Diamondback Energy has signed an agreement to acquire all Ajax Resources’ leasehold interests and related assets as part of a deal valued at $900m in cash and 2.58 million shares of Diamondback common stock.
The company plans to fund the cash portion of the transaction via a combination of cash on hand and cash proceeds from the previously announced drop down sale of mineral interests to Viper Energy Partners.
Diamondback will also leverage borrowings from its revolving credit facility or proceeds from one or more capital markets transactions to finance the acquisition.
The definitive purchase agreement will see Diamondback acquire 25,493 net leasehold acres in the Northern Midland Basin, including around 21,000 net acres in the Northwest Martin and Northeast Andrews counties.
The company will also buy 362 net identified potential horizontal drilling locations with an average lateral length of more than 9,500ft.
Around 220 net potential locations are featured in the top quartile of Diamondback’s current inventory.
Diamondback CEO Travis Stice said: “Diamondback’s announced acquisition of high-quality assets from Ajax Resources provides additional Tier 1 resource directly adjacent to our existing acreage in Northwest Martin and Northeast Andrews counties.
“With approximately 220 net locations capable of generating 100% or greater IRRs at $60 per barrel across three zones, this transaction is accretive to our top quartile inventory, NAV and 2019 financial metrics.”
Ajax midstream infrastructure includes 40 million barrels a day (Mb/d) in saltwater gathering and disposal, and 45Mb/d of existing fresh water production, in addition to ownership of more than 700 surface acres.
The acquisition is subject to continued diligence and closing conditions and is expected to close at the end of October.
The pending Ajax acquisition is expected to bring Diamondback’s total leasehold interests to approximately 230,000 net surface acres in the Permian Basin upon completion.
