Diamondback Energy has agreed to buy Endeavor Energy Resources in a $26bn deal, beating ConocoPhillips in a race for one of America’s most sought-after private oil producers.
The cash and stock transaction, announced on Monday, will transform Midland, Texas-based Diamondback into one of the biggest participants in the sprawling Permian Basin of Texas and New Mexico, the biggest US oilfield.
Diamondback, which was valued at $27bn before the deal was announced, had been vying for weeks with the much larger Conoco to buy the shale oil producer. News of the takeover sent its shares up 10 per cent on Monday.
“With this combination, Diamondback not only gets bigger, it gets better,” said Travis Stice, Diamondback’s chief executive.
The deal is the latest in a series of large-scale merger and acquisition activity in the US shale patch as companies look to snap up the best remaining drilling acreage.
ExxonMobil announced a $60bn deal in October to buy Pioneer Natural Resources, the biggest participant in the Permian. That was followed shortly afterwards by Chevron unveiling a $53bn acquisition of Hess, which has assets in North Dakota’s Bakken shale and a stake in the biggest oil find of the past decade, off the coast of Guyana in South America.
Last month, Chesapeake Energy agreed to buy Southwestern Energy for $7.4bn to create the country’s biggest natural gas producer.
Diamondback itself lost out to Occidental Petroleum in its bid to buy CrownRock, another big private operator in the Permian. Occidental agreed a $12bn deal for the company in December.
The Endeavor transaction will consist of an $8bn cash payment and 117.3mn Diamondback shares worth $18bn as of Friday. The combined company will produce 816,000 barrels of oil equivalent a day, making it one of the biggest participants in the US shale energy industry. Endeavor’s owners will retain a 40 per cent stake in the combined company.
Endeavor was set up by wildcat billionaire Autry Stephens in 2000, emerging from a business he built up from a solitary rig in 1979. Alongside CrownRock and Mewbourne Oil, it grew to become one of the leading private operators in the country.
The company has been on the market intermittently over the years, but no would-be acquirer has ever offered enough to satisfy Stephens.
“I am grateful to the Endeavor team and proud of what we have built since 1979,” Stephens said on Monday. “We believe Diamondback is the right partner for Endeavor, our employees, families and communities.”
Andrew Dittmar, an analyst at consultancy Enverus, said Diamondback’s record as a low-cost and efficient operator “gave the Stephens family confidence in taking their equity as the major consideration in the deal” and was “key to securing the deal . . . when negotiating against larger rivals”.
“The acquisition of Endeavor has a high likelihood of being the biggest upstream deal of 2024 and is among the last major outstanding M&A puzzle pieces to put together in the Permian Basin,” he added.
Like other private producers, Endeavor has increased output sharply in recent years as publicly listed rivals have held back on drilling under pressure from Wall Street to return cash to shareholders.
The surge in output from private oil groups has helped drive US production to record levels. The country pumped 13.3mn b/d of oil in November, the last month for which data is available from the Energy Information Administration, more than any country in history.
