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PE Firm Speaks Out Against Diamondback Deal; Other Firms Reaffirm Support

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QEP Resources shareholder Glazer Capital LLC is calling for the rejection of the pending merger acquisition of QEP by Diamondback Energy.

The $2.2 billion, all-stock merger deal was originally struck in December 2020 and is currently pending.

Glazer Capital collectively beneficially own over 13,800,000 shares, or approximately 5.7% of the outstanding shares of QEP.

Since the announcement, other QEP stakeholders have reaffirmed their support for the deal, including THRC Holdings LP (who holds a 5.84% stake)

The firm submitted a letter at the meeting of shareholders that states: "If QEP shareholders were to support the Diamondback Acquisition, we believe that QEP shareholders would forfeit substantial value in return for grossly inadequate consideration. We intend to vote AGAINST the Diamondback Acquisition at the Special Meeting of QEP stockholders next week on March 16, 2021 and we encourage other QEP shareholders to do likewise."

Others Push Back, Voice Support

Since the announcement, other QEP stakeholders have reaffirmed their support for the deal, including THRC Holdings LP (who holds a 5.84% stake).

Matt Wilks, VP Investments for Wilks Brothers, LLC, said: "We have felt for some time that consolidation in this market has been necessary to shore up companies' balance sheets. We also believe that, while QEP has great management and assets, leverage is a real issue that would have to be addressed. To that end, this transaction provides a number of synergies that are hard for us to ignore and we believe the combined production along with the decreased leverage created in this transaction will allow a successful path forward for the combined company.

"THRC has always sought out opportunities in which we could invest for the long haul. Put simply, this is not a trade for us, rather we firmly believe there is long-term value here for the shareholders. For that reason, we are excited to support the proposed acquisition of QEP by Diamondback and are voting FOR this transaction."

 Glass Lewis & Co. (a proxy advisory firm QEP has engaged) has also put forth a note of support.

The full text of Glazer's letter can be found further below.

It lists reasons to reject the deal, including:

• The merger consideration of 0.05 shares of Diamondback per QEP share is materially inadequate and the proposed acquisition would prevent shareholders of QEP from realizing the benefits of the recent surge in small cap exploration and production company valuations,

• The best means available for QEP shareholders to achieve full and fair value for their QEP shares is to reject the Diamondback Acquisition at the upcoming Special Meeting,

• Using traditional comparative valuation methodologies similar to those utilized by Evercore, QEP's financial advisor, in its fairness opinion results in a standalone valuation range of $5.74 - $6.34 per QEP share today – a value for QEP shares far in excess of the value offered by the current terms of the Diamondback Acquisition, and

• Evercore would no longer be able to re-render its fairness opinion today based on current comparable company valuations.

The letter further states: "Utilizing the same peer group as Evercore and employing a virtually identical public company trading multiple methodology, we believe there is considerably more upside potential in QEP shares today as a standalone company than the value offered to QEP shareholders under the current terms of the Diamondback Acquisition. It appears easily observable that current trading multiples of E&P companies similar to QEP are highly supportive of significant upside for QEP's stock and they reinforce our contention that the current terms of the Diamondback Acquisition are value destructive to QEP shareholders."

Full Text

March 8, 2021

Dear Fellow QEP Shareholders:

On December 21, 2020, QEP Resources announced¹ that it had entered into a definitive agreement to be acquired by Diamondback Energy, Inc. ("Diamondback") in an all-stock transaction (the "Diamondback Acquisition"), in which stockholders of QEP will receive 0.05 shares of Diamondback common stock (the "current terms"), then valued at $2.29 per QEP share and representing a 1% discount to QEP's closing share price on December 18, 2020, in exchange for each share of QEP common stock.

Since the announcement of the Diamondback Acquisition, valuations and share prices of exploration and production ("E&P") companies have surged, rendering inadequate the current terms of the Diamondback Acquisition. If QEP shareholders were to support the Diamondback Acquisition, we believe that QEP shareholders would forfeit substantial value in return for grossly inadequate consideration. As a significant QEP shareholder, we intend to vote AGAINST the Diamondback Acquisition at the Special Meeting of QEP stockholders next week on March 16, 2021 and we encourage other QEP shareholders to do likewise. We further urge Institutional Shareholder Services ("ISS") to rescind its previously issued recommendation in favor of the Diamondback Acquisition. The overwhelming evidence presented below supports our assertion that the current terms of the Diamondback Acquisition shortchanges QEP shareholders due to the change in circumstances.

Glazer Capital, LLC ("we" or "Glazer Capital"), on behalf of investment funds and separate accounts that it manages, is the beneficial owner of over 13,800,000 shares, or approximately 5.7% of the outstanding shares, of QEP common stock. We write to convey to our fellow QEP shareholders the reasons that we believe the current terms of the Diamondback Acquisition materially undervalue QEP shares today and we endeavor to ensure that we and our fellow QEP shareholders receive the full and fair value for our investment in QEP shares. It is clear to us that: (1) QEP's shares, anchored by the 0.05 merger consideration ratio, have materially lagged its peers' shares since both December 1 and December 18, 2020, and (2) re-running the valuation methodology utilized by QEP's financial adviser, Evercore Group, as laid out in QEP's proxy², would result in a standalone value for QEP shares far in excess of the value offered by the current terms of the Diamondback Acquisition. We urge our fellow shareholders to vote against the merger and retain the value embedded in QEP shares on a standalone basis.

I. Share Prices of Comparable Companies Have Surged

The terms of the Diamondback Acquisition currently value QEP shares at $4.26³ per share (as of March 5, 2021). Since the Diamondback Acquisition was announced last December, the global economic outlook has improved dramatically, the price of oil has rebounded, and share prices of E&P companies have appreciated materially. In particular, share prices of small cap E&P companies with a relatively higher percentage of debt to equity capital than mid cap and large cap E&P companies have experienced a breathtaking surge, buoyed by upward revisions to profitability estimates, expanding multiples, and upwardly revised sell-side price targets. Despite the fact that QEP shares have risen (a) 171% since December 1, 2020 (the "Unaffected Date" utilized by ISS in its voting recommendation published on February 26, 2021) and (b) 85% since December 18, 2020 (the last trading date prior to the announcement of the Diamondback Acquisition), these figures pale in comparison to the 329% and 191% increases (since the same two dates, respectively) in the average of the group of small cap E&P companies utilized by Evercore in its fairness opinion⁴ (the "Small Cap E&P Peers").

If QEP's share price were to have appreciated since December 1, 2021 in line with the average of its Small Cap E&P Peers, QEP's share price would presently be $6.77, or 59% higher than the current terms of the Diamondback Acquisition.