Diamondback Energy Inc. said Aug. 14 it will create a Permian powerhouse with the acquisition of Energen Corp. in an all-stock transaction worth roughly $9.2 billion. The transaction also includes the assumption of Energen’s net debt of $830 million as of June 30. This marks a big week for Diamondback as they announced last week they would acquire Ajax for $1.2 billion.
Under the terms of the deal, Energen shareholders would receive 0.6442 shares of Diamondback common stock, representing an implied value to each Energen shareholder of $84.95 a share based on the closing price of Diamondback stock on Monday. The transaction was unanimously approved by each company’s board of directors, they said in a statement. The deal would make Diamondback one of the largest independent energy companies in West Texas’s Permian basin, and increase by 57% Diamondback’s net acreage in the one of the most prolific U.S. “tight” oil and gas region
“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,” said Diamondback Chief Executive Travis Stice.
Energen owned about 150,000 acres across the Permian at the end of last year. The region straddling West Texas and New Mexico has become among the hottest oil and gas basins in the world, powering the U.S. drilling surge. The deal values Energen’s properties at about $65,000 per acre, among the highest prices in the Permian in the last several years, said Andrew Dittmar, an M&A analyst at data provider DrillingInfo.
Energen was placed up for sale in part from pressure from some of its activist investors like Corvex Capital and famed corporate raider Carl Icahn, who argued shareholders would benefit from selling at a premium in the red-hot Permian. Corvex last fall moved to call a special meeting of shareholders to remake Energen’s board, prompting a lawsuit from the company.
With most of the best acreage in the Permian already owned, more companies are buying up other firms in order to grow. Big Oil giants and several of the bigger independents, like Diamondback, are all trying to stake out the best and largest positions in the Permian, which accounts for almost one-third of the nation’s record-high crude oil production volumes.
