Diamondback Energy (NASDAQ:FANG) and privately held Endeavor Energy Resources are close to announcing a $25 billion stock-and-cash merger deal, according to the Wall Street Journal. The two prominent Permian Basin-based oil companies are expected to create a combined entity worth over $50 billion.
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The buyout would considerably strengthen FANG’s foothold in the Permian Basin, as Endeavor Energy holds over 350,000 net acres in the Midland Basin counties. This deal is expected to boost combined crude production, potentially exceeding 400,000 barrels per day.
Consolidation in the Oil Industry
Recently, several oil and gas firms, particularly those operating in the Permian Basin, have announced significant merger agreements. Buoyed by the post-pandemic rise in oil prices, these companies are utilizing their robust cash reserves to execute strategic expansion initiatives.
Last October, Exxon Mobil (XOM) agreed to acquire Pioneer Natural (PXD) for $59.5 billion to solidify its position as the leading shale producer within the Permian Basin region. Concurrently, Chevron (CVX) revealed its intentions to acquire Hess Corporation (HES) in an all-stock deal valued at $53 billion. Subsequently, in November, Occidental (OXY) agreed to acquire CrownRock for $10.8 billion.
Is FANG a Good Buy Now?
Diamondback’s solid balance sheet and efficient operational model keep it well poised for growth. In addition, FANG stock has an impressive dividend yield of 5.26%, much above the sector average of 3.75%.
Wall Street analysts are highly optimistic about Diamondback. It has a Strong Buy consensus rating based on 12 Buys and one Hold. The average FANG stock price target of $182.54 implies 20.3% upside potential. Shares of the company have gained 8% over the past year.
