Diamondback Energy's Bold Move: Acquiring Double Eagle for $5 Billion

Diamondback Energy, Inc. (NASDAQ: FANG) has made a significant move in the Permian Basin, announcing its intention to acquire Double Eagle IV Midco, LLC in a deal valued at approximately $5 billion. This strategic acquisition will further strengthen Diamondback's position in the region and enhance its production profile. The acquisition is expected to close on April 1, 2025, subject to customary closing conditions and regulatory approvals.

The acquired assets consist of approximately 40,000 net acres in the core of the Midland Basin, with an estimated run-rate production of around 27 MBo/d (69% oil). This addition will extend Diamondback's pro forma inventory life in the core of the Midland Basin and provide a longer runway for development and production. The acquired assets also come with 407 gross (342 net) horizontal locations in primary development targets, with an average lateral length of approximately >11,000 feet. Additionally, there are 44 gross upside locations primarily located in emerging zones, further enhancing Diamondback's production profile.

The acquisition is valued at approximately 5.2x 2025 EBITDA, making it an attractive deal for Diamondback. The company expects the acquisition to be immediately accretive to all relevant financial metrics, including Cash Flow per share, Free Cash Flow per share, and NAV per share. Diamondback also anticipates that the acquisition will enhance its expected pro forma 2026 Free Cash Flow per share by 5% or more.

Diamondback is funding the transaction through a combination of cash on hand, borrowings under the Company's credit facility, and/or proceeds from term loans and senior notes offerings. As part of the agreement, Diamondback and Double Eagle have also agreed to accelerate development on a portion of Diamondback's non-core southern Midland Basin acreage. This acceleration is expected to bring forward Net Asset Value (NAV) to Diamondback by developing Diamondback's lower quality acreage at a faster pace than current expectations. As a result, Diamondback expects significant Free Cash Flow growth in 2026 and beyond with minimal capital deployment through this accelerated development plan.

Diamondback is also committing to sell at least $1.5 billion of non-core assets to accelerate pro forma debt reduction and maintain its strong balance sheet. The company expects to reduce net debt to $10 billion and, long term, maintain leverage of $6 billion to $8 billion.

This acquisition aligns with Diamondback's long-term growth strategy, as it allows the company to consolidate its position in the Permian Basin and gain access to high-quality inventory. The acquisition is expected to generate significant synergies, with annual cost savings of over $300 million, by integrating Double Eagle's operations into Diamondback's own. This deal also advances Diamondback's ESG profile, as Double Eagle has a strong track record in environmental stewardship and community engagement.

In conclusion, Diamondback Energy's acquisition of Double Eagle IV Midco, LLC is a strategic move that will strengthen the company's position in the Permian Basin and enhance its production profile. The acquisition is expected to be immediately accretive to all relevant financial metrics and generate significant synergies. Diamondback's commitment to selling non-core assets and maintaining a strong balance sheet further solidifies the company's position in the energy sector.