Diamondback Expands Again with $4.1 Billion for Double Eagle

(Bloomberg) -- Diamondback Energy Inc. will expand in the Permian Basin after agreeing to acquire subsidiaries of closely held Double Eagle IV Midco LLC for about $4.1 billion, a significant asset boost for the top independent oil producer in North America’s most prolific shale patch.

The transaction will be paid for with $3 billion in cash and 6.9 million Diamondback common shares, according to a statement. The company also plans to sell at least $1.5 billion of non-core assets. The stock fell as much as 1.7% on Tuesday. 

The transaction is the latest in a flurry of acquisitions in the Permian, which straddles West Texas and New Mexico. As the industry matures and production growth slows, the largest players have been seeking greater efficiency by increasing the scale of operations. 

“Double Eagle is the most attractive asset remaining” in the Permian’s Midland sub-region, Travis Stice, chairman and chief executive officer of Diamondback, said in the statement. “This largely undeveloped asset adds high-quality inventory that immediately competes for capital.”

Double Eagle is led by former former Texas Tech University football player Cody Campbell and John Sellers, whose core team has started and sold several shale businesses in recent years.

The newly acquired assets will produce an average of 27,000 barrels of oil per day this year, according to Diamondback. The Midland, Texas-based explorer will deploy an additional drilling rig after the deal, despite significantly expanding its footprint in an underdeveloped part of the Permian. The transaction is expected to close by April 1.

Diamondback has planned to hold output growth in 2025 to about 2% as the company prioritizes free cash flow over capital spending. Shale drillers are trying to avoid getting caught in an oil glut as the global crude market risks oversupply.

Last year, Diamondback bought rival driller Endeavor Energy Resources LP for $28 billion, creating the largest explorer focused exclusively on the Permian.

(Updates with share price in second paragraph.)

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