Two major Texas oil producers are joining forces in a deal worth $26 billion, the latest in a wave of consolidation in the U.S. energy industry.
Diamondback Energy and Endeavor Energy Resources, both major players in the burgeoning Permian Basin oil field that straddles New Mexico and Texas, announced on monday that they would merge in a cash and stock deal, with Diamondback shareholders owning about 60 percent of the combined company.
The Permian Basin was once seen as a worn-out zone. But over the past decade, technological advances, including the advent of fracking, or hydraulically fractured horizontal wells, have opened up its oil- and gas-rich shale fields to development. The basin has become the most productive oil and gas field in the U.S.
“With this combination, Diamondback is not only growing, it is getting better,” Travis Stice, the company’s chief executive, said in a statement.
Diamondback Energy, founded in 2007 and publicly traded since 2012, reported $9.6 billion in revenue, primarily from oil, and more than $4 billion in profits in your last fiscal year. It has a market value of around $27 billion.
“Diamondback was built through an acquisition and exploitation strategy,” Stice said. wrote in a letter to shareholders in November. He added that being a “low-cost carrier” has been the company’s strength and that “we expect Diamondback to continue to be a consolidator in the future.”
Endeavor’s origins date back to 1979, when a wildcat explorer, Autry Stephens, drilled his first well in West Texas. He converted his business to Endeavor in 2000, and it has grown to become one of the largest private operators in the country. But Mr. Stephens, whose Bloomberg value Dear All is almost $15 billion, now it’s 85, and the current wave of consolidation makes this a good time to sell.
“As we look to the future, we are confident that joining Diamondback is a transformative opportunity for us,” Stephens said in a statement.
Deal fever has been sweeping the industry, as oil and gas companies rush to consolidate despite predictions that peak oil is just a few years away as the world transitions away from fuels. fossils. Over the years, the shale drilling industry has become an industrial process, with stronger companies acquiring more acreage to have better options and lower costs.
The combined company would be a major player, producing 816,000 barrels of oil and gas per day from a total of 838,000 acres. According to a press release, they could break even with oil at less than $40 a barrel, well below the current price of around $76 a barrel for West Texas Intermediate, the US standard.
The companies expect the deal to close in the fourth quarter of this year, subject to regulatory and shareholder approval.
A series of major deals were announced one after another last fall. In October, Exxon Mobil said it would buy Pioneer Natural Resources for $59.5 billion, positioning Exxon Mobil as the largest player in the Permian. Later that month, Chevron, the second-largest U.S. oil company, said it would buy Hess in a deal. valued at 53 billion dollarsalthough the most valuable assets in that transaction were abroad, in Guyana.
Occidental Petroleum made an aggressive play in the Permian in 2019, when it beat out Chevron by spending nearly $40 billion to buy Anadarko Petroleum. Last December, Occidental announced it would buy CrownRock, a privately held oil producer in the region, for $12 billion. The purchase covered 94,000 acres, including about 1,700 undeveloped locations, Occidental saying.
The Permian Basin has been the focus of environmentalists concerned about how the fracking boom has depleted water resources and caused methane emissions.
Stanley Reed contributed with reports.
