Editor’s note: Through the end of December, we’re taking a look back on the Deals of the Week from 2020. This was the Deal of the Week for the Houston Business Journal’s Oct. 23-29 edition.
The original story from October 2020 appears below.
The skinny
Houston-based ConocoPhillips (NYSE: COP) will acquire Midland, Texas-based Concho Resources (NYSE: CXO) in an all-stock deal valued at $9.7 billion. The enterprise value of the deal, including the assumption of debt, is $13 billion.
The details
Concho shareholders will receive 1.46 shares of COP common stock for each share of CXO, which represents a 15% premium to closing prices on Oct. 13, before news surfaced that the companies were in talks. ConocoPhillips shareholders will own about 79% of the combined company, with Concho shareholders owning the other 21%. The deal is expected to close in the first quarter of 2021.
After the deal closes, Concho Chairman and CEO Tim Leach will become an executive vice president of ConocoPhillips and president of the company’s Lower 48 business. He’ll also join ConocoPhillips’ board of directors.
The combined company
The combined company’s enterprise value is expected to be approximately $60 billion, and its pro forma net debt was $12 billion as of June 30. By 2022, the combined company is expected to achieve $500 million of annual cost and capital savings due to lower general and administrative costs as well as a reduction in ConocoPhillips’ future global new ventures exploration program.
The combined company will have pro forma production of over 1.5 million barrels of oil equivalent per day and hold approximately 23 billion barrels of oil equivalent resources. It will have a particularly large footprint in the the Delaware and Midland portions of the Permian Basin and other strong positions in the Eagle Ford and Bakken in the Lower 48 and the Montney in Canada.
The competition
The combined company is expected to be the largest independent oil and gas company in terms of daily production, the companies said Oct. 19. However, it won’t have the largest footprint in the Permian. One day after ConocoPhillips and Concho announced their deal, Irving, Texas-based Pioneer Natural Resources Co. (NYSE: PXD) announced it will acquire Austin-based Parsley Energy Inc. (NYSE: PE) in an all-stock transaction valued at $4.5 billion, or $7.6 billion including debt. Pioneer will have about 930,000 net acres in the Permian after its deal closes; ConocoPhillips will have about 700,000.
The players
Goldman Sachs & Co. LLC is serving as exclusive financial adviser to ConocoPhillips, and Wachtell, Lipton, Rosen & Katz is serving as ConocoPhillips’ legal adviser. Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are acting as financial advisers to Concho. Sullivan & Cromwell LLP is acting as legal adviser to Concho.
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience in implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor in this space. Stuart has led the “Total Corporate Digital Integration” platform at Sandstone and works with Sandstone clients to help integrate all aspects of modern digital business. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage and is the Co-Host of the energy news video and Podcast Energy News Beat.
Stuart is on Board Member of ASN Productions, DI Communities
Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.
