Two American oil and gas firms have announced a merger in a staggering $26 billion (£21 billion) deal, marking the latest move in a trend of acquisitions aimed at securing prime drilling territories.
Diamondback Energy has agreed to acquire Endeavor Energy Resources, forming a company with an estimated value of approximately $50 billion (£40 billion).
The surge in merger activity has been partly fueled by the uptick in oil prices following Russia’s invasion of Ukraine in early 2022. With substantial profits at their disposal, companies are racing to expand their production capacities, despite warnings from the International Energy Agency (IEA) that further fossil fuel developments could push the world beyond safe thresholds of global warming.
One of the fastest routes to ramp up production is through the acquisition of competitors holding rights to proven oil reserves. Notable acquisitions have been orchestrated by major U.S. oil companies. Chevron’s $53 billion (£42 billion) deal to purchase Hess and ExxonMobil’s agreement to acquire Pioneer Natural Resources for $59.5 billion (£47 billion) are among the significant transactions. In this instance, Diamondback outpaced rival ConocoPhillips, which had also shown interest in acquiring Endeavor, according to reports from the Wall Street Journal.
Smaller-scale acquisitions include Occidental Petroleum’s $12 billion (£9.5 billion) purchase of CrownRock in December. Both this deal and the acquisition of Endeavor are aimed at maximizing oil and gas extraction from the expansive Permian oilfield, spanning vast areas of Texas and New Mexico.
Founded in 1979 by Autry Stephens with a single well in the Permian, Endeavor has grown to produce approximately 400,000 barrels of oil per day.
The merger values Endeavor at around $26 billion. Endeavor shareholders will receive approximately 117 million shares of Diamondback stock plus $8 billion (£6.3 billion) in cash, resulting in Endeavor shareholders holding just under 40% of the combined entity.
Travis Stice, Chairman and CEO of Diamondback, commented, “This merger brings together two robust, well-established companies to form a premier North American independent oil company.” He added that Diamondback would boast an industry-leading portfolio characterized by superior depth and quality, ultimately translating into cash flow supported by the industry’s most competitive cost structure.