Summary
Diamondback Energy, Inc. (FANG) filed this Form 8-K on December 6, 2018, to report the completion of its merger with Energen Corporation on November 29, 2018. This significant transaction effectively combines two oil and gas companies, expanding Diamondback's operational footprint. The filing details the mechanics of the merger, including the exchange ratio for Energen's common stock and the conversion of equity awards. Furthermore, the report outlines material changes to Diamondback's financial agreements, specifically amendments to its revolving credit facility, which were necessary to accommodate the merger and provide increased financial flexibility for future growth and acquisitions.
Key Highlights
- 1Completion of the merger between Diamondback Energy and Energen Corporation occurred on November 29, 2018.
- 2Energen Corporation is now a wholly owned subsidiary of Diamondback Energy.
- 3Energen's common stock was converted into Diamondback's common stock at an exchange ratio of 0.6442 shares of Diamondback for each share of Energen.
- 4Diamondback amended its revolving credit facility to allow for the merger, increase letter of credit commitments, and provide more flexibility in calculating debt covenants (e.g., unrestricted cash netting, acquisition expense add-backs).
- 5The amended credit facility reaffirmed the borrowing base at $2.65 billion with an elected commitment of $2.0 billion.
- 6Immediately post-merger, Diamondback had $1.4 billion in borrowings under its credit facility, with a portion used to repay Energen's outstanding credit facility debt.
- 7Energen's existing notes remain outstanding, but Energen will now guarantee Diamondback's senior notes due 2024 and 2025.
Frequently Asked Questions
This 8-K filing primarily serves to announce and provide details regarding the completion of Diamondback Energy's merger with Energen Corporation, as well as to disclose material amendments to Diamondback's credit facility necessary for this transaction.
The merger significantly expands Diamondback's asset base and operational scale. Financially, it led to the assumption of Energen's outstanding debt, including its notes, and required an amendment to Diamondback's credit facility. The credit facility amendment provides increased financial flexibility for future operations and potential acquisitions by adjusting covenant calculations and increasing letter of credit capacity.
Energen's existing notes, totaling $530 million, remain outstanding under the original indenture. Energen, as a subsidiary of Diamondback, will continue to be the issuer and obligor for these notes. Additionally, Energen has guaranteed Diamondback's existing senior notes, and will also guarantee Diamondback's 2024 and 2025 notes as per indenture obligations.
Energen shareholders received 0.6442 shares of Diamondback common stock for each share of Energen common stock they held, plus cash in lieu of fractional shares. Energen's stock options, stock appreciation rights, and restricted stock units were converted into equivalent awards related to Diamondback's common stock.