Massive oil deal: Diamondback Energy announces game-changing Midland Basin acquisition

Diamondback Energy, Inc. has announced a major acquisition that will significantly expand its footprint in the Midland Basin, further consolidating its position as one of the dominant operators in the Permian Basin. The company has entered into a definitive agreement to acquire subsidiaries of Double Eagle IV Midco, LLC, a deal valued at approximately $3 billion in cash and 6.9 million shares of Diamondback common stock. The transaction, expected to close on April 1, 2025, is set to bring substantial financial and operational synergies, reinforcing Diamondback’s strategy of drilling inventory expansion and long-term value creation.

The acquisition will be financed through a mix of cash reserves, credit facility borrowings, and potential debt offerings. It includes 407 drilling locations adjacent to Diamondback’s existing acreage, adding high-quality Midland Basin assets that immediately compete for capital allocation. The move aligns with the company’s broader goal of accelerating production growth while maintaining strong financial discipline.

What Does the Acquisition Mean for Diamondback Energy?

Diamondback and Double Eagle have agreed to an accelerated development plan for a portion of Diamondback’s non-core southern Midland Basin acreage, a move that is expected to bring forward net asset value (NAV) growth. By expediting the development of previously lower-priority assets, the company aims to enhance free cash flow growth starting in 2026, ensuring capital efficiency and operational optimization.

To maintain financial flexibility, Diamondback has also committed to selling at least $1.5 billion in non-core assets to accelerate pro forma debt reduction. The company expects to bring its net debt down to $10 billion, with a long-term target of maintaining leverage between $6 billion and $8 billion. This structured financial approach ensures Diamondback remains well-capitalized while continuing to expand its Permian Basin operations.

How Will This Acquisition Strengthen Diamondback’s Position in the Midland Basin?

The deal represents a high-quality asset acquisition, with the newly acquired properties featuring substantial development potential. The 40,000 net acres in the core of the Midland Basin are expected to yield an estimated 27,000 barrels of oil per day (bpd) in 2025, with oil making up approximately 69% of the production mix.

Diamondback’s acquisition strategy is built around enhancing drilling inventory expansion, and this deal aligns with that goal. The assets acquired from Double Eagle include 407 horizontal drilling locations with an average lateral length exceeding 11,000 feet, optimizing efficiency and maximizing hydrocarbon recovery. Additionally, 44 gross upside drilling locations have been identified, providing further growth opportunities in emerging zones.

Travis Stice, Chairman and CEO of Diamondback, highlighted the strategic advantages of the acquisition, stating that Double Eagle represents one of the most attractive remaining assets in the Midland Basin. He emphasized that the deal strengthens Diamondback’s drilling inventory while also unlocking additional value from its existing acreage through lateral extensions and infrastructure synergies.

“The Permian Basin is undergoing rapid consolidation, and we have positioned Diamondback to have the longest-duration, low-breakeven inventory in the region. While this deal introduces some additional leverage, our strong free cash flow generation and planned asset sales will ensure that we quickly bring down debt,” Stice noted.

How Will the Acquisition Impact Diamondback’s Financial Performance?

From a financial standpoint, the acquisition is immediately accretive to Diamondback’s core metrics. The transaction is valued at 5.2x projected 2025 EBITDA and is expected to enhance cash flow per share, NAV per share, and overall financial performance. The company anticipates a 5%+ boost in free cash flow per share by 2026, reinforcing its ability to generate strong returns for investors.

This acquisition follows Diamondback’s recent drop-down transaction with Viper Energy, Inc., announced in late January. That deal, valued at $4.45 billion, involved selling mineral and royalty interests to Viper Energy, further strengthening Diamondback’s liquidity and financial position.

What Role Does Governance Play in Diamondback’s Expansion?

Beyond acquisitions, Diamondback has also made governance changes to support its long-term strategy. Earlier this month, the company appointed Darin G. Holderness to its Board of Directors, a move expected to enhance financial oversight and strategic decision-making. Holderness brings extensive experience in the energy sector, including previous leadership roles at ProPetro Holding Corp., Concho Resources, and KPMG LLP. His expertise will be instrumental in supporting Diamondback’s capital allocation strategy and financial management.

Stice expressed confidence in the board’s expansion, stating that Holderness’s knowledge of the Permian Basin and background in financial management make him a valuable addition to the company’s leadership.

What’s Next for Diamondback Energy?

With the Midland Basin acquisition, Diamondback Energy continues to strengthen its position as a leading independent oil and gas producer in the Permian Basin. The company’s strategic approach to drilling inventory expansion, free cash flow growth, and disciplined financial management sets it apart from competitors.

As the deal moves toward completion, Diamondback remains focused on maximizing the value of its expanded asset base while maintaining strong financial discipline. By combining high-quality drilling inventory with a commitment to debt reduction and operational efficiency, Diamondback is positioning itself for sustained long-term growth in the Permian Basin.

When Will the Transaction Be Finalized?

The Double Eagle acquisition is expected to close on April 1, 2025, subject to customary regulatory approvals and closing conditions.

Financial advisors for the transaction include TPH&Co, a division of Perella Weinberg Partners, representing Diamondback, with legal counsel provided by Kirkland & Ellis LLP. Double Eagle’s financial advisors include RBC Capital Markets, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC, with Vinson & Elkins LLP serving as legal counsel.

A Stronger Future for Diamondback Energy

As Diamondback Energy expands its Midland Basin operations, the company remains committed to a strategy that balances growth, financial discipline, and shareholder value. The $3 billion acquisition strengthens drilling inventory, enhances free cash flow growth, and reinforces Diamondback’s position in the Permian Basin. With a focus on efficient capital deployment and debt reduction, Diamondback is well-positioned to navigate the evolving oil and gas landscape in the years ahead.