ConocoPhillips to acquire Concho Resources

ConocoPhillips it to acquire Permian Basin shale oil producer Concho Resources in an all-stock deal valued at $9.7bn that is claimed to create the world’s largest independent oil company.

The deal will bring together acreage positions in the Permian’s Delaware and Midland basins in the US to create what ConocoPhillips says will be ‘an unconventional powerhouse’ that also includes positions in the Eagle Ford and Bakken in the Lower 48 and the Montney in Canada. The combined operation will have a resource base of some 23bn boe, with a less than $40/b WTI cost of supply and an average cost of supply below $30/b WTI.

The deal is expected to capture some $500mn of annual cost and capital savings by 2022.

Commenting on the news, Robert Clarke, Vice President, Lower 48 Upstream at Wood Mackenzie, says: ‘The combination is remarkable. Just in regards to scale, ConocoPhillips is adding enough Permian production to nip at the heels of ExxonMobil’s massive programme. We like the distinctives each firm brings too. Concho has a history of acquisitions in the region and brings a considerable amount of incumbent Permian knowledge. ConocoPhillips has proven itself as a leader in shale technology. This can be seen in how its Bakken and Eagle Ford projects have progressed down the cost curve as well as how successfully it manages later-life shale declines. The combination bodes well for the Permian’s longer-term outlook.’

He also adds: ‘Potentially overlooked is that ConocoPhillips will now reduce its exploration budget. If buying resource rather than exploring becomes a trend, the momentum for tight oil consolidation stands to increase considerably.’

ConocoPhillips’ acquisition of Concho Resources will bring together acreage positions in the Permian Basin
Photo: ConocoPhillips