Diamondback Energy’s acquisition of Double Eagle IV Midco LLC Subsidiaries

A recent deal which I have been following is Diamondback Energy’s partial subsidiary and asset-based acquisition of Double Eagle IV Midco LLC. The $4.1 billion deal, which is being structured by $3 Billion cash and 6.9 million shares of Diamondback Energy to be dispersed to Double Eagle’s shareholders, will support Diamondback Energy’s dominance of the Midland Basin. The Midland Basin being a major oil and natural gas extraction point, located within the greater fossil fuel-rich Permian Basin. Diamondback Energy's financing of the deal will be backed by a mix of cash reserves, usage of its credit facility, term loans and senior note offerings. The deal lies in around a 5.2x multiplier of Double Eagle’s speculated assets for 2025, falling within the typical Permian Basin M&A multiplier range of 4-6x. April 1st, 2025 is the current slotted close date of the deal pending typical closing procedures and regulatory approval.

Diamondback Energy’s expected synergies from the subsidiary and asset-based purchase, include both improved production capabilities and access to both additional acreage and drilling sites in the rich Midland Basin. Diamondback Energy will gain roughly 40,000 acres of what is mostly undeveloped land, around 68% being undeveloped. Thus the deal allows Diamondback Energy to expand its dominance within the Permian Basin whilst additionally allowing the continued existence of Double Eagle’s operations, as opposed to a complete buyout. Such deal allows Diamondback Energy to improve operational efficiency through efficient coverage of additional drilling assets, without incurring additional liabilities from Double Eagle’s debt. Diamondback Energy will gain access to roughly an additional 27,000 BPD, generated from the addition of roughly 407 gross drilling sites (342 net drilling sites), with access to potentially an additional 44 sites. The addition of such assets is expected to have immediate impacts, including positive cash flow per share, free cash flow per share, and a higher yielding net asset value per share.

Analysis:

• Comparable Permian Basin Deals

Transaction Value, compared to assets acquired

• WTI Price Fluctuation

WTI Price opposed to Diamondback Energy's expected increase in daily output