Diamondback Energy Prices Offering of Senior Notes

Rhea-AI Summary

Diamondback Energy (NASDAQ: FANG) has successfully priced a $1.2 billion senior notes offering with a 5.550% interest rate, maturing on April 1, 2035. The notes are priced at 99.937% of the principal amount.

The company plans to use the proceeds for general corporate purposes, including financing part of the pending acquisition of certain Double Eagle IV Midco subsidiaries and related fees. The offering is expected to close on March 20, 2025, subject to customary conditions.

The notes will be sold through a registered offering with joint book-running managers including BofA Securities, Barclays Capital, PNC Capital Markets, and TD Securities. The offering is being conducted under an effective shelf registration statement previously filed with the SEC.

Positive

• Secured $1.2B in long-term financing
• Strategic acquisition funding of Double Eagle IV Midco assets
• Successful debt placement with major financial institutions

Negative

• Additional long-term debt obligation at 5.550% interest rate
• Increased interest expense burden
• Higher leverage on balance sheet

Insights

Financial Analyst

Diamondback Energy's $1.2 billion senior notes offering at 5.550% represents a strategic capital raising move with several implications for investors. The company's ability to secure this substantial debt financing demonstrates strong market confidence in its financial position and business outlook, particularly significant as it plans to use these funds partially for its pending acquisition of Double Eagle IV Midco subsidiaries.

The pricing at 99.937% of principal is nearly at par, indicating healthy demand for Diamondback's debt in the current interest rate environment. With a 10-year maturity extending to 2035, this offering provides Diamondback with long-term capital flexibility while locking in rates before any potential market fluctuations.

For context, this debt issuance should be evaluated alongside Diamondback's existing leverage metrics and acquisition strategy. The company operates in the capital-intensive Permian Basin, where strategic acquisitions can significantly enhance reserve portfolios and production capabilities. The Double Eagle acquisition appears to be a priority investment requiring substantial capital commitment.

Investors should monitor how effectively management deploys this capital toward the acquisition and whether the resulting operational integration generates sufficient returns to justify the increased leverage. The successful execution of this notes offering, supported by major financial institutions, reflects the market's positive assessment of Diamondback's credit quality and business fundamentals within the energy sector.

Corporate Finance Expert

This $1.2 billion senior notes issuance represents a calculated financial engineering move by Diamondback Energy's treasury team. The 5.550% coupon rate positions this debt in the mid-range for similar energy sector issuances in the current market, neither particularly aggressive nor conservative.

What's notable is the timing strategy - Diamondback is proactively securing acquisition funding ahead of the transaction close, reducing execution risk for their Double Eagle deal. This approach provides certainty of funding while potentially avoiding more expensive financing options if market conditions deteriorate.

The 10-year tenor provides appropriate duration matching for energy assets with long production profiles, aligning debt maturity with expected cash flow generation from acquired assets. However, this additional leverage will increase Diamondback's debt service obligations by approximately $66.6 million annually (5.550% on $1.2 billion).

The decision to use senior notes rather than term loans or revolving credit suggests management is prioritizing covenant flexibility and potentially preserving bank capacity for future opportunities. The strong syndicate of underwriters (BofA, Barclays, PNC, TD) indicates broad financial institution support.

While this transaction optimizes Diamondback's capital structure for the pending acquisition, investors should evaluate whether the increased financial leverage is adequately offset by operational synergies and production growth from the acquired Double Eagle assets to maintain healthy coverage ratios in various commodity price scenarios.

MIDLAND, Texas, March 06, 2025 (GLOBE NEWSWIRE) -- Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback”) announced today that it has priced an offering (the “Notes Offering”) of $1,200,000,000 in aggregate principal amount of 5.550% senior notes that will mature on April 1, 2035 (the “Notes”). The price to the public is 99.937% of the principal amount of the Notes.

Diamondback intends to use the net proceeds from the Notes Offering for general corporate purposes, including, without limitation, paying a portion of the cash consideration for the pending acquisition of certain subsidiaries of Double Eagle IV Midco, LLC and paying fees, costs and expenses related thereto.   The Notes Offering is expected to close on March 20, 2025, subject to customary closing conditions.

The Notes will be sold in a registered offering pursuant to an effective shelf registration statement on Form S-3ASR that was previously filed with the Securities and Exchange Commission, a prospectus supplement and related base prospectus for the Notes Offering.

BofA Securities, Inc., Barclays Capital Inc., PNC Capital Markets LLC and TD Securities (USA) LLC have served as joint book-running managers for the Notes Offering. When available, copies of the prospectus supplement and related base prospectus for the Notes Offering may be obtained from BofA Securities, Inc. at NC1-022-02-25, 201 North Tryon Street, Charlotte, North Carolina 28255-0001, Attn: Prospectus Department, by email to dg.prospectus_requests@bofa.com and toll free at 1-800-294-1322; Barclays Capital Inc. at c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, by email to barclaysprospectus@broadridge.com and toll free at 1-888-603-5847; PNC Capital Markets LLC at 300 Fifth Avenue, 10th Floor, Pittsburgh, PA 15222, by email to pnccmprospectus@pnc.com and toll free at 1-855-881-0697 and TD Securities (USA) LLC at 1 Vanderbilt Avenue, 11th Floor, New York, NY 10017 and toll free at 1-855-495-9846. Electronic copies of the prospectus supplement and related base prospectus for the Notes Offering will also be available on the website of the Securities and Exchange Commission at www.sec.gov.

This press release is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. The Notes Offering may only be made by means of a prospectus supplement and related base prospectus.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including those relating to the expected timing of the closing of the Notes Offering. All statements, other than historical facts, that address activities that Diamondback assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Diamondback. Information concerning these risks and other factors can be found in Diamondback’s filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q, 8-K, the preliminary prospectus supplement filed by Diamondback for the Notes Offering and any amendments or supplements thereto, which can be obtained free of charge on the Securities and Exchange Commission’s web site at http://www.sec.gov. Diamondback undertakes no obligation to update or revise any forward-looking statement.

Investor Contact:
Adam Lawlis
+1 432.221.7467
alawlis@diamondbackenergy.com

Source: Diamondback Energy, Inc.

FAQ

What is the size and interest rate of Diamondback Energy's (FANG) new senior notes offering?

Diamondback Energy's offering consists of $1.2 billion in senior notes with a 5.550% interest rate, maturing on April 1, 2035.

How will Diamondback Energy (FANG) use the proceeds from its March 2025 notes offering?

The proceeds will be used for general corporate purposes, primarily to fund part of the Double Eagle IV Midco subsidiaries acquisition and related fees.

When is the expected closing date for FANG's $1.2 billion notes offering?

The notes offering is expected to close on March 20, 2025, subject to customary closing conditions.

Which investment banks are managing Diamondback Energy's (FANG) 2035 notes offering?

The joint book-running managers are BofA Securities, Barclays Capital, PNC Capital Markets, and TD Securities.