ConocoPhillips on October 19 agreed to acquire US shale oil producer Concho Resources in a $9.7-billion low-premium, all-stock deal which appeared to be the largest shale acquisition in 2020. The purchase came amid consolidations in the broader energy sector due to weak fuel prices and demand caused by the coronavirus pandemic. Weak crude prices have inflicted massive financial damage among US shale companies.
The deal exchanges 1.46 shares of ConocoPhillips for every share of Concho Resources, at about 1.5% premium over its price on Friday. Shares in both companies declined on Monday amid a market selloff. ConocoPhillips shares were down 3.2% to $32.70, while Concho lost 2.8% to $47.26. Concho shares traded as much as $93 in January before the pandemic ravaged oil consumption and prices.
Concho is the fifth-largest Permian producer with acreage of more than half a million and output of about 319,000 bpd. ConocoPhillips pumped about 50,000 bpd in the Permian, but it is also a major player in other basins. The acquisition sends ConocoPhillips’s production capacity to around 1.5 million bpd, making it the largest independent oil and gas producer in the US.
The deal is expected to generate $500 million in capital and cost savings annually by 2022. It remains subject to shareholders approval, with closing expected in the first quarter of 2021.
