Complementary Acquisition Adds Scale and
Long-Lateral Drilling Inventory in Top-Tier Red Hills Area
Increases 2017 Production Growth Target
Range to 18% to 21%
Concho Resources Inc. (NYSE: CXO) (“Concho” or the
“Company”) today announced it has reached a definitive agreement to
acquire approximately 24,000 gross (16,400 net) acres in the
northern Delaware Basin for approximately $430 million. 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.
Acquisition Highlights
- Includes approximately 2.5 MBoepd (69%
oil) of current production
- Expands position in Red Hills area by
more than 25% 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
Tim Leach, Chairman, Chief Executive Officer and President,
commented, “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. 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 the Company’s 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
January 2017 and is subject to customary closing conditions.
A presentation summarizing the transaction is available on
Concho’s website at www.concho.com.
Full-Year 2017 Outlook
As a result of this acquisition, Concho plans to increase its
operated rig count to an average of eight rigs in the northern
Delaware Basin during 2017. Concho expects to grow oil production
volumes by more than 20% year-over-year in 2017 and total
production by 18% to 21%, up from the previously disclosed guidance
range of 17% to 20%. The Company maintained its capital expenditure
guidance of $1.4 billion to $1.6 billion for 2017. Based on the
current commodity price outlook, Concho expects to fund its 2017
capital program within cash flow. The Company’s 2017 capital
program excludes acquisitions and is subject to change depending
upon a number of factors, including commodity prices and industry
conditions.
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 in the Company’s Quarterly Reports on Form 10-Q
for the quarters ended June 30, 2016 and September 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 risks and liabilities associated with the Company’s
acquisition of assets in the northern Delaware 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/20161121005291/en/
Concho Resources Inc.Investor RelationsMegan P.
Hays, 432-685-2533Vice President of Investor RelationsorMary
Tennant Starnes, 432-221-0477Senior Financial AnalystorRyan
Thrasher, 432-686-3025Financial Analyst
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