US-based Diamondback Energy has agreed to merge with its Permian Basin rival Endeavor Energy Resources in a stock and cash deal valued at around $26bn, inclusive of the latter’s net debt.

Listed on Nasdaq, Diamondback Energy is an independent oil and natural gas enterprise based in Midland, Texas. It concentrates on acquiring, developing, exploring, and exploiting unconventional onshore oil and natural gas reserves in the Permian Basin of West Texas.

Endeavor Energy Resources, a privately-owned exploration and production firm, is headquartered close to its operational hub in Midland, Texas. With over 1,200 employees, the firm holds approximately 344,000 net acres in the Core 6 Midland Basin counties.

The merger of Diamondback Energy and Endeavor Energy Resources will yield a combined pro forma scale of about 838,000 net acres and 816,000 barrels of oil equivalent per day (BOE/d) of net production.

The enlarged company is expected to have best-in-class inventory depth and quality, with roughly 6,100 pro forma locations having break-evens below $40 West Texas Intermediate (WTI).

Moreover, annual synergies of $550m are anticipated, representing over $3bn in net present value at a 10% discount rate (NPV10) over the upcoming decade.

Diamondback Energy chairman and CEO Travis Stice said: “This is a combination of two strong, established companies merging to create a ‘must own’ North American independent oil company.

“The combined company’s inventory will have industry-leading depth and quality that will be converted into cash flow with the industry’s lowest cost structure, creating a differentiated value proposition for our stockholders.

“This combination meets all the required criteria for a successful combination: sound industrial logic with tangible synergies, improved combined capital allocation and significant near and long-term financial accretion. With this combination, Diamondback not only gets bigger, it gets better.”

The transaction will involve about 117.3 million shares of Diamondback Energy common stock and $8bn in cash, subject to customary adjustments.

Following the merger, Diamondback Energy`s current stockholders are anticipated to own roughly 60.5% ownership of the enlarged firm, with Endeavor Energy Resources`s equity holders holding approximately 39.5%.

In 2025, on a pro forma basis, Diamondback Energy anticipates generating oil production ranging from 470-480 thousand barrels of oil per day with a capital budget of around $4.1bn-$4.4bn.

Endeavor Energy Resources president and CEO Lance Robertson said: “Our success up to this point is attributable to the dedication and hard work of Endeavor employees, and today’s announcement is recognition by Diamondback of the significant efforts from our team over the past seven years, driving production growth, improving safety performance and building a more sustainable company.

“We look forward to working together to scale our combined business, unlock value for all of our stakeholders and ensure our new company is positioned for long-term success as we build the premier Permian-focused company in Midland.”

The merger deal is slated to close in Q4 2024. This is contingent upon meeting customary closing conditions, such as the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and approval of the transaction by Diamondback Energy`s stockholders.

Jefferies has been engaged as the lead financial adviser to Diamondback Energy, with Citi acting as merger and acquisition (M&A) and capital markets adviser.

Legal advisory services for Diamondback Energy are provided by Wachtell, Lipton, Rosen & Katz.

J.P. Morgan Securities is the exclusive financial adviser to Endeavor Energy Resources, while Goldman Sachs & Co. is offering corporate advisory services. Legal counsel for Endeavor Energy Resources is provided by Paul, Weiss, Rifkind, Wharton & Garrison and Vinson & Elkins.