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Diversified Energy Co. is in advanced talks to acquire Elliott Investment Management-backed oil and gas company Birch Resources for more than $1.7 billion in cash, according to people familiar with the matter.
A deal for Birch, which operates in the Permian Basin, the largest oilfield in the US, could be announced in the coming weeks, said the people, who asked to not be identified because the details aren’t public. Diversified Energy is poised to emerge as the winner in a competitive sale process, the people said.
No final decision has been made and discussions could fall through, another buyer could emerge or the the timing could still change, the people added.
A representative for Elliott declined to comment. Representatives for Diversified Energy and Birch didn’t immediately respond to requests for comment.
The deal would mark a lucrative exit for Elliott, which was part of a group of investors that acquired the Birch assets in 2018 from Breitburn Energy Partners LP, a Los Angeles-based oil and gas company that went insolvent when oil prices crashed. Elliott was a creditor to Breitburn and used that status to take control of its most prized asset in the Permian along with other investors, according to regulatory filings.
They capitalized the business with about $775 million, the filings show.
While Elliott is best known for its high-profile activist investing, this potential exit underscores how the firm uses its deep expertise in the debt markets to seize control of choice businesses in distress, flipping them when things turn around. The talks follow a runup in oil and gas prices that has spurred a blitz of takeover activity.
The transaction would also bolster Diversified Energy’s position in the Permian, following its $1.3 billion takeover last year of Maverick Natural Resources. Diversified Energy and the Carlyle Group Inc. struck a $1.2 billion deal in May for Camino Natural Resources, which operates in Oklahoma.
Diversified Energy fell 0.8% to $14.37 at 1:42 p.m. in New York trading Thursday, giving the Birmingham, Alabama-based company a market value of about $1 billion.
Other deals
This transaction would add to a string of oil and gas deals in recent months. Magnolia Oil & Gas Corp. agreed in July to acquire WildFire Energy LLC for about $4.1 billion including debt, while Matador Resources Co. agreed to buy Permian Basin assets from EnCap Investments LP for about $1.3 billion.
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