- Permian rivals close to $50 billion merger creating oil and gas giant, per Wall Street Journal.
- Deal likely announced Monday, February 12, 2024, combining Diamondback’s shale expertise with Endeavor’s Midland holdings.
- Merger signifies end of era for Endeavor, founded by Autry Stephens, largest privately held Permian producer.
- Combined company gains strong foothold in prolific U.S. oil patch, benefiting from scale, synergies, and cash flow.
- Merger fosters resilient competition, leveraging recovery in oil and gas prices.
- Deal offers career growth for employees, aiming to create shareholder, customer, and community value.
Diamondback Energy
Diamondback Energy is a publicly traded, independent oil and natural gas company headquartered in Midland, Texas. The company focuses on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin. Diamondback’s activities are primarily directed at the horizontal development of multiple stacked pay zones in the Spraberry Trend and the Wolfcamp Shale formations.
As of December 31, 2023, Diamondback had approximately 1.2 million net acres in the Permian Basin, of which about 1 million were in the Midland Basin and about 200,000 were in the Delaware Basin. The company had proved reserves of 2.7 billion barrels of oil equivalent (BOE), of which 63% were oil, 19% were natural gas liquids (NGLs) and 18% were natural gas. Diamondback’s average daily production for 2023 was 1.1 million BOE per day (BOE/d), of which 69% was oil, 16% was NGLs and 15% was natural gas.
Diamondback has a track record of delivering strong operational and financial performance, driven by its efficient drilling and completion operations, low-cost structure, disciplined capital allocation and prudent hedging strategy. The company has also been active in pursuing strategic acquisitions to enhance its portfolio and scale in the Permian Basin. In 2023, Diamondback completed the acquisitions of QEP Resources and Guidon Operating for a total consideration of $2.8 billion, adding about 200,000 net acres and 100,000 BOE/d of production to its footprint.
Endeavor Energy Resources
Endeavor Energy Resources is a privately held oil and gas company based in Midland, Texas. The company was founded by Autry Stephens in 1979 as a small drilling contractor. Over the years, Endeavor grew into one of the largest exploration and production companies in the Permian Basin, with operations spanning across 350,000 net acres in the Midland portion of the basin.
Endeavor has a long history of innovation and excellence in the Permian Basin. The company was one of the first to adopt horizontal drilling and hydraulic fracturing techniques to unlock the potential of the Wolfcamp Shale formation. Endeavor also pioneered the use of electric-powered rigs to reduce emissions and operating costs. In addition, Endeavor has invested heavily in water management and infrastructure to support its operations and environmental stewardship.
As of December 31, 2023, Endeavor had proved reserves of 3 billion BOE, of which 72% were oil, 14% were NGLs and 14% were natural gas. Endeavor’s average daily production for 2023 was 1.2 million BOE/d, of which 75% was oil, 13% was NGLs and 12% was natural gas.
Endeavor has been exploring strategic alternatives to monetize its assets and reward its shareholders since late 2023. The company hired investment banks to solicit offers from potential buyers or merger partners that could value Endeavor at between $25 billion and $30 billion. The company received interest from several parties, including ConocoPhillips , but ultimately decided to merge with Diamondback.
Bright Future Ahead
The merger of Diamondback Energy and Endeavor Energy Resources would create a new leader in the Permian Basin with a combined market value of more than $50 billion. The combined company would have a premier acreage position with over 1.5 million net acres, a diversified portfolio of high-quality assets with multiple stacked pay zones, a large inventory of low-risk drilling locations, and a robust balance sheet with ample liquidity and financial flexibility.
The consolidated company would have significant operational and financial synergies that would enhance its profitability and cash flow generation. The merger is expected to result in annual cost savings of $300 million by 2025, mainly from reduced general and administrative expenses, lower lease operating expenses, and optimized capital spending. The merger is expected to be accretive to Diamondback’s earnings per share, free cash flow per share, and net asset value per share.
The combined company would have a compelling growth outlook, with the potential to increase its production by 10% annually through 2026, while maintaining a conservative leverage ratio of below 1.5 times net debt to EBITDA. The merged company would also have a strong commitment to returning capital to shareholders, with a target dividend payout ratio of 50% of free cash flow.
The merger between Diamondback and Endeavor would create a powerhouse in the Permian Basin, with a combined production of over 1.5 million barrels of oil equivalent per day and a diversified portfolio of assets across both the Midland and Delaware sub-basins. The deal would be structured as a cash-and-stock transaction, with Endeavor shareholders receiving Diamondback shares and cash. The exact terms of the deal have not been disclosed yet, but are expected to be announced soon.
Career Opportunities
The merger would create opportunities for careers and employment at the combined company. Diamondback and Endeavor are both committed to hiring and retaining talented employees who share their vision and values. The company would offer competitive compensation and benefits, as well as career development and advancement opportunities. If you’re interested in joining Diamondback or Endeavor before the upcoming merger, check out their websites for employment information and current opportunities.