Diamondback to buy Ajax’s Permian assets
The Midland oil producer Diamondback Energy said it will pay $1.2 billion for the Permian Basin holdings of a Houston startup, another in a string of deals focused on the prolific oil field in West Texas.
Diamondback’s cash-andstock offer is effectively buying out Ajax Resources, backed by the New York private equity firm Kelso & Co. Kelso formed Ajax in 2015 to buy the Permian acreage and operations of Houston’s W&T Offshore, which decided to keep its focus on offshore oil and gas. Ajax and its private equity sponsor acquired nearly 30,000 acres at a bargain price of $376 million in the recent oil bust.
Since then, oil prices have recovered and the Permian has become the epicenter for the growth in global oil and gas production, causing acreage
values to skyrocket. Earlier this week, two multibillion-dollar deals underscored the dominance of the Permian in the oil and gas industry.
The Houston company Occidental Petroleum Corp. said Wednesday it would sell its oil exporting terminal near Corpus Christi and a West Texas pipeline network to two private equity-backed firms for $2.6 billion as Occidental intensifies its focus on its extensive holdings in
the Permian. Houston’s Apache Corp., meanwhile, said it is forming a partnership with a California investment firm to spin off its Permian pipeline holdings into a new company with a projected market value of $3.5 billion.
Analysts expect more dealmaking in West Texas. With nearly all the Permian acreage spoken for, analysts say the only way to gain or build a position is to acquire companies, and they expect bigger players to buy smaller ones.
Diamondback is one of the fastest-growing Midland players focused on oil and gas production growth in the Permian. The acreage sold by Ajax is in Martin and Andrews counties just north of Midland and Odessa. Diamondback Chief Executive Travis Stice said his company is acquiring top-tier acreage that Ajax developed in the last couple of years.
The company said it will pay $900 million in cash and about $300 million in stock for the Ajax operations. The deal is expected
to close by the end of October.
“This transaction represents a logical transition for the Ajax asset base, as it complements Diamondback’s acreage position very well and further consolidates the Northern Midland Basin,” Ajax CEO Rich Little said.
Ajax and Kelso again plan to seek new acquisitions to jumpstart the Houston company all over again.