Diamondback Enters Into an Agreement to Expand Midland Basin Footprint

Core Insights - Diamondback Energy, Inc. (FANG) has acquired key Midland Basin assets from Double Eagle IV Midco, LLC in a deal valued at approximately $4 billion, consisting of$3 billion in cash and about 6.9 million shares of common stock [3][4] - The acquisition is expected to enhance Diamondback's core holdings and position the company for long-term free cash flow growth, with an estimated run-rate production of about 27 MBo/d [4][5] - The deal includes an agreement to accelerate development at a non-core southern Midland Basin asset, which will increase the net asset value and free cash flow with minimal capital deployment [2][4] Financial Considerations - The cash portion of the transaction will be financed through a combination of cash on hand, borrowings under a credit facility, and proceeds from term loans and senior notes offerings [3][6] - To maintain financial discipline, Diamondback has committed to selling at least $1.5 billion of its non-core assets, aiming to reduce net debt to$10 billion and maintain long-term leverage between $6 billion and$8 billion [6] Strategic Expansion - The acquisition covers approximately 40,000 net acres in the Midland Basin, with 68% of the undeveloped acreage and 407 new locations in development target, significantly extending Diamondback's high-quality inventory [4][5] - This strategic move solidifies Diamondback's position as a leader in the Permian Basin, enhancing its long-duration high-quality inventory with a low breakeven [5]