Concho Resources Inc. to Acquire Oil & Gas Assets in the Permian Basin
MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (CXO) (Concho or the Company) today announced that it has entered into a definitive agreement to acquire all the oil and natural gas assets of Three Rivers Operating Company and certain affiliated entities (collectively, Three Rivers) for $1.0 billion in cash. Three Rivers is a privately-held exploration and production company with approximately 310,000 gross (200,000 net) acres in the Permian Basin, including large positions in the Companys core northern Delaware Basin play, the Midland Basin Wolfberry play, and the emerging southern Midland Basin horizontal Wolfcamp and Cline shale plays.
Highlights of the Three Rivers Acquisition:
- Estimated proved reserves of approximately 58 million barrels of oil equivalent (50% oil and 55% proved developed) as of April 1, 2012
- Estimated current net production of 7,000 barrels of oil equivalent per day
- Adds approximately 380 identified horizontal drilling locations in the Delaware Basin, almost all of which are unproved, and over 1,100 vertical drilling locations in the Midland Basin, of which over 740 are unproved
- Represents a 42% increase to net acreage in the Midland Basin and a 23% increase to net acreage in the northern Delaware Basin
- Approximately 65% of the acreage is held by production
We are pleased to announce our largest and most strategic transaction since the Marbob acquisition nearly two years ago, commented Timothy A. Leach, Conchos Chairman, CEO and President. Three Rivers represents a material consolidation opportunity within the proven core of the Delaware Basin, a continued expansion into the horizontal Wolfcamp and Cline shale plays in the southern Midland Basin, and a complementary addition to our core Yeso play. Combined with our existing portfolio, these assets give the Company nearly 750,000 net acres across the Permian Basin, with exposure to some of the most exciting oil plays in the U.S. This acquisition is expected to be immediately accretive to earnings, discretionary cash flow, production and reserves on a per share basis and provides an additional platform to significantly grow our production in the Permian Basin. We look forward to accelerating development on these assets and executing the same strategy of delivering return-driven, high-margin growth to our shareholders over the next several years.
Concho intends to finance the acquisition with borrowings under its $2.0 billion credit facility, which had approximately $1.8 billion available to be borrowed at March 31, 2012. In addition, the Company plans to divest $200 million to $400 million of certain non-core assets from the acquisition and its existing assets over the next nine months. In connection with the acquisition, the Company has entered into crude oil swaps on 2.4 million barrels of oil at a weighted average price of $92.90 per barrel for the remainder of 2012 through 2017. Please see the Derivatives Information table at the end of this press release for more detailed information about the Companys current derivative positions.
J.P. Morgan acted as the Companys lead financial advisor, BMO Capital Markets acted as a financial advisor and Vinson & Elkins LLP represented the Company in connection with the transaction.
The acquisition is expected to close in July 2012, subject to regulatory approval and other customary closing conditions, and is subject to certain preferential rights to purchase and other customary purchase price adjustments.
Conference Call Information
The Company will host a conference call to discuss the acquisition with analysts, investors and other interested parties on Monday, May 14, 2012 at 10:00 a.m. Central Time. Individuals who would like to participate should call (866) 362-4666 (passcode: 22619627) approximately 15 minutes before the scheduled conference call time. To access the live audio webcast, please visit the investor relations section of the Company's website, www.concho.com. A replay of the call will also be available, by dialing (888) 286-8010 (passcode: 51646372) or via the Company's website, for approximately 30 days following the conference call.
Financial and Operational Guidance
|2H 2012||FY 2013|
|Oil equivalent (MMBoe)||1.2 - 1.3||4.6 - 5.1|
|% Oil||45% - 55%||50% - 60%|
|Operating costs and expenses:|
|Direct lease operating expense ($/Boe)||$10.00 - $11.00||$8.00 - $10.00|
|Capital expenditures ($ in millions)||$145||$425|
About Concho Resources Inc.
Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration 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 Concho's website at www.concho.com.
Forward-Looking Statements and Cautionary Statements
The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the completion of the transaction and the Company's future financial position, operations, performance, production growth, returns, capital expenditure budgets, oil and natural gas reserves, number of identified drilling locations, drilling program, derivative activities, costs and other guidance. These statements are based on certain assumptions made by the Company based on management's experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the factors discussed or referenced in the "Risk Factors" section of the Company's most recent Form 10-K and 10-Q filings and risks relating to declines in the prices we receive for our oil and natural gas; uncertainties about the estimated quantities of reserves; risks related to the integration of acquired assets; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; drilling and operating risks; the adequacy of our capital resources and liquidity; risks related to the concentration of our operations in the Permian Basin; the results of our hedging program; weather; litigation; shortages of oilfield equipment, services and qualified personnel and increases in costs for such equipment, services and personnel; uncertainties about our ability to replace reserves and economically develop our current reserves; competition in the oil and natural gas industry; and other important factors that could cause actual results to differ materially from those projected.
Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
|Concho Resources Inc.|
The table below provides data associated with the Companys derivatives at May 13, 2012.
|NYMEX price (Bbl) (a)||$||95.27||$||96.39||$||96.23||$||95.95||$||96.08||$||92.85||$||86.69||$||88.31||$||87.00|
|Natural Gas Swaps|
|NYMEX price (MMBtu) (b)||$||6.54||$||6.54||$||6.54||$||6.54||-||-||-||-||-|
(a) The index prices for the oil contracts are based on the NYMEX-West Texas Intermediate monthly average futures price.
(b) The index prices for the natural gas contracts are based on the NYMEX-Henry Hub last trading day of the month futures price.
Concho Resources Inc.
Price Moncrief, 432-683-7443
Director, Corporate Development
Source: Concho Resources Inc.Copyright Business Wire 2012