Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or the
“Company”) and Energen Corporation (NYSE: EGN) or (“Energen”),
today announced that they have entered into a definitive agreement
under which Diamondback will acquire Energen in an all-stock
transaction valued at approximately $9.2 billion, including
Energen’s net debt of $830 million as of June 30, 2018. The
consideration will consist of 0.6442 shares of Diamondback common
stock for each share of Energen common stock, representing an
implied value to each Energen shareholder of $84.95 per share based
on the closing price of Diamondback common stock on August 13,
2018. The transaction was unanimously approved by the Board
of Directors of each company.
TRANSACTION HIGHLIGHTS:
- Creates the premier large cap Permian independent with
peer-leading production growth, cost structure and capital
efficiency
- Over 266,000 net Tier One acres in the Permian Basin, an
increase of 57% from Diamondback’s current Tier One acreage of
approximately 170,000 net acres (pro forma for previously announced
Ajax acquisition)
- Over 7,000 estimated total net horizontal Permian locations, an
increase of over 120% from Diamondback’s current estimated net
locations (pro forma for previously announced Ajax
acquisition)
- Combined pro forma Q2 2018 production of over 222 Mboe/d (67%
oil), third largest production for a pure play company in the
Permian Basin, an increase of 79% from Diamondback’s Q2 2018
production of 124.7 Mboe/d (includes production from the previously
announced Ajax acquisition)
- 390,000 net acres across the Midland and Delaware basins, an
increase of 85% from 211,000 net acres as of June 30, 2018 (pro
forma for previously announced Ajax acquisition)
- Immediately accretive in 2019 on key per-share metrics
including: earnings per share, cash flow per share, net asset
value, production growth per debt-adjusted share and acreage
- Free cash flow enhancement expected to support increases in
return of capital; Diamondback dividend to be maintained and growth
in return of capital program to be assessed in 2019
- Held by production nature of assets allows for development
optimization with multi-zone, multi-well pads in both Midland and
Delaware Basins
- Primary deliverable synergies with net present value of $2.0
billion or more include:
- Capital Productivity: Drilling, completion and equip
(“D,C&E”) well cost savings of up to $200 per lateral foot
across over 2,000 net operated locations in the Midland Basin
- Estimated annual general and administrative (“G&A”) savings
of $30 - $40 million
- Lower cost of capital and accelerated path to investment grade
profile
- Primary deliverable synergies expected to be realized beginning
in 2019
- Secondary synergies with net present value of $1.0 billion or
more include:
- Capital Productivity: D,C&E well cost savings of up to $50
per lateral foot across over 1,500 net operated locations in the
Delaware Basin
- Benefits of economies of scale
- Benefit of overlapping and adjacent acreage in Howard, Martin
and Ward counties
- Lease operating expense reduction
- High grading of inventory allows for cash flow acceleration and
reinvestment
- “Grow and prune” strategy for non-core assets with cash
reinvested into higher return projects
- Substantial mineral ownership and acreage with net revenue
interest greater than 75%, providing compelling drop down
opportunities for Viper Energy Partners LP
- Combination of significant midstream assets across both Midland
and Delaware basins
- Secondary synergies expected to be realized post
integration
“This transaction represents a transformational
moment for both Diamondback and Energen shareholders as they are
set to benefit from owning the premier large cap Permian
independent with industry leading production growth, operating
efficiency, margins and capital productivity supporting an
increasing capital return program. The Energen team has done
an outstanding job assembling a portfolio of Tier One acreage in
both the Midland and Delaware basins, which, when combined with
Diamondback’s current portfolio, will present an extended runway
for Diamondback’s record of best-in-class execution and low-cost
operations. This transaction also adds critical mass for
driving capital efficiencies in what is now truly becoming a
manufacturing business. I expect the pro forma company to be
able to grow at industry leading rates while returning capital at a
competitive yield,” stated Travis Stice, Chief Executive Officer of
Diamondback.
Mr. Stice continued, “We look forward to
welcoming Energen’s employees as members of the Diamondback team,
and applaud them for the hard work and dedication they have put
forth to create this opportunity for the two teams to become one.
The synergies provided in this transaction, as well as the
opportunities for capital improvements provided by increased size
and scale, create a truly outstanding value proposition. The
combined company’s expected production growth, capital productivity
and cost structure will enhance our free cash flow profile to grow
our long-term capital return program.”
