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Diamondback Sells More After Hitting $1B Target
08/10/2023
Diamondback Energy sold more midstream assets in Q2 as part of a $1B plan to shed non-core assets, reducing debt in the Permian Basin.
In July, Texas-based Diamondback Energy Inc. sold a 43% stake in the OMOG crude oil system, revealing this in its Q2 earnings on July 31. OMOG JV LLC, running 400 miles of pipelines and 350,000 bbl of storage in Midland, Martin, Andrews, and Ector counties, was detailed in Diamondback's filings. The sale provided $225 million in gross proceeds. Diamondback has announced or completed $1.1 billion in non-core asset sales since initiating the program. Initially aimed at raising $500 million, the 2023 target was increased to $1 billion.
Deal Details
- Diamondback exceeded its $1 billion divestiture target by year-end, possibly eyeing more asset sales.
- As of July 31, TD Cowen analysts noted $742 million in assets held for sale at Q2's end, hinting at likely further cash reserves to favorably increase capital returns.
- This is up from the $143 million in assets held for sale reported after Q1 earnings in May.
- Diamondback's balance sheet also reflected $587 million in equity method investments at the close of the second quarter.
Managing Director Gabriele Sorbara of Siebert Williams Shank & Co. remarked in an Aug. 1 report that Diamondback hasn't increased its non-core asset sale target, yet it still holds considerable value in midstream assets and equity investments that might be monetized later.
Diamondback has utilized the proceeds from asset sales to reduce debt. The company's total debt decreased to roughly $6.7 billion in Q2, down from about $7 billion the prior quarter.
The ongoing plan for the company includes further debt reduction in Q3 through the generation of free cash flow, proceeds from pending divestitures, and a reduction in its income tax receivable.
Diamondback's Divestitures
During the quarter, Diamondback emphasized its divestments while also advancing its efforts in leasing negotiations, according to the company's President and CFO, Kaes Van’t Hof, who spoke about it on the Aug. 1 earnings call with analysts.
Diamondback invested $145 million in property acquisitions in the second quarter, in connection with leasing activities in the Permian Basin.
Van't Hof mentioned, “We've been exploring the leasing of some of the deeper rights within the Midland Basin across some of our holdings, and this is connected to some of those purchases reflected in the cash flow statement.”
Diamondback's business development team is actively extending offers for undeveloped interests and positions that the company does not own within its areas of operation.
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SM Energy Acquires 20,000 Acres in Texas for $90.6M
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/171Blog_SM Energy Buys 20,000 Acres in Dawson and north Martin Texas in Q2 2023.png)
SM Energy acquired 20,000 net acres in Dawson and north Martin counties in Texas, completing the transaction in cash. SM Energy Co., based in Denver, intends to expand on its success from the second quarter by increasing its drilling and completion activities in the coming quarter. This plan also includes preparations to develop the newly acquired land in the Midland basin. In June, the company's president and CEO, Herb Vogel, along with his team, raised their target for total oil and gas production for the second quarter to 13.9 MMboe, up from 13.4 MMboe. They exceeded this target, reaching nearly 14.1 MMboe, with oil making up 42% of that figure. During the quarter, SM Energy drilled 17 wells, with 12 located in South Texas and five in the Midland basin. They also completed 25 wells, 17 of which were in the Midland basin.
Diamondback's Viper Energy Acquires $1 Billion in Royalty Interests in the Permian Basin
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/186Blog_Viper Energy Secures $1 Billion in Permian.png)
Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/184Blog_Rangeland Energy Divests Canadian Pipeline to Kingston Midstream.png)
Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/187Blog_ONEOK Completes Acquisition of Magellan Midstream.png)
The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.