Diamondback Acquires QEP in ~US$2.2 Billion All-Stock Deal
Diamondback Energy Inc. has entered into a definitive merger agreement to acquire 100% of QEP Resources Inc., in an all-stock corporate transaction valued at approximately US$2.15 billion, including the assumption of debt. Upon completion, Diamondback shareholders will own 92.8% of the combined entity, and QEP unitholders will own the remaining 7.2%.
Concurrently, Diamondback has also entered into a definitive purchase agreement to acquire all leasehold interests and related assets of a wholly-owned subsidiary of Permian-focused Guidon Energy LLC, for a total consideration of approximately US$862 million in cash and stock. The assets acquired include approximately 32,500 net acres in the Midland basin in Texas.
Under the terms of the first transaction, QEP shareholders will receive 0.05 shares of Diamondback common stock for each share of QEP common stock held, resulting in the issuance of approximately 12.27 million Diamondback shares valued at US$45.84 per share (based on Diamondback’s closing share price on December 18th). The total equity value amounts to US$562 million. Adjusting for QEP’s reported net debt of approximately US$1.59 billion, the total transaction value is approximately US$2.15 billion on an enterprise value basis.
NYSE-listed QEP is currently focused on operations in the Midland and Williston basins, and holds interests in approximately 146,000 net acres located across North Dakota, Texas, Idaho and Oregon. Net average daily production attributable to the company during Q3-2020 was approximately 76,500 barrels of oil equivalent per day (Mboe/d), of which 82% was oil.
In a separate transaction, Diamondback also announced that it will acquire all of the leasehold interests and related assets in Texas owned by Guidon Operating LLC, a wholly-owned subsidiary of Guidon Energy, for a total consideration of around US$862 million, payable in cash and stock. The assets acquired include around 32,500 net acres of northern Midland Basin properties located in Martin County.
“The business combination with QEP and the Guidon transaction are accretive on all relevant 2021 financial metrics including free cash flow per share, cash flow per share and leverage, even before accounting for synergies. Most importantly, the addition of this Tier-1 resource competes for capital right away in Diamondback’s current portfolio, and we will now be able to allocate most of our capital to the high-returning Midland Basin for the foreseeable future,” said Travis Stice, CEO of Diamondback.
Tim Cutt, President & CEO of QEP, stated, “We believe that this strategic merger with Diamondback, along with the addition of the Guidon assets, provides our shareholders with an exciting investment opportunity, now and in the future. The large contiguous Tier-1 acreage position in the Northern Midland Basin is expected to lead to operational synergies and deliver capital efficiencies beyond what each company could achieve independently.”
The Diamondback-QEP transaction is subject to customary closing conditions, including the receipt of regulatory and shareholder approvals, and is expected to close by Q2-2021.
Goldman Sachs and Moelis & Co. are acting as financial advisors to Diamondback for the QEP transaction. Evercore is advising QEP.