Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback” or “the Company”) today announced that it has entered into a definitive purchase agreement to acquire all leasehold interest and related assets of Lario Permian, LLC, a wholly owned subsidiary of Lario Oil & Gas Company, and certain associated sellers (collectively “Lario”) in exchange for 4.18 million shares of Diamondback common stock and $850 million of cash. The cash portion of this transaction is expected to be funded through a combination of cash on hand, borrowings under the Company’s credit facility and/or proceeds from a senior notes offering. The cash outlay at closing is expected to be approximately $775 million due to the expected Free Cash Flow to be generated by the acquired assets between the effective date and the closing date, which is expected to be January 31, 2023.
“Lario is an attractive bolt-on to our existing Martin County position, home to some of the best rock in the Permian Basin,” stated Travis Stice, Chairman and Chief Executive Officer of Diamondback. “This is a deal that checks all the boxes Diamondback looks for in an acquisition, as it brings over 150 gross locations in the core of the Northern Midland Basin and also provides immediate accretion to all relevant financial metrics, enhancing Diamondback’s overall value proposition to our stockholders.”
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Diamondback, Lario, Firebird wells Drilled 2022
Mr. Stice continued, “When combined with our pending FireBird acquisition, we will grow our Midland Basin footprint by approximately 83,000 net acres, add 500 high quality drilling opportunities that compete for capital with our current development plan and increase our 2023 production profile by approximately 37 MBo/d (50 MBoe/d). Our enhanced size and scale in the Midland Basin, along with our low-cost operations, puts us in an advantageous position to deliver differentiated near-term and long-term returns to our stockholders.”
Transaction Highlights:
- Valued at approximately 3.3x 2023 EBITDA with a 21% unlevered Free Cash Flow Yield at strip pricing
- Immediately accretive to all relevant 2023 and 2024 financial metrics including Cash Flow per share, Free Cash Flow per share and NAV per share
- Full year 2023 cash capital expenditures of approximately $150 million
- Increases expected pro forma 2023 per share cash returned to stockholders by over 5%
- Leverage neutral
Diamondback Map with new Assets (click to view)
Asset Highlights:
- Approximately 25,000 gross (15,000 net) acres in the core of the Northern Midland Basin
- Full year 2023 estimated average production of approximately 18 MBo/d (25 MBoe/d)1
- Diamondback expects to reduce operated rig count from two currently to one or less post-closing for 2023 development
- 154 estimated gross (132 net) horizontal locations in primary development targets with an average lateral length of over 9,400 feet; includes 20 DUCs
- Primary targets are the Middle Spraberry, Jo Mill, Lower Spraberry, Wolfcamp A and Wolfcamp B formations
- 28 gross upside locations in the Wolfcamp D based on recent well results
- 93% of acreage is operated with an average 86% working interest; 92% of acreage currently held by production
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