2024.02.12 21:27
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A $26 billion mega acquisition is coming! The world's third-largest oil and gas giant is about to emerge.

If Diamondback Energy completes the acquisition of Endeavor Energy, a major shale oil producer in the Permian Basin, it will become the world's third-largest oil and gas producer with a value exceeding $50 billion, second only to Exxon Mobil and Chevron. In October last year, Exxon Mobil and Chevron announced super mergers worth $59.5 billion and $53 billion respectively, both involving the acquisition of assets related to the Permian Basin in the United States.

US shale oil and gas producer Diamondback Energy has announced a mega acquisition that, if completed, will create a new global oil and gas giant.

On Monday, February 12th, Diamondback Energy announced that it has reached an agreement to acquire fellow company Endeavor Energy Partners in a cash and stock deal. The transaction, including Endeavor's net debt, is valued at approximately $26 billion. The deal includes around 117.3 million shares of Diamondback common stock and $8 billion in cash. After the completion of the transaction, Diamondback's existing shareholders are expected to hold approximately 60.5% of the merged company, while Endeavor's shareholders will hold approximately 39.5%.

Following the announcement of the transaction agreement, Diamondback (FANG) stock price rose more than 5% at the opening on Monday, with an intraday high increase of approximately 10.8%. The midday increase narrowed to around 9%, still on track to reach a new high since October 2023.

Endeavor is the largest private oil and gas producer in the Permian Basin, the main shale oil production area in the United States. Diamondback stated that the acquisition will create a top-tier independent operator in the Permian Basin. Over the weekend, more than one media outlet reported the possibility of Diamondback acquiring Endeavor. The official announcement on Monday means that the two companies will merge into an oil and gas industry giant worth over $50 billion. Some media outlets have referred to the new company as the world's third-largest oil and gas producer, after ExxonMobil and Chevron.

Travis Stice, Chairman and CEO of Diamondback, stated that over the past twelve years, Diamondback has proven itself to be a leading low-cost operator in the Permian Basin. This acquisition allows us to bring this cost structure to a larger scale of assets and allocate capital to a more robust inventory level. The merger of these two strong companies will create a "must-have" independent oil company in North America. After the merger, the new company's inventory will have industry-leading depth and quality, and will convert into cash flow with the industry's lowest cost structure, creating differentiated value propositions for our shareholders.

Diamondback's announcement on Monday stated that the acquisition has been approved by all members of the Diamondback board of directors and has also received the necessary approvals from Endeavor. The announcement expects the merger to be completed in the fourth quarter of this year if the conditions for completion within the specified period are met. The merged company will have a daily oil equivalent production of 816,000 barrels and generate $550 million in synergies annually, with a net worth of over $3 billion in the next ten years. The media widely believes that Diamondback's acquisition highlights the trend of consolidation in the oil industry, especially the integration wave initiated by Permian Basin companies to increase production. Last October, two energy giants, ExxonMobil and Chevron, coincidentally announced mega-merger deals.

On October 11th of last year, ExxonMobil announced its agreement to acquire shale oil company Pioneer Natural Resources in an all-stock transaction worth $59.5 billion. Each share of Pioneer stock held by shareholders will receive 2.3234 shares of ExxonMobil stock, and the transaction is expected to be completed in the first half of this year. This is ExxonMobil's largest acquisition since the acquisition of Mobil and is seen as a deal that solidifies ExxonMobil's dominant position in the Permian Basin.

Less than two weeks later, on October 23rd, Chevron announced that it would also acquire Hess Corp in an all-stock transaction valued at $53 billion. After the completion of the transaction, Chevron will gain a 30% ownership stake in Hess's Stabroek block in Guyana, which is estimated to have recoverable resources of approximately 11 billion barrels of oil equivalent. Additionally, by acquiring Hess's assets in the Bakken region of the United States, Chevron will enhance its position in shale oil production in the country.