Viper Energy, the royalty-focused arm of Midland, Texas-based Diamondback Energy, said it will acquire Sitio Royalties Corp. in an all-stock deal valued at $4.1 billion, including $1.1 billion in assumed debt.
The deal will add approximately 25,300 net royalty acres in the Permian Basin to Viper’s portfolio, along with nearly 9,000 acres in other key US shale plays, including the Denver-Julesburg Basin, Eagle Ford Shale, and Williston Basin.
According to the acquisition announcement on 3 June, nearly half of Sitio’s Permian acreage overlaps with existing horizontal wells that Viper holds interests in.
In the first quarter, the Denver-based Sitio reported an average crude production of 18,900 B/D, with 14,500 B/D from its Permian assets.
Following the acquisition, Viper’s total royalty position will grow to about 85,700 net acres, with 43% operated by Diamondback. The company expects to account for up to 68,000 B/D on a pro forma basis by the end of the year.
“This combination creates a leader in size, scale, float, liquidity, and access to investment grade capital in the highly fragmented minerals industry. Pro forma Viper is now clearly a must-own public mineral and royalty company in North America, with attractive size and scale in the Permian Basin,” Kaes Van’t Hof, CEO of Viper, said in a statement.
Viper will also gain an estimated 16 net drilled-but-uncompleted (DUC) wells, bringing its total to 75.4 net DUCs. Of these, 41.1 are operated by Diamondback and have average lateral lengths exceeding 12,400 ft.
The combined company is projected to achieve $50 million in annual savings by addressing general and administrative redundancies and other capital synergies. Diamondback will own approximately 41% of the combined company’s common stock after the deal closes, which is expected to take place in the third quarter.
The move to buy Sitio comes fewer than 4 months after Diamondback announced it was acquiring the holdings of private producer Double Eagle IV in a cash-and-stock deal valued at more than $4 billion.
