Energy Analytics

ConocoPhillips acquires Concho Resources for $13.3 billion in the largest pure shale deal since 2011


ConocoPhillips is acquiring Permian heavyweight Concho Resources in an all-stock deal for $49.30 per share (total equity value of $9.7 billion) and a total enterprise value of $13.3 billion. The acquisition adds 550,000 net acres in the Permian (350,000 Delaware acres and 200,000 Midland acres) plus 200,000 bbl/d oil output and 719 MMcf/d gas production for 2Q20 to Conoco’s portfolio, increasing Permian output six-fold. Only 20% of Concho’s leasehold is located on federal land.

Download the ConocoPhillips/ Concho Resources Executive Deal Summary Report

“Concho Resources is one of the premier acquisition targets among U.S. shale drillers and Conoco is on a very short list of potential buyers, so this deal looks to be a natural fit on both sides,” said Enverus M&A analyst Andrew Dittmar. The $13.3 billion acquisition is the largest upstream deal entirely focused on shale since BHP bought Petrohawk for $15.1 billion in 2011.

Top Ten U.S. Upstream Deals Since 2010

Top Ten U.S. Upstream Deals Since 2010

“Buying Concho strategically fills a gap in Conoco’s portfolio. While well positioned in multiple U.S. plays like the Eagle Ford and Bakken plus internationally, Conoco lagged rivals in the Permian,” added Dittmar. “Conoco’s patience waiting for the right deal appears well rewarded as the company is picking up one of the premier positions in the Permian at ~$10,000/acre or a fraction of the cost of other large deals in the basin over the last few years.”

An important factor when evaluating potential merger targets in the current market are debt loads. Acquirers don’t want to stress their own balance sheets by taking on targets with excess debt. Again, Concho registers well in this category with debt comprising less than 30% of total transaction enterprise value.

Like the other corporate consolidation deals in 2020, the consideration to Concho shareholders is entirely stock. One difference is that this deal does include a moderate premium of 15% to Concho’s share price before rumors of a deal began to swirl on October 13th. That is in contrast to 2020’s other corporate deals, which have been for essentially no premium. Concho was trading at enough of a discount to its intrinsic value that Conoco is able to pay this premium and still see the deal as accretive to its shareholders.

The deal looks beneficial to Concho owners, giving them a piece of a more diversified asset base that includes significant Alaska and international exposure in addition to shale. The addition of conventional assets lessens the base decline rate and makes it more straight forward to return capital to shareholders. Conoco’s pre-deal stock price and payout implies a dividend yield of around 5%. The combined company will target returning 30% of cash from operations to shareholders through ordinary dividends and additional distributions.

With over $30 billion in announced E&P mergers now on the books in 2020 including two deals over $10 billion, shale consolidation is well underway. Even the total dollar amount transacted understates the scale of consolidation going on in the industry given still depressed equity prices relative to past years. Over 1.0 Mboe/d of production and 1.6 million net acres have changed hands in four corporate deals year-to-date.

“Even after 2020’s merger activity, there is still room left for the industry to consolidate,” commented Dittmar. “The limiting factor will be the number of attractive merger partners available, both on the seller and acquirer side.”

The relative scarcity of attractive deals may place additional pressure on some companies to get a transaction in place and lead to more activity in the near term. Some of the other well-positioned independents in the Permian with reasonable debt loads are likely the best prospects for a deal.

Download Your Executive Deal Summary Report



Energy’s most trusted SaaS platform — creating intelligent connections that uncover insights and opportunities to deliver extraordinary outcomes.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Energy Analytics Other
ByShane Reddell

In the current landscape of heightened environmental and social consciousness, upstream oil and gas companies face significant challenges in achieving favorable refinancing for their existing credit facilities. These challenges are compounded by the recent volatility in the debt markets and...

Energy Analytics Intelligence Publications
ByMaurice Smith

Wildfires that have already scorched more than double the average annual fire destruction across Alberta forced the shut-in of more than 300,000 boe/d while threatening future shuttering of output from the so-far largely unaffected oil sands region. Record temperatures saw...

Energy Analytics Energy Transition
ByHeather Leahey

CO2 containment risk has become one of the most popular topics among our clients evaluating CCUS projects. Operators need to understand and evaluate subsurface features that could trigger CO2 migration and containment losses as well as introduce additional safety, reputational...

Energy Analytics Energy Transition
ByRyan Luther

Anyone who thinks spending time at a public charging station is a blocker to buying an electric vehicle (EV) might want to consider the numbers behind EV and internal combustion engine (ICE) vehicle refueling times. The answer is that it...

Enverus Blog - 6 tax preparation tips for mineral and royalty managers
Energy Analytics
BySilas Martin

Recent years have been a roller coaster for mineral buyers, from record low commodity prices to highs for oil and natural gas in the last year. Going forward, challenges and opportunities will be plentiful. We expect oil prices between $80...

Power and Renewables
ByKenneth Curtis

It’s that time of year when generator and transmission outages are at their peak in PJM. The first half of April has not disappointed volatility-wise as the WHUB/NIHUB spread has set new 30-day highs largely driven by congestion. Figure 1:...

Enverus Blog - April's energy outlook: Analyst insights you can't miss
Analyst Takes Energy Analytics
ByChris Griggs

May marks a new month, and it’s essential to assess the energy landscape of April. Our Enverus Intelligence® | Research (EIR) team has scrutinized critical trends and advancements, delivering to you insightful analyst takes that can shape your business decisions....

Energy Analytics
ByCayley Krynowsky

Inventory is king in 2023. Operators and investors alike are more concerned than ever about remaining inventory – who has it, where is it, and will it be economic? To answer these questions, most turn to the tried-and-true, but also...

Enverus Blog - Securing domestic supply of lithium
Energy Analytics Energy Transition
ByGraham Bain

In last week’s issue of Energy Transition Today, we discussed the significant drop in solar capture prices in California over the past five years. This decline presents a valuable opportunity for solar projects to utilize co-located battery storage, charging them...

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Speak to an Expert

Book a Demo