uploads///operational eff

How Concho Resources Expects to Benefit from RSP Permian Deal


Apr. 3 2018, Updated 8:33 a.m. ET

Corporate and operational synergies

The deal with RSP Permian (RSPP) would expand Concho Resources’ (CXO) Permian Basin footprint by 92,000 acres. About 45,000 net acres are in the Delaware Basin, and ~47,000 are in the Midland Basin.

The transaction would add 2.2 billion Boe (barrels of oil equivalent) of resource potential (almost two-thirds of that is Permian resource) to CXO’s existing resource base of 10 billion Boe.

Article continues below advertisement

Longer laterals: CXO’s key focus

The transaction is also expected to drive down costs through efficient drilling and completion techniques. CXO noted that the combination would complement its focus on the development of longer laterals. According to CXO’s 4Q17 earnings release, it sold non-core leaseholds in Ward and Reeves Counties in the Permian Basin for approximately $280 million since those assets were “non-operated with low working interest and not conducive to long-lateral development.”

According to its 4Q17 earnings release, in the Northern Delaware Basin, Concho achieved an average lateral length of 6,685 feet in 4Q17, while in the Southern Delaware Basin, it achieved an average lateral length of 10,354 feet. In the Midland Basin, it achieved an average lateral length of 11,656 feet in 4Q17.

Since RSP’s assets lie adjacent to Concho’s (see image in Part 2), that would create significant operational synergies “(FINAL)-Concho-Acquires-RSP-Permian-Release.pdf">through development optimization, shared infrastructure and(FINAL)-Concho-Acquires-RSP-Permian-Release.pdf"> capital efficiencies, with a present value of more than $2 billion.” Additionally, the company expects to realize more than $60 million in annual corporate level savings.

In the next part, we’ll see how the deal could enhance Concho’s position.


More From Market Realist

  • Recon Africa employees
    Energy & Utilities
    Is Recon Africa a Multi Bagger Stock You Should Buy?
  • Dr. Donald Sadoway (second from left) pictured with Paula S. Aspell, David Pogue, and Chris Schmidt
    Energy & Utilities
    Ambri Expands in the Liquid Metal Battery Space, Still Privately Held
  • Valero gas station
    Energy & Utilities
    Valero Energy’s Prospects in 2021, Rebound in Energy and Gas
  • Crude oil pumpjack
    Energy & Utilities
    Oil Stocks Are Going Down, Lower Prices Could Help Markets
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.