UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

April 18, 2024

Date of Report (Date of Earliest Event Reported)

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DIAMONDBACK ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

500 West Texas Ave.

Suite 100

Midland, Texas 79701

(Address of principal executive offices) (Zip Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

☐	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new

 

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As previously disclosed, on February 11, 2024, Diamondback Energy, Inc., a Delaware corporation (the “Company” or “Diamondback”), entered into an Agreement and Plan of Merger, which was amended on March 18, 2024 (as so amended and as it may be further amended from time to time, the “Merger Agreement”), by and among the Company, Eclipse Merger Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub I”), Eclipse Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub II”),  Endeavor Manager, LLC, a Texas limited liability company (the “Company Representative”) (solely for purposes of certain sections set forth therein), and Endeavor Parent, LLC, a Texas limited liability company (“Endeavor”).

 

Pursuant to the terms and conditions of the Merger Agreement, upon the closing, Merger Sub I will merge with and into Endeavor (the “First Merger”), with Endeavor surviving the First Merger and becoming a wholly owned subsidiary of the Company (the “First Surviving Company”). Immediately following the First Merger, the First Surviving Company will merge with and into Merger Sub II (the “Second Merger”, and together with the First Merger, the “Merger”), with Merger Sub II surviving the Second Merger and continuing as a wholly owned subsidiary of the Company.

 

In connection with the proposed Merger, the Company filed a definitive proxy statement (the “Proxy Statement”) with the U.S. Securities and Exchange Commission (the “SEC”), dated March 29, 2024.  The Company first mailed the Proxy Statement to its stockholders on or about March 29, 2024.

 

 

The Weiss Complaint and McDaniels Complaint name Diamondback and the members of its board of directors as defendants.  The Nicosia Complaint names Diamondback, the members of its board of directors, Endeavor, the Company Representative and Diamondback’s financial advisor as defendants.

 

The Weiss Complaint and McDaniels Complaint allege, among other things, that Diamondback and the members of its board of directors violated Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-9 promulgated thereunder by preparing and disseminating a proxy statement that misstates or omits certain allegedly material information.  They also allege that the members of Diamondback’s board of directors violated Section 20(a) of the Exchange Act by causing Diamondback to disseminate a misleading proxy statement.

 

The Nicosia Complaint alleges, among other things, claims under New York law for negligent misrepresentation and concealment.

 

Each of the Diamondback Complaints seeks, among other things, injunctive relief enjoining Diamondback from holding the stockholder vote relating to the Merger, rescission or rescissory or compensatory damages in the event the Merger is consummated and an award of the plaintiff’s costs, including attorneys’ and experts’ fees.

 

In addition to the Diamondback Complaints, beginning on March 28, 2024, purported stockholders of Diamondback sent demand letters (the “Demands,” and together with the Diamondback Complaints, the “Matters”) alleging similar deficiencies regarding the disclosures made in the Proxy Statement.

 

All of the defendants named in the Matters believe that the Matters are without merit.  However, litigation is inherently uncertain and there can be no assurance regarding the likelihood that the defense of the actions will be successful.  Additional lawsuits arising out of the Merger may also be filed in the future.  While the defendants believe that the disclosures set forth in the Proxy Statement comply fully with applicable law, to moot plaintiffs’ disclosure claims and to avoid nuisance, potential expense and delay, Diamondback has determined to voluntarily supplement the Proxy Statement with the below disclosures.  Nothing in the below supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable law of any of the disclosures set forth herein or in the Proxy Statement.  To the contrary, all defendants deny all allegations in the Matters and that any additional disclosure was or is required in the Proxy Statement.

