Diamondback, Double Eagle Form JV to Drill in Southern Midland Basin

Diamondback Energy is buying assets from fellow Permian producer Double Eagle IV, consolidating an even larger position in the Midland Basin.

Diamondback will pay approximately $4.1 billion in cash and stock to acquire mostly undeveloped acreage from Double Eagle, the companies announced Feb. 18.

As part of the transaction, Double Eagle is also striking an agreement to “accelerate development on a portion of Diamondback’s non-core southern Midland Basin acreage,” according to the announcement.

Few details on the structure of the southern Midland Basin agreement were disclosed. But Double Eagle is retaining a significant portion of its existing production in the southern Midland Basin, according to analysts.

That includes a blocky, operated asset base in Reagan County, Texas, according to Texas Railroad Commission (RRC) figures.

“That provides an existing platform to build from or could be sold to another operator,” said Andrew Dittmar, principal M&A analyst for Enverus Intelligence Research.

Double Eagle IV produced approximately 23.26 MMbbl of oil and condensate from the Midland Basin in 2024, per RRC data.

Of that total, nearly 15 MMbbl, or 64%, came out of Reagan County.

Double Eagle’s Reagan County assets produced an average of 40,900 bbl/d of liquids during 2024.

Diamondback has gotten bigger in the southern Midland through M&A over the past year.

The company’s transformational $26 billion acquisition of private E&P Endeavor Energy Resources last year included acreage and producing wells in the southern Midland Basin, including Upton and Reagan counties.

After closing the Endeavor deal in September, Diamondback agreed to swap certain Delaware Basin assets for TRP Energy’s Midland Basin assets.

TRP’s Midland holdings included around 15,000 net acres in Upton and Reagan counties, 55 undrilled locations and 18 DUCs.

Diamondback said it traded TRP in exchange for assets in its Vermejo development area, located across Reeves, Loving, Ward and Winkler counties, Texas.

Before the Endeavor and TRP transactions, Diamondback had very little operated production from Upton and Reagan counties. Legacy Diamondback production from those areas averaged just around 325 bbl/d of liquids last year, per RRC figures.

Working with Double Eagle to accelerate development in the southern Midland Basin, Diamondback expects to bring forward net asset value (NAV) by developing the lower quality acreage at a faster pace than current expectations.

“As a result, Diamondback expects significant free cash flow growth in 2026 and beyond with minimal capital deployment through this accelerated development plan,” the company said.

Siebert Williams Shank & Co. Managing Director Gabriele Sorbara told Hart Energy that Double Eagle’s Reagan County assets likely would have watered down Diamondback’s core position in the Midland Basin.

“I would guess Double Eagle finds a buyer for the Reagan County assets down the road,” he said.

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More in the core

Instead of adding southern Midland Basin production, Diamondback is acquiring Double Eagle’s mostly undeveloped assets in the core of the Midland Basin.

The Double Eagle acquisition includes around 40,000 net acres and an estimated run-rate production of approximately 27,000 bbl/d (69% oil).

Around 68% of the Double Eagle assets being acquired are undeveloped. The deal is expected to add 407 gross (342 net) horizontal locations to Diamondback’s portfolio, based on an 11,000-ft average lateral length.

The deal adds inventory primarily in the well-delineated Middle Spraberry through Wolfcamp B zones, Diamondback said.

The company plans to issue 6.9 million shares of common stock and pay $3 billion in cash for the Double Eagle assets. Double Eagle’s investors include EnCap Investments, Apollo Natural Resources and Elda River Capital.

It’s a premium price for some of the highest-quality undeveloped acreage remaining in the core of the Midland Basin, analysts say.

“The acquisition price looks high for Double Eagle’s remaining inventory, not surprising given demand for assets in the Permian contrasted with few opportunities,” Dittmar said.

Diamondback is paying $104,349 per flowing boe/d of production and an estimated $6.7 million per net location. Proved developed producing (PDP) valuation is approximately $1.78 billion, or 43.7% of the price tag, according to Siebert Williams Shank.

The Double Eagle acquisition also adds 44 gross “upside locations” primarily located in emerging Permian zones, Diamondback said.

Double Eagle is on a growing list of operators interested in the Permian’s deeper, gassier Barnett Shale interval.

RRC records show DE IV Operating picked up two Barnett horizontals (~10,000-ft laterals) that were previously operated by Slant Energy. Slant brought the two Barnett wells online in Andrews County in early 2023.

Diamondback has also tested the Permian’s Barnett, landing a handful of wells in the Peart Barnett field near the Ector-Crane County line.

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