Diamondback Energy will buy rival Endeavor Energy Resources in a cash-and-stock deal valued at about $26 billion to create a drilling giant in the Southwestern United States.
Growing confidence in an economic recovery, particularly in the U.S., has driven massive deals in the energy sector in recent months, including Chevron's $53 billion acquisition of Hess in October, and a $59.5 billion deal two weeks before that by Exxon Mobil, its biggest acquisition since buying Mobil two decades ago.
Diamondback and Endeavor combined will oversee 838,000 acres and can produce 816,000 oil-equivalent barrels each day.
Endeavor is the largest private operator in the Permian Basin, the largest oil field in the United States. Drillers can pull more than 4 million barrels of oil equivalent from the Permian daily.
The Diamondback, Endeavor deal confirmed Monday includes approximately 117.3 million shares of Diamondback common stock and $8 billion in cash, and will create a huge operator in the Permian Basin that straddles Texas and New Mexico.
“Our companies share a similar culture and operating philosophy and are headquartered across the street from one another, which should allow for a seamless integration of our two teams," Diamondback Chairman and CEO Travis Stice said in a prepared statement.
Despite broad expectations that it would dip into recession in a turbulent global economy, the U.S. has proven surprisingly resilient, with a red hot job market and economic growth that has surprised almost everyone. The nation’s economy grew at an unexpectedly brisk 3.3% annual pace from October through December.
Shareholders of Diamondback Energy Inc. will own about 60.5% of the combined company, while Endeavor’s equity holders would own approximately 39.5%.
The combined company will be based in Midland, Texas.
The boards of both companies have approved the deal, which is expected to close in the fourth quarter. It also has all of the necessary Endeavor approvals, the companies said.
Diamondback's stock rose slightly before the market open.