In a significant development for the energy sector, Diamondback Energy, Inc. (NASDAQ: FANG) and Endeavor Energy Resources, L.P. have unveiled plans to merge in a landmark deal valued at around $26 billion, including the assumption of Endeavor’s net debt. This strategic move is poised to establish a leading independent operator in the Permian Basin, marking a major step in the consolidation of the oil and gas industry in this key U.S. shale region.
Under the terms of the definitive merger agreement, the transaction will be financed through a combination of approximately 117.3 million shares of Diamondback common stock and $8 billion in cash, alongside customary adjustments. The cash component will be covered through existing cash reserves, borrowings under Diamondback’s credit facilities, and potentially through the proceeds from term loans and senior notes offerings.
Post-merger, current Diamondback stockholders will retain a majority stake, owning around 60.5% of the newly formed entity, while Endeavor’s equity holders will control the remaining 39.5%. Both companies’ boards have given their unanimous approval for the merger, which now awaits the green light from Diamondback’s shareholders and the completion of regulatory procedures.
Travis Stice, Chairman and CEO of Diamondback, praised the merger for combining two formidable entities to forge a “must own” independent oil company in North America. Highlighting the synergies and enhanced capital efficiency expected from the merger, Stice emphasized the creation of a differentiated value proposition for shareholders. “Diamondback not only gets bigger, it gets better,” he remarked, underlining the seamless integration anticipated due to the companies’ shared cultures, operational philosophies, and proximity in Midland, Texas.
Autry C. Stephens, Founder and Chairman of the Board at Endeavor, expressed pride in the legacy built since 1979 and confidence in Diamondback as the ideal partner to drive forward the collective vision and value for shareholders, employees, and the community.
The merger is anticipated to deliver substantial strategic and financial benefits, including a combined scale of approximately 838,000 net acres and 816 MBOE/d of net production. It promises annual synergies estimated at $550 million, translating into over $3.0 billion in net present value over the next decade, alongside significant improvements in capital and operational efficiencies.
In conjunction with the merger announcement, Diamondback also disclosed a 7% increase in its base dividend to $3.60 per share annually, reflecting robust fourth-quarter production in 2023 and a solid financial outlook for 2024. The company aims to prioritize capital efficiency and free cash flow generation, adjusting its return of capital commitment to ensure financial flexibility and balance sheet strength post-merger.
The transaction is expected to close in the fourth quarter of 2024, subject to customary closing conditions and approvals. Diamondback and Endeavor will host a conference call to discuss the transaction details further on February 12, 2024.
Jefferies LLC and Citi are advising Diamondback on the financial and legal aspects of the merger, with J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC offering financial and corporate advisory services to Endeavor.
This merger represents a pivotal moment for the Permian Basin, as Diamondback and Endeavor join forces to capitalize on their combined strengths, promising to reshape the competitive landscape of the American oil and gas industry.
