Concho Resources has closed two acquisitions of interests in producing and non-producing assets in the Wolfberry trend of the Permian Basin for approximately $260 million.
The $225 million acquisition that the Company announced on November 23 was closed, after the effects of the participation rights and other adjustments, for $213 million in cash, subject to usual and customary post-closing adjustments.
In addition, in a separate transaction in December 2009 the Company purchased additional rights and interests in the Wolfberry trend for approximately $47 million from multiple private sellers, subject to usual and customary post-closing adjustments. These acquired interests are included in 522 producing wells and 848 identified locations in which the Company currently operates.
Combined Transactions Highlights:
Timothy A. Leach, Concho's Chairman, CEO and President, commented, "Both of these acquisitions are consistent with our strategy of consolidating interests and acquiring assets in our core areas of operation. We plan to add four additional drilling rigs in the Texas Permian by the end of the second quarter on the newly acquired acreage, which we expect will significantly grow production on these assets throughout the year. The addition of these rigs on our newly acquired acreage and the additional working interest we acquired in our existing assets will increase our 2010 capital forecast and production guidance and should provide excellent momentum into 2011."
Financial and Operational Guidance
In late December 2009, Concho's Board of Directors approved an updated capital budget for 2010 of approximately $625 million. This budget includes an additional $120 million to develop the newly acquired Wolfberry trend assets, and the Company’s updated budget now averages twenty operated rigs in the Permian Basin for 2010. The Company currently estimates that its 2010 production will total between 13.6 MMBoe and 14.1 MMBoe. At the high end of the production guidance range and at current 2010 NYMEX strip prices (approximately $84 per barrel and $6 per Mcf), the Company expects that its updated capital budget can be substantially funded with internally generated after-tax cash flow. The Company will continue to monitor its capital expenditures in relation to its cash flow and expects to adjust its activity and capital spending level based on changes in commodity prices and the cost of goods and services and other considerations.
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