James McManus, Chairman and Chief Executive
Officer of Energen, stated, “We are very pleased about this
transaction and believe the combination of the two companies’
quality assets, track record of execution, and peer-leading cost
structures will form an even stronger, large-cap independent
producer uniquely positioned to drive growth and development in the
Permian Basin. This transaction is the outcome of a
comprehensive strategic review by Energen’s Board with the
assistance of our outside advisors. The process examined our
business plan, competitive positioning, and strategic alternatives.
We believe this all-stock transaction with Diamondback is the
best path forward for our company and provides Energen shareholders
with an excellent value for their investment, now and in the
future.”
Mr. McManus added, “I also want to take this
opportunity to recognize Energen’s biggest strength, our employees,
and publicly thank them for their dedication and hard work in
driving Energen’s success.”
TRANSACTION DETAILS
Under the terms of the definitive merger
agreement, shareholders of Energen will receive 0.6442 shares of
Diamondback common stock in exchange for each share of Energen
common stock, representing an implied value to each Energen
shareholder of $84.95 per share based on the closing price of
Diamondback common stock on August 13, 2018. The
consideration represents an approximately 19% premium to Energen’s
closing price of $71.36 on August 13, 2018. Upon closing the
transaction, Diamondback shareholders will own approximately 62% of
the combined company, and Energen shareholders will own
approximately 38%. The resulting capital structure is
consistent with Diamondback’s strategy of maintaining a
conservative financial profile and will accelerate the Company’s
path to an investment grade credit rating profile.
The transaction, which is expected to be
completed by the end of the fourth quarter of 2018, is subject to
the approval of both Diamondback and Energen shareholders, the
satisfaction of certain regulatory approvals and other customary
closing conditions.
Upon closing, Diamondback’s Board of Directors
and executive team will remain unchanged. Additionally, the
Company will continue to be headquartered in Midland, Texas.
ADVISORS
Citigroup Global Markets, Inc. is acting as
exclusive financial advisor to Diamondback, and Akin Gump Strauss
Hauer & Feld LLP is acting as legal advisor to Diamondback.
J.P. Morgan Securities LLC and Tudor, Pickering, Holt &
Co are acting as exclusive financial advisors to Energen, and
Wachtell, Lipton, Rosen & Katz is acting as legal advisor to
Energen.
CONFERENCE CALL
Diamondback will host a conference call and
webcast for investors and analysts to discuss the proposed
transaction on Wednesday, August 15, 2018 at 7:30 a.m. CT.
Participants should call (877) 440-7573 (United
States/Canada) or (253) 237-1144 (International) and use the
confirmation code 1539287. A telephonic replay will be
available from 10:30 a.m. CT on Wednesday, August 15, 2018 through
Wednesday, August 22, 2018 at 10:30 a.m. CT. To access the
replay, call (855) 859-2056 (United States/Canada) or (404)
537-3406 (International) and enter confirmation code 1539287.
A live broadcast of the earnings conference call will also be
available via the internet at www.diamondbackenergy.com under the
“Investor Relations” section of the site. A replay will also
be available on the website following the call.
About Diamondback Energy, Inc.
Diamondback is an independent oil and natural
gas company headquartered in Midland, Texas focused on the
acquisition, development, exploration and exploitation of
unconventional, onshore oil and natural gas reserves in the Permian
Basin in West Texas. For more information, please visit
www.diamondbackenergy.com.
About Energen Corporation
Energen Corporation is an oil-focused
exploration and production company with operations in the Permian
Basin in West Texas and New Mexico. For more information, go
to www.energen.com.
Important Information for Investors and
Shareholders
This communication does not constitute an offer
to buy or sell or the solicitation of an offer to buy or sell any
securities or a solicitation of any vote or approval. This
communication relates to a proposed business combination between
Diamondback and Energen.
In connection with the proposed transaction,
Diamondback intends to file with the Securities and Exchange
Commission (the "SEC") a registration statement on Form S-4 that
will include a joint proxy statement of Diamondback and Energen
that also constitutes a prospectus of Diamondback. Each of
Diamondback and Energen also plan to file other relevant documents
with the SEC regarding the proposed transaction. No offering
of securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the U.S. Securities Act of 1933,
as amended. Any definitive joint proxy statement/prospectus of for
Diamondback and/or Energen (if and when available) will be mailed
to shareholders of Diamondback and/or Energen, as applicable.
