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.