(Corrects Guidon deal to cash-and-stock from all stock)
Dec 21 (Reuters) - U.S. oil producer Diamondback Energy Inc on Monday agreed to buy two rivals for a combined $3.2 billion including debt, continuing a consolidation spurred by the coronavirus pandemic-induced oil downturn.
Facing heavy debt burdens and weak oil prices, shale oil producers have been selling at low- to no premiums to market value. Investors, unlike during the 2016 oil slump, have not shown a willingness to put new money into struggling firms.
Diamondback will buy QEP Resources in a stock-and-debt deal that includes assumption of $1.6 billion in debt. QEP holders will get 0.05 of a Diamondback share for each share, or about $2.29, a discount to the stock’s Friday close. Including debt, the deal is valued at $2.2 billion.
It also agreed to purchase lease interests and assets from privately-held shale producer Guidon Operating LLC for 10.63 million shares and $375 million in cash, valued at about $850 million.
QEP shares lost 8.4% in early trading while Diamondback’s shares fell 6% to $43.16.
“Every time Diamondback concludes a transaction it’s objectively shown shareholders are better off,” Diamondback Chief Executive Travis Stice said in a call. “These are extraordinary times and it creates extraordinary opportunities,” he said.
The deals will add to its projected 2021 free cash flow per share and will result in annual savings of at least $60 million to $80 million after closing. The QEP deal will close by the second quarter of 2021.
The QEP purchase will add around 49,000 acres to Diamondback’s holdings in the Midland region of the giant Permian basin shale field in Texas. It also includes North Dakota properties that the company expects to divest over time.
The two deals will expand Diamondback’s land in the Midland area of the Permian to over 276,000 acres.
Recent deals in the Permian Basin include Pioneer Natural Resource Co’s $4.5 billion buyout of Parsley Energy Inc and ConocoPhillips’ $9.7 billion deal for Concho Resources Inc. (Reporting by Shariq Khan and Arundhati Sarkar in Bengaluru; writing by Gary McWilliams; editing by Sriraj Kalluvila and Grant McCool)