Summary
Diamondback Energy, Inc. (FANG) has filed an 8-K report detailing a significant acquisition in the Delaware Basin. The company announced an agreement to purchase assets from Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC for approximately $2.43 billion. This transaction, referred to as the Pending Acquisition, includes $1.62 billion in cash and the issuance of 7.69 million shares of Diamondback's common stock to the seller. The acquired assets encompass over 76,000 net acres in Pecos and Reeves counties, Texas, with current production of approximately 9,500 BOE/d (77% oil) and substantial undeveloped drilling potential. To finance this acquisition, Diamondback is also undertaking a concurrent equity offering of 10.5 million shares (plus a potential over-allotment) and a proposed offering of $250 million in Senior Notes due 2025. The company anticipates that the acquisition, if completed, will significantly expand its acreage position and boost its preliminary 2017 production guidance. The transaction is subject to due diligence and closing conditions, with an expected closing in February 2017. Investors should note the dilutive effect of the stock issuance and the financing strategy involving both equity and debt.
Key Highlights
- 1Diamondback Energy enters into a material definitive agreement to acquire assets in the Delaware Basin for approximately $2.43 billion.
- 2The acquisition includes $1.62 billion in cash and the issuance of 7.69 million shares of Diamondback's common stock.
- 3The acquired assets consist of over 76,000 net acres in Pecos and Reeves counties, Texas, with current production of ~9,500 BOE/d (77% oil).
- 4The transaction is expected to add significant undeveloped horizontal drilling locations, estimated at 1,213 net locations.
- 5Diamondback is concurrently launching an equity offering of 10.5 million shares (plus an option) to fund a portion of the acquisition.
- 6A proposed $250 million offering of Senior Notes due 2025 is also being undertaken to help finance the purchase.
- 7The company raised its preliminary full-year 2017 production guidance to 64.0-73.0 MBOE/d, reflecting the impact of the acquisition.