Permian Basin pure-play Concho Resources Inc. is tightening up after agreeing to sell its New Mexico Shelf properties to recently formed Spur Energy Partners LLC for $925 million.

The transaction, set to close in November, includes 100,000 gross acres with production estimated at 25,000 boe/d. The sale implies a valuation of around $37,000/flowing boe.

Houston-based Spur in May partnered with private equity sponsor KKR to buy 22,000 net acres in New Mexico’s Northwest Shelf from Percussion Petroleum LLC.

Concho’s New Mexico Shelf properties during 2Q2019 had incurred a one-time impairment of $868 million on their carrying value.

“Proactively managing our asset portfolio has long been a key part of our strategy,” Concho CEO Tim Leach said. “Divesting our New Mexico Shelf position enables us to accelerate the value of these legacy assets, while focusing our portfolio on opportunities with the highest potential for strong returns.”

Concho is still maintaining its exploration and development program in southeastern New Mexico, Leach noted. During the second quarter conference call, Leach had signaled that the activity would be moderated and rigs would be dropped through the rest of the year in part because of weak natural gas and liquids prices.

In addition to paying down debt, Concho is using the asset sale to launch a repurchase of up to $1.5 billion in common shares. The sale would reduce the overall cost structure while allowing Concho to achieve its leverage target. Management already had planned to sell around $1 billion of assets that were not competing for capital.

Concho said its Delaware sub-basin well costs in the first half of the year averaged $1,560/foot, up 12% year/year, while average Midland sub-basin costs were $912, down 7%. By year’s end, Concho is targeting well reductions of more than 12% in the Delaware and 6% in the Midland.