Diamondback Energy has signed a definitive agreement to purchase all the leasehold interest and related assets of FireBird Energy in a cash and stock deal valued at $1.6bn.
Under the terms of the purchase agreement, FireBird Energy shareholders will receive 5.86 million shares of Diamondback common stock and $775m in cash.
Diamondback to acquire FireBird Energy. (Credit: drpepperscott230 from Pixabay)
Diamondback intends to fund the cash portion of the transaction through a combination of available cash, and borrowings under a credit facility or proceeds from senior notes offering.
The transaction is expected to be completed in the fourth quarter of this year.
Diamondback chairman and chief executive officer Travis Stice said: “This bolt-on acquisition adds significant, high-quality inventory right in our backyard.
“With over 350 locations adjacent to our current Midland Basin position, this asset adds more than a decade of inventory at our anticipated development pace, including inventory that competes for capital right away in Diamondback’s current development plan.
“Also, importantly, this transaction is accretive on all relevant 2023 and 2024 financial metrics, immediately increasing expected per share returns to our stockholders in the near-term while also improving the long-term duration of the Company’s cash return profile.”
FireBird currently owns assets spanning about 68,000 net acres of highly contiguous prospects in the Midland Basin in Texas.
The assets are estimated to produce about 17 million barrels of oil per day (bopd) upon closing and reach an average production of around 19MBo/d in 2023.
The acquisition of FireBird marks the biggest for Diamondback and follows the purchase of QEP Resources and Guidon Operating in 2020 for a total of $3.2bn.
Stice added: “We remain committed to capital discipline by returning at least 75% of our Free Cash Flow to stockholders while also maintaining a fortress balance sheet.
“To do this, we are today announcing a target to sell at least $500m of non-core assets by year-end 2023, with proceeds earmarked for further debt reduction.”
Kirkland & Ellis served as a legal advisor to Diamondback, while Akin Gump Strauss Hauer & Feld and Weil, Gotshal & Manges served as legal advisors and RBC Capital Markets and Goldman Sachs & Co. as lead financial advisors to FireBird on the transaction.