Concho Resources Inc. is showing more love to the Permian Basin in southeastern New Mexico, a bit of a wallflower compared to its West Texas sister, after agreeing Monday to bolt on 16,400 net acres for $430 million.

The additional leasehold in the northern Delaware sub-basin, which is being acquired from an undisclosed seller, includes current production of 2,500 boe/d (69% weighted to oil).

The deal would expand the Midland, TX-based independent's position by 25% to 47,000 net acres in its favored Red Hills area in Lea County, NM. Red Hills is an oil-prone fairway with more than 5,000 feet of hydrocarbon column, which makes it prospective for multi-zone development.

"This transaction is an opportunistic bolt-on in the Red Hills area where we are consistently delivering strong well performance," CEO Tim Leach said. "Our evaluation provides for multiple opportunities to enhance value through increased density development on multi-well pads, as well as additional zones beyond the Avalon Shale, Wolfcamp Shale and the emerging Wolfcamp Sands.

"With a continued focus on driving capital efficiency gains and actively managing our portfolio, this acquisition further strengthens our industry-leading position in the Permian Basin and reinforces our ability to deliver differentiated long-term growth."

Tudor, Pickering, Holt & Co. estimated Concho paid about $21,000/acre for the Delaware bolt-on. Concho in August paid $1.6 billion to acquire 40,000 net acres in the Midland sub-basin from Reliance Energy. Earlier this year it also made a trio of deals to consolidate its southern Delaware position in West Texas.

For the latest northern Delaware transaction, set to close early next year, Concho agreed to pay $150 million in cash and trade 2.18 million shares of common stock.

Concho plans to increase its activity next year in the northern Delaware using an average of eight operated rigs -- one more than it had planned pre-acquisition. With the increased activity, oil volumes are forecast to increase by more than 20% year/year, with total production rising 18-21% from previous guidance of 17-20%.

Capital spending for 2017 remains set at $1.4-1.6 billion, and based on the current commodity price outlook, the program should be funded within cash flow. Next year's capital program excludes acquisitions could change, Concho management said, depending on commodity prices and industry conditions.

Although the New Mexico portion of the Permian has not received as much interest as the Delaware and Midland sub-basins within West Texas, several big operators have activity underway across the region, including Chevron Corp. and EOG Resources Inc.

Chevron, which as of late October was running eight drilling rigs in the Permian, said Delaware and Midland activity during 3Q2016 contributed a 50,000 b/d bounce in production. And EOG agreed in September to spend $2.5 billion-plus to buy Delaware specialist Yates Petroleum Corp., doubling its position in southeastern New Mexico and West Texas to 574,000 net acres.