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Diamondback to acquire Midland Basin assets in $1.25B deal

Diamondback Energy Inc. agreed to acquire all leasehold interests and associated assets of the Midland Basin-focused producer Ajax Resources LLC for $900 million in cash and $345 million worth of Diamondback common shares.

The assets include 25,493 net leasehold acres in the northern Midland Basin, about 89% of which is held by production, that are directly adjacent to Diamondback's existing position. The acreage has 362 net identified potential horizontal drilling locations and was producing over net 12,100 barrels of oil equivalent per day as of Aug. 6, 88% of which is oil. About 99% of the acreage is operated.

The acquisition is expected to boost Diamondback's total leasehold interests in the Permian Basin to about 230,000 net surface acres, according to an Aug. 8 earnings release. Ajax's development would focus on large multi-well, multi-zone pad development, which would be assumed by Diamondback in November.

Under the deal, Diamondback would issue 2.58 million Diamondback shares, whose $345 million value is based on the company's Aug. 6 closing price of $133.62. Diamondback plans to fund the cash portion of the deal using cash on hand, cash proceeds from a $175 million drop-down sale of mineral interests to its subsidiary Viper Energy Partners LP, revolver debt and proceeds from capital markets transactions.

The transaction has an effective date of July 1 and is scheduled to close at the end of October.