Diamondback Energy, Inc. FANG recently announced that it has entered into a definitive agreement to sell certain mineral and royalty interests to its subsidiary, Viper Energy, Inc. VNOM, for a total transaction value of $4.45 billion.
The deal is expected to close by the second quarter of 2025 and is subject to approval by the shareholders of Viper Energy and satisfaction of customary closing conditions.
Compensation of the Drop-Down Deal
The total transaction value will be compensated partly in cash and partly in exchange for stock. Diamondback, currently carrying a Zacks Rank #3 (Hold), will receive $1 billion in cash and approximately 69.6 million units of Viper’s operating subsidiary as compensation for its deal. The operating company units will be issued with Viper’s equal number of Class B common stock shares.
The cash portion of the transaction will be funded via cash on hand and borrowings under Viper’s credit facility and the stock price of the transaction will be calculated based on Viper’s average sales price of $49.55 on Jan. 24, 2025, reaching the total transaction value of $4.45 billion.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
How Will the Deal Benefit FANG?
The transaction will help Diamondback in its debt reduction initiative after a $26 billion acquisition of Endeavor Energy Resources and boost its exposure to Viper’s growth profile and market-leading minerals position. This transaction is a key milestone for Diamondback to capture the benefits of synergies and execute corporate development objectives with respect to the Endeavor transaction.
Key Picks
Investors interested in the energy sector might look at some top-ranked stocks like SM Energy Company SM and Sunoco LP SUN.
Denver, CO-based SM Energy Company is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America. The Zacks Consensus Estimate for SM’s 2024 earnings indicates 15.11% year-over-year growth.
Dallas, TX-based Sunoco LP is a master limited partnership that deals with distribution of motor fuel to roughly 10,000 customers that include independent dealers, commercial customers, convenience stores as well as distributors. The Zacks Consensus Estimate for SUN’s 2024 earnings indicates 184.11% year-over-year growth.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.
Sunoco LP (SUN) : Free Stock Analysis Report
SM Energy Company (SM) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
Viper Energy Inc. (VNOM) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
