Concho to acquire RSP Permian
On March 28, 2017, Concho Resources (CXO) announced its decision to acquire RSP Permian in an all-stock transaction valued at $9.5 billion, which will include RSPP’s net debt.
Concho Resources is a pure-play Permian player, and the combination with RSPP could create the “(FINAL)-Concho-Acquires-RSP-Permian-Presentation.pdf">largest unconventional shale producer” in the Permian Basin, according to a company presentation.
For context, the largest Permian deal announced until now was ExxonMobil’s (XOM) acquisition of the Bass family companies for $6.6 billion. To know more, read Key Trends in Energy Sector Mergers and Acquisitions in 2017
Pro forma for the acquisition, Concho Resources will hold 640,000 net acres in the Permian Basin, with gross drilling locations of 26,000 acres. CXO’s 4Q17 production was 211 Mboepd (thousand barrels of oil equivalent per day).
Production for RSP’s assets in 4Q17 totaled 55.5 Mboepd. About 80% of that was crude oil, and 20% was natural gas.
Jefferies had estimated a purchase price of $76,000 per acre for the RSPP transaction. The price tag for the acquisition is significantly higher than the recent deals announced in the Permian. Prices have been roughly $40,000 per acre or less.
Next, we’ll look at key transaction highlights of the deal.