An oil and natural gas company in West Texas’ Permian Basin is set to become the largest drilling operation in the region after a deal worth $9.5 billion dollars.
Midland-based Concho Resources announced Wednesday they’re buying RSP Permian. The company says the deal will increase their Permian footprint and make them the biggest producers in West Texas.
“Together our scale in the Permian Basin will be powerful," said Concho CEO Tim Leach on a call with investors. "We will be the largest Permian Basin from unconventional resource…and our combined position will be more than 640,000 net acres."
Leach says the all-stock deal — which is valued at $9.5 billion — would also make the company the largest drilling operation in the Permian with 27 rigs. Concho is paying $8 million for the Dallas Company, but will assume roughly $1.5 million in debt.
“This combination allows us to consolidate premier assets that seamlessly fold into our drilling program, enhance our scale advantage and reinforce our leadership position in the Permian Basin, all while strengthening our platform for delivering predictable growth and returns," said Concho CEO Tim Leach in a statement.
Looking ahead, industry analysts say future large-scale deals like this one could face "significant headwinds" such as anxious investors and scrutiny on operation performance.
"If this deal is to mark a second wave of 'Permania' in the oil M&A market, potential acquirers will have to be firmly confident in the Permian's long-term potential," said Wood Mackenzie research Andy McConn.
The Concho transaction is expected to be completed later this year, but still requires shareholder approval and must meet regulatory approval as well.
