US-based oil and gas producer Diamondback Energy has agreed to acquire Energen in an all-stock deal valued at approximately $9.2bn, including debt.
Under the terms of the deal, shareholders of Energen will receive 0.6442 shares of Diamondback common stock in exchange for each share held. Energen has net debt of $830m as of 30 June 2018.
Diamondback CEO Travis Stice said: “This transaction represents a transformational moment for both Diamondback and Energen shareholders as they are set to benefit from owning the premier large cap Permian independent with industry leading production growth, operating efficiency, margins and capital productivity supporting an increasing capital return program.
“The Energen team has done an outstanding job assembling a portfolio of Tier One acreage in both the Midland and Delaware basins, which, when combined with Diamondback’s current portfolio, will present an extended runway for Diamondback’s record of best-in-class execution and low-cost operations.
“The combined company’s expected production growth, capital productivity and cost structure will enhance our free cash flow profile to grow our long-term capital return program.”
Upon completion of the deal, Diamondback will own 62% of the combined company while the remaining 38% stake will be held by Energen.
Planned to be completed by the end of the fourth quarter of 2018, the deal is subject to the approval of both Diamondback and Energen shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.
Energen chairman and CEO James McManus said: “This transaction is the outcome of a comprehensive strategic review by Energen’s Board with the assistance of our outside advisors.
“The process examined our business plan, competitive positioning, and strategic alternatives. We believe this all-stock transaction with Diamondback is the best path forward for our company and provides Energen shareholders with an excellent value for their investment, now and in the future.”
The deal comes week after Diamondback signed an agreement to acquire Ajax Resources for $1.2bn.
Diamondback expects the combined deals to increase its acreage in the Permian’s Midland and Delaware basins by about 85%, up from 211,000 net acres to 390,000 net acres.
The two deals are expected to bring the third largest production capacity for a pure play company in the Permian Basin, the firm noted.