Two major Texas oil producers announce $26 billion merger

Two large Texas oil producers are joining forces in a deal valued at $26 billion, the latest in a wave of consolidation in the U.S. energy industry.

Diamondback Energy and Endeavor Energy Resources, both major players in the booming Permian Basin oil field that straddles New Mexico and Texas, announced Monday that they would merge in a cash-and-stock deal, with Diamondback’s shareholders owning about 60% of the combined company.

The Permian Basin was once seen as a worn-out patch. But over the last decade or so, technological advances, including the advent of fracking, or hydraulically fractured horizontal wells, have opened its oiland gas-rich shale fields to development. The basin has been transformed into the most productive oil and gas field in the United States.

“With this combination, Diamondback not only gets bigger, it gets better,” Travis Stice, the company’s CEO, said in a statement. The news sent Diamondback’s shares up 10%.

Diamondback Energy, which was founded in 2007 and has been publicly traded since 2012, reported that it had $9.6 billion in revenue, primarily from oil, and more than $4 billion in profit in its last fiscal year. It has a market value of about $27 billion.

“Diamondback was built through an acquire-and-exploit strategy,” Stice wrote in a letter to shareholders in November. He added that being a “low-cost operator” was the company’s strength, and that “we expect Diamondback to remain a consolidator in the future.”

Endeavor’s roots date to 1979, when a wildcatter, Autry Stephens, drilled his first well in West Texas.