News Feb 12, 2024 11:42 PM EST

Diamondback Targets Endeavor in Cash-and-Stock Deal Valued at $26 Billion

By April Fowell

To build an energy juggernaut in the Southwest valued at over $50 billion, Diamondback Energy plans to acquire competitor Endeavor Energy Resources.

Diamondback Targets Endeavor in Cash-and-Stock Deal Valued at $26 Billion

(Photo : by MARK FELIX/AFP /AFP via Getty Images)
To build an energy juggernaut in the Southwest valued at over $50 billion, Diamondback Energy plans to acquire competitor Endeavor Energy Resources.

Massive deals in the energy sector have been driven in recent months by growing confidence in an economic recovery, especially in the U.S. These deals include Chevron's $53 billion acquisition of Hess in October and Exxon Mobil's $59.5 billion deal two weeks earlier, which was the company's largest acquisition since purchasing Mobil two decades earlier.

If successful, a partnership between Diamondback and Endeavor would add a participant to the vast Permian Basin oil and gas industry that spans both Texas and New Mexico.

After Exxon and Chevron, it would own 838,000 acres and be the third-largest producer in the Permian, with the capacity to produce 816,000 barrels of oil equivalent per day.

On Monday, Diamondback announced that it will acquire Endeavor for around $26 billion in cash and equity.

The biggest private operator in the Permian Basin is called Endeavor. With no indication that the US economy is slowing down as many had predicted, drillers are racing to obtain prime real estate in the country's largest oil field, the Permian, where more than 4 million barrels of oil equivalent may be extracted every day.

The United States has been remarkably resilient, with a strong job market and economic growth that has astonished nearly everyone, despite widespread forecasts that it would enter a recession amid a tumultuous global economy. From October through December, the country's economy grew at an unusually rapid 3.3% annual pace.

In addition, since OPEC has been reducing output in an effort to improve prices, the price of gas and oil has been largely stable recently. American drivers will benefit from lower oil prices as they will spend less at the petrol pump. It's terrible news, though, for the OPEC+ nations whose economies depend heavily on oil revenue and who have struggled to raise prices despite initial concerns that the Israel-Hamas conflict might disrupt oil shipments.

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Surging U.S. Oil Production Amidst OPEC+ Output Cuts

As OPEC+ has reduced output, U.S. oil production has reached all-time highs, and producers outside of the organization are predicted to continue driving global increase in oil supply in 2024, according to a November report from the International Energy Agency.

In the merged business, Endeavor's stock holders would possess roughly 39.5% and Diamondback Energy Inc. shareholders would own about 60.5%.

About 117.3 million shares of Diamondback common stock and $8 billion in cash are part of the Diamondback-Endeavor agreement, which was confirmed on Monday. This merger would establish a significant operator in the Permian Basin, which spans Texas and New Mexico.

Midland, Texas will serve as the united company's headquarters. The transaction has been authorized by the boards of both firms, and a fourth-quarter closing is anticipated. Also, according to the corporations, it possesses all required Endeavor permissions.

Should the sale go through, it will contribute to the wave of transactions surpassing $5 billion. In addition to the agreements reached by Chevron and Exxon Mobil, other agreements include the announcements made in December that Occidental is purchasing CrownRock for approximately $12 billion in cash and stock, and last month's $7.4 billion merger between Chesapeake Energy and Southwestern Energy.

In morning trade, Diamondback's shares increased by about 9%.

Related Article: Global Growth Grinds to a Halt as World Bank Predicts Third Year of Slowdown

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