Concho Resources’s $9.5 Billion Acquisition of RSP Permian

Morgan Stanley & Co. LLC is acting as exclusive financial advisor to Concho, and Sullivan & Cromwell LLP and Gibson, Dunn & Crutcher LLP are acting as legal advisors to Concho. Tudor, Pickering, Holt & Co. is acting as exclusive financial advisor to RSP, and Vinson & Elkins LLP is acting as legal advisor to RSP

Concho Resources Inc. (NYSE: CXO) and RSP Permian, Inc. (NYSE: RSPP) have entered into a definitive agreement under which Concho will acquire RSP in an all-stock transaction valued at approximately $9.5 billion, inclusive of RSP’s net debt. The consideration will consist of 0.320 shares of Concho common stock for each share of RSP common stock. The transaction was unanimously approved by the board of directors of each company.

The acquisition will add approximately 92,000 net acres that strongly complement Concho’s existing acreage position in the Permian Basin. The combined position will cover more than 640,000 net acres. In fourth-quarter 2017, production on RSP’s assets totaled approximately 55.5 thousand barrels of oil equivalent (Boe) per day on a two-stream basis, of which approximately 80% was crude oil and 20% was natural gas. The transaction adds 2.2 billion Boe of resource potential, of which more than two-thirds is premium resource.

The combined company will run the largest drilling and completion program in the Permian Basin. With a focused portfolio and substantial scale advantage, the benefits of this transaction are expected to drive corporate level savings and operational synergies by combining the complementary assets and the technical skills of both company’s employees. Specific operational synergies include: asset optimization, directing capital to high-return manufacturing-style projects and utilizing shared infrastructure systems. The present value of corporate and operational synergies is expected to exceed $2 billion.

The acquisition is expected to be accretive in the first year to Concho’s key per-share metrics, including net asset value, earnings, cash flow and debt-adjusted growth. In addition, the transaction is expected to enhance Concho’s three-year outlook for annualized production growth on a capital program within cash flow from operations.

Concho Resources Inc. led by Timothy A Leach, Jack F Harper and C William Giraud, in 2017 recorded $2.665 Billlion Reveues.

RSP Permian, Inc., led by Steven Gray, Scott McNeill and Zane Arrott, in 2017 recorded $818 Million Revenues.

Gibson Dunn advised Concho with a team including oil and gas partner Michael Darden (Picutre), corporate partner Hillary Holmes, corporate associates Lindsay Ellis and Harrison Tucker and oil and gas associates Matt Savage, David Cias and Graham Valenta, tax partner James Chenoweth, corporate partner Tull Florey, finance partner Shalla Prichard and oil and gas partner Justin Stolte, corporate partner Doug Rayburn; intellectual property partner Alexander Southwell, benefits partners Michael Collins and environmental partner Michael Murphy and benefits partner Sean Feller.

Sullivan & Cromwell advised Concho with corporate partners Joseph Frumkin and Krishna Veeraraghavan, and associates Daniel Belke and Matthew Aulds.

Vinson & Elkins advised RSP Permian, Inc. with a team including Doug McWilliams, Steve Gill and Lande Spottswood, with assistance from associates Leonard Wood, Jing Tong, Mariam Boxwala, David Bumgardner, Maggie Webber, Andrianna Frinzi, Michael Pascual and Ryan Rivera. Other key team members include partner David D’Alessandro, senior associate Dario Mendoza and associate Steven Oyler; partner David Peck and associate Megan James; partner John Grand; and counsel Larry Pechacek.

Davis Polk is advising Morgan Stanley & Co. LLC as financial adviser to Concho Resources Inc. with a team including Lee Hochbaum and associate Jason P. Thompson.

 

Involved fees earner: Douglas McWilliams – Vinson & Elkins LLP; Stephen Gill – Vinson & Elkins LLP; Lande Alexandra Spottswood – Vinson & Elkins LLP; Leonard Wood – Vinson & Elkins LLP; Jing Tong – Vinson & Elkins LLP; Mariam Boxwala – Vinson & Elkins LLP; David Bumgardner – Vinson & Elkins LLP; Maggie Dunlap Webber – Vinson & Elkins LLP; Andrianna Frinzi – Vinson & Elkins LLP; Michael Pascual – Vinson & Elkins LLP; Ryan Rivera – Vinson & Elkins LLP; John Grand – Vinson & Elkins LLP; David D’Alessandro – Vinson & Elkins LLP; Dario Mendoza – Vinson & Elkins LLP; Steven Oyler – Vinson & Elkins LLP; David Peck – Vinson & Elkins LLP; Megan James – Vinson & Elkins LLP; Larry Pechacek – Vinson & Elkins LLP; Lee Hochbaum – Davis Polk & Wardwell; Jason Thompson – Davis Polk & Wardwell; Michael Darden – Gibson Dunn & Crutcher; Hillary Holmes – Gibson Dunn & Crutcher; Lindsay Ellis – Gibson Dunn & Crutcher; Harrison Tucker – Gibson Dunn & Crutcher; Tull Florey – Gibson Dunn & Crutcher; Doug Rayburn – Gibson Dunn & Crutcher; Matt Savage – Gibson Dunn & Crutcher; David Cias – Gibson Dunn & Crutcher; Graham Valenta – Gibson Dunn & Crutcher; Justin Stolte – Gibson Dunn & Crutcher; James Chenoweth – Gibson Dunn & Crutcher; Shalla Prichard – Gibson Dunn & Crutcher; Alexander Southwell – Gibson Dunn & Crutcher; Michael Collins – Gibson Dunn & Crutcher; Sean Feller – Gibson Dunn & Crutcher; Michael Murphy – Gibson Dunn & Crutcher; Joseph Frumkin – Sullivan & Cromwell; Krishna Veeraraghavan – Sullivan & Cromwell; Daniel Belke – Sullivan & Cromwell; Matthew Aulds – Sullivan & Cromwell;

Law Firms: Vinson & Elkins LLP; Davis Polk & Wardwell; Gibson Dunn & Crutcher; Sullivan & Cromwell;

Clients: Morgan Stanley; Concho Resources Inc.; RSP Permian, Inc.;

 

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Author: Ambrogio Visconti