Big news in the Permian this morning, as the rumours that Diamondback was looking at acquiring Double Eagle turned out to be true. Diamondback press released this morning that it has entered into a definitive purchase agreement to acquire certain subsidiaries of Double Eagle IV Midco, LLC (“Double Eagle”) in exchange for approximately 6.9 million shares of Diamondback common stock and $3 billion of cash, subject to customary adjustments (the “Double Eagle Acquisition”).
Diamondback quoted the acquisition at ~5.2x 2025 estimated EBITDA, and run-rate oil production of 27,000 bbl/d. The company also suggested production was ~69% oil, so on a BOE/d basis, the run-rate appears to be ~39,100 BOE/d.
The all-in purchase price including shares is ~$USD 4.08 billion.
A fun thought experiment might be to see how much prime Montney production someone could buy for that same flowing barrel price, if that someone was willing to put up with the challenges that come with producing hydrocarbons in Canada of course.
First, let’s convert that $USD 4.08 billion to CAD…..call it ~$CAD 5.8 billion.
Then let’s take a look at some of the larger recent M&A transactions for Montney production in Canada (Figure 1). For simple math, let’s use $45,000/BOE/d as a reasonable flowing barrel metric for these transactions (the actual average from this list would be slightly below $40,000/BOE/d but the more recent average is higher).
So at a flowing barrel metric of $45,000/BOE/d for Canadian Montney, someone in theory could buy ~129,000 BOE/d of production for $CAD 5.8 billion.
That’s more than 3 times the amount of production that Diamondback will acquire from Double Eagle.
At what point does the valuation gap between Permian production and Canadian Montney production begin to narrow?
Figure 1 – Montney M&A comparables – BOE Intel (turn sideways to view full table on mobile)
| Date | Type | Acquirer | Target | Value ($) | Region/Play | BOE/d | % liquids | $/BOE/d |
|---|---|---|---|---|---|---|---|---|
| 2024-11-14 | Asset | Ovintiv | Paramount Resources | 3,325,000,000 | AB Montney | 70,000 | 50 | 47,500 |
| 2024-08-12 | Corporate | Tourmaline Oil Corp. | Crew Energy | 1,300,000,000 | BC Montney | 29,500 | 44,068 | |
| 2023-11-06 | Corporate | Crescent Point | Hammerhead Energy | 2,550,000,000 | Alberta Montney | 56,000 | 48 | 45,536 |
| 2023-08-01 | Corporate | Strathcona Resources | Pipestone Energy Corp. | 920,000,000 | Montney | 33,143 | 41 | 27,759 |
| 2023-03-28 | Asset | Crescent Point | Spartan Delta Corp. | 1,700,000,000 | Alberta/Montney | 38,000 | 55 | 44,737 |
| 2022-06-28 | Corporate | Whitecap Resources | XTO Energy Canada | 1,700,000,000 | Montney/Duvernay | 32,000 | 30 | 53,125 |
| 2022-03-28 | Corporate | Vermilion Energy | Leucrotta Exploration | 477,000,000 | Montney | 13,000* | 36,692 | |
| 2021-11-10 | Corporate | Canadian Natural Resources Limited | Storm Resources | 960,000,000 | Montney | 28,267 | 19 | 33,962 |
| 2021-06-11 | Corporate | Tourmaline Oil Corp. | Black Swan Energy | 1,100,000,000 | North Montney | 50,000 | 22,000 |
*Press released acquisition volumes of 13,000 BOE/d were a forward looking number. Actual volumes at the time were likely significantly lower.
**BC Montney transactions highlighted in green – AB Montney in black