Diamondback boosts Permian basin presence with 2 shale deals

Map of the Permian Basin

Diamondback Energy Inc. rounded off a tumultuous year for the U.S. shale industry with the acquisition of two rival producers for about $1.4 billion that will expand the company’s position in the Permian Basin.

Diamondback said Monday in a statement it agreed to buy shale oil and natural gas producer QEP Resources Inc. The all-stock deal values QEP at $2.29 per share, or about $555 million.

In a separate statement, Diamondback said it agreed to purchase closely held Guidon Operating LLC. That cash-and-stock deal values Guidon, which was co-founded in 2016 by funds managed with Blackstone Group, at about $862 million.

The acquisitions are a bet by Midland, Texas-based Diamondback on the resilience of the shale sector, whose production has dropped this year following the collapse of oil prices. The deals are Diamondback’s largest since its $7 billion takeover of Energen Corp. in 2018, and will bring its total leasehold interests to over 276,000 net surface acres in the Midland Basin, which is part of the Permian in West Texas.

Diamondback said QEP’s assets in the Williston Basin, which straddles Montana, North Dakota and South Dakota, are considered non-core and will be used to harvest cash flow or sold, based on market conditions. Diamondback dropped 4.2 per cent to $43.90 in pre-market trading at 7:30 a.m. in New York. QEP fell 8.2 per cent to $2.12.

For the QEP deal, Goldman Sachs Group Inc. is lead financial adviser to Diamondback, with Moelis & Co. also serving as a financial adviser. Akin Gump Strauss Hauer & Feld LLP and Gibson, Dunn & Crutcher LLP are its legal advisers. Evercore and Latham & Watkins LLP are QEP’s financial and legal advisers respectively.

For Guidon, Morgan Stanley is Diamondback’s financial adviser and Akin Gump Strauss Hauer & Feld LLP is its legal adviser. Citigroup Inc. and RBC Capital Markets are Guidon’s financial advisers and Kirkland & Ellis LLP is its legal adviser.

© 2020 Bloomberg L.P.

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.