Double Eagle IV Midco, LLC Enters Into Definitive Purchase Agreement With Diamondback Energy, Inc.

Rhea-AI Summary

Double Eagle IV Midco has entered into a definitive purchase agreement to sell its equity interest in certain subsidiaries to Diamondback Energy (NASDAQ: FANG) for $3 billion in cash and approximately 6.9 million shares of Diamondback common stock. The transaction involves assets in the Midland Basin and is expected to close on April 1, 2025.

Double Eagle's leadership expressed confidence in Diamondback as a high-quality Midland operator that shares their core values and understanding of community impact in West Texas. EnCap's partner highlighted the natural fit of the asset base with Diamondback's operations and expressed enthusiasm about becoming a significant shareholder.

Positive

• Acquisition strengthens Diamondback's position in the Midland Basin with high-quality inventory
• Strategic expansion through $3 billion cash plus stock transaction
• Addition of valuable assets to Diamondback's portfolio

Negative

• Significant cash outlay of $3 billion may impact Diamondback's liquidity
• Share dilution from issuance of 6.9 million new shares

Insights

Financial Analyst

This $3 billion cash plus stock acquisition marks a strategic expansion for Diamondback Energy in the Midland Basin, with the total transaction value approaching $4.1 billion when including the stock component at current market prices. The deal structure is particularly noteworthy, as it demonstrates sophisticated financial engineering that preserves Diamondback's liquidity while giving Double Eagle ongoing exposure to the assets' performance.

The mixed payment structure, combining cash and approximately 6.9 million shares, represents a well-balanced approach that: 1) maintains Diamondback's financial flexibility for future opportunities, 2) provides Double Eagle and EnCap with continued upside potential through equity ownership, and 3) aligns all parties' interests in the long-term success of the combined assets.

The timing of this acquisition is strategic, coming amid a wave of consolidation in the Permian Basin as operators seek to optimize their positions and capture operational synergies. This deal follows recent major transactions in the region and reinforces Diamondback's position as a leading Midland Basin operator.

Several key implications emerge from this transaction:

• The deal strengthens Diamondback's high-quality inventory position in one of the most productive areas of the Permian Basin
• The equity component suggests confidence in Diamondback's future performance from both the seller and EnCap, a sophisticated energy private equity firm
• The April 1, 2025 closing timeline allows for orderly transition and integration planning
• The transaction reinforces the ongoing trend of public companies acquiring private equity-backed operators to secure premium drilling locations

This acquisition positions Diamondback to potentially realize significant operational synergies through economies of scale and enhanced operational efficiency in the Midland Basin. The involvement of multiple top-tier financial advisors (RBC, Goldman Sachs, J.P. Morgan) underscores the transaction's complexity and strategic importance.

-- Diamondback Energy Acquires Certain Midland Basin Entities from Double Eagle --

FORT WORTH, Texas--(BUSINESS WIRE)-- Double Eagle IV Midco, LLC (“Double Eagle”) today announced that it has entered into a definitive purchase agreement to divest its equity interest in certain subsidiaries to Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback”) in exchange for $3 billion of cash and approximately 6.9 million shares of Diamondback common stock.

Cody Campbell and John Sellers, Co-Chief Executive Officers of Double Eagle, commented “We are excited to announce our agreement with Diamondback. We believe our team has built a truly standout asset that further increases Diamondback’s high-quality inventory. It was important to us that we maintain the stewardship of this asset going forward not only with a world-class Midland operator but also a group that shares our core values and understands the importance of community impact in West Texas.”

Kyle Kafka, Partner of EnCap, added “We congratulate John, Cody and the entire Double Eagle team on another exceptional outcome and look forward to continuing our partnership. This high-quality asset base is a natural fit with Diamondback, the leading public operator in the Midland Basin, and we are excited to be a significant shareholder going forward.”

Timing and Approvals

Transaction is expected to close on April 1, 2025, subject to the satisfaction of customary closing conditions.

Advisors

RBC Capital Markets, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC are acting as financial advisors to Double Eagle. Vinson & Elkins LLP is serving as legal advisor.

TPH&Co, the energy business of Perella Weinberg Partners, is serving as financial advisor to Diamondback. Kirkland & Ellis is acting as legal advisor to Diamondback.

About Double Eagle

Double Eagle IV Midco, LLC is an independent oil and natural gas company focused on development and production throughout the Permian Basin. Headquartered in Fort Worth, Texas, Double Eagle IV was formed in 2022 by the same management team that successfully led its predecessor companies. The Company was formed with equity capital commitments from EnCap Investments L.P., Apollo Natural Resources, Elda River Capital, Double Eagle Management, and other strategic institutional investors.

About EnCap Investments L.P.

Since 1988, EnCap Investments has been a leading provider of growth capital to the independent sector of the U.S. energy industry. The firm has raised 25 institutional funds totalling approximately $47 billion and currently manages capital on behalf of more than 350 U.S. and international investors. For more information, please visit www.encapinvestments.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250218127318/en/

For Double Eagle:

Jordan Huelse

Vice President – Finance

817-928-3260

Jhuelse@depermian.com

For EnCap:

Meredith Hargrove Howard

Redbird Communications Group

210-737-4478

Meredith@redbirdpr.com

For other investor inquiries regarding EnCap:

Charles W. Bauer

Partner – Investor Relations

713-659-6100

cbauer@encapinvestments.com

Matt Crystal

Managing Director – Investor Relations

713-659-6100

mcrystal@encapinvestments.com

Source: Double Eagle IV Midco, LLC

FAQ

How much is Diamondback Energy (FANG) paying for Double Eagle's assets?

Diamondback Energy is paying $3 billion in cash plus approximately 6.9 million shares of Diamondback common stock for Double Eagle's assets.

When is the Double Eagle acquisition by FANG expected to close?

The transaction is expected to close on April 1, 2025, subject to customary closing conditions.

What assets is Diamondback Energy (FANG) acquiring from Double Eagle?

Diamondback is acquiring Double Eagle's equity interest in certain Midland Basin subsidiaries.

How will the Double Eagle acquisition impact FANG shareholders?

The acquisition will result in share dilution due to the issuance of 6.9 million new shares, but will add high-quality inventory to Diamondback's Midland Basin portfolio.