Diamondback to acquire Ajax Resources in $1.25-billion deal

Aug. 10, 2018
Diamondback Energy Inc. will acquire privately held Ajax Resources LLC, Houston, in a cash and stock deal valued at $1.25 billion, bringing its total leasehold interests to 230,000 net surface acres in the Permian basin.

Diamondback Energy Inc. will acquire privately held Ajax Resources LLC, Houston, in a cash and stock deal valued at $1.25 billion, bringing its total leasehold interests to 230,000 net surface acres in the Permian basin.

For $900 million cash and 2.58 million shares of Diamondback common stock valued at $345 million, the Midland, Tex.-based company will add 25,493 net acres (21,000 net acres in northwest Martin and northeast Andrews counties) and 12,100 boe/d of production, of which 88% is oil. The deal was announced as part of the company’s second-quarter financials.

Diamondback estimates 362 net potential horizontal drilling locations with an average lateral length of more than 9,500 ft. The acreage is about 99% operated, with an average 99% working interest and 23% average royalty burden.

The acreage is 89% held by production, allowing for 12+ well multizone pad development in the Middle Spraberry, Lower Spraberry, and Wolfcamp A, the company said.

Ajax midstream infrastructure includes 40,000 b/d in saltwater gathering and disposal, 45,000 b/d of existing fresh water production, and ownership of over 700 surface acres.

The assets provide additional Tier 1 resource directly adjacent to its existing acreage, said Travis Stice, chief executive officer of Diamondback. Pending the deal’s close, expected at the end of October, Ajax’s interim development will be focused on large multiwell, multizone pad development to be assumed by Diamondback in November, Stice said.

Operations update

Diamondback’s second quarter production was 112,600 boe/d (73% oil), up 46% year-over-year from 77,000 boe/d in second-quarter 2017, and up 10% quarter-over-quarter from 102,600 boe/d in this year’s first quarter.

In the second quarter, the company drilled 53 gross horizontal wells and turned 50 operated horizontal wells to production. The average completed lateral length for wells in the quarter was 9,300 ft. Operated completions during consisted of 29 Wolfcamp A wells, 18 Lower Spraberry wells, and three Wolfcamp B wells.

The company operated 11 drilling rigs and 5 dedicated frac spreads during the quarter and plans to add its 12th and 13th operating rigs to development during this year’s third quarter. Diamondback continues to expect to turn between 170 and 190 gross operated horizontal wells to production for full-year 2018.

In Pecos County, Diamondback completed four Wolfcamp A wells with an average lateral of 9,995 ft and an average peak 30-day, two-stream flowing initial production (IP) rate of 146 boe/d per 1,000 ft (86% oil).

In Reeves County, the company completed two Wolfcamp A wells with an average lateral length of 10,228 ft and a current average peak 30-day flowing IP rate of 219 boe/d per 1,000 ft (81% oil).

Pro forma for the pending Ajax acquisition, Diamondback is increasing its full-year 2018 production guidance to a range of 115,000 boe/d to 119,000 boe/d.

Contact Mikaila Adams at [email protected].