Diamondback said it has entered into a definitive purchase agreement to acquire certain subsidiaries of Double Eagle IV Midco LLC.

Diamondback Energy Inc announced a Midland Basin acquisition in a statement posted on its site on Tuesday.

In that statement, the company said it has entered into a definitive purchase agreement to acquire certain subsidiaries of Double Eagle IV Midco LLC in exchange for approximately 6.9 million shares of Diamondback common stock and $3 billion of cash, subject to customary adjustments.

The company said in the statement that it expects the transaction to close on April 1, 2025, subject to the satisfaction of customary closing conditions and regulatory approval.

Diamondback Energy revealed in the statement that the cash portion of the deal “is expected to be funded through a combination of cash on hand, borrowings under the company’s credit facility, and/or proceeds from term loans and senior notes offerings”.

The company noted in the statement that, as part of this agreement, Diamondback and Double Eagle have also agreed to accelerate development on a portion of Diamondback’s non-core southern Midland Basin acreage.

Diamondback also said in the statement that it is “committing … to sell at least $1.5 billion of non-core assets to accelerate pro forma debt reduction in order to maintain its strong balance sheet”. The company noted that it expects to reduce net debt to $10 billion “and, long term, maintain leverage of $6 billion to $8 billion”.

“Double Eagle is the most attractive asset remaining in the Midland Basin,” Travis Stice, Chairman and Chief Executive Officer of Diamondback, said in the statement.

“With 407 locations adjacent to our core position, this largely undeveloped asset adds high-quality inventory that immediately competes for capital,” he added.

“Additionally, we see value uplift to our existing inventory as acreage overlap allows for meaningful lateral length extensions and infrastructure synergies. We look forward to seamlessly implementing our industry leading cost and operational structure on this differentiated asset,” he continued,

Stice went on to note in the statement that “the Permian Basin continues to consolidate rapidly”.

“We have worked tirelessly over the last thirteen years to position Diamondback to have the longest duration of high quality, low-breakeven inventory; a position we are solidifying with today’s announcement,” he said.

“While we are adding a small amount of leverage to complete this trade, we are confident that we can quickly reduce debt both naturally through our consistent and growing Free Cash Flow and through our commitment to sell at least $1.5 billion of non-core assets,” he went on to state.

Cody Campbell and John Sellers, Co-Chief Executive Officers of Double Eagle, said in the statement, “we are excited to announce our agreement with Diamondback”.

“We believe our team has built a truly standout asset that further increases Diamondback’s high-quality inventory,” they added.

“It was important to us that we maintain the stewardship of this asset going forward not only with a world-class Midland operator but also a group that shares our core values and understands the importance of community impact in West Texas,” they continued.

First Big Permian Deal of 2025

In a statement sent by the Enverus team, Andrew Dittmar, a principal analyst at the company, described the Diamondback-Double Eagle transaction as “the first big Permian deal of 2025”.

“Midland Basin juggernaut Diamondback Energy is buying part of the assets of private equity funded Double Eagle IV for $3 billion in cash and $1.08 billion in Diamondback equity,” Dittmar highlighted.

“The deal adds 27,000 barrels per day of net oil production plus 40,000 net acres in the Midland Basin,” he pointed out.

Dittmar noted in the statement that Diamondback has been one of the most acquisitive companies in the Permian Basin throughout its history and said the company transformed itself from a mid-size operator to the second largest producer in the Midland Basin behind ExxonMobil, based on gross operated oil volumes.

“With Pioneer Natural Resources sold to Exxon in 2023, Diamondback has taken over the mantel of being the premier large Permian pure play with broadly comparable scale to Pioneer at the time of its sale,” Dittmar stated.

“For a company as focused on M&A in the Midland Basin as Diamondback, buying Double Eagle is a key priority because it represents one of the last current opportunities to get a large, high-quality asset from a private seller,” he added.

“The acquisition price looks high for Double Eagle’s remaining inventory - not surprising given demand for assets in the Permian contrasted with few opportunities,” he continued.

Dittmar said in the statement that Diamondback has an advantage over most other potential buyers because of its low drilling costs that can be applied to acquired inventory, premium equity valuation, and willingness of sellers to take its stock.

The Enverus Principal Analyst noted in the statement that public companies have been largely focused on adding undeveloped inventory and highlighted that Diamondback “is structuring this deal with Double Eagle retaining a significant portion of its existing production in the southern Midland Basin and also striking an agreement to accelerate development on part of Diamondback’s southern Midland position”.

“Diamondback also said it would pursue $1.5 billion in non-core asset sales. Diamondback would likely look to its Delaware Basin assets for sales opportunities, further concentrating its focus on the Midland Basin,” Dittmar said.

The Enverus analyst stated that buying private assets has been fundamental to Permian Basin M&A but added that “after three years of furious consolidation there are very few remaining opportunities”.

“Remaining private companies with high-quality drilling inventory - like Fasken Oil & Ranch in the Midland Basin and Mewbourne Oil in the Delaware Basin - are multi-generation family companies not necessarily interested in a sale like the private equity-built E&Ps,” he noted.

“Additionally in the past, private equity firms would reenter the play after a sale, but with inventory increasingly locked up by big companies not interested in selling, that has become far more challenging,” he said.

While building a new position in the Permian is challenging, it can be done, Dittmar said in the statement, adding that the Double Eagle team has been as, or more, effective than anyone in consistently building new positions and selling them at premium prices.

“The team’s sale of DoublePoint to Pioneer in April 2021 set a post-Covid record for Permian asset valuations and kicked off the buying frenzy of private companies in the Basin,” Dittmar said.

“Now four years later, the same co-founders are selling one of the last big private companies at acreage pricing that looks to be about 50 percent higher than the 2021 sale,” he added.

“The Basin has evolved significantly since the 2021 sale including operators unlocking new stacked intervals that can be economically developed, but on a price per undeveloped drilling location Double Eagle also again appears to be selling at a premium price,” he continued.

“The company is also retaining a large wedge of its existing production in the southern Midland Basin. That provides an existing platform to build from or could be sold to another operator,” he went on to state.