INVESTORS AND SECURITY HOLDERS OF DIAMONDBACK
AND ENERGEN ARE URGED TO READ THE REGISTRATION STATEMENT, JOINT
PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to
obtain free copies of these documents (if and when available) and
other documents containing important information about Diamondback
and Energen, once such documents are filed with the SEC through the
website maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by Diamondback will be available free
of charge on Diamondback's website at
http://www.diamondbackenergy.com or by contacting Diamondback's
Investor Relations Department by email at IR@Diamondbackenergy.com,
alawlis@diamondbackenergy.com, or by phone at 432-221-7467.
Copies of the documents filed with the SEC by Energen will be
available free of charge on Energen website at
http://www.energen.com or by phone at 205-326-2634.
Diamondback, Energen and certain of their
respective directors and executive officers may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information about the directors and
executive officers of Energen is set forth in Energen’s proxy
statement for its 2018 annual meeting of shareholders, which was
filed with the SEC on March 22, 2018. Information about the
directors and executive officers of Diamondback is set forth in its
proxy statement for its 2018 annual meeting of shareholders, which
was filed with the SEC on April 27, 2018. These documents can
be obtained free of charge from the sources indicated above.
Other information regarding the participants in
the proxy solicitations and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other
relevant materials to be filed with the SEC when such materials
become available. Investors should read the joint proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions. You may obtain
free copies of these documents from Diamondback or Energen using
the sources indicated above.
Forward Looking Statements
This news release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements, other than historical
facts, that address activities that Diamondback or Energen assumes,
plans, expects, believes, intends or anticipates (and other similar
expressions) will, should or may occur in the future are
forward-looking statements. The forward-looking statements
are based on management’s current beliefs, based on currently
available information, as to the outcome and timing of future
events, including this proposed transaction and the previously
announced Ajax transaction. These forward-looking statements
involve certain risks and uncertainties that could cause the
results to differ materially from those expected by the management
of Diamondback or Energen. These include the expected timing
and likelihood of completion of the proposed transaction, including
the timing, receipt and terms and conditions of any required
governmental and regulatory approvals of the proposed transaction
that could reduce anticipated benefits or cause the parties to
abandon the proposed transaction, the ability to successfully
integrate the businesses, the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement, the possibility that stockholders of Diamondback
may not approve the issuance of new shares of common stock in the
proposed transaction or that shareholders of Energen may not
approve the merger agreement, the risk that the parties may not be
able to satisfy the conditions to the proposed transaction in a
timely manner or at all, risks related to disruption of management
time from ongoing business operations due to the proposed
transaction, the risk that any announcements relating to the
proposed transaction could have adverse effects on the market price
of Diamondback’s common stock or Energen’s common stock, the risk
of any unexpected costs or expenses resulting from the proposed
transaction, the risk of any litigation relating to the proposed
transaction, the risk that the proposed transaction and its
announcement could have an adverse effect on the ability of
Diamondback and Energen to retain customers and retain and hire key
personnel and maintain relationships with their suppliers and
customers and on their operating results and businesses generally,
the risk the pending proposed transaction could distract management
of both entities and they will incur substantial costs, the risk
that problems may arise in successfully integrating the businesses
of the companies, which may result in the combined company not
operating as effectively and efficiently as expected, the risk that
the combined company may be unable to achieve synergies or other
anticipated benefits of the proposed transaction or it may take
longer than expected to achieve those synergies or benefits and
other important factors that could cause actual results to differ
materially from those projected. All such factors are
difficult to predict and are beyond Diamondback’s or Energen’s
control, including those detailed in Diamondback’s annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K that are available on its website at
http://www.diamondbackenergy.com and on the SEC’s website at
http://www.sec.gov, and those detailed in Energen’s annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K that are available on Energen’s website at
http://www.energen.com and on the SEC’s website at
http://www.sec.gov.
All forward-looking statements are based on
assumptions that Diamondback or Energen believe to be reasonable
but that may not prove to be accurate. Any forward-looking
statement speaks only as of the date on which such statement is
made, and Diamondback and Energen undertake no obligation to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, except as
required by applicable law. Readers are cautioned not to
place undue reliance on these forward-looking statements that speak
only as of the date hereof.
Investor Contact:Adam Lawlis+1
432.221.7467alawlis@diamondbackenergy.com
Media Contacts:Sard Verbinnen & Co.Frances
JeterFJeter@sardverb.com832.680.5120
Kelly
KimberlyKKimberly@sardverb.com832.680.5120
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