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Diamondback acquires two oil companies in a $3 billion deal

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Diamondback Energy announced Monday a pair of acquisitions of more than $3 billion worth QEP Resources and Guidon Operating LLC. According to the Company, these acquisitions further enhance its position in the Midland Basin of West Texas.

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Diamondback: new acquisitions

The Midland oil and gas producer, Diamondback Energy, announced Monday its QEP Resources and Blackstone Groupowned Guidon Operating LLC acquisitions. The company said these agreements would bring its total leasehold interests in the region to more than 276,000 surface acres, generating at least $60 million in savings from efficiencies.

In this regard, the purchaser will acquire QEP in an all-stock transaction valued at about $2.2 billion. This transaction includes QEP’s net debt of $1.6 billion. Unanimously approved by the two companies’ boards of directors, the deal is expected to reach close by the second quarter of 2021, at the end of February.

Moreover, the company agreed to purchase the Blackstone group-owned Guidon Operating LLC. That cash-and-stock deal values Guidon at about $862 million as of Friday. The purchaser offers 10.63 million shares and $375 million of cash; these transactions are funded through cash on hand and borrowing under the company’s credit line.

The deals are Diamondback’s largest since its $7 billion takeovers of Energen Corp.

Resilience in the shale sector

These acquisitions show Diamondback’s resilience in the shale sector, whose production dropped this year following the collapse of oil prices.

“Diamondback does not need to participate in industry consolidation to get bigger simply,” Travis Stice, the company’s CEO, said in a statement. “We participate in corporate development opportunities that we firmly believe will increase the long-term value of our stockholders’ investment.”

Other oil company consolidation efforts include ConocoPhillips’ $9.7 billion takeover of Concho Resources; Pioneer Natural Resources’ $4.5 billion of Parsley Energy; and Devon Energy’s nearly $2.6 billion plans to purchase WPX Energy.  

The deals will give Diamondback 56 drilled but not completed oil wells and pipelines in the Permian Basin. The company said it could sell QEP’s assets in the Williston Basin of Canada to pay down its debt. Diamondback shares closed down nearly 2 percent Monday at $45.02

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