BY Fraser Tennant
Strengthening its position in the Midland Basin of West Texas, independent crude oil and natural gas exploration and production company Diamondback Energy is to acquire rival QEP Resources in an all-stock transaction valued at approximately $2.2bn, including QEP’s net debt of $1.6bn.
Under the terms of the definitive agreement, stockholders of QEP will receive 0.05 shares of Diamondback common stock in exchange for each share of QEP common stock, representing an implied value to each QEP stockholder of $2.29 per share based on the closing price of Diamondback common stock on 18 December 2020.
Furthermore, upon closing the transaction, Diamondback stockholders will own approximately 92.8 percent of the combined company, and QEP stockholders approximately 7.2 percent.
“The acquisition of QEP also checks every box of Diamondback’s corporate development strategy,” said Travis Stice, chief executive of Diamondback. “The business combination with QEP is accretive on all relevant 2021 financial metrics including free cash flow per share, cash flow per share and leverage, even before accounting for synergies. Most importantly, the addition of this Tier-1 resource competes for capital right away in Diamondback’s current portfolio.”
Upon closing, Diamondback’s board of directors and executive team will remain unchanged and the company will continue to be headquartered in Midland, Texas.
“We believe that this strategic merger with Diamondback provides our shareholders with an exciting investment opportunity, now and in the future,” said Tim Cutt, president and chief executive of QEP. “The large contiguous Tier-1 acreage position in the Northern Midland Basin is expected to lead to operational synergies and deliver capital efficiencies beyond what each company could achieve independently.”
The transaction has been unanimously approved by the boards of directors of Diamondback and QEP and is expected to be completed in the first quarter or early in the second quarter of 2021, subject to the approval of QEP stockholders, the satisfaction of certain regulatory approvals and other customary closing conditions.
Mr Cutt concluded: “I believe in this combination and look forward to being a long term shareholder and watching the value of the company grow with time.”
News: Diamondback to buy shale rival QEP in $2.2 billion deal