Diamondback and Endeavor to Merge in $50 Billion Oil Deal

The deal would create one of the largest independent oil producers in the world, with a production capacity of over 1 million barrels per day.

by Motoni Olodun

The US oil industry is set to witness one of its biggest mergers in history, as Diamondback Energy Inc. and Endeavor Energy Resources are in final discussions to create a $50 billion energy giant.

The deal, which could be announced as soon as Monday, would value Endeavor at around $25 billion in a mix of stock and cash, according to people familiar with the matter. Diamondback has a market capitalization of $27.2 billion, making it one of the largest independent oil producers in the country.

The merger would combine Diamondback’s prolific shale assets in the Permian Basin with Endeavor’s vast land holdings and mineral rights in the same region. The combined company would have a production capacity of over 1 million barrels of oil equivalent per day, rivaling some of the major oil companies in the world.

The deal comes amid a wave of consolidation in the US oil sector, as producers seek to cut costs, boost efficiency, and increase returns to shareholders in a challenging market environment. Oil prices have rebounded from the historic lows of 2022 when the coronavirus pandemic crushed global demand, but they remain well below the levels seen before the crisis.

The US oil industry has also faced increasing pressure from investors and regulators to reduce its carbon footprint and invest more in clean energy sources. The Biden administration has pledged to achieve net-zero emissions by 2050 and has taken several steps to limit new oil and gas development on federal lands and waters.

The Diamondback-Endeavor deal would create a company with a strong balance sheet and cash flow, as well as a diversified portfolio of assets that could support both conventional and renewable energy projects. The deal would also give Diamondback access to Endeavor’s mineral rights, which cover about 10 million acres in the Permian Basin and generate royalty income from other operators.

The deal would be the latest in a series of mega-mergers in the US oil industry, following the combinations of ConocoPhillips and Concho Resources, Pioneer Natural Resources, Parsley Energy, and Chevron and Noble Energy in 2022 and 2023. These deals have reshaped the competitive landscape in the Permian Basin, the most prolific oil-producing region in the US and the world.

The Diamondback-Endeavor deal would also mark a major milestone for Endeavor’s founder and chairman, Autry Stephens, who started the company in 1979 with a single well and built it into one of the largest privately held oil producers in the country. Stephens, who owns about 90% of Endeavor, has resisted selling the company in the past, but has reportedly been open to a deal with Diamondback.

Neither Diamondback nor Endeavor have commented on the deal, which is still subject to final negotiations and approvals. The Wall Street Journal first reported on the talks on Sunday.

Source: Bloomberg

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