Page 16 - NorthAmOil Week 01 2021

NorthAmOil INVESTMENT NorthAmOil

Shale consolidation

continues over

Christmas with

Diamondback deals

US CONSOLIDATION of the US shale industry
continued over the 2020-21 festive season, with
Diamondback Energy announcing on Decem-
ber 21 that it had struck a deal to acquire QEP
Resources. The all-stock transaction is estimated
to be worth around $2.2bn, including QEP’s net
debt, which stood at $1.6bn as of September 30,
2020. The transaction values QEP at $2.29 per
share, or roughly $555mn before debt.
Diamondback is a pure play Permian
Basin-focused company, and the primary attrac-
tion of the deal is considered to be QEP’s assets
in the region’s Midland sub-basin. QEP’s Willis- and Midland basins, the company will have
ton Basin in North Dakota will be considered around 429,000 net acres (1,736 square km).
non-core and either used to generate cash flow “The business combination with QEP and the
or sold off, depending on market conditions, the Guidon transaction are accretive on all relevant
companies said. 2021 financial metrics, including free cash flow
The merger is anticipated to close in the first per share, cash flow per share and leverage, even
or second quarter of 2021. before accounting for synergies,” Diamondback’s
Diamondback will gain around 49,000 net CEO, Travis Stice, stated. He added that QEP’s
acres (198 square km) in the Midland Basin assets would compete for capital “right away” in
through the deal, the majority of which are held Diamondback’s current portfolio, and the com-
by production. This will allow for “capital effi- pany would now be able to allocate most of its
cient” development, the company said. capital to the Midland Basin for the foreseeable
QEP’s average production in the third quarter future. Meanwhile, the Guidon acquisition is
of 2020 totalled 48,300 barrels per day of oil, and expected to allow Diamondback to reduce capi-
76,700 barrels of oil equivalent per day overall. tal spending on its existing assets and re-allocate
Diamondback This consisted primarily of Permian Basin pro- a portion of that to “high-return” projects on the
duction, which amounted to 30,500 bpd of oil Guidon acreage, according to Stice.
will not only and 47,600 boepd in total. The company cur- “Diamondback will not only get bigger
get bigger rently has 48 drilled but uncompleted (DUC) through this transaction, but most importantly
wells, which Diamondback anticipates working better,” he said.
through this down 2021 alongside its own DUC inventory. The Diamondback deals follows several
This will help lower its 2021 reinvestment ratio, other shale-focused mergers and acquisitions
transaction, but the company said. (M&As) that were announced in the second half
Separately, Diamondback announced on of 2020 as operators increasingly saw consoli-
most importantly the same day that it had agreed to acquire all dation as a means to navigate a market experi-

better. leasehold interests and related assets of Guidon encing unprecedented challenges. Indeed, in an
Operating in exchange for 10.63mn shares of its update on a separate deal, Devon Energy and
common stock and $375mn in cash. That deal is WPX Energy announced on January 7 that they
Travis Stice due to close by the end of February and includes had completed their “merger of equals”, worth
CEO around 32,500 net acres (132 square km) in the $2.6bn. That deal creates a company that says it
Diamondback Energy Northern Midland Basin, most of which are also has its asset base underpinned by a “premium”
held by production. Guidon’s third-quarter pro- acreage position in the core of the Permian’s Del-
duction averaged 11,600 bpd of oil and 17,900 aware sub-basin.
boepd in total. Other pending deals that are due to close
Together, the QEP and Guidon deals will in the first quarter of 2021 include Pioneer
bring Diamondback’s total leasehold interests to Natural Resources’ acquisition of Parsley
over 276,000 net surface acres (1,117 square km) Energy and ConocoPhillips’ takeover of Con-
in the Midland Basin. Across both the Delaware cho Resources.™

P16 www. NEWSBASE .com Week 01 07•January•2021