ConocoPhillips has agreed to an all stock deal to acquire Concho Resources for $9.7 billion. Including Concho’s net debt of $3.9 billion, the deal value is $13.6 billion.
The combine will be the largest independent oil and gas company, with pro forma production of over 1.5 MMboe/d, the companies said in a joint release Oct. 19. Estimated resource base of the combine is some 23 billion boe with a less than $40/bbl WTI cost of supply and an average cost of supply below $30/bbl WTI.
The transaction brings together contiguous and complementary acreage positions across the Delaware and Midland basins and includes positions in the Eagle Ford and Bakken in the Lower 48 and the Montney in Canada.
The companies expect to capture $500 million of annual cost and capital savings by 2022 from lower general and administrative costs and a reduction in ConocoPhillips’ future global new ventures exploration program. The de-emphasis of ConocoPhillips’ organic resource addition program is driven by the addition of Concho’s large, low-cost resource base, the companies said. Additional supply chain, commercial and drilling and completion capital efficiency savings are not yet included in the cost-reduction estimates.
The combine will target an average reinvestment level of less than 70% of cash from operations to ensure sufficient free cash flow generation to fund compelling returns of capital to shareholders.
Upon closing, subject to the approval of both ConocoPhillips and Concho stockholders, regulatory clearance, and other customary closing conditions, Concho’s chairman and chief executive officer Tim Leach will join ConocoPhillips’ board of directors and executive leadership team as executive vice-president and president, Lower 48.
The transaction is expected to close in first-quarter 2021.
Under the terms of the deal, approved by the board of directors of each company, each share of Concho common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock.