Diamondback's Energen Acquisition Will Create Synergies in Permian

Diamondback's Energen Acquisition Will Create Synergies in Permian
Diamondback's purchase of rival Energen signifies a move toward consolidation, according to Rystad Energy.

Diamondback Energy’s acquisition of Energen Corp. is expected to “generate significant synergies and improved overall production on operations,” according to analysis by Rystad Energy.

The $9.2 billion deal announced Aug. 14 puts Diamondback at the top when it comes to Permian M&A spenders in 2018 and signals a shift in the U.S. shale industry towards consolidation.

“Acreage positions of Energen and Diamondback are strictly adjacent only in a few selected areas of the Permian Basin. Therefore, synergies from the increased number of long-lateral locations will be limited,” Artem Abramov, Rystad’s VP Shale Research, said in a release. “Nevertheless, relative proximity of individual acreage blocks in the Northern Midland basin opens the door to significant logistical efficiencies, which will ultimately allow for material drilling and completion cost savings on a per-well basis.”

Another benefit of Diamondback’s acquisition is the company’s easier access to capital. And the company boasts an efficient cost structure and outstanding well productivity.

“Looking at realized oil decline curves for 2016-2018 completions in the Northern Midland, we observe that Diamondback’s wells typically deliver 25 percent higher cumulative oil production over the first year as compared to Energen’s wells,” Abramov said. “This outperformance in normalized productivity is mirrored by lower proppant intensity, significantly lower drilling and completion costs and consequently lower breakeven prices on Diamondback’s portfolio.”


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