Concho Resources bought assets in the Permian basin of Texas for $1.63bn
OREANDA-NEWS. Concho Resources bought assets in the Permian basin of Texas for $1.63bn, adding to signs of the region becoming a favorite as US oil and gas merger activity revives.
Concho will acquire about 40,000 net acres in the deal, expanding its core Midland basin position to 150,000 net acres with a total output of 30,000 b/d of oil equivalent (boe/d). Of that, 10,000 boe/d will come from the new acreage. The deal will give the company a drilling inventory of more than 530 long-lateral locations across the middle and lower Spraberry and Wolfcamp B areas of the region.
"These assets not only build scale, but more importantly high-grade our inventory with additional long-lateral locations that compete with the best projects in the Permian basin," chief executive Tim Leach said. "This transaction demonstrates Concho's commitment to the Midland basin as a core operating area."
The acquisition, which is contiguous to Concho's existing assets, includes 326 vertical wells and 44 horizontal wells, with estimated proven reserves of 43mn bl of oil equivalent (boe). Of the total value of the deal, Concho will pay $1.1bn in cash, which will funded through an equity market transaction, it said. It is buying the assets from Reliance Energy, a privately held, Midland-based energy company.
Separately, mid-sized producer Parsley Energy is also acquiring assets in the Midland basin for $400mn. The deal includes some undeveloped acreage and producing oil and gas properties in the Glasscock county. Current output is about 270 boe/d from 67 gross vertical wells, and some 240 gross horizontal drilling locations across the Lower Spraberry, Wolfcamp A and B formations. Parsley will fund the deal through debt and equity issues.
"This acquisition represents an important step toward a large-scale, basin-wide development program that can generate sustainably strong production and cash flow growth," Parsley Energy chief executive Bryan Sheffield said.
Both the Concho and Parsley deals are expected to close in October.