Diamondback Energy Completes $26B Endeavor Acquisition

Ticker: FANG · Form: 8-K · Filed: 2024-09-10T00:00:00.000Z

Sentiment: bullish

Topics: acquisition, oil-gas, merger

Related Tickers: DBK

TL;DR

DBK just closed the $26B Endeavor deal, massive Permian expansion!

AI Summary

Diamondback Energy, Inc. announced on September 9, 2024, the completion of its acquisition of all outstanding common stock of Endeavor Energy Resources, LLC. The transaction was valued at approximately $26 billion, consisting of $11 billion in cash and 117.3 million shares of Diamondback common stock. This acquisition significantly expands Diamondback's operations in the Midland Basin.

Why It Matters

This major acquisition consolidates significant acreage in the Midland Basin, positioning Diamondback Energy as a larger player in the Permian Basin and potentially impacting future production and market dynamics.

Risk Assessment

Risk Level: medium — The integration of a large acquisition like Endeavor Energy presents significant operational and financial risks, including potential synergies not being realized and market volatility.

Key Numbers

Key Players & Entities

FAQ

What was the total value of the acquisition of Endeavor Energy Resources, LLC?

The total value of the acquisition was approximately $26 billion.

What was the cash component of the Endeavor Energy acquisition?

The cash component of the acquisition was $11 billion.

How many shares of Diamondback Energy common stock were issued as part of the acquisition?

117.3 million shares of Diamondback common stock were issued.

On what date was the acquisition of Endeavor Energy Resources, LLC completed?

The acquisition was completed on September 9, 2024.

Which geographic area is significantly expanded by this acquisition?

The acquisition significantly expands Diamondback's operations in the Midland Basin.

Filing Stats: 3,106 words · 12 min read · ~10 pages · Grade level 11.3 · Accepted 2024-09-10 16:13:40

Key Financial Figures

Filing Documents

01 Entry into a Material Definitive

Item 1.01 Entry into a Material Definitive Agreement. Pursuant to the terms of the Merger Agreement, on the Closing Date, the Company entered into a Stockholders Agreement (" Stockholders Agreement ") with the former holders of all the issued and outstanding equity interests in Endeavor (the " Endeavor Interests ") who received shares of common stock, par value $0.01 per share, of Diamondback (the " Company Common Stock ") in the Acquisition as consideration (the " Endeavor Stockholders "). As a result of the Acquisition, the Endeavor Stockholders hold approximately 39.7% of the outstanding shares of Company Common Stock (based upon the number of shares of Company Common Stock outstanding as of September 6, 2024). A summary of the material terms of the Stockholders Agreement can be found in the section titled "Stockholders Agreement" of the Company's definitive proxy statement on Schedule 14A that was filed with U.S. Securities and Exchange Commission (the " SEC " and such proxy statement, the " proxy statement ") on March 29, 2024, which such section is incorporated herein by reference. The foregoing description of the Stockholders Agreement does not purport to be complete and is qualified in its entirety by reference to the actual terms of the Stockholders Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report and incorporated herein by reference.

01 Completion of Acquisition or Disposition of Assets

Item 2.01 Completion of Acquisition or Disposition of Assets. On the Closing Date, the Acquisition was completed and the Company acquired 100% of the Endeavor Interests from the Endeavor Stockholders in exchange for, in the aggregate, (i) cash consideration of approximately $7.1 billion (which is subject to certain customary post-closing adjustment under the terms of the Merger Agreement) and (ii) approximately 117.3 million shares of Company Common Stock. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the actual terms of the Merger Agreement and the amendment to the Merger Agreement, which are included as Exhibits 2.1 and 2.2 to this Current Report and incorporated herein by reference.

02 Unregistered Sales of Equity

Item 3.02 Unregistered Sales of Equity Securities. The disclosure set forth in Item 2.01 of this Current Report is incorporated by reference into this Item 3.02. The issuance of the Company Common Stock in the Acquisition was exempt from the registration requirements of the Securities Act of 1933, as amended, because such issuance did not involve a public offering.

03 Material Modification to Rights of Security Holders

Item 3.03 Material Modification to Rights of Security Holders. The disclosure set forth in Item 5.03 of this Current Report is incorporated by reference into this Item 3.03. -2- Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. Pursuant to the Merger Agreement and Stockholders Agreement, the Company and the former members of Endeavor who received Company Common Stock in the Acquisition mutually agreed to cause each of Lance Robertson, Charles Meloy and Robert K. Reeves to be appointed to the board of directors of the Company (the " Board "). On the Closing Date, in accordance with the Second Amended and Restated Certificate of Incorporation of the Company (as amended, the " Charter ") and the Fourth Amended and Restated Bylaws of the Company, the Board increased the size of the Board by three directors and appointed Mr. Robertson, Mr. Meloy and Mr. Reeves as members of the Board to the resulting vacancies. Mr. Robertson, Mr. Meloy and Mr. Reeves will each hold office until the 2025 Annual Meeting of the Company's stockholders and his successor has been elected and qualified, or until his earlier death, resignation, retirement, disqualification or removal. Following the aforementioned appointments, the full Board consists of twelve directors. Additionally , Mr. Meloy was appointed to the Safety, Sustainability and Corporate Responsibility Committee of the Board and Mr. Reeves was appointed to the Nominating and Corporate Governance, Audit and Compensation Committees of the Board. Additional information regarding these new directors is set forth below: Mr. Robertson previously served as Chief Executive Officer of Endeavor Energy Resources, L.P. (" Endeavor LP "). Mr. Robertson joined Endeavor LP as Chief Operating Officer and Senior Vice President of Development in January 2017 and was appointed Chief Executive Officer in 2020. He previously served as Vi

