Permian Basin Pumpjack. Credit: blake.thornberry.

The Carlyle Group has signed a joint venture (JV) agreement with Diamondback Energy to finance the development of the latter’s oil and gas assets in Texas, US.

The companies will collectively invest $620m to develop Diamondback’s assets in the San Pedro area of Pecos County, Texas, within the Southern Delaware basin.

Under the terms of the agreement, Carlyle Energy Mezzanine Opportunities Fund II will contribute up to 85% of the development costs over five years.

Once certain performance milestones are met, Carlyle’s working interests will largely revert to Diamondback.

Carlyle Energy mezzanine opportunities team managing director Vince Hahn said: “We are incredibly excited to start this partnership with Diamondback, which has demonstrated year-after-year excellence in developing the Permian Basin.”

Diamondback appointed UBS Investment Bank to serve as the sole financial adviser on the transaction.

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“This joint venture will allow Diamondback to bring forward present value on the southeastern portion of our Pecos County acreage.”

Vinson & Elkins and Akin Gump respectively offered counsel services to Carlyle and Diamondback.

Diamondback Energy CEO Travis Stice said: “This joint venture will allow Diamondback to bring forward present value on the southeastern portion of our Pecos County acreage, with the added benefit to our minerals and midstream businesses.

“We look forward to our partnership with a group as well respected as The Carlyle Group.”

Through its two funds, namely the Carlyle Energy Mezzanine Opportunities Fund and Carlyle Energy Mezzanine Opportunities Fund II, The Carlyle Energy Mezzanine Opportunities Group provides growth and refinancing capital to projects and companies operating in the energy sector.

As of 30 June, the funds have combined assets worth around $4bn.

Diamondback is focused on the exploration of unconventional oil and natural gas reserves in the Permian Basin in West Texas.

The company undertakes horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline formations.

Last month, the company reached a $9.2bn deal to acquire Energen to bolster its position in the Permian Basin.