Concho Resources (CXO) Update - July 19

[dan_s]

Seven members of the "Wall Street Gang" have published new reports on Concho in July. Their valuations range from $150 to $210 per share.
> CXO + RSPP is a Powerhouse Permian Basin company.
> It is now a company "in transition" (i.e. - very hard for most of the Wall Street Gang to understand)
> Although the company will give a lot of details on their Q2 conference call and in presentations, we really won't have a clear picture on this one until they release Q4 results.
> I have updated my forecast/valuation model for CXO. My valuation is now $195/share.
> The timing is good on this merger because everything, including the people, should be settled in by year-end. I worked on some big deals at Hess, like our merger with Transco Offshore and the move to Houston. There is lot of work that goes into a deal of this size.
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Concho Resources Inc. (CXO) (“Concho” or the “Company”) today announced that it has completed its acquisition of RSP Permian, Inc. (RSPP) (“RSP”). The transaction creates the largest unconventional shale producer in the Permian Basin.

Tim Leach, Chairman and Chief Executive Officer of Concho, commented, “We are excited to complete this transaction and welcome the RSP team to Concho. By combining two great companies focused on the highest quality resources in the Permian Basin, we are creating a compelling enterprise with the scale and technical expertise necessary to compete globally. The transition to large-scale development has been one of our most important operational and strategic priorities. RSP’s incredible asset base enhances our development platform within the Permian Basin to drive continued performance, innovation and stronger returns for our shareholders.

“Concho’s solid financial position, which includes a low cost of capital and investment-grade ratings, underpins our scale advantage and enables Concho to accelerate value across the combined portfolio through capital efficient, large-scale development,” Mr. Leach continued.

Acquisition Details

Under the terms of the merger, each share of RSP common stock was converted into the right to receive 0.320 shares of Concho common stock. As a result, Concho expects to issue approximately 51 million shares of common stock in connection with the merger. In addition, RSP common stock will no longer be listed for trading on NYSE, and RSP will no longer have reporting obligations under the Securities Exchange Act of 1934.

In connection with the closing of the transaction, Concho announced the appointment of Steve Gray, formerly Chief Executive Officer of RSP, to the Company’s Board of Directors.

Maintaining a Strong Financial Position

Concho recently closed its previously announced offering of $1,600 million aggregate principal amount of senior unsecured notes, consisting of $1,000 million aggregate principal amount of 4.300% senior unsecured notes due 2028 and $600 million aggregate principal amount of 4.850% senior unsecured notes due 2048. The proceeds from the offering were used to redeem RSP’s 6.625% senior notes due 2022 and 5.250% senior notes due 2025 for approximately $1.2 billion as well as repay a portion of the outstanding balance under RSP’s existing credit facility. Concho repaid the remaining balance under RSP’s credit facility with borrowings under Concho’s credit facility.

Concho plans to provide an update to its 2018 outlook with second quarter 2018 results.

About Concho Resources

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin of Southeast New Mexico and West Texas. For more information, visit the Company’s website at www.concho.com.

[jb2257]

Do you have any explanation for the $4.85 drop in the price of the stock today? I can't find any news other than the completion of the merger.

[dan_s]

Nothing specific to CXO. Lots of red on the screen today.