What did FANG pay for Energen
Posted: Tue Aug 21, 2018 6:27 pm
This is an all stock deal, so no cash changes hands. That said the market values the merger at $9.2 Billion.
FANG will issue ~65 million new share in exchange for 100% of the outstanding EGN shares: "The consideration will consist of 0.6442 shares of Diamondback common stock for each share of Energen common stock, representing an implied value to each Energen shareholder of $84.95 per share based on the closing price of Diamondback common stock on August 13, 2018."
Per Energen's 10Q they had 100,707,670 shares of common stock outstanding on 6/30/2018. So, 100,707,670 X 0.6442 = 64,875.881 shares of FANG stock will be traded to the Energen shareholders, who BTW will end up owning about 38% of FANG.
As I posted yesterday: First Call's estimate of Energen's operating cash flow per share is:
2018 = $10.22
2019 = $13.57
2020 = $18.16
So (10.22 + 13.57 + 18.16)/3 = $13.983
$84.93 / $13.983 = 6.074 < So.... IMO Diamondback is paying about 6X forward looking operating cash flow per share for Energen. That is a very reasonable price for this much upside. BTW the First Call CFPS estimates look very conservative to me.
If you looked at my forecast/valuation model, you can see that the Energen merger will increase Diamondbacks operating cash flow by approximately $1.6 Billion in 2019. I believe this is a very conservative estimate because FANG has estimated "synergies" that will reduce costs by $2 Billion (D&C, G&A and lower debt costs). Trust me, there are a lot of back office costs that will be saved by a merger of this size. Over half of the Energen staff will be gone within six months and lots of duplicate systems will go away. I did this stuff at Hess.
FANG will issue ~65 million new share in exchange for 100% of the outstanding EGN shares: "The consideration will consist of 0.6442 shares of Diamondback common stock for each share of Energen common stock, representing an implied value to each Energen shareholder of $84.95 per share based on the closing price of Diamondback common stock on August 13, 2018."
Per Energen's 10Q they had 100,707,670 shares of common stock outstanding on 6/30/2018. So, 100,707,670 X 0.6442 = 64,875.881 shares of FANG stock will be traded to the Energen shareholders, who BTW will end up owning about 38% of FANG.
As I posted yesterday: First Call's estimate of Energen's operating cash flow per share is:
2018 = $10.22
2019 = $13.57
2020 = $18.16
So (10.22 + 13.57 + 18.16)/3 = $13.983
$84.93 / $13.983 = 6.074 < So.... IMO Diamondback is paying about 6X forward looking operating cash flow per share for Energen. That is a very reasonable price for this much upside. BTW the First Call CFPS estimates look very conservative to me.
If you looked at my forecast/valuation model, you can see that the Energen merger will increase Diamondbacks operating cash flow by approximately $1.6 Billion in 2019. I believe this is a very conservative estimate because FANG has estimated "synergies" that will reduce costs by $2 Billion (D&C, G&A and lower debt costs). Trust me, there are a lot of back office costs that will be saved by a merger of this size. Over half of the Energen staff will be gone within six months and lots of duplicate systems will go away. I did this stuff at Hess.