Released February 13, 2024 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--In what would become an oil and gas powerhouse producer, Diamondback Energy, Incorporated (NASDAQ:FANG) (Midland, Texas) and Endeavor Energy Resources, L.P. (Midland) announced Monday that they have "entered into a definitive merger agreement" in a $26 billion stock and cash deal. Under the agreement, Diamondback shareholders will own 60.5% of the combined company, and Endeavor's equity holders will own about 39.5%.
Diamondback, under Chairman and Chief Executive Officer Travis Stice, and Endeavor, with founder and Chairman of the Board Autry Stephens, have expressed a strong commitment to environmental, social and governance (ESG) issues. The combined company will own 838,000 net acres and 816,000 barrels of oil equivalent per day (boe/d) of net production, according to a joint press release.
IIR's Geoffrey S. Lakings sees this consolidation as an opportunity for more production from a basin that is already among the world's most productive--and growing. Lakings noted, "Market pundits including the EIA are predicting U.S. production to average 13.3 million barrels per day (BBL/d) through 2025, but I suspect we'll be looking to break through to 14 million BBL/d of oil and 108 billion cubic feet per day in natural gas by the end of this Year of the Dragon."
It will have an inventory of approximately 6,100 drillable locations with a break-even WTI oil price at less than $40 per barrel. The capital budget is estimated at $4.1 billion-$4.4 billion. During a post-release conference call, Diamondback's leadership pointed out that there is also a large inventory of drilling locations with break-even prices of $50-$60, in the Middle Spraberry to parts of the Wolfcamp in the Permian Basin. With oil prices predicted to approach $80-$90 by year's end, those wells could be productive, cost-wise, for the foreseeable future.
The synergies abound. In the call, Diamondback's Travis Stice noted there are "about 100,000 acres that are touching or overlapping," including some properties where both companies are involved, with Endeavor as the non-operating partner. "We've modeled about 150-175 laterals that that can be extended" once the transaction closes.
"As you think about secondary zone development in this basin over the next 10-20 years there's a lot of upside between the two businesses," Stice said. Diamondback and the industry as a whole expand shale laterals to 3-4 miles, "particularly in Martin County, if you look at the overlap, will accrue to the combined shareholder base over a long time." They believe they can drill in this region for $625 per foot.
Currently, Diamondback is completing about 300 wells per year and Endeavor is completing about 200, adding up to about 500 wells. Once the companies are combined, some economies may be created by reviewing that number, with somewhere between 475 or 460 wells being sufficient to sustain growth instead.
The Big Picture
The Oil & Gas Industry hosted record merger and acquisition (M&A) activity last year, topping $100 billion, with Exxon Mobil Corporation (NYSE:XOM) (Spring, Texas) and Chevron Corporation (NYSE:CVX) (San Ramon, California) as the top buyers. This year began with several smaller M&As until now. With all domestic basins maturing, including the Permian, many analysts see the days of the independent wildcatter bowing out and giving way to more efficient economies of scale as referenced above.
The Chevron and ExxonMobil transactions may face scrutiny by the Biden administration as some are concerned that the consolidations could lead to higher oil and gas prices. But as prices are more affected by international issues such as Houthi attacks on Red Sea shipping, the Israel-Hamas conflict and others, it may be more likely that the Oil & Gas Industry sees a chance to do two things--further increase profits by continuing to grow production, and, especially in the natural gas realm, to supply allies with a relatively clean fuel as part of the energy transition.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Diamondback, under Chairman and Chief Executive Officer Travis Stice, and Endeavor, with founder and Chairman of the Board Autry Stephens, have expressed a strong commitment to environmental, social and governance (ESG) issues. The combined company will own 838,000 net acres and 816,000 barrels of oil equivalent per day (boe/d) of net production, according to a joint press release.
IIR's Geoffrey S. Lakings sees this consolidation as an opportunity for more production from a basin that is already among the world's most productive--and growing. Lakings noted, "Market pundits including the EIA are predicting U.S. production to average 13.3 million barrels per day (BBL/d) through 2025, but I suspect we'll be looking to break through to 14 million BBL/d of oil and 108 billion cubic feet per day in natural gas by the end of this Year of the Dragon."
It will have an inventory of approximately 6,100 drillable locations with a break-even WTI oil price at less than $40 per barrel. The capital budget is estimated at $4.1 billion-$4.4 billion. During a post-release conference call, Diamondback's leadership pointed out that there is also a large inventory of drilling locations with break-even prices of $50-$60, in the Middle Spraberry to parts of the Wolfcamp in the Permian Basin. With oil prices predicted to approach $80-$90 by year's end, those wells could be productive, cost-wise, for the foreseeable future.
The synergies abound. In the call, Diamondback's Travis Stice noted there are "about 100,000 acres that are touching or overlapping," including some properties where both companies are involved, with Endeavor as the non-operating partner. "We've modeled about 150-175 laterals that that can be extended" once the transaction closes.
"As you think about secondary zone development in this basin over the next 10-20 years there's a lot of upside between the two businesses," Stice said. Diamondback and the industry as a whole expand shale laterals to 3-4 miles, "particularly in Martin County, if you look at the overlap, will accrue to the combined shareholder base over a long time." They believe they can drill in this region for $625 per foot.
Currently, Diamondback is completing about 300 wells per year and Endeavor is completing about 200, adding up to about 500 wells. Once the companies are combined, some economies may be created by reviewing that number, with somewhere between 475 or 460 wells being sufficient to sustain growth instead.
The Big Picture
The Oil & Gas Industry hosted record merger and acquisition (M&A) activity last year, topping $100 billion, with Exxon Mobil Corporation (NYSE:XOM) (Spring, Texas) and Chevron Corporation (NYSE:CVX) (San Ramon, California) as the top buyers. This year began with several smaller M&As until now. With all domestic basins maturing, including the Permian, many analysts see the days of the independent wildcatter bowing out and giving way to more efficient economies of scale as referenced above.
The Chevron and ExxonMobil transactions may face scrutiny by the Biden administration as some are concerned that the consolidations could lead to higher oil and gas prices. But as prices are more affected by international issues such as Houthi attacks on Red Sea shipping, the Israel-Hamas conflict and others, it may be more likely that the Oil & Gas Industry sees a chance to do two things--further increase profits by continuing to grow production, and, especially in the natural gas realm, to supply allies with a relatively clean fuel as part of the energy transition.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
