IPPToday #268: Operators in US' largest shale oil basin agree to US$9.2 billion merger
- Diamondback Energy
- Energen Corporation
- Ajax Resources
Related M&A Transactions
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Diamondback Energy, Inc. and Energen Corporation have announced that they have entered into a definitive agreement under which Diamondback will acquire Energen in an all-stock transaction valued at approximately US$9.2 billion.
Both companies are involved in exploration and production of onshore oil and natural gas reserves in the Permian Basin, the largest and fastest growing oil and natural gas producing area in the USA, located in the south of the country (west Texas and south-east New Mexico).
The merged company will be the third largest pure play company in terms of production operating in the Permian Basin. It will own over 266,000 net Tier One acres in the Permian Basin, an increase of 57% for Diamondback, and over 7,000 estimated total net horizontal Permian locations, an increase of over 120% from Diamondback’s current estimated net locations.
As of July 1, 2017, Energen had identified 4,116 net engineered, unrisked, potential drilling locations in the two largest component basins of the Permian Basin, the Delaware and Midland basins, with an estimated 2.5 billion barrels of oil-equivalent, net, undeveloped resource potential.
Under the terms of the definitive merger agreement, shareholders of Energen will receive 0.6442 shares of Diamondback common stock in exchange for each share of Energen common stock, representing an implied value to each Energen shareholder of US$84.95 per share based on the closing price of Diamondback common stock on 13 August 2018. This represents an approximately 19% premium to Energen’s closing price that day of US$71.36.
The transaction was unanimously approved by the Board of Directors of each company. It is expected to be completed by the end of the fourth quarter of 2018, subject to the approval of both Diamondback and Energen shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.
Upon closing the transaction, Diamondback shareholders will own approximately 62% of the combined company, and Energen shareholders will own approximately 38%.
As of the company's announcement last week, Diamondback is also in the process of purchasing Ajax Resources, which owns 25,493 net leasehold acres in the Northern Midland Basin, demonstrating a clear strategy to consolidate control of the Permian Basin.
Diamondback is acquiring Ajax for US$900 million in cash and 2.58 million shares of Diamondback common stock, subject to certain adjustments.