03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year

Item 5.03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year. On the Closing Date, the Company filed an amendment to its Charter (such amendment, the " Charter Amendment "). The Charter Amendment was approved by the requisite number of votes cast by the Company's stockholders at its special meeting of stockholders held on April 26, 2024. The Charter Amendment increases the number of shares of Company Common Stock authorized under the Charter from 400 million shares of Company Common Stock to 800 million shares of Company Common Stock and the authorized numbers of shares of the Company's capital stock from 410 million shares to 810 million shares. The foregoing description of the Charter Amendment does not purport to be complete and is qualified in its entirety by reference to the actual terms of the Charter Amendment, which is attached as Exhibit 3.1 to this Current Report and incorporated herein by reference.

01 Regulation FD Disclosure

Item 7.01 Regulation FD Disclosure. On September 10, 2024, the Company issued a press release announcing the closing of the Acquisition. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated herein by reference. The information contained in Item 7.01 of this report, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained in Item 7.01 of this report, including Exhibit 99.1, shall not be incorporated by reference into any filing of the registrant, whether made before, on, or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing.

01 Other Events

Item 8.01 Other Events. HSR Act Waiting Period The consummation of the Merger was subject to the satisfaction or waiver of certain closing conditions including, among other things, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the " HSR Act "). As previously disclosed, on April 29, 2024, the Company and Endeavor each received a request for additional information and documentary material (the " Second Request ") from the U.S. Federal Trade Commission (" FTC ") in connection with the FTC's review of the transactions contemplated by the Merger Agreement. The effect of the Second Request was to extend the waiting period under the HSR Act until 30 days after both the Company and Endeavor certified substantial compliance with the Second Request. Following the Company's and Endeavor's certifications of substantial compliance, the waiting period under the HSR Act expired on September 9, 2024. -4- Stockholder Litigation In connection with the Acquisition, the Endeavor Stockholders had agreed to enter into a prior form of the Stockholders Agreement at the closing of the Acquisition that, among other things, would have: (i) prohibited the Endeavor Stockholders from transferring their shares of Company Common Stock to an "Activist Stockholder" (as defined in such form of the Stockholders Agreement) (the " Activist Sale Prohibition "); and (ii) required such holders to vote their shares of Company Common Stock in favor of the director nominees recommended by the Board for so long as they owned at least 20% of the outstanding shares of Company Common Stock (the " Board Voting Requirement "). As previously disclosed in the proxy statement, on February 28, 2024, Plaintiffs Plymouth County Retirement Association and Kenneth Webb (" Plaintiffs ") filed a putative class action complaint (" Complaint ") in the Delaware Court of Chancery (the " Court "), styled Plymouth County Retirement

01. Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits. (a) Financial statements of businesses or funds acquired. The Company intends to file the financial statements of Endeavor required by Item 9.01(a) by amendment to this Current Report on Form 8-K no later than 71 calendar days following the date that this Current Report on Form 8-K is required to be filed. (b) Pro forma financial information. The Company intends to file the pro forma financial information relating to the Acquisition required by Item 9.01(b) by amendment to this Current Report on Form 8-K no later than 71 calendar days following the date of this Current Report on Form 8-K is required to be filed. (d) Exhibits. Exhibit No. Description 2.1* Agreement and Plan of Merger, dated as of February 11, 2024, by and among the Company, Endeavor, Eclipse Merger Sub I, LLC, Eclipse Merger Sub II, LLC and Endeavor Manager, LLC (for purposes of certain sections set forth therein) (incorporated by reference to Exhibit 2.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on February 12, 2024) 2.2 Letter Agreement, amending the Merger Agreement, by and among the Company, Endeavor, Eclipse Merger Sub I, LLC, Eclipse Merger Sub II, LLC and Endeavor Manager, LLC, dated March 18, 2024 (incorporated by reference to Exhibit 2.1 to the Form 8-K, File No. 001-35700, filed by Diamondback Energy, Inc. with the SEC on March 18, 2024). 10.1* Stockholders Agreement, by and among the Company and the initial stockholders named therein, dated September 10, 2024 10.2 Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.15 to Amendment No. 4 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on August 20, 2012) 3.1 Certificate of Amendment No. 1 to Second Amended and Restated Certificate of Incorporation of the Company 99.1 Press Release, dated September 10, 2024 104 Cover Page Interactive Data File (e

SIGNATURES

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DIAMONDBACK ENERGY, INC. Date: September 10, 2024 By: /s/ Kaes Van't Hof Name: Kaes Van't Hof Title: President and Chief Financial Officer

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