Notes from Raymond James:
"Concho announced plans to acquire RSP Permian (RSPP) for $9.5B all-in on March 28. If successful, the acquisition adds ~92K net acres to Concho’s already
vast Permian portfolio (~45K net Delaware acres and ~47K net Midland acres). We estimate the deal value at ~$75K per net undeveloped acre—a significant
premium to recent public deals in the area (~$35-45K on average)—which could generate higher valuations for other operators in the basin and help close the gap between recent private and public deal valuations." RJ sees higher valuations for EGN, LPI, MTDR and PE
"Concho has an attractive Midland acreage position (~217,000 net acres after the RSPP acquisition discussed above). We think the market undervalues Concho’s core Midland position and we see potential for NAV upside as the company pursues its large-scale development strategy." - RJ see impact on valuations for PXD, FANG and PE
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MY TAKE: This merger should draw a lot more attention to CPE, ESTE and SM
Concho + RSP Merger
Concho + RSP Merger
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Concho + RSP Merger
"As companies get to this point and look at their assets and their activity, the efficiency you can gain by a bigger balance sheet and a bigger program is really what's driving this," Concho CEO Tim Leach said in a call with analysts Wednesday.
Midland-based Concho averaged 211,000 barrels of oil per day in the fourth quarter of 2017. RSP Permian pumped an average of 56,000 barrels a day.
No decisions have been made about the future of RSP Permian's 180 employees, spread among offices in Dallas, Midland and Kermit. Fifty of those jobs are at the company's Dallas headquarters.
Read more: https://www.dallasnews.com/business/ene ... -arms-race
This buyout tops a 2014 deal in which Encana Corp. bought 140,000 acres of Athlon Energy's Permian holdings for $7.1 billion. And last year, Irving-based Exxon Mobil bought 275,000 in Permian acreage from Fort Worth's Bass family. That deal was worth as much as $6.6 billion.
Midland-based Concho averaged 211,000 barrels of oil per day in the fourth quarter of 2017. RSP Permian pumped an average of 56,000 barrels a day.
No decisions have been made about the future of RSP Permian's 180 employees, spread among offices in Dallas, Midland and Kermit. Fifty of those jobs are at the company's Dallas headquarters.
Read more: https://www.dallasnews.com/business/ene ... -arms-race
This buyout tops a 2014 deal in which Encana Corp. bought 140,000 acres of Athlon Energy's Permian holdings for $7.1 billion. And last year, Irving-based Exxon Mobil bought 275,000 in Permian acreage from Fort Worth's Bass family. That deal was worth as much as $6.6 billion.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Concho + RSP Merger
Since the merger was announced RSPP has been downgraded by about 4 firms. Why are they doing that when it will be taken out? It seems that they are basing the price on what CXO is trading at.
Re: Concho + RSP Merger
RSPP should move in lockstep with CXO from now until the deal closes. Just multiply CXO by 0.32 and it should be very close to RSPP.
If you want to see what CXO will look like "post merger" just take my forecast models for both companies and add the columns for 2019 together. Don't forget to increase the CXO share count for 0.32 X the RSPP share count. Then reduce G&A expense by 50% of what RSPP's G&A expense is for 2019 in their forecast model.
It does take some time for G&A to settle down after a merger of this size because there is a lot of work that Concho has to do to set up the RSPP properties in their system. What we did at Hess was keep the systems of the acquired company going through year-end and then we merged them into our systems. Since RSPP is a Permian Basin pure play, it should be a fairly simple process for accounting and land records.
When the "dust settles" the Wall Street Gang will love Concho. It will be a Permian Basin "powerhouse".
If you want to see what CXO will look like "post merger" just take my forecast models for both companies and add the columns for 2019 together. Don't forget to increase the CXO share count for 0.32 X the RSPP share count. Then reduce G&A expense by 50% of what RSPP's G&A expense is for 2019 in their forecast model.
It does take some time for G&A to settle down after a merger of this size because there is a lot of work that Concho has to do to set up the RSPP properties in their system. What we did at Hess was keep the systems of the acquired company going through year-end and then we merged them into our systems. Since RSPP is a Permian Basin pure play, it should be a fairly simple process for accounting and land records.
When the "dust settles" the Wall Street Gang will love Concho. It will be a Permian Basin "powerhouse".
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Concho + RSP Merger
That's what I was afraid of in an all stock merger. At today's price the proceeds for RSPP shareholders would be 44.37 not 49.00. RSPP is trading today at 43.24. CX0 is down $18.00 since the agreement was announced. I guess that is why everyone is selling.
Re: Concho + RSP Merger
Think long-term. Concho is going to be a "Power House" of an upstream company when this deal closes.
On big mergers like this, the "Wall Street Gang" always rates the acquired company as a "HOLD" since it no longer has a life of its own.
On big mergers like this, the "Wall Street Gang" always rates the acquired company as a "HOLD" since it no longer has a life of its own.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Concho + RSP Merger
Zacks really likes the deal: Below is what they said today.
Concho Resources, an upstream player, recently signed a deal to acquire its rival RSP Permian Inc. in a $9.5 billion deal, to expand its presence in the prolific Permian play.
The agreement marks the largest takeover in the oil and gas exploration and production industry since 2012 and the biggest pure-Permian deal ever. The acquisition is set to create a humongous Permian Pure-play and likely to make the Zacks Rank #1 (Strong Buy) Concho one of the top energy producers in the Permian basin.
The complementary asset base has been the key driver of the deal. The buyout will integrate the premier assets of both the companies, bolstering the scale and leadership position of the combined entity in the region. The deal will enable the companies to pool their expertise in the region and share their best practices, thereby enhancing buying power in securing services in the region.
The deal adds 92,000 acres of complementary holdings to Concho’s Permian portfolio, expanding the total Permian acreage of the company to 640,000 net acres. The combined entity is set to run 27 rigs in the region, marking one of the largest drilling programs in the Permian shale play.
Concho Resources, an upstream player, recently signed a deal to acquire its rival RSP Permian Inc. in a $9.5 billion deal, to expand its presence in the prolific Permian play.
The agreement marks the largest takeover in the oil and gas exploration and production industry since 2012 and the biggest pure-Permian deal ever. The acquisition is set to create a humongous Permian Pure-play and likely to make the Zacks Rank #1 (Strong Buy) Concho one of the top energy producers in the Permian basin.
The complementary asset base has been the key driver of the deal. The buyout will integrate the premier assets of both the companies, bolstering the scale and leadership position of the combined entity in the region. The deal will enable the companies to pool their expertise in the region and share their best practices, thereby enhancing buying power in securing services in the region.
The deal adds 92,000 acres of complementary holdings to Concho’s Permian portfolio, expanding the total Permian acreage of the company to 640,000 net acres. The combined entity is set to run 27 rigs in the region, marking one of the largest drilling programs in the Permian shale play.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Concho + RSP Merger
I appreciate your explanation. Hopefully everything will work out for the best.