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$1.55 Billion Deal, Diamond Energy Acquires Lario Permian
12/14/2022
On November 16 Diamondback Energy Inc. decided to expand in the Midland portion of the Permian Basin with the acquisition of Lario Permian LLC in a $1.55 billion cash-and-stock transaction.
The Permian operator announced another billion-dollar agreement to purchase FireBird Energy LLC, a private Midland Basin operator. In total, Diamondback is paying almost $3.3 billion to extend in the Midland Basin.
When combined with the pending FireBird acquisition, Diamondback is increasing its Midland Basin footprint by roughly 83,000 net acres, is adding 500 high-quality drilling opportunities that compete for capital with the current development plan and is raising the 2023 production profile by almost 37,000 bbl/d of oil (50,000 boe/d).
In 2007, Diamondback started with 10,000 acres in Midland Basin and has since built up to 500,000 acres in the Permian today.
The acquisition of Lario Permian adds about 25,000 gross (15,000 net) acres and over 150 gross locations in the core of the northern Midland Basin. Full-year 2023 estimated average production of about 18,000 bbl/d of oil (25,000 boe/d).
Founded in 1927, Lario Oil & Gas has operated throughout both the U.S. and Canada concentrating its resources and capital on rate-of-return driven projects. Over the last several years, Lario divested over $500 million worth of properties, according to the company website.
Lario buys a chunk of its Permian footprint in 2017 with the $345 million acquisition of 10,000 net acres mainly in Midland and Martin counties.
Meanwhile, Diamondback purchases all leasehold interest and related assets of Lario Permian from Lario Oil & Gas and certainly associated sellers in exchange for 4.18 million shares of Diamondback common stock and $850 million of cash.
The cash portion of this transaction is anticipated being funded through a combination of cash on hand, borrowings under the Diamondback’s credit facility, and/or proceeds from senior notes offering.
The cash outlay at closing is anticipated being roughly $775 million because of the expected free cash flow to be generated by the bought assets between the deal's effective date of November 1 and the closing date, which is expected to be January 31.
The transaction is estimated at almost 3.3x 2023 EBITDA with a 21% unlevered free cash flow yield at strip pricing. According to the company release, it is reducing the operated rig count from 2 now to 1 or less post-closing for 2023 development.
Jefferies LLC is serving as financial adviser to Diamondback and Kirkland & Ellis LLP is serving as legal adviser to Diamondback.
J.P. Morgan Securities LLC is serving as financial adviser to Lario and the associated sellers and Vinson & Elkins LLP and Boigon Law Ltd. are serving as legal advisers to Lario and the associated sellers.
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Diamondback Acquires FireBird In Midland, For $1.6 Bln
FireBird Energy LLC, a private Midland Basin operator backed by RedBird Capital Partners and Ontario Teachers’ Pension Plan, purchases Diamondback Energy Inc. in a cash-and-stock transaction estimated at almost $1.6 billion, according to a company release on Oct. 11. Moreover, Diamondback also unveiled an aim to sell not less than $500 million of noncore assets by year-end 2023, with proceeds earmarked for further debt reduction, to support the Midland, Texas-based company’s pledge to reward shareholders.
Multi-Billion Dollar Deal: Ovintiv to Expand Midland Basin Portfolio with EnCap Acquisition and Exit Bakken
Ovintiv Strikes Billion-Dollar Oil Deal, Doubling Production in Permian Basin with EnCap's Black Swan, PetroLegacy, and Piedra Resources. The deal, which was approved unanimously by Ovintiv's board, is slated to close on June 30. With over $5 billion in transactions announced on April 3, Ovintiv is set to expand its oil production by snatching up 65,000 net acres in the core of the Midland Basin. The deal with EnCap will give them a strategic edge in Martin and Andrews counties, Texas, with approximately 1,050 net, 10,000-ft well locations added to their inventory.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.
EOG Resources is pushing boundaries in Ohio's Utica oil play and now drilling on the Sable pad, also located in Noble County. This site features the 3.7-mile lateral currently under construction. The company's first multi-well pads in the area Timberwolf and Xavier have each produced over 200,000 barrels of oil since their inception—Timberwolf in August and Xavier in October. A third site, the four-well White Rhino pad in Noble County, is also showing promising early results, according to Keith Trasko, EOG’s Senior Vice President of Exploration and Production, who noted the wells are performing as expected in their initial weeks.