Permian Rivals Near Deal to Create $50 Billion Oil-and-Gas Behemoth

Rivals Diamondback Energy and Endeavor Energy Resources are finalizing a merger that would create an oil-and-gas behemoth worth more than $50 billion, as higher oil prices and a rush to grab prime acreage fuel consolidation in the energy sector.Diamondback could announce a deal with the closely held Endeavor as soon as Monday, according to people familiar with the matter, assuming the talks don’t hit a last-minute snag.

Endeavor, founded by wildcatter Autry Stephens, has long been one of the most prized businesses in the consolidating Permian Basin, the largest U.S. oil patch that straddles West Texas and New Mexico.In striking a deal for Endeavor, Diamondback fended off competition from other parties including ConocoPhillips, some of the people said.

The stock-and-cash deal would value Endeavor at around $25 billion, and Diamondback shareholders would own the majority of the combined company after it closes, they said. Diamondback, based in Midland, Texas, has a market value of around $27 billion.A pair of megadeals by Exxon Mobil and Chevron late last year helped prompt a flurry of deals in the sector. It is another sign that the U.S. economy is proving surprisingly resilient and that for many companies, it is business as usual even amid elevated interest rates.

Already, deal volumes in the U.S. are up 78% compared with a year earlier, according to Dealogic. Pricier debt and a tighter regulatory environment crimped merger and acquisition activity in 2023, but many advisers expect a busier 2024 as companies put their extra cash to work and rates appear poised to come down.Diamondback went public in 2012 and has been one of the fastest-growing frackers, with its crude production growing around 50 times in the past decade to reach more than 260,000 barrels of oil per day. It has been adding to its inventory of wells through acquisitions.

A combination with Endeavor would grant the combined company top-tier status in the Permian, endowing it with nearly as much acreage in the basin as rival ConocoPhillips, and crude production likely eclipsing 400,000 barrels per day.Endeavor’s Stephens is an 85-year-old billionaire who has drilled aggressively in West Texas for decades. He formed a sole proprietorship and drilled his first well in 1979 and turned that proprietorship into Endeavor Energy Resources in 2000.

He has since built it to have one of the most sought-after land positions of any oil-and-gas conglomerate in the world. Its operations cover roughly 350,000 net acres across the Midland Basin counties.Endeavor has explored selling itself on and off for years, attracting interest from the likes of Shell, Exxon and Pioneer Natural Resources at various times, people familiar with the matter have said.

Stephens himself is known for his intense work ethic, frugal spending and encyclopedic knowledge of his company’s deals. He has been known to work late, show up to his offices on weekends and walk the building’s staircases for exercise. He sometimes flies on commercial flights despite his estimated fortune of nearly $15 billion.

While many American frackers have seen oil-well productivity decline as they have drilled through their best locations—a big factor in recent deals—Endeavor has the largest remaining inventory of top-tier oil acreage of any private Permian company, according to energy-analytics firm Flow Partners.It has also been one of the most active producers in the region. The company was among private operators that kept drilling through the Covid-19 pandemic and helped U.S. crude production recover rapidly after a lull.

Following Exxon’s nearly $60 billion all-stock deal to buy Pioneer last fall, Chevron announced a $53 billion all-stock deal to purchase Hess the same month. Occidental Petroleum late last year revealed a $10.8 billion agreement to buy West Texas producer CrownRock. Last month, energy company APA agreed to buy smaller peer Callon Petroleum in a deal valued at about $4.5 billion including debt.

Elsewhere in the energy space, Southwestern Energy and Chesapeake Energy agreed to a merger in January that created one of the largest natural-gas producers in the U.S.Reuters reported in December that Endeavor was again exploring a sale.Collin Eaton and Benoît Morenne contributed to this article.