Includes Approximately 40,000 Net Acres in
Core Midland Basin
2017 Production Growth Outlook Approximately
20%
Concho Resources Inc. (NYSE: CXO) (the “Company” or
“Concho”) today announced it has reached a definitive agreement to
acquire approximately 40,000 net acres in the core of the Midland
Basin from Reliance Energy, a privately held, Midland-based energy
company, for $1.625 billion. The privately negotiated acquisition
is consistent with Concho’s opportunistic and disciplined portfolio
management strategy as it expands its core Midland Basin position
to more than 150,000 net acres and production of 30 thousand
barrels of oil equivalent per day (MBoepd).
Acquisition Highlights
- Adds approximately 40,000 net acres
with an average 99% working interest to Concho’s core Midland Basin
position
- Includes approximately 10 MBoepd (67%
oil) of current production
- Enhances the Company’s drilling
inventory with more than 530 long-lateral drilling locations
targeting the Middle Spraberry, Lower Spraberry and Wolfcamp B
- Provides expansive development upside
across multiple zones
Tim Leach, Chairman, Chief Executive Officer and President,
commented, “This transaction demonstrates Concho’s commitment to
the Midland Basin as a core operating area and highlights our
continued efforts to consolidate complementary leasehold. In line
with the objectives of our southern Delaware Basin acquisition in
the first quarter of 2016, these assets not only build scale, but
more importantly high-grade our inventory with additional
long-lateral locations that compete with the best projects in the
Permian Basin. As we continue to enhance our ability to efficiently
allocate capital across our four key assets in the Permian Basin,
we are uniquely positioned to deliver attractive returns today and
build shareholder value over the long term.”
The acquisition includes 10 MBoepd from 326 vertical wells and
44 horizontal wells, only one of which was completed in 2016. The
present value of this stable production base at current NYMEX strip
pricing is approximately $0.5 billion, with the remaining $1.1
billion of the purchase price attributable to 40,000 undeveloped
acres.
Estimated proved reserves attributable to the acquisition total
approximately 43 million Boe. Proved developed reserves represent
approximately 69% of the total proved reserves. The estimate of
proved reserves is based on the Company’s internal estimates as of
June 30, 2016, and utilizes the Securities and Exchange
Commission’s reserve recognition standards and pricing assumptions
based on the trailing 12-month average first-day-of-the-month
prices of $39.63 per Bbl of oil and $2.24 per MMBtu of natural
gas.
The acquired acreage is located in Andrews, Martin and Ector
counties in Texas with minimal leasehold obligations. The
acquisition adds more than 530 long-lateral drilling locations to
the Company’s inventory. Due to the contiguous nature of the
acquired assets, two-thirds of these locations are two-mile
laterals, and the remaining locations are 1.5-mile laterals. The
engineered locations are based on eight locations per zone in the
Middle Spraberry, Lower Spraberry or Wolfcamp B, with two to three
of these zones targeted per drilling spacing unit. The Company
believes there is substantial development upside from applying
optimal drilling and completion methods, testing closer well
spacing and delineating other zones.
Consideration in the transaction includes approximately $1.1
billion of cash and 3.96 million shares of Concho’s common stock
valued at approximately $0.5 billion and issuable pursuant to a
stock payment option that the Company intends to exercise. The
Company intends to fund the cash portion of the acquisition through
proceeds from a potential equity market transaction, subject to
market conditions and other factors. The acquisition is expected to
close in October 2016, and is subject to customary closing
conditions.
Vinson & Elkins LLP acted as legal advisor and Evercore
acted as financial advisor to Concho on the acquisition. Sidley
Austin LLP acted as legal advisor to Reliance Energy.
For a map related to this acquisition, visit “Investor News” on
the “Investors” page on the Company’s website at
www.concho.com.
Outlook
Full Year 2016
Concho updated its full-year 2016 production outlook to a range
of 1% to 3% annual growth to reflect production from the acquired
assets in the fourth quarter of 2016. The Company maintained its
capital expenditure guidance of $1.1 billion to $1.3 billion,
excluding acquisitions.
Full Year 2017
Based on the current commodity price outlook, Concho expects to
execute a capital program within cash flow and deliver
approximately 20% annual production growth, with oil volume growth
exceeding 20%. Concho’s 2017 capital program excludes acquisitions
and is subject to change depending upon a number of factors,
including commodity prices and industry conditions.
