Aug. 14–Midland oil producer Diamondback Energy said it will pay about $8.4 billion to scoop up a rival as industry consolidation unfolds in West Texas’ Permian Basin.
Diamondback said it is buying Alabama-based Energen, both of which operate exclusively in the Permian, in an all-stock deal. The acquisition comes just a week after Diamondback also agreed to buy out Houston-based Ajax Resources, another Permian player, for $1.2 billion.
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.
Earlier this year, Midland-based Concho Resources paid $8 billion to buy RSP Permian of Dallas. And, in July, London-based BP made a big Permian move by agreeing to pay $10.5 billion for the Texas assets of Australia’sBHP Billiton, which is pulling out of the U.S. oil business.
As for Diamondback, the Energen and Ajax deals combine to spike Diamondback’s acreage in the Permian’s Midland and Delaware basins by about 85 percent, up from 211,000 net acres to 390,000 net acres. The Ajax sale includes less than 30,000 acres.
“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 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.
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