ConocoPhillips Acquires Concho Resources
ConocoPhillips has entered into a definitive agreement to acquire Permian-focused independent Concho Resources Inc., in an all-stock corporate transaction valued at approximately US$13.3 billion, including net debt adjustments. The transaction has been unanimously approved by the Board of Directors of both companies.
Under the terms of the deal, each share of Concho will be exchanged at a fixed ratio of 1.46 ConocoPhillips shares. The offer represents a 15% premium to Concho’s closing share price on October 13th. Based on approximately 196 million shares outstanding, Concho’s shareholders will receive around 287 million ConocoPhillips shares, which are currently valued at US$33.77 per share (based on its closing share price on October 16th), amounting to a total equity offer value of approximately US$9.7 billion. Adjusting for Concho’s reported net debt of approximately US$3.6 billion, the total transaction value on an enterprise value basis is US$13.3 billion.
The transaction brings together contiguous and complementary ‘core-of-the-core’ acreage positions across the Delaware and Midland basins, and creates an unconventional powerhouse including leading positions in the Eagle Ford and Bakken formations in the Lower 48, and the Montney formation in Canada.
Upon completion, ConocoPhillips will become the largest independent oil & gas company in the U.S., with an enterprise value of approximately US$60 billion, and a resource base of approximately 23 billion barrels of oil equivalent (Bboe). The merged entity will have pro forma production of over 1.5 million barrels of oil equivalent per day (MMboe/d). Concho’s Chairman & CEO Tim Leach will be appointed as a board member and Executive Vice President of the merged entity.
“Through this combination, we are joining a diversified energy company with even more scale and resources to create shareholder value in today’s markets and beyond,” Mr. Leach said in a statement.
“Through consolidation, we will apply our assets, capabilities and superior performance to the business model of the future, creating a better-capitalized company with enhanced capital discipline, more flexibility and an unwavering commitment to sustainability,” he added.
Goldman Sachs is acting as exclusive financial advisor to ConocoPhillips, while Credit Suisse Securities and JP Morgan are advising Concho on the deal.
The completion of the transaction is subject to customary closing conditions including shareholder approvals and regulatory clearances, and is expected to close in Q1-2021.