 

Supplemental Disclosures to the Proxy Statement

 

Diamondback has agreed to make these supplemental disclosures to the Proxy Statement.  This supplemental information should be read in conjunction with the Proxy Statement, which should be read in its entirety.  Defined terms used but not defined below have the meanings set forth in the Proxy Statement.  All page references in the information below are to pages in the Proxy Statement.  Paragraph references used herein refer to the Proxy Statement before any additions or deletions resulting from the supplemental disclosures.  The information contained herein speaks only as of April 17, 2024, unless the information indicates another date applies. For clarity, new text within restated paragraphs from the Proxy Statement is highlighted with bold, underlined text.

 

The section of the Proxy Statement entitled “Opinion of Diamondback’s Financial Advisor” under the subheading “Endeavor’s Standalone Financial Analyses” starting on page 53 is hereby supplemented as follows:

 

The first paragraph under the heading “Discounted Cash Flow Analysis” on page 53 is amended and restated in its entirety as follows:

 

The first paragraph under the heading “Net Asset Value Analysis” on page 53 is amended and restated in its entirety as follows:

 

 

The first and second paragraphs under the heading “Comparable Public Company Analysis” starting on page 53 are amended and restated in their entirety as follows:

 

The third paragraph under the heading “Comparable Public Company Analysis” starting on page 54 is amended and restated in its entirety as follows, including the addition of the following table:

 

Estimated EBITDA and levered free cash flow for the Endeavor Selected Companies was based on market data as of February 9, 2024 and utilizing First Call Pricing. For this analysis, Jefferies assumed First Call WTI Pricing for oil prices reflecting Wall Street research consensus estimates for 2024 and 2025 (which were $75.61 Bbl and $71.27 Bbl for oil in 2024 and 2025, respectively, and $3.09 MMBtu and $3.79 MMBtu for natural gas in 2024 and 2025, respectively), remaining constant at 2025 levels thereafter (‘‘First Call Pricing’’).  For each of the Selected Endeavor Companies, Jefferies calculated multiples of implied total enterprise value to estimated EBITDA for each of 2024 and 2025, and the estimated free cash flow yield for each of 2024 and 2025.  The results of this analysis are summarized in the following table:

 

Each of the two tables under the heading “Comparable Public Companies” and subheading “Endeavor Selected Companies” on page 54 are amended and restated in their entirety as follows:

 

The second paragraph under the heading “Precedent Transaction Analysis” on page 55 and the accompanying table are amended and restated in their entirety as follows:

 

 

The third paragraph under the heading “Precedent Transaction Analysis” on page 55 is amended and restated in its entirety as follows:

 

 

 

The following table is added to the section entitled “Precedent Transaction Analysis” on page 55 immediately following the first bulleted list on that page:

 

The second and third tables under the heading “Precedent Transaction Analysis” on page 55 are amended and restated in their entirety as follows:

 

The section of the Proxy Statement entitled “Opinion of Diamondback’s Financial Advisor” under the subheading “Diamondback’s Standalone Financial Analyses” starting on page 55 is hereby supplemented as follows:

 

The first paragraph under the heading “Discounted Cash Flow Analysis” on page 55 is amended and restated in its entirety as follows:

 

 

The first paragraph under the heading “Net Asset Value Analysis” on page 56 is amended and restated in its entirety as follows:

 

The first and second paragraphs under the heading “Comparable Public Company Analysis” starting on page 56 are amended and restated in their entirety as follows:

 

 

 

 

 

 

 

 

 

 

 

 

The third paragraph under the heading “Comparable Public Company Analysis” starting on page 57 is amended and restated in its entirety as follows, including the addition of the following table:

 

Estimated EBITDA and levered free cash flow for the Diamondback Selected Companies was based on market data and Capital IQ consensus estimates as of February 9, 2024. For this analysis, Jefferies assumed First Call Pricing. For each of the Selected Diamondback Companies, Jefferies calculated multiples of implied total enterprise value to estimated EBITDA for each of 2024 and 2025, and the estimated free cash flow yield for each of 2024 and 2025.  The results of this analysis are summarized in the following table:

 

Each of the three tables under the heading “Comparable Public Companies” and subheading “Diamondback Selected Companies” on page 57 are amended and restated in their entirety as follows:

 

Forward Looking Statements

This Current Report on Form 8-K may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, which involve risks, uncertainties, and assumptions.  All statements, other than statements of historical fact, including statements regarding the proposed business combination transaction between Diamondback and Endeavor; future performance; business strategy; future operations (including drilling plans and capital plans); estimates and projections of revenues, losses, costs, expenses, returns, cash flow, and financial position; reserve estimates and its ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures), including the proposed transaction; the expected amount and timing of synergies from the proposed transaction; the anticipated timing of the proposed transaction; and plans and objectives of management (including plans for future cash flow from operations and for executing environmental strategies) are forward-looking statements. When used in this communication, the words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “model,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions (including the negative of such terms) are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Although Diamondback believes that the expectations and assumptions reflected in its forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond Diamondback’s control. Accordingly, forward-looking statements are not guarantees of future performance and actual outcomes could differ materially from what Diamondback has expressed in its forward-looking statements.

 

Factors that could cause the outcomes to differ materially include (but are not limited to) the following: the completion of the proposed transaction on anticipated terms and timing or at all, including obtaining Diamondback stockholder  approval, regulatory approval and satisfying other conditions to the completion of the transaction; uncertainties as to whether the proposed transaction, if consummated, will achieve its anticipated benefits and projected synergies within the expected time period or at all; Diamondback’s ability to integrate Endeavor’s operations in a successful manner and in the expected time period; the occurrence of any event, change, or other circumstance that could give rise to the termination of the proposed transaction; risks that the anticipated tax treatment of the proposed transaction is not obtained; unforeseen or unknown liabilities; unexpected future capital expenditures; potential litigation relating to the proposed transaction; the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the effect of the announcement, pendency, or completion of the proposed transaction on the parties’ business relationships and business generally; risks that the proposed transaction disrupts current plans and operations of Diamondback or Endeavor and their respective management teams and potential difficulties in retaining employees as a result of the proposed transaction; the risks related to Diamondback’s financing of the proposed transaction; potential negative effects of this announcement and the pendency or completion of the proposed transaction on the market price of Diamondback’s common stock and/or operating results; rating agency actions and Diamondback’s ability to access short- and long-term debt markets on a timely and affordable basis; changes in supply and demand levels for oil, natural gas, and natural gas liquids, and the resulting impact on the price for those commodities; the impact of public health crises, including epidemic or pandemic diseases and any related company or government policies or actions; actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments, including any impact of the ongoing war in Ukraine and the Israel-Hamas war on the global energy markets and geopolitical stability; instability in the financial markets; concerns over a potential economic slowdown or recession; inflationary pressures; rising interest rates and their impact on the cost of capital; regional supply and demand factors, including delays, curtailment delays or interruptions of production, or governmental orders, rules or regulations that impose production limits; federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations; physical and transition risks relating to climate change; risks described in Item 1A of Diamondback’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 22, 2024, risks disclosed in its subsequent filings on Forms 10-Q and 8-K, and risks described in Diamondback’s definitive proxy statement for the transaction, filed with the SEC on March 29, 2024, all of which can be obtained free of charge on the SEC’s website at http://www.sec.gov and Diamondback’s website at www.diamondbackenergy.com/investors/.

 

In light of these factors, the events anticipated by Diamondback’s forward-looking statements may not occur at the time anticipated or at all.  Moreover, Diamondback operates in a very competitive and rapidly changing environment and new risks emerge from time to time. Diamondback cannot predict all risks, nor can it assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements it may make. Accordingly , you should not place undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this Current Report on Form 8-K or, if earlier, as of the date they were made. Diamondback does not intend to, and disclaims any obligation to, update or revise any forward-looking statements unless required by applicable law.

