Concho Resources Inc. Enhances Southern Delaware Basin Position
Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”)
today announced three separate transactions that enhance the Company’s
position in the southern Delaware Basin, high grade the Company’s
portfolio and reduce net debt.
Highlights
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Concho agreed to acquire approximately 12,000 net acres complementary
to the Company’s core North Harpoon prospect in Ward and Reeves
Counties, Texas, from a private operator for total consideration of
approximately $360 million, through a combination of common stock,
cash and drilling carry.
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The Company completed an acreage exchange with Clayton Williams
Energy, Inc. (NYSE: CWEI) (“Clayton Williams”), consolidating 21,000
net non-operated acres into a concentrated, operated position adjacent
to the Company’s Big Chief prospect in Reeves County, Texas.
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Concho agreed to sell 14,000 net acres in Loving County, Texas, for
cash proceeds of $290 million.
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The aggregate impact of these transactions is neutral to Concho’s 2016
capital and production outlook.
Tim Leach, Chairman, Chief Executive Officer and President, commented,
“These transactions highlight our focus on actively managing and
improving our portfolio of high-quality assets in the Permian Basin. The
acquisition and acreage swap in Reeves and Ward Counties increase our
exposure to the best part of the southern Delaware Basin and provide for
more efficient development of our existing assets in North Harpoon and
Big Chief, with drilling inventory that we believe competes with the
best projects in our portfolio. The combined effect of these
transactions not only strengthens our portfolio, but also frees up
capital to develop higher returning properties while improving our
leverage metrics.”
Property Acquisition and Asset Exchange
Concho has entered into a definitive agreement to acquire 12,000 net
acres in Reeves and Ward Counties, Texas, adjacent to the Company’s
North Harpoon prospect for total consideration of approximately $360
million, including 2.2 million shares of Concho common stock, $150
million of cash and $40 million to carry a portion of the seller’s
future drilling costs. The acquisition increases the Company’s exposure
to core acreage in the southern Delaware Basin and enables more
efficient, long-lateral development of Concho’s existing North Harpoon
acreage. The acquired properties have current net production of
approximately 3.6 MBoepd and estimated proved reserves of 18.5 MMBoe as
of December 31, 2015. As part of the transaction, the seller will retain
a 20% non-operated working interest in the assets. This acquisition is
expected to close during the first quarter of 2016.
The acreage exchange with Clayton Williams encompasses approximately
21,000 net acres in the Company’s Big Chief prospect in Reeves County,
Texas. Consolidating operated positions benefits both parties and allows
Concho to optimize drilling activity with more efficient long-lateral
wells and provides for greater control of field development. The acreage
exchange will have no impact on Concho’s daily production.
Concho was a first mover in the southern Delaware Basin, which is
characterized by multi-zone potential and considerable oil in place. The
Company continues to lead development in the region with a focus on
drilling longer laterals and optimizing completion techniques. The
property acquisition and acreage exchange add more than 350 horizontal
locations to the Company’s inventory in the southern Delaware Basin, of
which more than 200 are long-laterals.
Acreage Divestiture
Concho also entered into a definitive agreement to sell 14,000 net acres
located in Loving County, Texas, for cash proceeds of $290 million to
Silver Hill Energy Partners II, LLC. Production for the third quarter of
2015 attributable to the assets was 2.5 MBoepd. The assets also include
5 MMBoe of estimated proved reserves as of December 31, 2014. The asset
sale eliminates approximately $100 million of lower rate-of-return
obligation drilling in 2016. The sale is expected to close during the
first quarter of 2016 and be structured as a like-kind exchange.
Vinson & Elkins LLP acted as legal advisor to Concho on the property
acquisition and the acreage divestiture. Scotia Waterous acted as
financial advisor to Concho on the acreage divestiture.
A presentation providing maps and other information related to these
transactions is available on Concho’s website at www.concho.com.
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 primarily 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 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 Current Reports on Form 8-K; risks relating to
declines in the 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, including risks related to
properties where the Company does not serve as the operator and risks
related to hydraulic fracturing activities; 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; 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 management
program; risks and liabilities related to the integration of acquired
properties or businesses; 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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