Diamondback Energy, an American shale oil and gas producer, has announced a colossal acquisition that could give birth to a new global oil behemoth. On Monday, February 12, Diamondback Energy revealed an agreement to acquire its peer, Endeavor Energy Partners, in a cash-and-stock transaction valued at approximately $26 billion, including Endeavor's net debt. The deal comprises around 117.3 million shares of Diamondback common stock and $8 billion in cash. Following the transaction's completion, Diamondback's current shareholders are expected to own about 60.5% of the merged company, with Endeavor's shareholders owning approximately 39.5%.
After the announcement of the deal, Diamondback's stock price (FANG) surged over 5% at the opening on Monday, reaching a peak increase of about 10.8% in the morning and narrowing slightly to around 9% by noon, potentially setting a new high since October 2023.
Endeavor is the largest private oil and natural gas producer in the Permian Basin, a major shale oil region in the United States. Diamondback stated that the acquisition would create a top-tier independent operator in the Permian Basin. Over the weekend, several media outlets had speculated about the potential acquisition of Endeavor by Diamondback. Monday's official announcement means the two companies will merge into an oil and gas industry giant valued at over $50 billion, with some media sources claiming the new company will be the third-largest oil and gas producer globally, trailing only ExxonMobil and Chevron.
Diamondback's Chairman and CEO, Travis Stice, expressed that over the past twelve years, Diamondback has proven itself as a leading low-cost operator in the Permian Basin. The acquisition will allow the company to apply this cost structure to a larger asset base and allocate capital to a stronger inventory level. The merger of two strong companies will create a "must-own" North American independent oil company. The new company's inventory will feature industry-leading depth and quality, transforming into cash flow at the industry's lowest cost structure, thereby creating a differentiated value proposition for its shareholders.
Diamondback announced that the acquisition had been unanimously approved by its board of directors and had received the necessary approval from Endeavor's side. The announcement anticipates that the merger, subject to closing conditions being met within the deadline, is expected to be completed in the fourth quarter of this year. The merged company will have the capacity to produce 816,000 barrels of oil equivalent per day, generate $550 million in annual synergies, and exceed a net worth of $3 billion over the next decade.
Analysts widely view Diamondback's acquisition as highlighting the ongoing consolidation trend in the oil industry, particularly in the Permian Basin, where companies are merging to increase production. ExxonMobil and Chevron announced their own mega-merger deals in October of the previous year.
ExxonMobil declared on October 11 that it had agreed to acquire shale oil company Pioneer Natural Resources in an all-stock transaction valued at $59.5 billion, expected to close in the first half of this year. This acquisition, the largest since acquiring Mobil, is seen as a move to solidify ExxonMobil's dominance in the Permian Basin.
Less than two weeks later, on October 23, Chevron announced its all-stock acquisition of Hess Corp for $53 billion. Upon completion, Chevron will gain a 30% ownership in Guyana's Stabroek block, estimated to contain about 11 billion barrels of oil equivalent, and enhance its position in U.S. shale oil production through Hess's assets in the Bakken region.
