Midland, Texas – Diamondback Energy, Inc. has announced a merger with Endeavor Energy Partners in a move that aims to continue the company’s tradition of increasing free cash flow and earnings. This merger, involving a combination of stock and cash for the purchase, is expected to keep the debt ratio low, with plans to quickly repay some of the debt. Despite being in a cyclical industry, the company’s stock price is projected to continue growing at a pace comparable to many growth stocks.

This merger signifies a significant development in the energy sector, as Diamondback Energy has positioned itself as a rare growth story in a cyclical industry. With the company’s expansion, management faces the challenge of maintaining a high level of performance with each acquisition. However, the long-term success and profitability of the company point to a strong management team.

The deal involves Diamondback issuing 117 million shares of stock and adding roughly $8 billion in debt. The acreage being acquired is largely “bolt-on,” offering the potential for more profitable wells due to larger contiguous positions. Additionally, management plans to raise the base dividend and aims to find superior acreage, thereby ensuring continued growth and success in the volatile industry.

The merger is expected to yield cost savings, as technology advancements enable better performance and potential for additional intervals to become cost competitive in the future. Management intends to capitalize on the benefits of the combination and continues to seek ways to offset cost increases in the industry.

However, the company still faces risks, including unexpected commodity price downturns and the challenges associated with large mergers. Despite these risks, management highlights the expected synergies and benefits of the merger, emphasizing the opportunities for investors to seize growth and profit in the long term.

Shareholders can anticipate a 10% increase in free cash flow after the acquisition, pointing to the potential for continued brisk pace in cash flow and free cash flow. As the industry remains out of favor, investors may find opportunities in Diamondback Energy’s strong management and growth potential.