Diamondback Energy announces transformative $25.8 billion merger with Endeavor Energy Resources
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Diamondback Energy, a prominent Permian Basin exploration and production (E&P) company, has unveiled a landmark merger with Endeavor Energy Resources, another Permian-focused E&P operator, in a strategic cash and stock deal valued at $25.8 billion. This merger, slated for closure in Q4 2024, marks the creation of a leading Midland Basin entity, boasting a combined output of 816,000 barrels of oil equivalent per day (Boepd), predominantly oil (57%), across an expansive 838,000 net acres.
Financially, the deal comprises 117.3 million Diamondback (FANG) shares, approximating $17.8 billion, and an $8 billion cash component, financed through available cash, credit facilities, and potential debt issuances. This merger is anticipated to forge a premier independent operator in the Permian, projected to realize annual synergies of $550 million, equating to a Net Present Value (NPV) exceeding $3.0 billion over the next ten years. Following the merger, Diamondback shareholders and Endeavor equity holders are expected to own approximately 60.5% and 39.5% of the amalgamated company, respectively, leveraging increased scale, enhanced inventory depth, and improved operational efficiencies.
The newly formed conglomerate is poised to operate around 6,100 prime drilling locations, maintaining break-even points below $40 per barrel of West Texas Intermediate (WTI), underlining the transaction's investor appeal. Diamondback Energy also disclosed its Q4 2023 operational highlights and 2024 forecasts, indicating a planned production range of 270-275 thousand barrels of oil per day (MBO/d) for 2024, with a capital expenditure budget set between $2.3 billion and $2.55 billion. Additionally, the company intends to adjust its capital return strategy to allocate at least 50% of its free cash flow to shareholders, down from the previous commitment of 75%, starting Q1 2024 to support growth endeavors, including this acquisition.
With an ambitious outlook for 2025, Diamondback projects an oil production capacity of 470-480 MBO/d (800-825 MBOE/d) and a capital expenditure forecast of roughly $4.1-$4.4 billion, promising significant cash flow and free cash flow per share accretion. This acquisition is poised to deliver exceptional value to investors through substantial scale expansion, inventory deepening, synergy realization, and cost optimization, affirming Diamondback Energy's position as a compelling investment proposition in the Permian E&P landscape.