- Diamondback Energy shares rose in pre-market 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 ramp up production amid higher oil prices.
- The Diamondback Energy share 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.
Diamondback Energy (FANG) shares rose in pre-market trading Monday after the company announced plans for a merger with Endeavor Energy Resources, the latest in a string of big energy sector deals in recent months.
Under the transaction, which values Endeavor at about $26 billon, Diamondback shareholders will own about 60.5% of the combined company, while Endeavor’s equity holders will own the remainder, the company’s said in a press release early Monday. The combined company will be worth about $53 billion, based on Diamondback’s current market capitalization.
Diamondback successfully held off larger players, including ConocoPhillips (COP), according to The Wall Street Journal, which first reported on Sunday that a deal was in the works. Endeavor, a private energy company founded by wildcat billionaire Autry Stephens, has an operation that stretches over 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 ramp up production amid higher oil prices, putting pressure on other companies within the energy industry to consolidate for 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 takeover. More recently, Chesapeake Energy (CHK) made a $7.4 billion play in January to buy Southwestern Energy (SWN) in an all stock deal to create the largest U.S. natural gas producer.
“This is a layup in terms of the acreage overlap and fit,” Pickering Energy Partners’ Dan Pickering told Reuters. The combined company would replace Pioneer Natural Resources as the top solely Permian producer, he added.
The FANG share price has traded within a textbook ascending triangle since early June 2022, indicating a continuation of the longer-term uptrend upon a breakout. Interestingly, share turnover has decreased in recent weeks as the price consolidates toward the triangle’s apex. In upcoming trading sessions, keep an eye out for volume-back breakouts either side of the pattern for clues on the stock’s future price direction.
Diamondback shares were up 2.7% at $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 for the fourth quarter of 2023.
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