Concho Resources Inc., Midland, will acquire RSP Permian Inc. (RSPP) in a $9.5-billion stock transaction to create the largest unconventional shale producer in the Permian basin.
The combined company expects to run the largest drilling program in the Permian with 27 rigs on a combined footprint of more than 640,000 net acres. Included in RSPP’s 92,000 net Permian acres is a 14,000-net acre block of Delaware acreage that Concho sold to Silver Hill in January 2016 (OGJ Online, Jan. 16, 2016).
In fourth-quarter 2017, production on RSPP’s assets totaled 55,500 boe/d on a two-stream basis (80% crude oil, 20% natural gas) and 62,400 boe/d on a three-stream basis (71% oil, 17% NGLs, 12% gas). Concho’s total production was 211,000 boe/d on a two-stream basis (62% oil, 38% gas), according to Cowen & Co. LLC.
“[Concho] states that RSPP will add 5,000 gross locations, increasing its gross location count to 26,000. In RSPP’s latest predeal presentation, it notes 3,980 net locations in the Delaware [and] Midland based on base case well spacing and resource potential of about 2.8 billion boe,” the analysts detailed in a Mar. 28 research note.
Overall, the transaction adds 2.2 billion boe of resource potential, of which more than two-thirds is premium resource, the company said.
RSPP built a high-margin asset portfolio with large, contiguous positions in the core of the Permian, said Concho Chairman and Chief Executive Officer Tim Leach, and “they did so with a strategy of maximizing well performance and returns, which provides substantial running room for continuous development with large-scale projects,” he said.
The consideration will consist of 0.32 of a share of Concho common stock for each share of RSPP common stock. On closing, Concho shareholders will own 74.5% of the combined company, and RSPP shareholders will own 25.5%.
The transaction is expected to be completed in this year’s third quarter. Approved by the boards of both companies, the deal is subject to the approval of both Concho and RSPP shareholders, and the satisfaction of regulatory approvals and customary conditions.
On closing, Concho’s board will be expanded to 11 directors, including one independent member of the RSPP board.
