The Carlyle Group (ticker: CG) and Diamondback Energy (ticker: FANG) are joining forces in the Permian. The two are forming a new JV to develop Permian assets held by Diamondback.

The Carlyle Energy Mezzanine Opportunities Fund II will join with Diamondback to develop assets in the San Pedro area of Pecos County, where Diamondback owns significant acreage. The majority of Diamondback’s Delaware acreage is in Pecos County, in large contiguous blocks. The San Pedro area is a block on the eastern edge of Diamondback’s Delaware holdings, and is not one of the company’s current focus areas.

Diamondback Energy, Carlyle Group to Rendezvous in the Permian

Source: Diamondback Energy

This JV likely does not target acreage that Diamondback acquired in its purchase of Energen last month, as Energen only holds a minor position in Pecos County.

Carlyle will fund up to 85% for the development of the area over the next five years. After certain performance hurdles are achieved, Carlyle’s interest will largely revert to Diamondback.

The Carlyle Group was silent on further details, including the number and timeline of planned wells.

Positive for FANG

The JV is a positive for Diamondback, as it provides an opportunity for the company to develop acreage it was not planning to target soon.

Diamondback CEO Travis Stice commented on this potential, saying “This joint venture will allow Diamondback to bring forward present value on the southeastern portion of our Pecos County acreage, with added benefit to our minerals and midstream businesses. We look forward to our partnership with a group as well respected as The Carlyle Group.”


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