Concho Resources has agreed to acquire RSP Permian in a US$9.5 billion all-stock deal.
Concho Resources has agreed to acquire RSP Permian in a US$9.5 billion all-stock deal.
The deal will add approximately 92,000 net acres that strongly complement Concho’s existing acreage position in the Permian Basin. The combined position will cover more than 640,000 net acres. In fourth-quarter 2017, production on RSP’s assets totaled approximately 55.5 thousand barrels of oil equivalent (Boe) per day.
"The transaction is the largest US upstream M&A deal since 2012 and the largest purely Permian deal ever," said Andy McConn, corporate upstream research analyst at Wood Mackenzie.
The combined company will run the largest drilling and completion program in the Permian Basin.
Tim Leach, Chairman and Chief Executive Officer of Concho, commented, “This transaction provides a compelling opportunity for both Concho and RSP shareholders to benefit from the strength of our combined company. This combination allows us to consolidate premier assets that seamlessly fold into our drilling program, enhance our scale advantage and reinforce our leadership position in the Permian Basin, all while strengthening our platform for delivering predictable growth and returns."
Steve Gray, Chief Executive Officer of RSP, added: "The combined company will have the vision and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”
The companies highlighted the specific operational synergies that include: asset optimisation, directing capital to high-return manufacturing-style projects and utilizing shared infrastructure systems.
McConn said: "An expectation to realise new efficiencies was key to Concho's rationale in acquiring RSP. But realizing efficiencies to the extent that Concho estimates (over $2 billion) will be challenging for multiple reasons.
Concho's acquisition of RSP marks another step in the consolidation of the Permian Basin. Between Q2 2016 and Q1 2017, more than US$40 billion was spent on Permian upstream M&A. However, the targets during this period were mainly assets and privately-held companies rather than public corporations.
McConn added: "Looking ahead, any other large-scale deals will face significant headwinds, i.e. rich valuations, anxious investors, and scrutiny on operational performance. If this deal is to mark a second wave of 'Permania' in the oil M&A market, potential acquirers will have to be firmly confident in the Permian's long-term potential."
Source: Pipeline ME
