Complementary acquisition adds scale and long-lateral drilling inventory in top-tier Red Hills area
MIDLAND, Texas – Concho Resources Inc. says it reached an agreement to acquire approximately 24,000 gross (16,400 net) acres in the northern Delaware Basin for approximately $430 million, according to a press release.
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 per cent oil) of current production
- Expands position in Red Hills area by more than 25 per cent 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
“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,” said Tim Leach, Concho Resources CEO.
“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 Concho Resources 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 Jan. 2017 and is subject to customary closing conditions.