Benzinga | Dec 21, 2020 06:43AM EST

Diamondback Energy, Inc. to Acquire QEP Resources in All-Stock Transaction

Diamondback Energy, Inc. (NASDAQ:FANG) ("Diamondback" or the "Company") and QEP Resources (NYSE:QEP) ("QEP") today announced that they have entered into a definitive agreement under which Diamondback will acquire QEP in an all-stock transaction valued at approximately $2.2 billion, including QEP's net debt of $1.6 billion as of September 30, 2020. The consideration will consist of 0.05 shares of Diamondback common stock for each share of QEP common stock, representing an implied value to each QEP stockholder of $2.29 per share based on the closing price of Diamondback common stock on December 18, 2020. The transaction was unanimously approved by the Board of Directors of each company.

TRANSACTION HIGHLIGHTS:

Adds material Tier-1 Midland Basin inventory that competes for capital immediately in Diamondback's portfolioAccretive on all relevant 2021 per share metrics including cash flow per share, free cash flow per share and leverage, before accounting for synergiesLowers 2021 reinvestment ratio and enhances ability to generate free cash flow, de-lever and return capital to stockholdersSignificant, tangible annual synergies of at least $60 - $80 million comprised of: G&A savingsCost of capital and interest expense savingsImproved capital efficiency from high-graded developmentPhysical adjacencies to increase lateral lengthsSignificant adjacent Permian midstream assetsDiamondback is expected to maintain its Investment Grade statusSignificant majority of Diamondback's capital will now be allocated to the Northern Midland Basin

QEP HIGHLIGHTS:

Approximately 49,000 net acres in the Midland Basin primarily held by production allowing for capital efficient developmentQ3 2020 average production of 48.3 MBO/d (76.7 MBOE/d); Q3 2020 average Permian production of 30.5 MBO/d (47.6 MBOE/d)48 current drilled but uncompleted wells ("DUCs"); DUC balance expected to be worked down along with Diamondback's DUC balance in 2021, lowering 2021 reinvestment ratioQEP's Williston assets will be considered non-core and will be used to harvest cash flow or they will be divested, pending market conditions, with potential sale proceeds to be used towards debt reductionSignificant adjacent Permian midstream infrastructureThe pending QEP acquisition, together with the previously announced pending acquisition of assets from Guidon Operating LLC ("Guidon"), will bring Diamondback's total leasehold interests to over 276,000 net surface acres in the Midland Basin (429,000 Midland and Delaware Basin net acres)