Markets
COP

ConocoPhillips Wades Deeper Into Permian With Concho Acquisition

The Permian Basin is about to get a new heavyweight player as the rumors of ConocoPhilips (NYSE: COP) buying Concho Resources (NYSE: CXO) proved true.

The oil giant announced today that it has agreed to acquire its rival for about $9.7 billion, or a 15% premium. The deal puts Conoco on a footing with Occidental Petroleum (NYSE: OXY) and Chevron (NYSE: CVX) with some 372,000 barrels of oil equivalent per day (BOE/d) in the Permian. Occidental produced 465,000 BOE/d in the second quarter. Chevron had reported production of 580,000 barrels of unconventional net oil-equivalent in the first quarter, but announced in March it expected Permian production to decline to 125,000 BOE/d by the end of the year, or 20% below previous guidance.

Oil pumps at sunset

Image source: Getty Images.

Under the merger agreement, the all-stock transaction will see Concho shareholders receive 1.46 shares of Conoco stock and will give the combined company a $60 billion enterprise value. The oil and gas companies expect to capture $500 million of annual cost and capital savings by 2022.

The new business will have about 23 billion BOE/d, with a cost of supply of less than $40 per barrel of West Texas Intermediate (WTI), and an average cost of supply below $30 per barrel WTI. Currently, WTI is trading for slightly less than $41 per barrel.

The deal comes amid a pickup in industry consolidation, with Occidental acquiring Anadarko last year, and Chevron buying Noble Energy this past summer.

Other deals in the space include Southwestern Energy acquiring Montage Resources, and Devon Energy buying WPX Energy.

The transaction is expected to close in the first quarter of 2021.

10 stocks we like better than ConocoPhillips
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and ConocoPhillips wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 24, 2020

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

COP CVX OXY

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More