Diamondback Energy announces $4.08 billion acquisition to expand Permian presence

Diamondback Energy announced a definitive agreement to acquire certain subsidiaries of Double Eagle IV Midco, LLC, an energy producer backed by EnCap Investments. The transaction, valued at approximately $4.08 billion, comprises $3 billion in cash and 6.9 million shares of Diamondback common stock. The acquisition is slated to close on 1 April 2025, pending customary closing conditions and regulatory approvals.

This strategic move aims to bolster Diamondback's footprint in the oil-rich US Permian Basin, particularly within the Midland Basin. The acquired assets encompass about 40,000 net acres, including 407 locations adjacent to Diamondback's core operations. This expansion is expected to enhance the company's inventory of high-quality drilling locations, contributing to long-term growth and operational synergies.

To finance the cash portion of the deal, Diamondback plans to utilise a combination of cash reserves, borrowings under its credit facility, and proceeds from term loans and senior notes offerings. In line with its financial strategy, the company has also committed to divesting at least $1.5 billion in non-core assets. This initiative aims to reduce pro forma debt, targeting a net debt level of $10 billion and maintaining long-term leverage between $6 billion and $8 billion.

“Double Eagle is the most attractive asset remaining in the Midland Basin,” stated Travis Stice, Chairman and Chief Executive Officer of Diamondback. “With 407 locations adjacent to our core position, this largely undeveloped asset adds high-quality inventory that immediately competes for capital. Additionally, we see value uplift to our existing inventory as acreage overlap allows for meaningful lateral length extensions and infrastructure synergies. We look forward to seamlessly implementing our industry leading cost and operational structure on this differentiated asset.”

He continued, “The Permian Basin continues to consolidate rapidly. We have worked tirelessly over the last thirteen years to position Diamondback to have the longest duration of high quality, low-breakeven inventory; a position we are solidifying with today’s announcement.  While we are adding a small amount of leverage to complete this trade, we are confident that we can quickly reduce debt both naturally through our consistent and growing Free Cash Flow and through our commitment to sell at least $1.5 billion of non-core assets.”

Cody Campbell and John Sellers, Co-Chief Executive Officers of Double Eagle, commented, “We are excited to announce our agreement with Diamondback. We believe our team has built a truly standout asset that further increases Diamondback’s high-quality inventory. It was important to us that we maintain the stewardship of this asset going forward not only with a world-class Midland operator but also a group that shares our core values and understands the importance of community impact in West Texas.”

Financially, the acquisition is valued at approximately 5.2 times projected 2025 EBITDA. It is anticipated to enhance 2026 Free Cash Flow per share by over 5% and is expected to be immediately accretive to key financial metrics, including Cash Flow per share, Free Cash Flow per share, and Net Asset Value per share.

This transaction reinforces Diamondback's position as a leading operator in the Permian Basin, further solidifying its inventory and financial outlook for the coming years.