Concho Resources acquires Northern Delaware Basin Assets

Concho Resources Inc. (NYSE: CXO) 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.

The deal includes approximately 2.5 MBoepd (69% oil) of current production and expands the company’s position in the Red Hills area by more than 25% to approximately 47,000 net acres.

“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,” commented Concho’s chairman, CEO and president Tim Leach.

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.

Full-year 2017 outlook
As a result of the 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.

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