By: Jensen Werley – Denver Business Journal – QEP Resources (NYSE: QEP), a Denver-based oil and gas company, is being acquired by Diamondback Energy Inc. (Nasdaq: FANG).
The deal is an all-stock transaction valued at about $2.2 billion. The deal includes QEP’s $1.6 billion net debt as of Sept. 30. The deal will consist of 0.05 shares of Diamondback common stock for each share of QEP common stock. That’s a value of about $2.29 per share for each QEP shareholder. The transaction was unanimously approved by the Board of Directors for each company.
Diamondback Energy is an independent oil and natural gas company headquartered in Midland, Texas. It focuses on the acquisition and development of natural gas reserves in the Permian Basin in West Texas. QEP is an independent crude oil and natural gas exploration and production company. It’s focused on two regions: the Southern Region, primarily in Texas, and the Northern Region, primarily in North Dakota.
The acquisition will add to Diamondback’s inventory. QEP had about 49,000 net acres in the Midland Basin.
At the same time as its QEP acquisition, Diamondback also announced it was acquiring all leasehold interests and related assets of Texas-based Guidon Operating LLC in exchange for 10.63 million shares of Diamondback common stock and $375 million in cash. The deal gave Diamondback an additional 32,500 net acres in the Northern Midland Basin.
“The acquisition of QEP also checks every box of Diamondback’s corporate development strategy,” Diamondback CEO Travis Stice said in a prepared statement. “Most importantly, the addition of this Tier-1 resource competes for capital right away in Diamondback’s current portfolio, and we will now be able to allocate most of our capital to the high-returning Midland Basin for the foreseeable future.”
The deal is also beneficial to QEP shareholders.
“We believe that this strategic merger with Diamondback, along with the addition of the Guidon assets, provides our shareholders with an exciting investment opportunity, now and in the future,” said Tim Cutt, president and CEO of QEP, in a prepared statement. “The large contiguous Tier-1 acreage position in the Northern Midland Basin is expected to lead to operational synergies and deliver capital efficiencies beyond what each company could achieve independently. I believe in this combination and look forward to being a long-term shareholder and watching the value of the company grow with time.”
QEP has undergone a year of change, particularly early in 2020 when oil and gas was hard hit by the pandemic and economic downturn. In March, it announced 30% spending restrictions, which was about a $300 million reduction. By early June, it saw its stock value improve significantly, more than doubling its stock value from $1.08 per share at the time to $2.48 per share. It tacked on $339 million in stock value.
At the end of June, Wilks Brothers LLC, the Cisco, Texas-based company of billionaires Dan and Farris Wilks, became the third-largest owner of stock in QEP Resources. They purchased about $25 million worth of stock. And in early August, QEP Resources decided it would stay independent, after Elliot Management Corp., a New York City-based private equity investor, tried to take control of the company. The two reached a cooperation agreement.