In its second Permian-focused deal signing in a month, Diamondback Energy Inc., Midland, Tex., has agreed to acquire Energen Corp., Birmingham, Ala., in an all-stock transaction valued at $9.2 billion, including Energen’s net debt of $830 million.
The combine will increase Diamondback’s Tier 1 Permian basin acreage to 266,000 net acres from its current 170,000 net acres (pro forma for the company’s recent deal to acquire Ajax Resources) and will create more than 7,000 estimated total net horizontal Permian locations (OGJ Online, Aug. 10, 2018).
The combined company will hold 390,000 net acres across the Midland and Delaware basins, where held by production assets will allow for multizone, multiwell pads, Diamondback said. Second quarter production for the combine is 222,000 boe/d (67% oil).
Expected primary synergies with net present value of $2 billion include a reduction in drilling, completion, and equipment costs of up to $200 per lateral foot across over 2,000 net operated locations in the Midland basin and an estimated annual general and administrative savings of $30-40 million, the company said.
Secondary synergies with net present value of $1 billion include a reduction in drilling, completion, and equipment costs of up to $50 per lateral foot across 1,500 net operated locations in the Delaware basin, the benefit of overlapping and adjacent acreage in Howard, Martin, and Ward counties, drop-down opportunities for Viper Energy Partners LP, and the combination of midstream assets across both basins.
Energen shareholders will receive 0.6442 of a share of Diamondback common stock for each share of Energen common stock—an implied value of $84.95/share based on Diamondback’s Aug. 13 closing price. At close, Diamondback shareholders will own 62% of the combine and Energen shareholders will own 38%.
Subject to shareholder and regulatory approval and customary conditions, the deal is expected to close by the end of the fourth quarter. Diamondback’s board and executive team will remain unchanged and the company will continue to be headquartered in Midland.
