Business Context and Reporting Period
This Form 8-K Current Report, dated December 14, 2016, details material definitive agreements entered into by Diamondback Energy, Inc. to finance a pending acquisition of oil and natural gas assets from Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC. The transactions closed on December 20, 2016.
Key Financial Metrics and Capital Structure
- Common Stock Offering: Sold 10,500,000 shares at $95.3025 per share, with a full exercise of the 30-day option for an additional 1,575,000 shares.
- Net Proceeds (Equity): Approximately $1,150.5 million after underwriting discounts and estimated expenses.
- Debt Offering: Issued $500 million aggregate principal amount of 5.375% Senior Notes due 2025.
- Debt Capacity: Amended Credit Agreement to increase permitted unsecured senior notes issuance from $750 million to $1.0 billion.
- Liquidity Usage: Proceeds from equity and debt offerings, combined with cash on hand, are designated to fund the cash consideration for the pending acquisition.
Material Changes and Transactions
The filing reports three primary material changes to the company's capital structure and agreements:
- Equity Financing: Execution of an Underwriting Agreement with Credit Suisse Securities (USA) LLC for the public offering of common stock.
- Debt Financing: Execution of a Notes Purchase Agreement for a private placement of senior notes to qualified institutional buyers and non-U.S. persons.
- Credit Facility Amendment: Entry into a Fourth Amendment to the Second Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, expanding debt issuance limits.
Outlook, Risks, and Management Commentary
Management intends to use the net proceeds primarily to fund the pending acquisition of Brigham Resources assets. If the acquisition is not consummated or the purchase price is reduced, proceeds will be used for exploration and development activities, leasehold interest and property acquisitions, and general corporate purposes. The Notes Purchase Agreement includes a 90-day lock-up provision regarding the offer or sale of debt securities. The filing notes that underwriters and initial purchasers have provided and may continue to provide financial advisory and banking services to the company.
Investor Verification Checklist
- Verify the final closing date and total net proceeds received from the Common Stock Offering and Notes Offering.
- Confirm the status and expected closing date of the pending acquisition of Brigham Resources assets.
- Review the full text of the Fourth Amendment to the Credit Agreement for specific covenants and restrictions.
- Assess the impact of the new $500 million senior notes on the company's leverage ratios and interest coverage.
- Monitor the 90-day lock-up period restrictions on future debt issuances.