Diamondback Energy Inc. is merging with privately held Endeavor Energy Resources LP to create a Permian Basin juggernaut in a $26 billion cash and stock transaction, the companies said Monday.
Upon joining forces, the two Midland, TX-based independents would boast about 830,000 net acres and 816,000 boe/d of combined net production.
The merger, expected to close in the fourth quarter, would see existing Diamondback shareholders own 60.5% of the combined company, while Endeavor equity holders would own about 39.5%.
“This is a combination of two strong, established companies merging to create a ‘must own’ North American independent oil company,” said Diamondback CEO Travis Stice. “The combined company’s inventory will have industry-leading depth and quality that will be converted into cash flow with the industry’s lowest cost structure, creating a differentiated value proposition for our stockholders.”
Endeavor was founded in 1979 as a sole proprietorship by Autry Stephens, who remains chairman. He turned the company into a limited partnership in 2000.
“We believe Diamondback is the right partner for Endeavor, our employees, families and communities,” said Stephens. “Together we will create value for shareholders and our other stakeholders.”
Endeavor operates exclusively in the Permian’s Midland sub-basin, while Diamondback’s assets span the Midland, the Delaware sub-basin and the Central Basin Platform.
“Over the past 45 years, Mr. Stephens and his team at Endeavor have built the highest quality private oil company in the United States,” said Stice. “Our companies share a similar culture and operating philosophy and are headquartered across the street from one another, which should allow for a seamless integration of our two teams.”
The combined company’s drilling inventory would comprise some 6,100 locations with West Texas Intermediate oil price breakevens below $40/bbl.
“As we look toward the future, we are confident joining with Diamondback is a transformational opportunity for us,” said Endeavor CEO Lance Robertson. “We look forward to working together to scale our combined business, unlock value for all of our stakeholders and ensure our new company is positioned for long-term success as we build the premier Permian-focused company in Midland.”
In conjunction with announcing the merger, Diamondback said it produced 462,600 boe/d (273,100 b/d oil) during the fourth quarter of 2023. The company is targeting standalone production of 458-466,000 boe/d (270-275,000 b/d oil) for 2024, with a capital budget of roughly $2.3-2.55 billion.
The 4Q2023 production figures “exceeded expectation,” said Stice, who added that the 2024 plan “prioritizes capital efficiency and free cash flow generation over growth…”
Endeavor, for its part, is forecasting standalone production of 350-365,000 boe/d (190-200,000 b/d oil), and a capital budget of $2.5-2.6 billion in 2024.
After the merger is closed, Diamondback expects to generate pro forma production of 800-825,000 boe/d in 2025, with a capital budget of roughly $4.1-4.4 billion.
Diamondback is scheduled to release its full fourth quarter and full year 2023 earnings on Feb. 20.
After a record year for upstream mergers and acquisitions (M&A), dealmaking in 2024 is off to a fast start as well.
However, the Endeavor acquisition “has a high likelihood of being the biggest upstream deal of 2024 and is among the last major outstanding M&A puzzle pieces to put together in the Permian Basin,” said Enverus Intelligence Research’s Andrew Dittmar, senior vice president. “Endeavor’s remaining inventory towered over private peers, including the next largest private Mewbourne Oil Co., which has about 1,500 net locations and has also seen no rumors it will be for sale.
“Beyond that, there is a much-shortened list of private equity sponsored companies after over $80 billion have sold in the Permian Basin since 2021.”
Dittmar added, “While there are a handful of potential public company tie-ups, the next wave of Permian dealmaking will likely need to be driven by non-core asset sales from the big buyers.”
