American Oil and Gas Giants Diamondback Energy and Endeavor Energy Resources Announce $26bn Merger
In a move that has sent shockwaves through the energy industry, American oil and gas companies Diamondback Energy and Endeavor Energy Resources have announced their plans to merge in a deal worth a staggering $26 billion. This merger is just the latest in a series of acquisitions that have been taking place in recent years, as companies scramble to secure the most lucrative drilling sites.
The decision to merge comes at a time when oil prices have been steadily rising since Russia’s invasion of Ukraine in 2022. This geopolitical event has caused a surge in profits for oil companies, prompting them to seek ways to increase their output. However, this rush for expansion has not come without controversy, as the International Energy Agency (IEA) has warned that new fossil fuel developments could push the world beyond safe limits of global heating.
One of the quickest ways for companies to boost their output is by acquiring rivals who have rights to proven reserves. This trend has been seen across the industry, with major players like Chevron and ExxonMobil making multi-billion dollar deals to acquire other companies. In fact, just last month, Chevron agreed to a $53 billion deal to buy Hess, while ExxonMobil announced its plans to acquire Pioneer Natural Resources for $59.5 billion.
In the case of Diamondback Energy and Endeavor Energy Resources, Diamondback emerged victorious in the bidding war against ConocoPhillips, another major player in the industry. The Wall Street Journal reported that ConocoPhillips had also expressed interest in acquiring Endeavor but was ultimately outbid by Diamondback.
The focus of these acquisitions, including the recent takeover of CrownRock by Occidental Petroleum, and now Endeavor by Diamondback, is centered around extracting more oil and gas from the Permian oilfield. This vast oilfield stretches across parts of Texas and New Mexico and is considered one of the most valuable reserves in the United States.
Endeavor Energy Resources, founded in 1979 by Autry Stephens, has grown from a single well in the Permian to a company that now produces approximately 400,000 barrels of oil per day. The deal values Endeavor at around $26 billion, with shareholders set to receive approximately 117 million Diamondback shares and $8 billion in cash. After the merger, Endeavor shareholders will hold just under 40% of the new company.
Travis Stice, chairman and chief executive of Diamondback, expressed his excitement about the merger, stating that it would create a “must-own” North American independent oil company. He also highlighted the industry-leading depth and quality that the combined company would possess, which would ultimately result in a strong cash flow and the lowest cost structure in the industry.
As the energy industry continues to evolve and adapt to changing global dynamics, mergers and acquisitions like this one are likely to become more commonplace. While they may bring short-term benefits for companies seeking to increase their output and profitability, the long-term implications for global heating and climate change remain a cause for concern. Only time will tell how these developments will shape the future of the energy industry and our planet as a whole.
