Diamondback Energy, one of the largest O&G producers in the Permian, announced Tuesday that it is acquiring certain subsidiaries from Fort Worth-based Double Eagle IV Midco, for $3 billion in cash and 6.9 million shares of Diamondback’s common stock currently valued at about $158.32 per share.
The deal includes about 40,000 acres and production of about 27,000 barrels of oil daily. Diamondback expects the transaction to close in early April. The sellers include Double Eagle Holdings IV and a company owned by Houston-based EnCap Holdings.
“Double Eagle is the most attractive asset remaining in the Midland Basin,” said Travis Stice, chairman and CEO of Midland-based Diamondback. “With 407 locations adjacent to our core position, this largely undeveloped asset adds high-quality inventory that immediately competes for capital. Additionally, we see value uplift to our existing inventory as acreage overlap allows for meaningful lateral length extensions and infrastructure synergies,” Travis Stice, chairman and CEO of Diamondback, said in its announcement of the deal.
Diamondback says it will fund the acquisition through cash on hand, borrowings from its credit facility and proceeds from past-term loans and senior notes offerings. The company also plans to sell $1.5 billion of non-core assets to help reduce net debt to $10 billion.
In addition, the two firms have also agreed to speed up development on a portion of Diamondback’s non-core southern Midland Basin acreage in hopes of increasing its value and creating more cash flow for Diamondback in the coming years.
Kirkland & Ellis served as Diammondback’s outside legal counsel on the deal, working alongside Diambondback’s Midland-based EVP and Chief Legal and Administrative Officer Matt Zmigrosky. TPH&Co served as its financial advisor.
The Kirkland team that contributed to the deal included Chris Heasley (Austin/Houston), Jarrod Gamble (Houston), Sean Wheeler (Houston/New York), Debbie Yee (Houston), Camille Elizabeth Meissner (Houston), Lauren Stelck(Austin), Mohammad Alkadhem (Houston), Bernadette Marie Hayden (Houston), Trent Tucker (Dallas), Rachel Miller(Houston), Dakota Priest (Austin), Bridget Ryan Hamway (Dallas), Tyler Carrington Ambrose (Houston), Pi Praveen(Austin), David Wheat (Dallas/Houston), Joe Tobias (Dallas), Rachael Lichman (Houston), Layton Bell (Dallas), Michael Rigdon (Houston), Billy Vranish (Houston), Chuck Boyars (Washington, D.C.), Matthew Wheatley(Washington, D.C.), Jonathan Kidwell (Dallas) and Jennifer Cornejo (Houston).
Vinson & Elkins advised Double Eagle and its affiliates in the deal, working alongside its Fort Worth-based corporate counsel, Luke Tanner. RBC Capital Markets, Goldman Sachs and JP Morgan were its financial advisors on the deal.
The V&E team that worked on the deal included Bryan Loocke (Houston), Matthew Strock (Houston), Michael Marek(Houston), Michael Zarcaro (Houston), David Lassetter (Houston), Rivers Stephens (Houston), Drew Clements(Houston), Michael Gassman (Houston), Chandni Jaggi (Houston), Danielle Mangrum Patterson (Houston), Rebecca Baker (Houston), David D’Alessandro (Houston/Dallas), Megan James (Dallas), Evan Miller (Washington, D.C.), Hill Wellford (Washington, D.C.), Jackson O’Maley (Houston), David Peck (Dallas), Tzvi Werzberger (New York), Regina Ibarra (Houston), Carter Olson (Houston), Peter Goetschel (Houston), Daniel Henderson (Houston), Walt Baker(Houston), Lauren Perillo (Houston), Kelly McGee (Houston), Rami Rashmawi (Washington, D.C.), Adam Thomas(Washington, D.C.) and Cassandra Zarate (Houston).
“The Permian Basin continues to consolidate rapidly. We have worked tirelessly over the last thirteen years to position Diamondback to have the longest duration of high quality, low-breakeven inventory; a position we are solidifying with today’s announcement,” Stice said in a recent release.
The move comes a little over a year after Diamondback announced that it was merging with Endeavor Energy Resources in a transaction valued at $26 billion. Vinson & Elkins advised on the seller side of that transaction.