Diamondback Energy and Endeavor Energy to form combined company
Diamondback Energy and Endeavour Energy US oil and gas companies have announced a merger. The deal is worth US$52 billion. Diamondback will own most of the combined company. Its capitalisation is US$27 billion, while Endeavor’s is US$25 billion.
Under the terms of the agreement, payment will be as follows:
– Diamondback will transfer approximately 117 million of its common shares and US$8 billion;
– the cash portion will be funded in part by cash on hand and borrowings;
– Diamondback shareholders will receive a 60.5% interest in the new company;
– Endeavour will own 39.5% of the securities.
Expert Chaslau Koniukh notes that talk about the merger with Endeavor has been happening for some time in business circles. Several parties, including ConocoPhillips Corporation, have been interested in the company. Endeavor’s appeal lies in its assets in Texas and New Mexico. These are the largest shale oil fields in the US.
The merger would allow the combined company to expand the size of its fields significantly. This would make it a major competitor to ConocoPhillips for oil production in the Permian Basin in Texas. Analysts also expect the company’s oil production to exceed 400,000 barrels daily.
As a result of the merger, the parties will create an independent company with operations focused on the Permian oil basin.
Benefits of the deal
Travis Stice, CEO of Diamondback, said the merger opens up new opportunities to build a strong business. The company’s reserves will allow it to significantly increase production, while its feedstock quality will help reduce operating costs. The parties have already developed a financial growth strategy for the short and long term.
Stice also stressed that Diamondback and Endeavor have a similar operating structure and philosophy. As a result, the integration should be straightforward and take little time.
For his part, Endeavour founder Otri K. Stevens thanked the team for their dedication. The company has existed since 1979 and has enjoyed success in the American market. Endeavour officials are optimistic about the future with a strong partner like Diamondback.
Initially, the new company plans to focus on scaling the business, highlighting the benefits of the merger, including:
– the expansion of the mine area to 838,000 net acres;
– the ability to produce 816 million barrels of oil per day;
– approximately 6,100 break-even inferred fields;
– annual synergies of approximately US$550 million;
– capital and operating cost synergies of US$325 million.
According to forecasts, the business combination will increase the value per share by 10% by 2025. Analysts also expect an increase in the company’s investment grade rating.
