This deal, which is the latest in a wave of consolidation in the energy business in the United States, involves two significant oil producers from Texas coming together to form a partnership with a value of $26 billion.
Diamondback Energy and Endeavor Energy Resources, two significant participants in the thriving Permian Basin oil region that spans both New Mexico and Texas, made the announcement on Monday that they will merge in a cash-and-stock transaction. The shareholders of Diamondback Energy would own approximately sixty percent of the merged business.
Once upon a time, the Permian Basin was considered to be a worn-out area. However, over the course of the past decade or so, technological advancements, such as the introduction of hydraulically fractured horizontal wells, sometimes known as fracking, have made it possible to develop its naturally occurring shale resources that are rich in oil and gas.
Oil and gas production in the basin has increased to the point where it is now the most prolific field in the United States.
In its most recent fiscal year, Diamondback Energy, which was established in 2007 and has been publicly traded since 2012, stated that it generated more than $4 billion in profit and $9.6 billion in revenue, the majority of which came from oil sales. Approximate market value for it is approximately $27 billion.
In a letter that Mr. Stice sent to shareholders in November, he stated that “Diamondback was built through an acquire-and-exploit strategy.” He went on to say that the company’s strength has been its ability to be a “low-cost operator,” and that “we expect Diamondback to remain a consolidator in the future.”
When it was announced in 2019 that Occidental Petroleum had surpassed Chevron in terms of spending roughly $40 billion to acquire Anadarko Petroleum, the company took a bold move in the Permian.
Occidental made the announcement in December of this year that it would be purchasing CrownRock, a privately owned oil producer in the region, for a total price of $12 billion. According to Occidental, the acquisition encompassed over 1,700 underdeveloped areas and spanned a total area of 94,000 acres.
Environmentalists have been concentrating their attention on the Permian region because they are concerned about the impact that the fracking boom has had on the depletion of water resources and the emission of methane.