producer Diamondback Energy says it will buy privately held rival Endeavor Energy Partners in US$26bil cash-and-stock deal that continues a rapid consolidation in the top US shale oilfield.
The combined company would be the third-largest oil and gas producer in the Permian Basin of West Texas and New Mexico, behind Exxon Mobil and Chevron, with both having announced recent deals.
The deal comes amid a wave of consolidation in the basin in a drive to boost ongoing production and secure future drilling inventory.
The combined company would pump 816,000 barrels of oil and gas per day (boepd), behind the Exxon-Pioneer combination of about 1.3 million boepd and Chevron’s 867,000 boepd in the basin.
Fewer wells would be needed to keep production flat in 2025 and beyond, with both companies being able to run a full business on Diamondback’s cost structure, chief financial officer Kaes Van’t Hof said in a call to analysts.
“Eventually there will be non-core asset sales. We still have some significant joint-venture interest … the Delaware Basin is going to get less capital than as a percentage of total than it did previously. But we’re not a forced seller.”
Shares of Diamondback were up nearly 10% at US$166.93 in morning trading. Reuters had on Sunday reported about merger talks between Diamondback and Endeavor, citing sources.
The deal to buy Endeavor consists of about 117.3 million shares of Diamondback common stock and US$8bil in cash.
The sale comes almost 45 years after Texas oilman Autry Stephens started the company that would become Endeavor.
Diamondback would be able to pay the large cash component and still keep its balance sheet strong due to its relatively low debt-to-capital of 23%, Tim Rezvan, an analyst at KeyBanc Capital Markets, said. — Reuters