Several well-respected oil CEOs have made it clear that they have no appetite for making a big acquisition, even though oil prices have improved dramatically. However, not all companies are against mergers and acquisitions (M&A). Concho Resources (NYSE:CXO) made waves earlier this year when it acquired RSP Permian (NYSE:RSPP) in a $9.5 billion deal. Concho CEO Tim Leach even saw his company's transaction as a "roadmap for in-basin consolidation" in the Permian. While it has yet to set off an M&A boom, that doesn't mean transaction activity won't heat up.

Diamondback Energy (NASDAQ:FANG) is among the many Permian drillers that plan to remain active in the M&A market, which was clear from the comments of CEO Travis Stice on the company's first-quarter conference call. The Permian driller has a long history of making deals that have helped fuel its rapid rise over the past few years, as shares have rocketed nearly 600% since the company went public in late 2012 versus a 90% gain from the S&P 500 over that time frame. If Diamondback Energy can secure the right acquisition, its shares could continue their torrid pace.

Two people talking next to some oil pumps at dusk.

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It's the air we breathe

Stice stated on the call that Diamondback isn't currently "more interested or less interested in acquisitions than we've ever been in our company's history." However, that's because "M&A activity is as fundamental to Diamondback Energy as the air that we breathe," according to Stice. "It's something that we've done from day one, and we're going to continue to demonstrate that discipline in looking for accretion and looking for ways that we can deliver differential results to our shareholders."

The company has completed six large deals since coming public, spending well over $5 billion in the process. However, what has set these transactions apart from others in the industry is that they've helped grow the value of the company on a per-share basis even though Diamondback has issued a significant amount of new stock to help pay for these deals. Overall, earnings before interest, taxes, depreciation, and amortization (EBITDA) per share is up a stunning 700% since the company's IPO, even though oil prices are down 30% over that time frame.

The sun setting behind an oil pump.

Image source: Getty Images.

What it's looking for in its next deal

The company's aim going forward will be to continue making acquisitions that create value. Because of that, a transaction "has to be accretive on the measures that we care about," according to Stice and it "needs to be complementary to our existing asset base." The CEO said that its formula isn't "particularly complicated, but there's a lot of brilliance in the simplicity of just doing accretive deals that are smart for our shareholders."

The company's last major acquisition provides a good blueprint for the future. In late 2016, Diamondback made its largest deal yet spending $2.43 billion to buy Brigham Resources in a transformation deal that added more than 75,000 largely contiguous acres to the company's position. Further, while Diamondback issued nearly 7.7 million new shares, the transaction was still highly accretive to EBITDA and earnings per share. In fact, since the deal closed, it has helped boost EBITDA by 84% on a per-share basis.

It's worth pointing out that those same factors are what led Concho Resources to the purchase of RSP Permian. Concho noted that the deal would be immediately accretive to the key per-share metrics of earnings, cash flow, debt-adjusted production growth, and net asset value. Further, much of RSP Permian's acreage is contiguous with Concho's land, making it a highly complementary purchase.

In addition to that, Concho added 2,000 more high-return drilling locations to its inventory, and the company believes it can capture up to $2 billion of synergies in the coming years, which would make the deal even more accretive to earnings and cash flow. A transaction like that, which is both immediately accretive and has ample upside for the future, would be an ideal situation for Diamondback.

A high-octane oil stock

Diamondback Energy has grown production and earnings at a brisk pace over the past several years by acquiring oil and gas producing assets that started moving the needle right away while providing additional upside for the future. Because of that, the company still has plenty of growth left in the tank from previous deals to increase production and earnings at a brisk pace in the coming years. However, Diamondback could add even more upside if it can continue finding good deals, which makes it a compelling stock for growth-focused investors to consider buying.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.