Business Context and Reporting Period
This Form 8-K, dated May 16, 2022, reports that Diamondback Energy, Inc. (the "Company") entered into an Agreement and Plan of Merger on May 15, 2022, with Rattler Midstream LP (the "Partnership"). The transaction involves the Company acquiring the publicly held units of the Partnership, a midstream entity in which the Company already holds a significant interest.
Key Financial Metrics and Transaction Terms
This filing is a current report regarding a material definitive agreement and does not contain periodic financial statements (e.g., revenue, profit, or cash flow) for the Company or the Partnership. Key transaction metrics include:
- Exchange Ratio: Each outstanding publicly held Common Unit of the Partnership will be converted into 0.113 shares of Diamondback Energy Common Stock.
- Approval Status: The Company's subsidiary, Diamondback E&P LLC, holds 107,815,152 Class B units (a "Unit Majority") and has delivered written consent, making a separate vote by other limited partners unnecessary.
- Termination Fee: In the event of termination due to a material breach, the breaching party must reimburse the other party for expenses up to $3.5 million.
- Listing Status: Following the merger, Rattler Midstream Common Units will no longer be listed on the Nasdaq Global Select Market.
Material Changes and Transaction Structure
The primary material change is the proposed consolidation of the Partnership into the Company's corporate structure. Upon the Effective Time:
- Merger Sub will merge with and into the Partnership, with the Partnership surviving as a wholly-owned subsidiary of the Company.
- Public Common Units will be exchanged for Diamondback Energy Common Stock.
- Outstanding Partnership equity awards (Phantom Units) will be converted into Diamondback Energy Restricted Stock Units (RSUs) or cashed out, adjusted by the Exchange Ratio.
- The General Partner will continue as the general partner of the surviving Partnership entity.
Guidance, Risks, and Contingencies
Closing Conditions: The merger is subject to customary conditions, including the effectiveness of a Form S-4 registration statement, Nasdaq listing authorization for the new shares, and the absence of laws or injunctions prohibiting the transaction. The transaction must be consummated by December 31, 2022, or it may be terminated.
Risks and Forward-Looking Statements: The filing includes standard cautionary statements regarding risks such as commodity price fluctuations, geopolitical events (including the Russian-Ukrainian conflict), regulatory changes regarding hydraulic fracturing, and public health crises. Actual outcomes may differ materially from expectations.
Management Commentary: The Conflicts Committee of the Partnership's General Partner unanimously determined the transaction is not adverse to the interests of the Partnership or its public unitholders.
Investor Verification Checklist
- Verify the final Exchange Ratio (0.113 shares per unit) and the implied valuation of the Partnership at the time of closing.
- Monitor the filing and effectiveness of the Form S-4 registration statement, which is a condition precedent to closing.
- Review the definitive Information Statement/Prospectus for detailed terms regarding the treatment of specific equity awards and tax implications.
- Confirm the timeline for the delisting of Rattler Midstream units from Nasdaq.
- Assess the impact of the merger on the Company's capital structure and future liquidity.