Diamondback Energy Inc. is seeking investors, including buyout firms, to finance part of its drilling operations in the Permian Basin, according to three people familiar with the matter.
Drilling joint ventures, referred to in the energy industry as "DrillCos," allow companies to raise cash from investors such as private equity firms to develop acreage.
Such a structure could prove attractive to energy companies at a time when shareholders are putting increasing pressure on them to improve returns and efficiency, instead of spending extra cash on new developments.
Diamondback has sent out a teaser to potential investors in a DrillCo arrangement, according to sources. UBS Group AG is advising the company on the process, two of the sources said. The amount of money raised by the DrillCo will depend on investor demand, one of the sources added.
Diamondback did not immediately respond to a request for comment. UBS declined to comment.
Given its position in the Permian Basin, a field which stretches across Western Texas and Eastern New Mexico and has some of the lowest production costs in the U.S. onshore industry, Diamondback is hoping to attract strong investor interest.
Traditionally, DrillCos take control of drillable land and generally turn over 100 percent of the cash flow from oil and gas production to investors until they earn a 15 percent return. At that point, control reverts to the producer, with the investor's stake shrinking to about 10 percent of remaining production.
Other oil producers that have completed DrillCos in recent years include EOG Resources and Alta Mesa Holdings . Jones Energy said in November it was evaluating a number of strategic and financial options including a possible DrillCo.
Recommended Reading
Subsea Tieback Round-Up, 2026 and Beyond
2024-02-13 - The second in a two-part series, this report on subsea tiebacks looks at some of the projects around the world scheduled to come online in 2026 or later.
AI Advancing Underwater, Reducing Human Risk
2024-03-25 - Experts at CERAWeek by S&P Global detail the changes AI has made in the subsea robotics space while reducing the amount of human effort and safety hazards offshore.
Defeating the ‘Four Horsemen’ of Flow Assurance
2024-04-18 - Service companies combine processes and techniques to mitigate the impact of paraffin, asphaltenes, hydrates and scale on production—and keep the cash flowing.
Forum Energy Signs MOU to Develop Electric ROV Thrusters
2024-03-13 - The electric thrusters for ROV systems will undergo extensive tests by Forum Energy Technologies and SAFEEN Survey & Subsea Services.
Tech Trends: QYSEA’s Artificially Intelligent Underwater Additions
2024-02-13 - Using their AI underwater image filtering algorithm, the QYSEA AI Diver Tracking allows the FIFISH ROV to identify a diver's movements and conducts real-time automatic analysis.