U.S. oil and gas producer Diamondback Energy (NASDAQ: FANG) on Tuesday agreed to buy shale rival Energen (NYSE: EGN) in an all-stock deal valued at $9.2 billion, giving it an expanded footprint in the country's largest and fastest growing oil field.
Energen had been under pressure from activist investor Corvex Management for more than a year to sell itself to address weak returns.
The proposed acquisition is Diamondback's second in the Permian in a week, after striking a deal to pay $1.2 billion for Ajax Resources.
The deal values Energen's properties at about $65,000 per acre (0.4 hectare), among the highest prices in the Permian in the last several years, said Andrew Dittmar, an M&A analyst at data provider DrillingInfo.
Concho Resources Inc earlier this year paid $8 billion in stock, or more than $70,000 per acre, for West Texas shale rival RSP Permian.
The purchase brings together two companies with holdings in the same areas of the Permian, said Dittmar, potentially allowing for longer horizontal wells, shared labor and equipment.
For independent oil producers like Diamondback, adding new drilling prospects represents the best way to compete for services with larger rivals that have moved into the Permian this year despite pressure by investors to focus on shareholder returns.
Diamondback's implied offer of $84.95 per Energen share represents a premium of about 16% to Energen's Tuesday close. The transaction includes $830 million in net debt.
Energen shares gained $4.35, or 6%, to $77.49 in early Wednesday trading, while Diamondback shares fell $12.33, or 9.2%, to $121.42.
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