Merger of North American oil companies creates new giant in the market

North American oil companies Diamondback Energy and Endeavor Energy Resources confirmed this Monday (12.Feb.2024) a merger agreement valued at around US$50 billion. This movement will create a new giant in the oil and gas sector in the USA, especially in the area of ​​influence of the Permian basin, the country’s main oil region.

The agreement was reached through payment and exchange of shares. Diamondback committed to paying US$8 billion from Diamonfback, in addition to 117.3 million common shares (with the right to vote at shareholder meetings), for Endeavor Energy. Read the full statement (PDF – 198 kB, in English).

Diamondback shareholders will own 60.5% of Endeavor upon completion of the transaction. The remainder of the oil company’s shares will be held by Endeavor shareholders.

After the announcement, Diamondback’s share price rose 9.53% on the Nasdaq, one of the main indices in the North American stock market.

Both companies are based in Texas, where the largest portion of the Permian Basin is also located. This region, which stretches from west Texas to New Mexico, is the main oil-producing region in the USA. With the merger, Diamondback’s production will be approximately 816 thousand barrels of oil equivalent per day.

Among the companies operating in the Permian basin, this volume will place Diamondback as the 2nd largest producer in the region. It will be second only to ExxonMobil, which purchased Pioneer, another competitor in this oil basin, in October 2023.

The attraction that the Permian basin causes for oil companies is also related to the fact that the region is the largest shale basin in the world. Shale is a rock capable of producing oil like petroleum. The advantage is that drilling and operating costs are lower, which further increases companies’ profitability.

Diamondback’s acquisition of Endeavor was strategic, as the 1st specializes in the production of shale oil, while the 2nd is focused on oil production.

“This is a combination of two strong, established companies merging to create an independent North American oil company. O The company’s inventory will have industry-leading depth and quality, which will be converted into cash flow with the lowest cost structure in the industry, creating a differentiated value proposition for our shareholders”said Travis Stice, CEO of Diamondback.