Midland-based Diamondback Energy announced Tuesday that it is paying $1.6 billion in stock and cash to acquire all leasehold interests and related assets owned there by Fort Worth’s FireBird Energy.
The bolt-on transaction is designed to add about 68,000 acres of potentially productive assets to Diamondback’s current holdings in the Midland Basin in exchange for 5.86 million shares of Diamondback common stock worth about $800 million and $775 million in cash. The deal will add about 17 million barrels per day to Diamondback’s production.
Kirkland & Ellis is advising Diamondback. FireBird was advised by Akin Gump Strauss Hauer & Feld and Weil Gotshal & Manges. RBC Capital Markets and Goldman Sachs advised FireBird on financial issues.
The Kirkland team was led by real asset M&A partners Anthony Speier, Chris Heasley and Fraser Wayne with associate Jarrod Gamble; corporate M&A partners Sean Wheeler and Cephas Sekhar; tax partner David Wheat; environmental transactions partners Jon Kidwell and Jennifer Cornejo; antitrust partner Carla Hine; executive compensation partner Rob Fowler; and labor & employment partner Christie Alcala.
From Akin, the team was led by Cole Bredthauer and included Wes Williams, Julia Pashin, Andrew Oelz, Alexandra Reuss, Eduardo Canales, Frankie Shulkin, Courtney Beloin, Dominic Riella, David Quigley, Matthew Schmitten, Gorav Jindal and Brian Patterson.
From Weil, Sam Peca led, along with Scott Bailey and Spencer Finney. Devon Bodoh, Joshua Graybill and Theo Agbi advised on tax matters. Barbra Broudy and Shelby Stanton on capital markets.
“This bolt-on acquisition adds significant, high-quality inventory right in our backyard,” stated Travis Stice, chairman and CEO of Diamondback. “With over 350 locations adjacent to our current Midland Basin position, this asset adds more than a decade of inventory at our anticipated development pace, including inventory that competes for capital right away in Diamondback’s current development plan.”
The neutral leverage deal is valued at 3x 2023 EBITDA with a 15 percent free cash flow at strip pricing, which increases by 3 percent per share pro forma 2023 cash returns.