Corrected: UPDATE 3-Diamondback Energy spurs new U.S. shale consolidation with two deals

Natural Resource Partners

21/12/2020 12:21

(Corrects Guidon deal to cash-and-stock from all stock)
    Dec 21 (Reuters) - U.S. oil producer Diamondback Energy Inc
 FANG.O  on Monday agreed to buy two rivals for a combined $3.2
billion including debt, continuing a consolidation spurred by
the coronavirus pandemic-induced oil downturn.
    Facing heavy debt burdens and weak oil prices, shale oil
producers have been selling at low- to no premiums to market
value. Investors, unlike during the 2016 oil slump, have not
shown a willingness to put new money into struggling firms. 
    Diamondback will buy QEP Resources in a stock-and-debt deal
that includes assumption of $1.6 billion in debt. QEP holders
will get 0.05 of a Diamondback share for each share, or about
$2.29, a discount to the stock's Friday close. Including debt,
the deal is valued at $2.2 billion. 
    It also agreed to purchase lease interests and assets from
privately-held shale producer Guidon Operating LLC for 10.63
million shares and $375 million in cash, valued at about $850
million. 
    QEP shares lost 8.4% in early trading while Diamondback's
shares fell 6% to $43.16. 
    "Every time Diamondback concludes a transaction it's
objectively shown shareholders are better off," Diamondback
Chief Executive Travis Stice said in a call. "These are
extraordinary times and it creates extraordinary opportunities,"
he said.     
    The deals will add to its projected 2021 free cash flow per
share and will result in annual savings of at least $60 million
to $80 million after closing. The QEP deal will close by the
second quarter of 2021.    
    The QEP purchase will add around 49,000 acres to
Diamondback's holdings in the Midland region of the giant
Permian basin shale field in Texas. It also includes North
Dakota properties that the company expects to divest over time. 
   
    The two deals will expand Diamondback's land in the Midland
area of the Permian to over 276,000 acres.
    Recent deals in the Permian Basin include Pioneer Natural
Resource Co's  PXD.N  $4.5 billion buyout of Parsley Energy Inc
 PE.N  and ConocoPhillips'  COP.N  $9.7 billion deal for Concho
Resources Inc  CXO.N . 

 (Reporting by Shariq Khan and Arundhati Sarkar in Bengaluru;
writing by Gary McWilliams; editing by Sriraj Kalluvila and
Grant McCool)
 ((Shariq.Khan@thomsonreuters.com; Within U.S.+1 646 223 8780,
outside U.S. +91 80 6182 2681; Twitter: @shariqrtrs))