Diamondback Energy spurs new U.S. shale consolidation with two deals
Monday, December 21, 2020

U.S. oil producer Diamondback Energy Inc on Monday agreed to buy two rivals for a combined $3.2 billion including debt, continuing a consolidation spurred by the coronavirus pandemic-induced oil downturn. 

Facing heavy debt burdens and weak oil prices, shale oil producers have been selling at low-to no premiums to market value. Investors, unlike during the 2016 oil slump, have not shown a willingness to put new money into struggling firms.

"It is a realization among small producers how difficult it is to deliver on returns expectations," said Enverus M&A analyst Andrew Dittmar. Sellers are having to accept low or no premium deals with a payoff down the road if the buyer's stock appreciates, he said.

Diamondback will buy QEP Resources in a stock-and-debt that swaps 0.05 of a Diamondback share for each QEP share, or about $2.29, a discount to Friday close. Including debt, the deal is valued at $2.2 billion. 

QEP shares lost 8% shortly after midday while Diamondback's shares fell 6% to $43.03.

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