Diamondback Energy, Inc. (FANG Quick QuoteFANG - Free Report) , a leading independent oil and natural gas company, recently announced the execution of a definitive agreement through its wholly owned subsidiaries to divest the 27.5% equity stake in EPIC Crude Holdings, LP (“EPIC Crude”). This transaction is structured so that Plains All American Pipeline, L.P. (PAA Quick QuotePAA - Free Report) and Plains GP Holdings (PAGP Quick QuotePAGP - Free Report) , two Houston, TX-based oil and gas storage and transportation companies collectively known as “Plains,” will acquire Diamondback’s full equity interest for a total consideration of more than $596 million.

This includes approximately $500 million in upfront net cash and an additional contingent cash payment of $96 million, which is dependent on the formal approval of a capacity expansion at EPIC Crude before the end of 2027.

Transaction Details and Valuation Implications

Under the sale terms, EPIC Crude is valued at an implied upfront enterprise value of $2.85 billion for complete ownership, highlighting the attractiveness of the deal. Additionally, the $350 million valuation attached to the contingent capacity expansion highlights the significant growth potential embedded within EPIC Crude’s midstream infrastructure. The comprehensive deal is anticipated to close in early 2026, subject to customary regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

This divestiture represents a key liquidity event for Diamondback, unlocking substantial capital that can be redeployed to enhance its core upstream operations and pursue further strategic initiatives. The structure of the contingent consideration ensures alignment between the long-term infrastructure development at EPIC Crude and Diamondback’s continued commercial interests.

FANG’s Strategic Focus and Commercial Partnership Continuity

Kaes Van’t Hof, CEO of Diamondback Energy, called the transaction a "meaningful return on invested capital.” Despite the sale, Diamondback will maintain a strong commercial relationship with EPIC Crude and Plains, continuing as an anchor shipper on the EPIC Crude pipeline to ensure reliable midstream transport critical to its crude oil logistics strategy.

Maintaining this shipping commitment preserves operational synergies and supply-chain efficiencies critical to Diamondback’s production footprint across the Permian Basin. This strategic collaboration affirms Diamondback’s commitment to optimizing its asset portfolio while ensuring uninterrupted midstream support.

EPIC Crude: A Midstream Asset With Robust Growth Prospects

EPIC Crude operates as a key midstream entity affiliated with EPIC Midstream Holdings LP, playing a vital role in crude oil gathering and transportation infrastructure. The company's pipeline network supports multiple producers in the Permian Basin, one of the most productive oil regions in the United States.

The pending capacity expansion, contingent on regulatory and market approvals, aims to further enhance throughput volumes and operational flexibility. This development would reinforce EPIC Crude’s competitive positioning in a highly strategic corridor for crude logistics, thereby amplifying value for all stakeholders.

Regulatory Review and Transaction Closing Outlook

The transaction is contingent on customary closing conditions, including regulatory scrutiny under the Hart-Scott-Rodino Antitrust Improvements Act. This federal statute requires the parties to obtain clearance to ensure the deal does not impede market competition. Industry analysts anticipate a smooth regulatory review given the divestiture’s alignment with competitive practices and market structures.

With an expected closing timeline by early 2026, FANG will be positioned to realize the financial benefits and reallocate capital toward advancing its upstream development programs, enhancing shareholder value through disciplined capital deployment.

Advisory and Legal Counsel Support

FANG engaged Akin Gump Strauss Hauer & Feld LLP as legal counsel to facilitate this significant transaction. The involvement of seasoned legal advisors underscores the complexity and strategic nature of the deal, ensuring comprehensive due diligence and regulatory compliance.

Implications for Investors and Market Positioning

For investors, this transaction signals FANG’s prudent capital management and strategic asset optimization. By monetizing a substantial equity position in a midstream infrastructure asset, Diamondback strengthens its balance sheet, increases financial flexibility and sharpens focus on core upstream production growth.

The sale price and contingent consideration reflect market confidence in EPIC Crude’s operational capabilities and expansion potential. Diamondback maintains a commercial shipping relationship with EPIC Crude, further mitigating logistical risks and supporting stable production cash flows.

Conclusion: FANG’s Commitment to Operational Excellence and Growth

FANG’s divestiture of the equity interest in EPIC Crude represents a landmark transaction in its portfolio strategy. The substantial capital inflow, combined with ongoing midstream partnership continuity, provides a robust foundation for growth and operational excellence. This deal highlights FANG’s disciplined approach to capital allocation, balancing asset monetization with sustained commercial relationships to drive long-term shareholder value. As the transaction progresses toward anticipated completion in 2026, FANG remains steadfast in its commitment to optimizing resources, enhancing operational efficiency and capitalizing on growth opportunities in the dynamic energy sector.

FANG's Zacks Rank & A Key Pick

Currently, FANG and PAA hold a Zacks Rank #3 (Hold) each, while PAGP carries a Zacks Rank #1 (Strong Buy).

Investors interested in the energy sector might look at a better-ranked stock like Repsol (REPYY Quick QuoteREPYY - Free Report) , currently sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.