Texas-based Diamondback Energy will acquire Denver oil and gas company QEP Resources in a $2.2 billion deal announced Monday. The merger will be an all-stock transaction.
The agreement with Diamondback, based in Midland, Texas, includes taking on QEP’s net debt of $1.6 billion, the companies said in a statement. QEP Resources’ oil and gas operations are focused in the Permian Basin in Texas and the Williston Basin in North Dakota.
QEP’s North Dakota assets will be used to generate cash flow or will be divested, depending on market conditions, the companies said. Diamondback is also acquiring Guidon Energy in Midland for 10.63 million shares of Diamondback common stock and $375 million in cash.
Tim Cutt, QEP president and CEO, said the merger with Diamondback along with the addition of the Guidon assets provides the company’s shareholders “an exciting investment opportunity” as well as increased capital efficiencies.
Diamondback’s acquisition of QEP fits in the mold of consolidations of public exploration and production companies in 2020, Andrew Dittmar, senior mergers and acquisitions analyst for Enverus, said in a statement.
“The deal is structured with no premium and all-stock consideration. It focuses on immediately boosting cash flow to fund shareholder capital returns and debt reduction,” Dittmar said.
The focus of the QEP acquisition is its core acreage in the Midland Basin and its midstream, or transmission assets, he added.
“For QEP, announcement of the acquisition ends a long run where they were often discussed as a potential target, including rumored buyouts by private investors,” Dittmar said. “While bringing significant economic assets and supporting midstream infrastructure to the table, the company found itself in a tough portion of the market where it is hard to compete given a lack of scale.”
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