Project report
USD 26 billion shale megadeal
Diamondback Energy Inc . has agreed to buy fellow Texas oil and gas producer Endeavor Energy Resources LP in a USD 26 billion cash-and-stock deal to create the largest operator focused on the prolific Permian basin .
By Joanne McIntyre , Valve World
Image by Endeavor Energy Resources LP .
The agreement , announced on February 12 , is the latest in a string of massive deals transforming the US oil and gas landscape as companies push to line up future drilling sites and cut costs . Over the past four months , Exxon Mobil Corp . struck a deal to buy Pioneer Resources for about USD 60 billion , Chevron Corp . agreed to buy Hess Corp . for about USD 53 billion and Occidental Petroleum Corp . agreed to buy CrownRock LP for about USD 10.8 billion .
Stronger together
The deal between Diamondback Energy and Endeavor will see the companies merge in a transaction valued at approximately USD 26 billion , inclusive of Endeavor ’ s net debt . The combination will create a premier Permian independent operator ( see box ). “ This is a combination of two strong , established companies merging to create a ‘ must own ’ North American independent oil company . The combined company ’ s inventory will have industry-leading depth and quality that will be converted into cash flow with the industry ’ s lowest cost structure ,
creating a differentiated value proposition for our stockholders ,” stated Travis Stice , Chairman and Chief Executive Officer of Diamondback . “ This combination meets all the required criteria for a successful combination : sound industrial logic with tangible synergies , improved combined capital allocation and significant near and longterm financial accretion .” Mr . Stice continued , “ Our companies share a similar culture and operating philosophy and are headquartered across the street from one another , which should allow for a seamless integration of our two teams . As a result , we look forward to continuing to deliver best-in-class results with a combined employee base headquartered in Midland , assuring Midland ’ s relevance in the global oil market for the next generation .”
Merger complete in 2024
Diamondback expects the merger to close in the fourth quarter of 2024 , subject to the satisfaction of customary closing conditions . Operational synergies are expected to be realised in 2025 by the combined company which will continue to be headquartered in Midland , Texas .
Permian basin set to break records
Oil production from the prolific Permian basin of West Texas and New Mexico is poised to rise to fresh record this year as drilling gets more efficient , according to the major U . S . pipeline operator Plains All American Pipeline LP . Production from the basin is set to reach 6.4 MMbpd at the end of this year , up from 6.1 MMbpd at the end of 2023 . The growth will happen due to drilling efficiencies even as the number of rigs remains stable , Chief Financial Officer Al Swanson said in the companies fourth quarter earning presentation . Three hundred rigs are “ probably doing the work of close to 330 rigs 12 months ago ,” he said . In the long term , Swanson also sees the industry increasing the amount of oil pumped from each well compared with the total volume available in the field . The Permian ’ s Delaware basin will lead the increase , while production in the Midland section will remain stable , Swanson said . Last year , total U . S . oil production soared by 1 MMbpd as operators drilled deeper and longer wells — some stretching for miles — to extract more crude . The surge helped American crude exports rise to a record , putting pressure on OPEC to restrain production and supplying European buyers who ’ ve turned away from Russian crude because of the war in Ukraine of the largest private operators in the United States .
12 Valve World March 2024 www . valve-world . net