![](/sites/default/files/styles/hart_news_article_image_640/public/image/2019/02/conchoad.jpg?itok=zqxWIWuH)
(Source: Hart Energy)
Concho Resources Inc. (NYSE: CXO) folded 12,400-net acres in Andrews and Martin counties, Texas, into its expansive Midland Basin position to end July in a deal that expands its long-lateral inventory.
Concho paid $600 million for leasehold contiguous with its Mabee Ranch at a price of about $40,000 per acre, Michael Hsu, an analyst at Jefferies LLC, said. The transaction was funded with cash on hand.
The July 31 acquisition includes average volumes of about 3,000 barrels of oil equivalent per day (boe/d), 73% oil, which Concho described as “legacy production.”
The deal came with some inflation on land prices. Concho bought the Mabee Ranch as part of $1.62 billion purchase of 40,000 acres from Reliance Energy in October 2016. That acreage cost roughly $25,000 per acre.
The deal adds to Concho’s 170,000 net acre position in the Midland Basin, where it has an estimated gross inventory of 4,000 horizontal drilling locations.
Tim Leach, Concho’s chairman and CEO, said the strategic deal complements its Midland Basin leasehold and is “consistent with our focus on high-grading our portfolio through trades, acquisitions and divestitures.”
“We believe one of the best ways to create value is by owning large, contiguous positions with high ownership in the Permian,” Leach said.
While the quarter wasn’t particularly unkind to Concho, the company’s production guidance faltered compared to analysts’ models. The company said production would range from 186 Mboe/d to 190 Mboe/d, slightly below the 193 Mboe/d modeled by RBC Capital Markets LLC.
However, second quarter production guidance increased with a “good part … related to an acquisition,” RBC analyst Scott Hanold said.
Year-over-year, Concho’s crude oil production has grown 27%.
“Capital spending was $383 million, below our $418 million estimate,” Hanold said. “Concho produced $35 million of free-cash-flow and marks the eighth straight quarter it did so.”
Tudor, Pickering, Holt and Co. said Concho remains its top overall pick as “update reveals material upside to fourth-quarter 2017 consensus expectations.”
Concho’s capex for the year remained at $1.6 billion to 1.8 billion.
Gibson, Dunn & Crutcher LLP advised Concho on the deal.
Darren Barbee can be reached at dbarbee@hartenergy.com.
Recommended Reading
EDF Renewables Secures Investment in Solar Energy Storage Project
2024-08-30 - Power Sustainable Energy Infrastructure acquired a 50% stake in EDF Renewables North America’s Desert Quartzite Solar+Storage Project in California.
Energy Transition in Motion (Week of Aug. 30, 2024)
2024-08-30 - Here is a look at some of this week’s renewable energy news, including a more than $2 billion hydrogen and atmospheric gases facility in the works.
TotalEnergies Launches Wind Project to Power North Sea Platform
2024-08-29 - TotalEnergies’ floating offshore wind turbine will be located 2 km west of the Culzean gas production platform and is expected to be fully operational by year-end 2025.
CIP Buffalo Plains Wind Farm Delivers First Power to Alberta Grid
2024-08-29 - Copenhagen Infrastructure Partners' 495-megawatt wind project is located on privately-owned farmland near Lomond, Alberta.
Petronas, Carbon Clean Sign Deal to Explore Carbon Capture Tech
2024-08-28 - The agreement between Petronas’ carbon capture subsidiary and U.K.-headquartered Carbon Clean will center on Carbon Clean’s CycloneCC technology.