Complementary Acquisition Adds Scale and Long-Lateral Drilling Inventory in Top-Tier Red Hills Area
Increases 2017 Production Growth Target Range to 18% to 21%
MIDLAND, Texas–(BUSINESS WIRE)–Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today announced it has reached a definitive agreement to acquire approximately 24,000 gross (16,400 net) acres in the northern Delaware Basin for approximately $430 million. The acquired acreage is complementary to the Company’s leasehold position in the northern Delaware Basin, with approximately 12,000 gross (10,000 net) acres located in the Red Hills area in Lea County, New Mexico.
- Includes approximately 2.5 MBoepd (69% oil) of current production
- Expands position in Red Hills area by more than 25% to approximately 47,000 net acres
- Doubles long-lateral drilling inventory in Red Hills
- Provides significant development upside across multiple, de-risked zones
- Accretive to cash flow per share and leverage neutral
Tim Leach, Chairman, Chief Executive Officer and President, commented, “This transaction is an opportunistic bolt-on in the Red Hills area where we are consistently delivering strong well performance. Our evaluation provides for multiple opportunities to enhance value through increased density development on multi-well pads as well as additional zones beyond the Avalon Shale, Wolfcamp Shale and the emerging Wolfcamp Sands. With a continued focus on driving capital efficiency gains and actively managing our portfolio, this acquisition further strengthens our industry-leading position in the Permian Basin and reinforces our ability to deliver differentiated long-term growth.”
The Red Hills area is an oil-prone fairway generating exceptional returns at current commodity prices. With more than 5,000 feet of resource-rich hydrocarbon column, this area is highly prospective for multi-zone development. The acquisition more than doubles the Company’s long-lateral drilling inventory in Red Hills and enhances its ability to drill long laterals on existing Concho leasehold.
Consideration in the transaction includes approximately $150 million of cash and 2.18 million shares of Concho’s common stock. Concho expects to fund the cash portion of the transaction with cash on hand, borrowings under its credit facility and potential non-core asset sales. The acquisition is expected to close in January 2017 and is subject to customary closing conditions.
A presentation summarizing the transaction is available on Concho’s website at www.concho.com.
Full-Year 2017 Outlook
As a result of this acquisition, Concho plans to increase its operated rig count to an average of eight rigs in the northern Delaware Basin during 2017. Concho expects to grow oil production volumes by more than 20% year-over-year in 2017 and total production by 18% to 21%, up from the previously disclosed guidance range of 17% to 20%. The Company maintained its capital expenditure guidance of $1.4 billion to $1.6 billion for 2017. Based on the current commodity price outlook, Concho expects to fund its 2017 capital program within cash flow. The Company’s 2017 capital program excludes acquisitions and is subject to change depending upon a number of factors, including commodity prices and industry conditions.
Concho Resources Inc.
Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin of southeast New Mexico and west Texas. For more information, visit the Company’s website at www.concho.com.