Back to top

Diamondback and Carlyle Form JV to Develop Permian Assets

Read MoreHide Full Article

While the lack of takeaway capacity in the prolific Permian play could mar the region’s growth prospects in the near future, Diamondback Energy, Inc. (FANG - Free Report) seems to be rather unfrazzled by this dilemma. The Texas-based Permian pure-play has been strategically working to further boost its presence in the region. While many producers have been reducing their spending levels in Permian and shifting their focus to other shale plays, Diamondback does not intend to re-evaluate its strategies. The company believes that once the pipeline issues get sorted after a year or so, the country’s chief oil growth engine, the Permian Basin, will surely offer handsome rewards to the firm.

Very recently, Diamondback announced that it has teamed up with investment management company The Carlyle Group LP (CG - Free Report) to form a joint venture (JV) for developing the former’s Permian assets.

The companies will jointly invest $620 million for the development of oil and gas assets in the San Pedro area of Pecos County, wherein Diamondback owns majority of its holdings. Notably, Carlyle will fund 85% of the development fund program. After achieving some performance milestones under the program, Carlyle's working interests will largely be transferred to Diamondback.

Over a month, Diamondback announced two big acquisitions to bolster its Permian footprint. Alongside second-quarter earnings release, the company announced that it will purchase a private-equity backed Permian player Ajax Resources LLC for $900 million in cash and around $300 million in stock. The deal will add around 25,493 net leasehold acres to Diamondback’s portfolio.

Just a few days later, it also entered into a mega $9.2-billion deal to acquire Energen Corporation , which will add around 96,000 acres of tier-1 Permian acreage to Diamondback’s portfolio, expanding its position by 57% to a total of 266,000 acres in the region. Net Permian acreage of the combined company will stand at around 366,000 acres.

Zacks Rank and A Key Pick

Diamondback currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same space is Jones Energy, Inc. (JONE - Free Report) , which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jones Energy’s 2019 earnings are expected to grow 32.1% on a year-over-year basis.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

The Carlyle Group L.P. (CG) - free report >>

Diamondback Energy, Inc. (FANG) - free report >>

Jones Energy, Inc. (JONE) - free report >>

More from Zacks Analyst Blog

You May Like