Aug. 15 (UPI) -- A $9.2 billion all-stock acquisition creates one of the larger entities working in the Permian shale basin in the United States, Diamondback Energy announced.
Diamondback announced the all-stock acquisition of Energen Corp. on Wednesday. Through the deal, Diamondback increases its acreage in the Permian shale basin by 57 percent to more than 266,000 net acres.
All told, the assets acquired from Energen produced more than 222,000 barrels of oil equivalent, with about two thirds of that existing as oil. That represents a 79 percent increase from Diamondbacks second quarter production.
Energen last week reported its production was at the top end of its guidance range. Adjusted income for the second quarter was $75.4 million, compared with $5.4 million in second quarter 2017. The company said its earnings per share exceeded internal expectations, driven in part by "substantially" higher production and improved commodity prices.
The company added, however, that total capital spending for the year would likely be at the high end of its estimate in part because of tariffs imposed on imported steel.
"We believe this all-stock transaction with Diamondback is the best path forward for our company and provides Energen shareholders with an excellent value for their investment, now and in the future," Chairman and CEO James McManus said in a statement.
U.S. President Donald Trump cited national security concerns when justifying import duties on aluminum and steel. Representatives from the U.S. energy sector have called for relief from steel tariffs in particular because only a handful of suppliers make steel pipe for energy infrastructure, leaving the domestic market dependent on foreign steel manufacturers.
Texas Gov. Greg Abbott, a Republican, said in a June letter to Trump that if the steel and aluminum tariffs lead to a cost increase for domestic oil and gas production, it would significantly impair the president's energy sector objectives
The Permian shale basin is the largest oil producer in the Lower 48. The U.S. Energy Information Administration expects production there to increase from July by x percent to average 3.4 million barrels per day.
Neither company mentioned tariffs as the reason for the tie up.