Share producer Diamondback Energy (FANG) – Get Report announced the acquisition of two rivals: QEP Resources (QEP) – Get Report and Guidon, which was co-founded by funds managed with Blackstone Group.
Diamondback agreed to purchase QEP for all stock in a transaction valued at $2.2 billion, including QEP’s debt of $1.6 billion. QEP shareholders will receive 0.05 a share of Diamondback common stock for each share of QEP they own.
Diamondback agreed to buy Guidon for 10.63 million shares of Diamondback common stock and $375 million of cash. The cash portion of the transaction is expected to be funded through a combination of cash on hand and borrowings under the company’s credit facility. The transaction values Guidon at $862 million.
Diamondback Energy traded at $42.75, down 6.74%. The stock has slid 51% year to date through Friday amid aslump in oil prices. But it has rebounded 36% in the last three months along with a bounceback in crude.
QEP traded at $2.08, down 9.96%. It has slumped 49% year to date through Friday, but has soared 106% in the last three months, perhaps on takeover speculation.
Morningstar analyst Stephen Ellis was bullish on Diamondback last month, putting its fair value at $83.
“Because of its enviable Permian Basin acreage, Diamondback Energy is the lowest-cost producer in the upstream oil and gas segment,” he wrote.
“The company is better positioned to cope with very weak oil prices than most peers, and at our midcycle forecast – currently $55 per barrel for WTI – it can really thrive. Accordingly, we award a narrow moat rating,” Ellis said.