Concho Resources Inc. said Thursday it is looking to divest "certain Permian Basin properties" because they are mostly not in the company's core areas of operation and because they have a higher per-unit cost than Concho's existing portfolio of assets.
The news came as Midland, TX-based Concho said it has closed its previously announced $1.1 billion acquisition of the oil and gas assets of Marbob Energy Corp. (see Daily GPI, July 21), which included assets in the Permian Basin of New Mexico.
The company also purchased additional nonoperated rights and interests in Marbob properties owned by persons affiliated with Marbob for approximately $32 million. As of June 30, estimated proved reserves associated with these additional interests totaled approximately 1.3 MMBoe.
The properties on the block in the Permian Basin currently produce approximately 1,500 Boe/d, consisting of 48% oil and 52% natural gas. As of June 30, estimated proved reserves associated with these properties totaled approximately 6.5 MMBoe. Concho said it anticipates closing the sale prior to year-end, as long as a suitable bid is received
Concho noted that the previously-announced purchase price for Marbob was reduced by approximately $400 million due to the exercise of preferential purchase rights by third parties. As of Oct. 1, current net daily production and proved reserves on the assets acquired from Marbob, reduced by the effects of the exercised preferential purchase rights, is approximately 12,000 Boe/d and 63 MMBoe, respectively.
Looking ahead, Concho said its preliminary capital expenditure budget for 2011 is approximately $1 billion, which the company said it expects will fund 2011 production of approximately 22 MMBoe.
"The properties we acquired from Marbob expand our Yeso drilling inventory and significantly enhance our position in the emerging Bone Spring play, where our company now has approximately 150,000 net acres," said Concho CEO Tim Leach. "Our $1 billion preliminary capital budget for 2011 anticipates maintaining a very active drilling program and achieving significant production growth while continuing to spend within cash flow."
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