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Image courtesy of Concho Resources.

Concho Resources Inc. said Monday that it has acquired 40,000 net acres in the Midland Basin for $1.62 billion.

Concho acquired the acres from Reliance Energy, a privately held, Midland-based energy company.

The acreage is located in Andrews, Martin and Ector counties in Texas with minimal leasehold obligations.

The acquisition will expand Concho’s core Midland Basin position to more than 150,000 net acres and boost production to 30,000 barrels of oil equivalent per day.

Concho will hold an average 99 percent working interest in the newly acquired acres.

The acres also include 10,000 barrels of oil equivalent per day in current production, with 67 percent of production being oil.

The acquired acres also hold 326 vertical wells and 44 horizontal wells.

Concho said only one of those wells was completed in 2016.

The present value of the acquisition’s stable production base at current NYMEX strip pricing is $500 million, with the remaining $1.1 billion of the purchase price attributable to 40,000 undeveloped acres.

Estimated proved reserves attributable to the acquisition total 43 million barrels of oil equivalent per day.

Concho said that proved developed reserves represent 69 percent of the total proved reserves.

The company said the purchase will also enhance its drilling inventory with more than 530 long-lateral drilling locations targeting the Middle Spraberry, Lower Spraberry and Wolfcamp B.

“Due to the contiguous nature of the acquired assets, two-thirds of these locations are two-mile laterals, and the remaining locations are 1.5-mile laterals,” Concho said.

The company said it “believes there is substantial development upside from applying optimal drilling and completion methods, testing closer well spacing and delineating other zones.”

Consideration in the transaction includes $1.1 billion of cash and 3.96 million shares of Concho’s common stock valued at about $500 million and issuable pursuant to a stock payment option that the company intends to exercise.

Concho intends to fund the cash portion of the acquisition through proceeds from a potential equity market transaction, subject to market conditions and other factors.

The acquisition is expected to close in October 2016, and is subject to customary closing conditions.

“This transaction demonstrates Concho’s commitment to the Midland Basin as a core operating area and highlights our continued efforts to consolidate complementary leasehold,” Concho chairman, CEO and president Tim Leach said.