Concho Resources' acquisition forms largest unconventional shale producer in the Permian
DALLAS and MIDLAND, Texas -- Concho Resources Inc. and RSP Permian, Inc., announced they have entered into a definitive agreement under which Concho will acquire RSP in an all-stock transaction valued at approximately $9.5 billion, inclusive of RSP’s net debt. The consideration will consist of 0.320 shares of Concho common stock for each share of RSP common stock. The transaction was unanimously approved by the board of directors of each company.
Highlights:
- Large, highly-complementary acreage expands Concho’s strategic portfolio in the Permian basin to approximately 640,000 net acres
- Reinforces leadership position as the premier Permian pure-play company and creates the largest crude oil and natural gas producer from unconventional shale in the Permian basin
- Combined company to run the largest drilling program in the Permian basin with 27 rigs
- Meaningfully expands premium resource base
- Drives significant operational synergies through development optimization, shared infrastructure and capital efficiencies, with a present value of more than $2 billion
- Expect to realize over $60 million in annual corporate level savings
- Immediately accretive to key per-share metrics, including net asset value, earnings, cash flow and debt-adjusted growth
- Expect to maintain investment grade credit ratings
- Enhances Concho’s three-year annualized production growth outlook within cash flow from operations
The acquisition will add approximately 92,000 net acres that strongly complement Concho’s existing acreage position in the Permian basin. The combined position will cover more than 640,000 net acres. In fourth-quarter 2017, production on RSP’s assets totaled approximately 55,500 boed on a two-stream basis, of which approximately 80% was crude oil and 20% was natural gas. The transaction adds 2.2 Bboe of resource potential, of which more than two-thirds is premium resource.
The combined company will run the largest drilling and completion program in the Permian basin. With a focused portfolio and substantial scale advantage, the benefits of this transaction are expected to drive corporate level savings and operational synergies by combining the complementary assets and the technical skills of both company’s employees. Specific operational synergies include: asset optimization, directing capital to high-return manufacturing-style projects and utilizing shared infrastructure systems. The present value of corporate and operational synergies is expected to exceed $2 billion.
The acquisition is expected to be accretive in the first year to Concho’s key per-share metrics, including net asset value, earnings, cash flow and debt-adjusted growth. In addition, the transaction is expected to enhance Concho’s three-year outlook for annualized production growth on a capital program within cash flow from operations.
