(Reuters) -Diamondback Energy Inc said on Monday it would buy rival QEP Resources Inc for $555.2 million in an all-stock deal, as the U.S. shale industry rapidly consolidates to weather a pandemic-induced downturn.
The purchase will give Diamond around 49,000 more acres in the Midland region of the top U.S. oil field, the Permian basin in Texas, the most sought after region in recent mergers.
Diamondback is also buying lease interests and assets in Midland from privately held Guidon Operating LLC for over $850 million, and it will now allocate most of its capital to the Northern Midland basin.
U.S. shale drillers are seeking to scale up and cut costs to survive lower oil production after COVID-19 lockdowns slashed global fuel demand through much of this year.
Recent deals in the Permian Basin include Pioneer Natural Resource Co’s $4.5 billion buyout of Parsley Energy Inc and ConocoPhillips’ $9.7 billion deal for Concho Resources Inc.
On closing of the QEP and Guidon deals, Diamondback said its total leasehold interest in Midland will be over 276,000 acres.
The company said both deals will immediately add to its 2021 free cash flow per share and will result in annual savings of at least $60 million to $80 million after they close. The QEP deal is expected to close in the first quarter or early in the second quarter of 2021.
QEP shareholders will get 0.05 of a Diamondback share for each share held, implying a per share value of $2.29, a small discount to the stock’s Friday close.
Including about $1.6 billion of QEP’s debt, the transaction is valued at $2.2 billion.
Diamondback shares fell 5.8% premarket, while QEP’s stock slid nearly 7%.
Reporting by Shariq Khan and Arundhati Sarkar in Bengaluru; Editing by Ramakrishnan M. and Sriraj Kalluvila
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December 21, 2020 at 06:56PM
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Diamondback Energy expands in Permian with QEP deal as shale deals gather pace - Reuters
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