(Bloomberg) -- Diamondback Energy Inc. is looking to sell non-core assets in the western Permian Basin as the oil producer looks to cash in on an increasingly active deal market in US shale.
The company is working with a financial adviser to seek a buyer for assets around Pecos County, Texas, according to people familiar with the matter, who asked to not be identified because the process is confidential. No final decision has been made and Diamondback could opt to hold onto the assets, the people added.
The move makes strategic sense and would enable the Midland, Texas-based explorer to cut debt quicker, according to KeyBanc Capital Markets.
“Diamondback is actually drilling stronger wells than industry peers in this part of the basin,” Tim Rezvan, a KeyBanc analyst, wrote in a note to investors on Wednesday. “Above-average results naturally increase the attractiveness of this acreage.”
While it’s not clear what the assets would fetch in a sale, Diamondback raised its non-core asset sale target to $1 billion from $500 million in February. The shares rose 1.3% in pre-market trading Wednesday, giving the company a market value of about $27 billion.
A representative for Diamondback declined to comment.
Following the recent surprise output cut from OPEC+ that helped give a floor to oil prices, deal activity in US shale is picking up, as oil and gas producers look to add new inventory after shying away from dealmaking in recent years. Ovintiv Inc. agreed to buy assets in the Permian this month from EnCap Investments for $4.3 billion.
“We believe these items may incentivize Diamondback to pursue non-core sales, such as Pecos County,” Rezvan wrote.
Most shale producers used record profits last year to pay down debt and are now in a position to buy in-production assets as well as undeveloped acreage that would extend their drilling locations.
Diamondback “is going to be patient and prudent when it comes to selling assets,” Chief Financial Officer Kaes Van’t Hof said during a conference call with analysts Feb. 22. The company is more likely to sell pipeline assets than exploration properties, he said. Two previous asset sales involved acreage that wouldn’t be developed for years, he said.
--With assistance from Mitchell Ferman and David Wethe.
©2023 Bloomberg L.P.
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