- Diamondback Energy shares rose in premarket trading Monday after announcing a $26 billion merger deal with Endeavor Energy Resources.
- Deal activity has increased in the energy sector over the past six months as producers seek prime acreage to boost production amid higher oil prices.
- The Diamondback Energy stock price has traded within an ascending triangle since June 2022, a chart pattern that indicates a continuation of the current long-term trend.
Diamondback Energy, Inc.
Shares of Diamondback Energy (FANG) rose in premarket trading on Monday after the company announced plans for a merger with Endeavor Energy Resources, the latest in a series of big deals in the energy sector in recent months.
Under the transaction, which values Endeavor at about $26 billion, Diamondback shareholders will own about 60.5% of the combined company, while Endeavor shareholders will own the remainder, the companies said in a news release on early Monday. The combined company will be worth about $53 billion, based on Diamondback's current market capitalization.
Diamondback managed to hold off the biggest players, including ConocoPhillips (COP), according to The Wall Street Journal, which first reported Sunday that a deal was in the works. Endeavor, a private energy company founded by wildcat billionaire Autry Stephens, has an operation spanning 350,000 acres in the Midland section of the Permian Basin, located in West Texas.
The deal comes as Permian producers seek prime acreage to increase production amid higher oil prices, putting pressure on other companies within the energy industry to consolidate to achieve greater efficiency and scale. Last October, ExxonMobil (XOM) purchased Pioneer Natural Resources (PXD) in a $60 billion transaction. That same month, Chevron (CVX) agreed to acquire oil producer Hess (HES) in a $53 billion acquisition. More recently, Chesapeake Energy (CHK) made a $7.4 billion bet in January to buy Southwestern Energy (SWN) in an all-stock deal to create the largest natural gas producer in the United States.
“This is a solution in terms of overlay and surface adjustment,” said Dan Pickering of Pickering Energy Partners. Reuters. The combined company would replace Pioneer Natural Resources as the largest sole producer in the Permian, he added.
The FANG stock price has been trading within a textbook ascending triangle since early June 2022, indicating a continuation of the long-term bullish trend following a breakout. Interestingly, stock turnover has slowed in recent weeks as the price consolidates towards the apex of the triangle. In the coming trading sessions, watch for volume breakouts on either side of the pattern for clues about the future direction of the stock's price.
Diamondback shares rose 2.7% to $155.88 about 30 minutes before Monday's opening bell. In announcing the merger, Diamondback also said Monday that it will approve a 7% increase in its base dividend, effective in the fourth quarter of 2023.
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