February 28, 2024

Two American oil and gas companies have said they will merge in a $26bn (£21bn) deal, the latest in a wave of acquisitions designed to buy up the best land for drilling.

Diamondback Energy has agreed to buy Endeavor Energy Resources in a takeover that will create a company with a value of about $50bn (£40bn).

The merger frenzy has been prompted in part by higher oil prices since Russia’s full-scale invasion of Ukraine two years ago in early 2022. Companies are rushing to use their huge profits to increase output, despite analysis by the International Energy Agency (IEA) that said new fossil fuel developments would push the world beyond the safe limits of global heating.

The quickest way to increase output is to buy rivals with rights to proven reserves. The spate of acquisitions has included deals by US super majors. In October, Chevron agreed a $53bn (£42bn) deal to buy Hess, while ExxonMobil agreed to buy the shale group Pioneer Natural Resources for $59.5bn (£47bn).

Diamondback beat its bigger rival ConocoPhillips, which had also expressed interest in buying Endeavor, the Wall Street Journal reported.

Smaller deals included Occidental Petroleum’s $12bn (£9.5bn) acquisition of CrownRock in December. That deal, and the takeover of Endeavor, are focused on extracting more oil and gas from the US’s vast Permian oilfield, which stretches across large parts of Texas and New Mexico.

Endeavor was founded in 1979 as a single well in the Permian by Autry Stephens, who still chairs the company’s board. Endeavor now produces about 400,000 barrels of oil a day.

The deal values Endeavor at around $26bn. Endeavor shareholders will receive about 117m Diamondback shares plus $8bn (£6.3bn) cash, the companies announced on Monday. Endeavor shareholders will hold just under 40% of the new company.

Travis Stice, chairman and chief executive of Diamondback, said: “This is a combination of two strong, established companies merging to create a ‘must own’ North American independent oil company.”

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He said Diamondback would “have industry-leading depth and quality that will be converted into cashflow with the industry’s lowest cost structure”.

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