In a deal valued at $26 billion, Diamondback Energy (FANG) has agreed to buy Endeavor Energy Resources, with $8 billion in cash 117.3 million Diamondback shares worth $18 billion. The deal allows for both companies to potentially become a major player in the Permian Basin.

Keybanc Capital Markets Managing Director Tim Rezvan joins Yahoo Finance to discuss the deal, what it could mean for companies, and the energy sector moving forward.

Rezvan puts the size of the deal in context: "When you look at it from the buyer's perspective, Diamondback is almost doubling from the acquisition. It's extremely transformative. Exxon (XOM) buying Pioneer, it doesn't have the same impact to Exxon. So it's really, a tremendous deal. A couple of things to point out...The cultural fit here is really important. These two companies area headquartered literally across the street from each other in the very big small town of Midland, Texas. So integration should go pretty well and as far as the stock price performance you're seeing today, in our view, it's warranted."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- Shares of Diamondback energy surging after announcing that merger with Endeavor Energy Resources. According to the release, the combination will create a premier Permian independent operator. And you see that stock up roughly 10% now.

This is the latest in a slew of deals for the energy space. And here to discuss the potential of this deal for Diamondback's future in the Permian Basin, we've got Tim Rezvan, KeyBanc Capital Markets managing director.

Tim, Ines just walking us through the slew of M&A that we have seen in this space. How does the one announced today rank in the bigger picture?

- Well, I think when you look at it from the buyer's perspective, Diamondback is almost doubling from this acquisition. So it's extremely transformative. Exxon buying Pioneer, it doesn't have the same impact to Exxon, so it's really a tremendous deal.

A couple of things to point out-- I think Ines had a lot of the points correctly-- the cultural fit here is really important. These two companies are headquartered literally across the street from each other in the very big small town of Midland, Texas. So integration should go pretty well.

And as far as the stock price performance you're seeing today, in our view, it's warranted. The market is putting a pretty clear correlation between size and trading multiples. So to the extent that Diamondback is nearly doubling its size, it warrants-- if you assume good integration-- it warrants a higher multiple, all else equal.