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Diamondback Energy Expands in Permian Basin Through $4.08 Billion Deal

On February 18, Diamondback Energy announced its acquisition of specific assets of Double Eagle, an energy producer backed by EnCap Investments, for $4.08 billion in cash and stock. This move aims to expand Diamondback's presence in the oil-rich U.S. Permian Basin region.

Having intensified its focus on the Permian Basin, which spans West Texas and New Mexico, Diamondback previously sealed a deal in 2024 to purchase Endeavor Energy Partners, positioning itself as the third-largest producer in the area.

The acquisition will grant Diamondback access to around 40,000 net acres situated in the Midland Basin core, representing a significant asset in the region.

Despite some fluctuations in morning trading, the company's shares experienced a slight increase.

Analyst Neal Dingmann from Truist Securities noted that market sentiment regarding the transaction's costliness compared to past deals may have influenced the stock performance, overlooking the stability of the acquired assets.

Diamondback Energy foresees $200 million in capital expenditures by 2025 and anticipates achieving a production rate of approximately 27,000 barrels of oil per day from the acquired Midland assets.

To reduce pro forma debt, the company plans to divest at least $1.5 billion of non-core assets, with the aim of cutting net debt to $10 billion and maintaining a long-term leverage of $6 billion to $8 billion.

Previously, Double Eagle had signaled its interest in offloading its Permian Basin-based assets.

Diamondback will settle the transaction with nearly 6.9 million shares and $3 billion in cash, with the closure slated for April 1.