Independent oil and gas producer RSP Permian Inc. (RSPP) announced on Thursday that it has agreed to acquire two privately held entities that control about 41,000 net acres in the Delaware Basin of the Permian Basin in west Texas. The deal is worth about $2.5 billion, of which RSP will pay $1.25 billion in cash and 31 million shares of common stock.
The sellers are Silver Hill Energy Partners and Silver Hill E&P II, controlled by private equity firms Kayne Anderson Capital Advisors and Ridgemont Equity Partners.
RSP also announced an underwritten offering of 20 million shares of common stock, along with a 3 million-share 30-day option for the underwriters. The share price dipped about 0.3% on the announcement Thursday. The stock traded down about 2.5% in Friday's premarket session.
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Diamondback Energy Inc. (FANG) was reported to be in negotiations to acquire Silver Hill, but in a preliminary guidance statement earlier this week, CEO Travis Stice acknowledged, "As has been rumored, we were engaged in discussions involving an acquisition but are not actively pursuing further negotiations at this time." That decision presumably opened the door to RSP.
Current production from the properties total about 15,000 barrels of oil equivalent per day of net production from 58 producing wells. The acreage also includes about 3,200 gross and 1,950 net total undeveloped locations.
RSP will acquire the companies in two separate transactions, the first of which will be Silver Hill Energy Partners, for which RSP will pay about $604 million in cash and 15 million shares of common stock. That deal is expected to close in the fourth quarter of this year.
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In the second transaction, for Silver Hill E&P II, RSP will pay approximately $646 million in cash and 16 million shares of common stock. The transaction is expected to close in the first quarter of next year.
With about an hour to go before Friday's opening bell, RSP stock traded down 2.5% at $40.68 after closing Thursday at $41.75. The stock's 52-week range is $16.74 to $42.56, and the high was posted Thursday. The consensus 12-month price target on the stock is $44.55 and RSP's market cap at Thursday's close was $4.24 billion.