Diamondback Energy to expand in Permian oilfield with $4.08 billion deal

Diamondback Energy said on Tuesday it would buy certain units of EnCap Investments-backed energy producer Double Eagle in a cash-and-stock deal for about $4.08 billion, as the shale producer looks to expand its presence in the oil-rich U.S. Permian basin.

Diamondback has been strengthening its position in the Permian basin, which straddles West Texas and New Mexico. Last year, it struck a $26-billion deal to buy privately held rival Endeavor Energy Partners, making it the third-largest oil and gas producer in basin.

However, growth in oil output in the top U.S. oilfield is expected to slow by at least 25% in 2025 despite calls by President Donald Trump to "drill, baby, drill", as producers focus on keeping spending under control and achieving higher prices for their oil and gas.

The deal would give Diamondback access to about 40,000 net acres in the core of Midland Basin, one of the last large assets in the Permian basin.

Diamondback also committed to selling at least $1.5 billion of non-core assets to reduce pro-forma debt. It expects to lower net debt to $10 billion and, long term, maintain leverage of $6 billion to $8 billion.

Shares of the company were up over 1% before the opening bell.

Last year, Reuters reported Double Eagle was exploring a sale of its Permian Basin-based producer.

"Double Eagle is the most attractive asset remaining in the Midland Basin. With 407 locations adjacent to our core position, this largely undeveloped asset adds high-quality inventory," Diamondback CEO Travis Stice said in a statement.

Diamondback said it would pay roughly 6.9 million shares and $3 billion in cash, which it expects to fund through a combination of cash on hand and borrowings.

The transaction is expected to close on April 1.