Under the terms of the deal, QEP stockholders will receive 0.05 shares of Diamondback common stock in exchange for each share of QEP common stock.
The transaction price represents an indirect value of $2.29 a share to each QEP stockholder, based on the closing price of Diamondback common stock on 18 December.
Diamondback Energy noted that the deal value also includes QEP’s $1.6bn net debt.
Diamondback Energy CEO Travis Stice said: “The business combination with QEP and the Guidon transaction are accretive on all relevant 2021 financial metrics including free cash flow per share, cash flow per share and leverage, even before accounting for synergies.
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“Most importantly, the addition of this Tier-1 resource competes for capital right away in Diamondback’s current portfolio, and we will now be able to allocate most of our capital to the high-returning Midland Basin for the foreseeable future.”
The transaction has been unanimously approved by the boards of directors of Diamondback and QEP. It is expected to be completed in the first quarter or early second quarter of next year.
The closing of the transaction is dependent on securing approvals of QEP stockholders and other regulatory authorities.
It is also subject to other customary closing conditions.
QEP president and CEO Tim Cutt said: “We believe that this strategic merger with Diamondback, along with the addition of the Guidon assets, provides our shareholders with an exciting investment opportunity, now and in the future.
“The large contiguous Tier-1 acreage position in the Northern Midland Basin is expected to lead to operational synergies and deliver capital efficiencies beyond what each company could achieve independently.”
Upon the completion of the transaction, Diamondback stockholders are expected to hold around 92.8% ownership in the combined company, while QEP stockholders will own the remaining 7.2%.