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Diamondback Acquires FireBird In Midland, For $1.6 Bln
11/01/2022
FireBird Energy LLC, a private Midland Basin operator backed by RedBird Capital Partners and Ontario Teachers’ Pension Plan, purchases Diamondback Energy Inc. in a cash-and-stock transaction estimated at almost $1.6 billion, according to a company release on Oct. 11.
Moreover, Diamondback also unveiled an aim to sell not less than $500 million of noncore assets by year-end 2023, with proceeds earmarked for further debt reduction, to support the Midland, Texas-based company’s pledge to reward shareholders.
It remains committed to capital discipline by returning at least 75% of its free cash flow to stockholders while also maintaining a fortress balance sheet.
FireBird, based in Fort Worth, Texas, manages over 450 vertical and horizontal wells in the Midland Basin. A bulk of the company’s portfolio was purchased from Chevron Corp. around the time of FireBird’s founding, according to its website.
Diamondback states that the acquisition of FireBird will include about 75,000 gross (68,000 net) intensely contiguous acres in the Midland Basin in West Texas. The acreage is 98.5% operated with an average 92% working interest and is currently 84% HBP.
The FireBird asset also adds 353 estimated gross (316 net) horizontal locations in basic development targets with an average lateral length of roughly 11,400 ft, which Firebird also noted is adjacent to Diamondback’s current Midland Basin position.
Diamondback anticipates the FireBird asset to include about 17,000 bbl/d of oil, or 22,000 boe/d, of production at closing, expected late in the fourth quarter. Production from the FireBird asset is valued to average about 19,000 bbl/d of oil, or 25,000 boe/d, in 2023.
Consideration for the FireBird asset is constituted of 5.86 million shares of Diamondback common stock and $775 million of cash. The cash portion of the transaction is anticipated to be funded through a combination of cash on hand, borrowings under Diamondback’s credit facility, and/or proceeds from a senior note offering.
The cash outlay at closing is anticipated to be almost $700 million due to the expected free cash flow to be produced on the asset between the effective date and the expected closing date late in the fourth quarter.
This transaction depends on all relevant 2023 and 2024 financial metrics, immediately raising expected per-share returns to Diamondback’s stockholders in the near-term while also improving the long-term duration of the company’s cash return profile.
Additionally, the FireBird transaction is estimated at 3x 2023 EBITDA with a 15% free cash flow yield at strip pricing. The company announced that the deal is immediately accretive to all relevant 2023 and 2024 financial metrics including cash flow per share, free cash flow per share, and NAV per share.
Kirkland & Ellis LLP is the legal adviser to Diamondback for the transaction. Akin Gump Strauss Hauer & Feld LLP and Weil, Gotshal & Manges LLP are serving as legal advisers to FireBird and its affiliates. RBC Capital Markets and Goldman Sachs & Co. LLC are lead financial advisers to FireBird.
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$1.55 Billion Deal, Diamond Energy Acquires Lario Permian
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On November 16 Diamondback Energy Inc. decided to expand in the Midland portion of the Permian Basin with the acquisition of Lario Permian LLC in a $1.55 billion cash-and-stock transaction. The Permian operator announced another billion-dollar agreement to purchase FireBird Energy LLC, a private Midland Basin operator. In total, Diamondback is paying almost $3.3 billion to extend in the Midland Basin. When combined with the pending FireBird acquisition, Diamondback is increasing its Midland Basin footprint by roughly 83,000 net acres, is adding 500 high-quality drilling opportunities that compete for capital with the current development plan and is raising the 2023 production profile by almost 37,000 bbl/d of oil (50,000 boe/d).
Enterprise acquires Navitas Midstream for $3.25 billion in cash
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Enterprise decided to go in on the Permian Basin. With the surprise purchase of Navitas Midstream for $3.25 billion in cash, the company gained a foothold in the Midland Basin, as it previously lacked #naturalgas or NGL infrastructure apart from downstream pipelines in the region. Enterprise estimates that distributable cash flow accretion will be in the range of $0.18 to $0.22 per unit in 2023, while simultaneously supporting additional capital returns to their limited partners through distribution growth and buybacks of common units.
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Enbridge acquired Tres Palacios natural gas storage facility in Texas for $335 million, adding approximately 35 Bcf of natural gas storage to their portfolio. The facility uses salt caverns for storage and has a gas header pipeline system that spans 62 miles and links to 11 major gas pipelines. Crestwood Equity Partners LP intends to divest its interests in Tres Palacios by the second quarter.
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The U.S. natural gas pipeline network is a complex system of pipelines that transport natural gas from production areas to consumers across the country. The pipeline network consists of three main types of pipelines: gathering pipelines, transmission pipelines, and distribution pipelines. Gathering pipelines are small-diameter pipelines that transport natural gas from production wells to processing facilities or larger transmission pipelines. Transmission pipelines are large-diameter pipelines that transport natural gas over long distances, sometimes across multiple states. Distribution pipelines operate at low pressure and are located in or near urban areas. They are often referred to as "utility pipelines" because they are typically owned and operated by local gas utility companies.
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Diamondback Energy, an independent oil and gas company, has successfully completed the acquisition of Lario Permian, marking the closure of two major deals in the fourth quarter of 2022. The company purchased two private operators in the Midland Basin for approximately $3.3 billion.