Redemption of Senior Notes
In addition to the announced transaction, the Company intends to
issue a notice to redeem the entire outstanding principal amount of
$600 million of its 7.0% Senior Notes due January 2021 (the
“Notes”) pursuant to the special mandatory redemption procedures
set forth in the indenture governing the terms of the Notes. The
Company plans to fund the redemption primarily through cash on
hand. This press release is not intended as a notice of any such
redemption.
Management Update
Brenda R. Schroer, who currently serves as the Company’s Vice
President and Chief Accounting Officer, has assumed the additional
role of Treasurer. Ms. Schroer joined Concho in 2013 as Vice
President and Chief Accounting Officer and was previously with
Ernst & Young LLP since 1999. She received a Bachelor of
Business Administration in Accounting from West Texas A&M
University, and a Master of Science in Accounting from Texas
A&M University and is a certified public accountant.
Participation in Upcoming Conferences
The Company announced it will participate in the following
conferences:
Conference Date
Conference August 24, 2016 Heikkinen Energy Conference
September 6, 2016 Barclays CEO Energy-Power Conference September
13, 2016 Raymond James North American Equities Conference
The Company will present at the Barclays CEO Energy-Power
Conference on Tuesday, September 6 at 3:05 PM ET. The presentation
will be available on the Company’s website on or prior to the day
of the first conference.
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.
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 fact, 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. Forward-looking statements
contained in this press release specifically include statements,
estimates and projections regarding the Company’s future financial
position, operations, performance, business strategy, oil and
natural gas reserves, drilling program, capital expenditure budget,
liquidity and capital resources, the timing and success of specific
projects, outcomes and effects of litigation, claims and disputes,
derivative activities and potential financing. The words
“estimate,” “project,” “predict,” “believe,” “expect,”
“anticipate,” “potential,” “could,” “may,” “foresee,” “plan,”
“goal” or other similar expressions that convey the uncertainty of
future events or outcomes are intended to identify forward-looking
statements, which generally are not historical in nature. However,
the absence of these words does not mean that the statements are
not forward-looking. These statements are based on certain
assumptions and analyses 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 risk factors
discussed or referenced in the Company’s most recent Annual Report
on Form 10-K and Quarterly Report on Form 10-Q for the quarter
ended June 30, 2016; risks relating to declines in the prices the
Company receives, or sustained depressed prices the Company
receives, for its oil and natural gas; uncertainties about the
estimated quantities of oil and natural gas reserves; drilling and
operating risks; the adequacy of the Company’s capital resources
and liquidity including, but not limited to, access to additional
borrowing capacity under its credit facility; the effects of
government regulation, permitting and other legal requirements,
including new legislation or regulation of hydraulic fracturing and
the export of oil and natural gas; the impact of potential changes
in the Company’s credit ratings; environmental hazards, such as
uncontrollable flows of oil, natural gas, brine, well fluids, toxic
gas or other pollution into the environment, including groundwater
contamination; difficult and adverse conditions in the domestic and
global capital and credit markets; risks related to the
concentration of the Company’s operations in the Permian Basin of
southeast New Mexico and west Texas; disruptions to, capacity
constraints in or other limitations on the pipeline systems that
deliver the Company’s oil, natural gas liquids and natural gas and
other processing and transportation considerations; the costs and
availability of equipment, resources, services and personnel
required to perform the Company’s drilling and operating
activities; potential financial losses or earnings reductions from
the Company’s commodity price risk-management program; risks and
liabilities associated with acquired properties or businesses,
including the Company’s acquisition of assets in the Midland Basin;
uncertainties about the Company’s ability to successfully execute
its business and financial plans and strategies; uncertainties
about the Company’s ability to replace reserves and economically
develop its current reserves; general economic and business
conditions, either internationally or domestically; competition in
the oil and natural gas industry; uncertainty concerning the
Company’s assumed or possible future results of operations; 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20160815006128/en/
Concho Resources Inc.Megan P. Hays, 432-685-2533Director
of Investor RelationsorMary Tennant, 432-221-0477Senior
Financial Analyst
Concho Resources (NYSE:CXO)
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