Diamondback Energy has signed an agreement to acquire certain units of Double Eagle IV Midco in a transaction valued at approximately $4.08bn, reported Reuters.
The deal consists of $3bn in cash and around 6.9 million shares of Diamondback common stock.
The acquisition expands Diamondback’s presence in the Midland Basin, adding approximately 40,000 net acres in the region’s core.
The assets involved in the deal include an estimated run-rate production of 27 thousand barrels of oil per day (MBo/d), with oil accounting for 69% of total production.
Approximately 68% of the acquired acreage remains undeveloped, with 407 estimated gross (342 net) horizontal locations in primary development targets, averaging lateral lengths of more than 11,000ft.
An additional 44 gross upside locations have been identified in emerging zones.
Diamondback and Double Eagle have also agreed to accelerate development on a portion of Diamondback’s non-core southern Midland Basin acreage.
By advancing development on these assets at a faster pace than initially planned, Diamondback expects to bring forward its Net Asset Value (NAV) while minimising capital deployment.
The company projects that this initiative will contribute to Free Cash Flow growth from 2026 onwards.
To support the financing of the transaction, Diamondback intends to use a combination of existing cash reserves, borrowings under its credit facility, and proceeds from term loans and senior notes offerings.
Additionally, Diamondback has committed to divesting at least $1.5bn in non-core assets to facilitate debt reduction. The company aims to lower net debt to $10bn in the near term, with a long-term leverage target between $6bn and $8bn.
Diamondback chairman and CEO Travis Stice said: “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.”
Double Eagle co-CEOs Cody Campbell and John Sellers said: “We are excited to announce our agreement with Diamondback. We believe our team has built a truly standout asset that further increases Diamondback’s high-quality inventory.
“It was important to us that we maintain the stewardship of this asset going forward not only with a world-class Midland operator but also a group that shares our core values and understands the importance of community impact in West Texas.”
The acquisition is expected to close on 1 April 2025, pending regulatory approvals and the satisfaction of customary closing conditions.
TPH&Co, the energy division of Perella Weinberg Partners, is acting as financial adviser to Diamondback on the transaction, with Kirkland & Ellis serving as legal counsel.
RBC Capital Markets, Goldman Sachs & Co, and J.P. Morgan Securities are advising Double Eagle, while Vinson & Elkins is providing legal counsel.
