Diamondback Energy has entered into a definitive purchase agreement to acquire all leasehold interest and related assets of FireBird Energy in exchange for 5.86 million shares of Diamondback common stock and $775 million of cash. The cash portion of this transaction is expected to be funded through a combination of cash on hand, borrowings under the Company’s credit facility and/or proceeds from a senior notes offering. The cash outlay at closing is expected to be approximately $700 million due to the expected Free Cash Flow to be generated on the asset between the effective date and expected closing date late in the fourth quarter of 2022.

“This bolt-on acquisition adds significant, high-quality inventory right in our backyard,” stated Travis Stice, Chairman and Chief Executive Officer of Diamondback. “With over 350 locations adjacent to our current Midland Basin position, this asset adds more than a decade of inventory at our anticipated development pace, including inventory that competes for capital right away in Diamondback’s current development plan. Also, importantly, this transaction is accretive on all relevant 2023 and 2024 financial metrics, immediately increasing expected per share returns to our stockholders in the near-term while also improving the long-term duration of the Company’s cash return profile.”

Mr. Stice continued, “We remain committed to capital discipline by returning at least 75% of our Free Cash Flow to stockholders while also maintaining a fortress balance sheet. To do this, we are today announcing a target to sell at least $500 million of non-core assets by year-end 2023, with proceeds earmarked for further debt reduction.”

Transaction Highlights

• Valued at approximately 3x 2023 EBITDA with a 15% Free Cash Flow Yield at strip pricing
• Immediately accretive to all relevant 2023 and 2024 financial metrics including Cash Flow per share, Free Cash Flow per share and NAV per share
• Increases expected pro forma 2023 per share cash returned to stockholders by approximately 3%
• Extends pro forma inventory life in primary development zones
• Leverage neutral

Asset Highlights: Building Scale in the Midland Basin

• Approximately 75,000 gross (68,000 net) highly contiguous acres in the Midland Basin
• Estimated production at closing of approximately 17 MBo/d (22 MBoe/d)
• 2023 estimated average production of approximately 19 MBo/d (25 MBoe/d)
• 2023 oil production can be maintained for multiple years with one rig running; Diamondback expects to reduce operated rig count from three currently to one post-closing for 2023 development
• 353 estimated gross (316 net) horizontal locations in primary development targets with an average lateral length of approximately 11,400’; 84 gross upside locations from co-development based on recent well results
• Primary targets are the Middle Spraberry, Lower Spraberry, Wolfcamp A and Wolfcamp B formations
• 98.5% of acreage is operated with an average 92% working interest; 84% of acreage currently held by production

Diamondback expects this transaction to close late in Q4 2022.

KeyFacts Energy: Diamondback Energy US onshore country profile