Diamondback Energy (FANG) has sealed a $4 billion deal to buy subsidiaries of West Texas based oil group Double Eagle.
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Undeveloped Assets in Biggest Oil Field
The cash and stocks deal will see Diamondback acquire 40,000 net acres from Double Eagle, which is backed by private equity group EnCap Investments, in the Midland Basin. This is in one of the last large assets left in the Permian Basin, which is the biggest oil field in the U.S. Around 70% of the acreage FANG is snapping up is undeveloped. “Double Eagle is the most attractive asset remaining in the Midland Basin,” stated Travis Stice, Chairman and Chief Executive Officer of Diamondback. “With 407 locations adjacent to our core position, this largely undeveloped asset adds high-quality inventory that immediately competes for capital.” The deal is expected to complete on April 1.
Sector is Consolidating In Trump’s New World
Diamondback Energy, headquartered in Midland, Texas, has a market value of around $46 billion. It is on something of an acquisition trail given its move last September to buy Permian producer Endeavor Energy Resources in a cash-and-stock transaction. The deal valued Endeavor at around $26 billion. This new deal signals that consolidation in the sector could be heating up given the arrival of President Donald Trump in the Oval Office and his commitment to fossil fuels.
TD Cowan analyst David Deckelbaum, who has a Buy rating and $225 price target on FANG stock, said the deal had “taken one of the last premier packages off the board”. However, FANG shares inched down 0.33% in trading today.
Is FANG a Good Stock to Buy?
On TipRanks, FANG has a Strong Buy consensus based on 17 Buy and 4 Hold ratings. Its highest price target is $256. FANG stock’s consensus price target is $214.38 implying an 36.10% upside.
