Concho agrees to three Delaware Basin transactions

Concho Resources Inc. (NYSE: CXO) has agreed to three separate transactions related to the Southern Delaware Basin. The transactions include the acquisition of acreage in Ward and Reeves counties, Texas, and an acreage exchange with Clayton Williams Energy Inc. (NYSE: CWEI). Concho is also selling acreage in Loving County, Texas.

Concho has agreed to acquire 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 $360 million, through a combination of common stock, cash and drilling carry.

The company has also completed an acreage exchange with Clayton Williams Energy, consolidating 21,000 net non-operated acres into a concentrated, operated position adjacent to Concho’s Big Chief prospect in Reeves County, Texas.

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  $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 acreage exchange with Clayton Williams encompasses 21,000 net acres in Concho’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 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. The sale is expected to close during the first quarter of 2016 and to be structured as a like-kind exchange.

Analysts from Wunderlich Securities commented, “Assuming $50K per flowing barrel, the 14,000 net acres in Loving County with 2.5 Mboep/d of production were sold for $11,786/net acre. Under the same assumption, 12,000 net acres on the Reeves/Ward county line would be worth $15,000/net acre. These transactions show that there is still healthy interest in the Delaware Basin and that the price tags have not changed much despite a sub-$30/bbl environment.”

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.

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