US oil companies in $26bn merger amid shale boom

TWO American oil companies are to combine in a $26bn (£21bn) deal that will create Texas’s biggest operator.

In the latest wave of consolidation in US oil and gas, Diamondback Energy has agreed to buy fellow Texas producer Endeavor Energy Resources in a cash-and-stock takeover.

The tie-up follows a string of other deals involving the Permian Basin, which stretches across parts of Texas and New Mexico and sits at the heart of the US energy industry because of its relatively low extraction costs.

Last year, Exxon struck a $60bn deal to buy shale oil giant Pioneer Natural Resources, while Chevron announced a $53bn takeover of Hess Corp, another big player. Occidental Petroleum also agreed to buy Crownrock for about $11bn.

The deals give producers the ability to expand production when needed rather than take on untested projects.

After part of the takeover of Endeavour, Diamondback said its shareholders will own 60.5pc of the enlarged company. Endeavor will hold the rest.

The deal frenzy is consolidating the US shale industry, creating much bigger players amid pressure to bring down costs and keep up dividend payouts after years of volatility.

Endeavor was founded by Autry Stephens, a shale pioneer, as a small concern in 1979. The former engineer, who became known through appearances on the television documentary Black

Gold, grew his company by acquiring unloved sites from competitors and extracting oil and gas profitably.

His company now employs more than 1,200 people, with operations covering some 350,000 net acres in the Midland portion of the Permian.

Diamondback was founded in 2007 and also focuses on the Permian.

Together, the two companies said they will have 838,000 net acres and a production output of 816,000 barrels of oil equivalent per day.

Travis Stice, Diamondback’s chief executive, said: “Diamondback has proven itself to be a premier low-cost operator in the Permian Basin over the last 12 years, and this combination allows us to bring this cost structure to a larger asset and allocate capital to a stronger pro forma inventory position.”

US oil output surged to a record high last year, even exceeding Saudi Arabia.