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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
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).
SM Energy Acquires 20,000 Acres in Texas for $90.6M
SM Energy acquired 20,000 net acres in Dawson and north Martin counties in Texas, completing the transaction in cash. SM Energy Co., based in Denver, intends to expand on its success from the second quarter by increasing its drilling and completion activities in the coming quarter. This plan also includes preparations to develop the newly acquired land in the Midland basin. In June, the company's president and CEO, Herb Vogel, along with his team, raised their target for total oil and gas production for the second quarter to 13.9 MMboe, up from 13.4 MMboe. They exceeded this target, reaching nearly 14.1 MMboe, with oil making up 42% of that figure. During the quarter, SM Energy drilled 17 wells, with 12 located in South Texas and five in the Midland basin. They also completed 25 wells, 17 of which were in the Midland basin.
Appalachian Basin (formerly Marcellus and Utica) covers most of New York, Pennsylvania, Eastern Ohio, West Virginia, and Western Maryland in the north, reaching down to parts of Northwest Georgia and Northeast Alabama in the south. The basin is massive, covering about 185,000 square miles, roughly 1,000 miles long from northeast to southwest, and in some places, it's up to 300 miles wide. In this area, some major companies are making significant investments. EQT stands out as the largest producer in the Appalachian Basin, with other key players including Chesapeake, Range Resources, Antero, Repsol, and Gulfport also actively investing.
Kinder Morgan stands as North America's top independent mover of petroleum products with around 2.4 million barrels daily across the continent. The bulk of this flow happens through its Products Pipelines division, which navigates gasoline, jet fuel, diesel, crude oil, and condensate through a network of about 9,500 miles of pipelines. Alongside, the company maintains roughly 65 liquid terminals that not only store these fuels but also blend in ethanol and biofuels for a green touch.
The Denver-Julesburg (DJ) Basin, spanning Northern Colorado, Eastern Wyoming, Western Kansas, and parts of Nebraska, stretches from north to south, from north of Cheyenne, Wyoming, down to Colorado Springs. Its primary production field, the Wattenberg gas field, is located in Weld County and Northwestern Adams County in Northeast Colorado. Oil and gas production in the D-J Basin traces back to a discovery in Boulder County, Colorado, in 1901, marking a long history of energy development in the area. The basin is highly productive, primarily due to its stacked plays, similar to those in other regions like the Anadarko Basin (with its SCOOP and STACK plays) and the Permian Basin. This geological feature is a key reason for the high productivity of wells in the DJ Basin.