 

Additional Information about the Acquisition and Where to Find It

In connection with the potential transaction between Diamondback and Endeavor, Diamondback filed relevant materials with the SEC including a definitive proxy statement on Schedule 14A.  Diamondback has mailed the definitive proxy statement to each stockholder entitled to vote at the meeting relating to the proposed transaction.  This Current Report on Form 8-K is not a substitute for the definitive proxy statement or for any other document that Diamondback may file with the SEC and send to its stockholders in connection with the proposed transaction.  INVESTORS AND STOCKHOLDERS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO AND ANY DOCUMENTS INCORPORATED BY REFERENCE THEREIN) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE TRANSACTION THAT DIAMONDBACK WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION AND THE PARTIES TO THE TRANSACTION. The definitive proxy statement and other relevant materials in connection with the transaction (when they become available) and any other documents filed by Diamondback with the SEC, may be obtained free of charge at the SEC’s website www.sec.gov. Copies of the documents filed with the SEC by Diamondback will be available free of charge on Diamondback’s website at www.diamondbackenergy.com/investors/.

Participants in the Solicitation

Diamondback and its directors and executive officers may be deemed, under SEC rules, to be participants in the solicitation of proxies from Diamondback’s stockholders in connection with the transaction. Information about the directors and executive officers of Diamondback is set forth in (i) Diamondback’s definitive proxy statement for the transaction, including under the headings “Voting by Diamondback’s Directors and Executive Officers”, “Reasons for the Merger; Recommendations of the Board of Directors”, “Board of Directors Following the Merger”, “Stockholders Agreement”, and  “Security Ownership of Certain Beneficial Owners and Management”, which was filed with the SEC on March 29, 2024 and is available at https://www.sec.gov/Archives/edgar/data/1539838/000114036124016439/ny20021341x14_defm14a.htm, (ii) Diamondback’s proxy statement for its 2023 annual meeting, including under the headings “Proposal 1—Election of Directors”, “Executive Officers”, “Compensation Discussion and Analysis”, “Compensation Tables”, “Pay Ratio Disclosure” and “Pay Versus Performance Disclosure”, which was filed with the SEC on April 27, 2023 and is available at https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/1539838/000130817923000793/fang-20221231.htm, (iii) Diamondback’s Annual Report on Form 10-K for the year ended December 31, 2023, including under the headings “Item 10. Directors, Executive Officers and Corporate Governance”, “Item 11. Executive Compensation”, “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Item 13. Certain Relationships and Related Transactions, and Director Independence”, which was filed with the SEC on February 22, 2024 and is available at https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/1539838/000153983824000019/fang-20231231.htm and (iv) subsequent statements of changes in beneficial ownership on file with the SEC. Additional information regarding the participants in the proxy solicitation and a description of their direct or indirect interests, by security holdings or otherwise, are contained in the proxy statement and other relevant materials filed with the SEC when they become available.  These documents may be obtained free of charge from the SEC’s website at www.sec.gov and Diamondback’s website at www.diamondbackenergy.com/investors/. To the extent that Diamondback’s directors and executive officers and their respective affiliates have acquired or disposed of security holdings since the applicable “as of” date disclosed in the definitive proxy statement for the transaction, such transactions have been or will be reflected on Statements of Change in Ownership on Form 4, Initial Statements of Beneficial ownership on Form 3, or amendments to beneficial ownership reports on Schedules 13D filed with the SEC including: Form 4s, filed by Teresa L. Dick, with the filings of Diamondback on March 21, 2024 and March 25, 2024; Form 4, filed by Matt Zmigrosky, with the filings of Diamondback on  March 25, 2024; Form 4, filed by Matthew Kaes Van’t Hof on March 21, 2024; Form 4, filed by Daniel N. Wesson, with the filings of Diamondback on March 21, 2024; Form 4, filed by Albert Barkmann, with the filings of the Company on March 21, 2024;  Form 4 filed by Travis D. Stice on April 4, 2024; and Form 4, filed by Jere W Thompson III, with the filings of the Company on March 21, 2024.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

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